S-1/A

As filed with the Securities and Exchange Commission on July 27, 2022

Registration No. 333-259011

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_______________________

Amendment No. 9 to

FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

_______________________

1847 HOLDINGS LLC
(Exact name of registrant as specified in its charter)

_______________________

Delaware	5700	38-3922937
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

590 Madison Avenue, 21st Floor
New York, NY 10022
(212) 417-9800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

_______________________

Ellery W. Roberts
Chief Executive Officer
590 Madison Avenue, 21st Floor
New York, NY 10022
(212) 417-9800
(Name, address, including zip code, and telephone number, including area code, of agent for service)

_______________________

Copies to:
Louis A. Bevilacqua, Esq. Bevilacqua PLLC 1050 Connecticut Avenue, NW, Suite 500 Washington, DC 20036 (202) 869-0888	Ross Carmel, Esq. Jeffrey Wofford, Esq. Jeffrey Koeppel, Esq. Carmel, Milazzo & Feil LLP 55 West 39th Street, 18th Floor New York, NY 10018 (212) 658-0458

_______________________

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 27, 2022

1847 HOLDINGS LLC

1,442,308

Common Shares

_______________________

We are offering 1,442,308 common shares, assuming an initial public offering price of $5.20 per share (which is the midpoint of the estimated range of the public offering price). We currently estimate that the public offering price will be between $4.20 and $6.20 per share. The actual number of shares we will offer will be determined based on the actual public offering price.

Our common shares are quoted on the OTCQB market operated by OTC Markets Group Inc. under the symbol “EFSH.” On July 25, 2022, the closing price of our common shares on the OTCQB market was $1.05. In connection with this offering, we received approval from NYSE American for the listing of our common shares. The closing of this offering is contingent upon our uplisting to NYSE American unless such condition is waived by the representatives of the underwriters.

Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 26 of this prospectus.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds, before expenses, to us(2)	$	$

____________

(1)      Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering payable to Craft Capital Management LLC and R.F. Lafferty & Co., Inc., the representatives of the underwriters. We have also agreed to issue warrants to the representatives of the underwriters. See “Underwriting” for a complete description of the compensation arrangements.

(2)      We estimate the total expenses payable by us, excluding the underwriting discount and non-accountable expense allowance, will be approximately $411,000.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional 216,346 common shares (equal to 15% of the common shares sold in the offering), solely to cover over-allotments, if any, at the public offering price less the underwriting discounts.

The underwriters expect to deliver the shares against payment in New York, New York on or about             , 2022.

Craft Capital Management LLC R.F. Lafferty & Co., Inc.

The date of this prospectus is         , 2022.

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	26
Cautionary Statement Regarding Forward-Looking Statements	65
Use of Proceeds	67
Dividend and Distribution Policy	68
Capitalization	69
Dilution	71
Market Price of Common Equity and Related Shareholder Matters	73
Management’s Discussion and Analysis of Financial Condition and Results of Operations	74
Corporate History and Structure	100
The Manager	103
Business	118
Management	143
Executive Compensation	149
Current Relationships and Related Party Transactions	151
Principal Shareholders	153
Description of Securities	155
Shares Eligible for Future Sale	166
Material U.S. Federal Income Tax Considerations	167
Underwriting	175
Legal Matters	181
Experts	181
Where You Can Find More Information	181
Financial Statements	F-1

Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in, or incorporated by reference into, this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell our common shares and seeking offers to buy our common shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or any sale of our common shares. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States:    Neither we nor the underwriters have done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our common shares and the distribution of this prospectus outside of the United States. See the section of this prospectus entitled “Underwriting” for additional information on these restrictions.

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MARKET AND INDUSTRY DATA

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industries and our markets is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and research. This information involves a number of assumptions, estimates and limitations. The industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on our behalf. The industries in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in this prospectus. These and other factors could cause results to differ materially from those expressed in these publications.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our businesses. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, ™ or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

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PROSPECTUS SUMMARY

The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements, the notes thereto and matters set forth under “Risk Factors.”

Unless the context requires otherwise, the words “we,” “us,” “our” and “our company” refer collectively to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated subsidiaries.

Our Company

Overview

We are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America. To date, we have completed six acquisitions and subsequently spun off two of the acquired companies.

On May 28, 2020, our subsidiary 1847 Asien Inc., or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s. Asien’s has been in business since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and exceptional service to its customers at competitive prices.

On September 30, 2020, our subsidiary 1847 Cabinet Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders.

On March 30, 2021, our subsidiary 1847 Wolo Inc., or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation (which we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded in 1965, Wolo 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.

On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain Door & Trim Inc., a Nevada corporation, or High Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited liability company, or Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain 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, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as commercial clients.

Our first acquisition was on March 3, 2017, pursuant to which our subsidiary 1847 Neese Inc., or 1847 Neese, acquired Neese, Inc., or Neese, a business specializing in providing a wide range of land application services and selling equipment and parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners.

On April 5, 2019, our subsidiary 1847 Goedeker Inc., or 1847 Goedeker, acquired substantially all of the assets of Goedeker Television Co., or Goedeker Television, a one-stop e-commerce destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker.

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Through our structure, we offer investors an opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increasing common shareholder value over time.

We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.

Our Manager

We have engaged 1847 Partners LLC, which we refer to as our manager, to manage our day-to-day operations and affairs, oversee the management and operations of our businesses and perform certain other services on our behalf, subject to the oversight of our board of directors. We believe that our manager’s expertise and experience is a critical factor in executing our strategy to make and grow quarterly distributions to our common shareholders and increasing common shareholder value over time. Ellery W. Roberts, our Chief Executive Officer, is the sole manager of our manager and, as a result, our manager is an affiliate of Mr. Roberts.

At our inception, our manager engaged Ellery W. Roberts as our Chief Executive Officer. Mr. Roberts is also an employee of our manager and is seconded to our company, which means that he has been assigned by our manager to work for our company during the term of the management services agreement. Although Mr. Roberts is an employee of our manager, he reports directly to our board of directors.

Since 2000, Mr. Roberts has developed and grown multiple sector-specific platform businesses, through the consummation of more than 40 acquisitions. Mr. Roberts was actively involved in all aspects of deal sourcing, structuring, financing, investment committee approval and post-closing management of these acquisitions. He has more than 20 years of experience in acquiring and managing small businesses and has been directly involved with over $3 billion in direct private equity investments. Collectively, our management team has more than 60 years of combined experience in acquiring and managing small businesses and has overseen the acquisitions and financing of over 50 businesses.

We entered into a management services agreement with our manager on April 15, 2013, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% (2.0% annualized) of our company’s adjusted net assets for services performed.

Our manager owns all of our allocation shares, which are a separate class of limited liability company interests. The allocation shares generally will entitle our manager to receive a 20% profit allocation upon the sale of a particular subsidiary, calculated based on whether the gains generated by such sale (in excess of a high-water mark) plus certain historical profits of the subsidiary exceed an annual hurdle rate of 8% (which rate is multiplied by the subsidiary’s average share of our consolidated net assets). Once such hurdle rate has been exceeded then the profit allocation becomes payable to our manager as described in “The Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation.”

Our Market Opportunity

We acquire and manage small businesses, which we characterize as those that have an enterprise value of less than $50 million. We believe that the merger and acquisition market for small businesses is highly fragmented and provides significant opportunities to purchase businesses at attractive prices. For example, according to GF Data, platform acquisitions with enterprise values greater than $50.0 million commanded valuation premiums 30% higher than platform acquisitions with enterprise values less than $50.0 million (8.2x trailing twelve month adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) versus 6.3x trailing twelve month adjusted EBITDA, respectively).

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We believe that the following factors contribute to lower acquisition multiples for small businesses:

•        there are typically fewer potential acquirers for these businesses;

•        third-party financing generally is less available for these acquisitions;

•        sellers of these businesses may consider non-economic factors, such as continuing board membership or the effect of the sale on their employees; and

•        these businesses are generally less frequently sold pursuant to an auction process.

We believe that our management team’s strong relationships with business brokers, investment and commercial bankers, accountants, attorneys and other potential sources of acquisition opportunities offers us substantial opportunities to purchase small businesses. See “Management” for more information about our management team.

We also believe that significant opportunities exist to improve the performance of the businesses upon their acquisition. In the past, our manager has acquired businesses that are often formerly owned by seasoned entrepreneurs or large corporate parents. In these cases, our manager has frequently found that there have been opportunities to further build upon the management teams of acquired businesses. In addition, our manager has frequently found that financial reporting and management information systems of acquired businesses may be improved, both of which can lead to substantial improvements in earnings and cash flow. Finally, because these businesses tend to be too small to have their own corporate development efforts, we believe opportunities exist to assist these businesses in meaningful ways as they pursue organic or external growth strategies that were often not pursued by their previous owners.

Our Strategy

Our long-term goals are to make and grow regular distributions to our common shareholders and to increase common shareholder value over the long-term. We plan to continue focusing on acquiring businesses. Therefore, we intend to continue to identify, perform due diligence on, negotiate and consummate platform acquisitions of small businesses in attractive industry sectors.

Unlike buyers of small businesses that rely on significant leverage to consummate acquisitions, we plan to limit the use of third-party (i.e., external) acquisition leverage so that our debt will not exceed the market value of the assets we acquire and so that our debt to EBITDA ratio will not exceed 1.25x to 1 for our operating subsidiaries. We believe that limiting leverage in this manner will avoid the imposition on stringent lender controls on our operations that would otherwise potentially hamper the growth of our operating subsidiaries and otherwise harm our business even during times when we have positive operating cash flows. Additionally, in our experience, leverage rarely leads to “break-out” returns and often creates negative return outcomes that are not correlated with the profitability of the business.

Our Management Strategy

Our management strategy involves the identification, performance of due diligence, negotiation and consummation of acquisitions. After acquiring businesses, we attempt to grow the businesses both organically and through add-on or bolt-on acquisitions. Add-on or bolt-on acquisitions are acquisitions by a company of other companies in the same industry. Following the acquisition of companies, we seek to grow the earnings and cash flow of acquired companies and, in turn, grow regular distributions to our common shareholders and to increase common shareholder value over time. We believe we can increase the cash flows of our businesses by applying our intellectual capital to improve and grow our businesses.

We seek to acquire and manage small businesses. We believe that the merger and acquisition market for small businesses is highly fragmented and provides opportunities to purchase businesses at attractive prices. We believe we will be able to acquire small businesses for multiples ranging from three to six times EBITDA. We also believe, and our manager has historically found, that significant opportunities exist to improve the performance of these businesses upon their acquisition.

In general, our manager oversees and supports the management team of our businesses by, among other things:

•        recruiting and retaining managers to operate our businesses by using structured incentive compensation programs, including minority equity ownership, tailored to each business;

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•        regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems;

•        assisting the management teams of our businesses in their analysis and pursuit of prudent organic growth strategies;

•        identifying and working with business management teams to execute on attractive external growth and acquisition opportunities;

•        identifying and executing operational improvements and integration opportunities that will lead to lower operating costs and operational optimization;

•        providing the management teams of our businesses the opportunity to leverage our experience and expertise to develop and implement business and operational strategies; and

•        forming strong subsidiary level boards of directors to supplement management teams in their development and implementation of strategic goals and objectives.

We also believe that our long-term perspective provides us with certain additional advantages, including the ability to:

•        recruit and develop management teams for our businesses that are familiar with the industries in which our businesses operate;

•        focus on developing and implementing business and operational strategies to build and sustain shareholder value over the long term;

•        create sector-specific businesses enabling us to take advantage of vertical and horizontal acquisition opportunities within a given sector;

•        achieve exposure in certain industries in order to create opportunities for future acquisitions; and

•        develop and maintain long-term collaborative relationships with customers and suppliers.

We intend to continually increase our intellectual capital as we operate our businesses and acquire new businesses and as our manager identifies and recruits qualified operating partners and managers for our businesses.

Our Acquisition Strategy

Our acquisition strategies involve the acquisition of small businesses in various industries that we expect will produce positive and stable earnings and cash flow, as well as achieve attractive returns on our invested capital. In this respect, we expect to make acquisitions in industries wherein we believe an acquisition presents an attractive opportunity from the perspective of both (i) return on assets or equity and (ii) an easily identifiable path for growing the acquired businesses. We believe that attractive opportunities will increasingly present themselves as private sector owners seek to monetize their interests in longstanding and privately held businesses and large corporate parents seek to dispose of their “non-core” operations.

We believe that the greatest opportunities for generating consistently positive annual returns and, ultimately, residual returns on capital invested in acquisitions will result from targeting capital light businesses operating in niche geographical markets with a clearly identifiable competitive advantage within the following industries: business services, consumer services, consumer products, consumable industrial products, industrial services, niche light manufacturing, distribution, alternative/specialty finance and in select cases, specialty retail. While we believe that the professional experience of our management team within the industries identified above will offer the greatest number of acquisition opportunities, we will not eschew opportunities if a business enjoys an inarguable moat around its products and services in an industry which our management team may have less familiarity.

From a financial perspective, we expect to make acquisitions of small businesses that are stable, have minimal bad debt, and strong accounts receivable. In addition, we expect to acquire companies that have been able to generate positive pro forma cash available for distribution for a minimum of three years prior to acquisition. Our previous acquisitions met these acquisition criteria.

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We benefit from our manager’s ability to identify diverse acquisition opportunities in a variety of industries. In addition, we rely upon our management teams’ experience and expertise in researching and valuing prospective target businesses, as well as negotiating the ultimate acquisition of such target businesses. In particular, because there may be a lack of information available about these target businesses, which may make it more difficult to understand or appropriately value such target businesses, our manager will:

•        engage in a substantial level of internal and third-party due diligence;

•        critically evaluate the management team;

•        identify and assess any financial and operational strengths and weaknesses of any target business;

•        analyze comparable businesses to assess financial and operational performances relative to industry competitors;

•        actively research and evaluate information on the relevant industry; and

•        thoroughly negotiate appropriate terms and conditions of any acquisition.

The process of acquiring new businesses is time-consuming and complex. Our manager has historically taken from 2 to 24 months to perform due diligence on, negotiate and close acquisitions. Although we expect our manager to be at various stages of evaluating several transactions at any given time, there may be significant periods of time during which it does not recommend any new acquisitions to us.

Upon an acquisition of a new business, we rely on our manager’s experience and expertise to work efficiently and effectively with the management of the new business to jointly develop and execute a business plan.

While primarily seek to acquire controlling interests in a business, we may also acquire non-control or minority equity positions in businesses where we believe it is consistent with our long-term strategy.

As discussed in more detail below, we intend to raise capital for additional acquisitions primarily through debt financing, primarily at our operating company level, additional equity offerings by our company, the sale of all or a part of our businesses or by undertaking a combination of any of the above.

Our primary corporate purpose is to own, operate and grow our operating businesses. However, in addition to acquiring businesses, we expect to sell businesses that we own from time to time. Our decision to sell a business will be based upon financial, operating and other considerations rather than a plan to complete a sale of a business within any specific time frame. We may also decide to own and operate some or all of our businesses in perpetuity if our board believes that it makes sense to do so. Upon the sale of a business, we may use the resulting proceeds to retire debt or retain proceeds for future acquisitions or general corporate purposes. Generally, we do not expect to make special distributions at the time of a sale of one of our businesses; instead, we expect that we will seek to gradually increase regular common shareholder distributions over time.

Summary of Our Businesses

Retail and Appliances

Our retail and appliances business is operated by Asien’s. This business segment, which was acquired in the second quarter of 2020, accounted for approximately 20.9% and 68.3% of our total revenues for the three months ended March 31, 2022 and 2021, respectively, and 41.6% and 87.2% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

Since 1948, we have been providing a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North Bay area of Sonoma County, California. Our main focus is delivering personal sales and exceptional service to our customers at competitive prices.

We operate one of the area’s oldest appliance stores and are well known and highly respected throughout the North Bay area. We have strong, established relationships with customers and contractors in the community. We provide products and services to a diverse group of customers, including homeowners, builders, and designers. As a member

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of BrandSource, a buying group that offers vendor programs, factory direct deals, marketing support, opportunity buys, close-outs, consumer rebates, finance offers, and similar benefits, we offer a full line of top brands from U.S. and international manufacturers.

Our retail and appliances segment generated revenues of $2,520,784 and $3,264,366 for the three months ended March 31, 2022 and 2021, respectively, $12,741,064 for the year ended December 31, 2021 and $7,625,222 for the period from May 29, 2020 to December 31, 2020.

Custom Carpentry

Our custom carpentry business is operated through our subsidiaries Kyle’s, High Mountain and Innovative Cabinets. Kyle’s was acquired in the third quarter of 2020 and High Mountain and Innovative Cabinets were acquired in the fourth quarter of 2021. This business segment accounted for approximately 65.5% and 31.7% of our total revenues for the three months ended March 31, 2022 and 2021, respectively, and 39.8% and 12.8% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

We specialize 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. We also install windows and kitchen countertops. We primarily service large homebuilders and homeowners of single-family homes and commercial and multi-family developers in the greater Reno-Sparks-Fernley metro area in Nevada and in the Boise, Idaho area.

Our custom carpentry segment generated revenues of $7,911,103 and $1,515,909 for the three months ended March 31, 2022 and 2021, respectively, $12,203,890 for the year ended December 31, 2021 and $1,120,224 for the period from October 1, 2020 to December 31, 2020.

Automotive Supplies

Our automotive supplies business is operated by Wolo. This business segment, which was acquired at the end of the first quarter of 2021, accounted for approximately 13.6% our total revenues for the three months ended March 31, 2022 and 18.6% of our total revenues for the year ended December 31, 2021.

Our automotive supplies business is headquartered in Deer Park, New York and was founded in 1965. We design and sell horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), and offer vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. Focused on the automotive and industrial after-market, we sell our products to big-box national retail chains, through specialty and industrial distributors, as well as on-line/mail order retailers and original equipment manufacturers, or OEMs. With a stellar reputation for innovative design, our current product line consists of over 455 products, including 54 patented products, as well as over 90 exclusive trademarks.

Our automotive supplies segment generated revenues of $1,641,991 for the three months ended March 31, 2022 and $5,716,030 for the period from April 1, 2021 to December 31, 2021. Prior to our acquisition, Wolo generated revenues of $7,444,776 for the year ended December 31, 2020.

Our Structure

Our company is a Delaware limited liability company that was formed on January 22, 2013. Your rights as a holder of common shares, and the fiduciary duties of our board of directors and executive officers, and any limitations relating thereto, are set forth in the operating agreement governing our company and differ from those applying to a Delaware corporation. See “Description of Securities” for more information about the operating agreement. However, subject to certain exceptions, the documents governing our company specify that the duties of our directors and officers will be generally consistent with the duties of directors and officers of a Delaware corporation.

Our company is classified as a partnership for U.S. federal income tax purposes. Under the partnership income tax provisions, our company is not expected to incur any U.S. federal income tax liability; rather, each of our shareholders will be required to take into account his or her allocable share of company income, gain, loss, deduction and credit. As a holder of our shares, you may not receive cash distributions sufficient in amount to cover taxes in respect of your allocable share of our net taxable income. We will file a partnership return with the Internal Revenue Service, or IRS, and will issue you with tax information, including a Schedule K-1, setting forth your allocable share of our income,

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gain, loss, deduction, credit and other items. The U.S. federal income tax rules that apply to partnerships are complex, and complying with the reporting requirements may require significant time and expense. See “Material U.S. Federal Income Tax Considerations” for more information.

We currently have four classes of limited liability company interests — the common shares, the series A senior convertible preferred shares, the series B senior convertible preferred shares and the allocation shares. All of our allocation shares have been and will continue to be held by our manager. See “Description of Securities” for more information about our shares.

Our Competitive Advantages

We believe that our manager’s collective investment experience and approach to executing our investment strategy provide us with several competitive advantages. These competitive advantages, certain of which are discussed below, have enabled our management to generate very attractive risk-adjusted returns for investors in their predecessor firms.

Robust Network.    Through their activities with their predecessor firms and their comprehensive marketing capabilities, we believe that the management team of our manager has established a “top of mind” position among investment bankers and business brokers targeting small businesses. By employing an institutionalized, multi-platform marketing strategy, we believe our manager has established a robust national network of personal relationships with intermediaries, seasoned operating executives, entrepreneurs and managers, thereby firmly establishing our presence and credibility in the small business market. In contrast to many other buyers of and investors in small businesses, we believe that we can buy businesses at value-oriented multiples and through our asset management activities with a group of professional, experienced and talented operating partners, create appreciable value. We believe our experience, track record and consistent execution of our marketing and investment activities will allow us to maintain a leadership position as the preferred partner for today’s small business market.

Disciplined Deal Sourcing.    We employ an institutionalized, multi-platform approach to sourcing new acquisition opportunities. Our deal sourcing efforts include leveraging relationships with more than 3,000 qualified deal sources through regular calling, mail and e-mail campaigns, assignment of regional marketing responsibilities, in-person visits and high-profile sponsorship of important conferences and industry events. We supplement these activities by retaining selected intermediary firms to conduct targeted searches for opportunities in specific categories on an opportunistic basis. As a result of the significant time and effort spent on these activities, we believe we established close relationships and unique “top of mind” awareness with many of the most productive intermediary sources for small business acquisition opportunities in the United States. While reinforcing our market leadership, this capability enables us to generate a large number of attractive acquisition opportunities.

Differentiated Acquisition Capabilities in the Small Business Market.    We deploy a differentiated approach to acquiring businesses in the small business market. Our management concentrates their efforts on mature companies with sustainable value propositions, which can be supported by our resources and institutional expertise. Our evaluation of acquisition opportunities typically involves significant input from a seasoned operating partner with relevant experience, which we believe enhances both our diligence and ongoing monitoring capabilities. In addition, we approach every acquisition opportunity with creative structures, which we believe enables us to engineer mutually attractive scenarios for sellers, whereas competing buyers may be limited by their rigid structural requirements. We believe our commitment to conservative capital structures and valuation will enhance each acquired operating subsidiary’s ability to deliver consistent levels of cash available for distribution, while additionally supporting reinvestment for growth.

Value Proposition for Business Owners.    We employ a creative, flexible approach by tailoring each acquisition structure to meet the specific liquidity needs and certain qualitative objectives of the target’s owners and management team. In addition to serving as an exit pathway for sellers, we seek to align our interests with the sellers by enabling them to retain and/or earn (through incentive compensation) a substantial economic interest in their businesses following the acquisition and by typically allowing the incumbent management team to retain operating control of the acquired operating subsidiary on a day-to-day basis. We believe that our company is an appealing buyer for small business owners and managers due to our track record of capitalizing portfolio companies conservatively, enhancing our ability to execute on its strategic initiatives and adding equity value. As a result, we believe business owners and managers will find our company to be a dynamic, value-added buyer that brings considerable resources to achieve their strategic, capital and operating needs, resulting in substantial value creation for the operating subsidiary.

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Operating Partner.    Our manager has consistently worked with a strong network of seasoned operating partners — former entrepreneurs and executives with extensive experience building, managing and optimizing successful small businesses across a range of industries. We believe that our operating partner model will enable us to make a significant improvement in the operating subsidiary, as compared to other buyers, such as traditional private equity firms, which rely principally upon investment professionals to make acquisition/investment and monitoring decisions regarding not only the business, financial and legal due diligence aspects of a business but also the more operational aspects including industry dynamics, management strength and strategic growth initiatives. We typically engage an operating partner soon after identifying a target business for acquisition, enhancing our acquisition judgment and building the acquisition team’s relationship with the subsidiary’s management team. Operating partners usually serve as a member of the board of directors of an operating subsidiary and spend two to four days per month working with the subsidiary’s management team. We leverage the operating partner’s extensive experience to build the management team, improve operations and assist with strategic growth initiatives, resulting in value creation.

Small Business Market Experience.    We believe the history and experience of our manager’s partnering with companies in the small business market allows us to identify highly attractive acquisition opportunities and add significant value to our operating subsidiaries. Our manager’s investment experience in the small business market prior to forming our company has further contributed to our institutional expertise in the acquisition, strategic and operational decisions critical to the long-term success of small businesses. Since 2000, the management team of our manager has collectively been presented with several thousand investment opportunities and actively worked with more than 30 small businesses on all facets of their strategy, development and operations, which we have successfully translated into unique, institutionalized capabilities directed towards creating value in small businesses.

Impact of Coronavirus Pandemic

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

Asien’s was qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results. Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s profitability and financial condition.

Kyle’s was also qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment. Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees. Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial condition.

High Mountain was qualified as an essential business and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety.

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Innovative Cabinets was also qualified as an essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities. Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher supply costs, which could adversely impact its profitability and financial condition.

Wolo qualified as an essential business and remained open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business. The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately 90% of Wolo’s vendor base is located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers. We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position.

The spread of COVID-19 has also adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. See also “Risk Factors” for more information.

Corporate Information

Our principal executive offices are located at 590 Madison Avenue, 21st Floor, New York, NY 10022 and our telephone number is 212-417-9800. We maintain a website at www.1847holdings.com. Asien’s maintains a website at www.asiensappliance.com, Kyle’s maintains a website at www.kylescabinets.com, Wolo maintains a website at www.wolo-mfg.com and Innovative Cabinets maintains a website at www.innovativecabinetsanddesign.com. Information available on our websites is not incorporated by reference in and is not deemed a part of this prospectus.

Reverse Split

Our board of directors has approved a 1-for-4 reverse split of our outstanding common shares, which will become effective automatically at the effective time of the registration statement of which this prospectus forms a part. As a result of this reverse split, our issued and outstanding common shares will decrease from 4,995,232 shares to approximately 1,248,829 shares. Reference to “post-split” below are references to the number of our common shares and/or the exercise or conversion prices of our securities after giving effect to this split.

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The Offering

Shares offered:	1,442,308 common shares (or 1,658,654 common shares if the underwriters exercise the over-allotment option in full).
Offering price:	We currently estimate that the public offering price will be between $4.20 and $6.20 per share. For purposes of this prospectus, the assumed public offering price per share is $5.20, the midpoint of the anticipated price range. The actual offering price per share will be as determined between us and the representatives at the time of pricing and the actual number of shares we will offer will be determined based on the actual public offering price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price. See “Underwriting.”
Common shares to be outstanding after this offering(1)(2):	3,770,851 common shares (or 3,987,197 common shares if the underwriters exercise the over-allotment option in full), based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus.
Over-allotment option:	We have granted to the underwriters a 45-day option to purchase from us up to an additional 15% of the common shares sold in the offering, solely to cover over-allotments, if any, at the initial public offering price, less the underwriting discounts.
Use of proceeds:	We expect to receive net proceeds of approximately $6.6 million from this offering (or $7.6 million if the underwriters exercise the over-allotment option in full), based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering for the payment of certain accrued liabilities and for general corporate purposes, which could include future acquisitions, capital expenditures and working capital. See “Use of Proceeds.”
Dividend policy:	If this offering is consummated, we plan to make regular quarterly distributions on our outstanding common shares in an amount that is equal to 2.5% (or 10% per annum) of the public offering price per share for this offering (or $0.13 per quarter (post-split) ($0.52 per annum (post-split)), based upon the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus), subject to our operating subsidiaries generating sufficient cash flow to support such regular cash distributions.
	Our distribution policy will be based on the liquidity and capital of our businesses and on our intention to pay out as distributions to our shareholders most of the cash resulting from the ordinary operation of the businesses, and not to retain significant cash balances in excess of what is prudent for our company or our businesses, or as may be prudent for the consummation of attractive acquisition opportunities. If our strategy is successful, we expect to maintain and increase the level of quarterly distributions to common shareholders in the future.
	The declaration and payment of any monthly distribution to our common shareholders will be subject to the approval of our board of directors. Our board of directors will take into account such matters as general business conditions, our financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by us to our shareholders or by our subsidiaries to us, and any other factors that the board of directors deems relevant. However, even if our board of directors were to decide to declare and pay

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	distributions, our ability to pay such distributions may be adversely impacted due to unknown liabilities, government regulations, financial covenants of our debt, funds needed for acquisitions and to satisfy short- and long-term working capital needs of our businesses, or if our operating subsidiaries do not generate sufficient earnings and cash flow to support the payment of such distributions. In particular, we may incur debt in the future to acquire new businesses, which debt will have substantial debt commitments, which must be satisfied before we can make distributions. These factors could affect our ability to continue to make quarterly distributions to our common shareholders. See “Dividend Policy” for more information.
Risk factors:	Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 26.
Representative’s warrants:	We have agreed to issue to Craft Capital Management  LLC and R.F. Lafferty & Co., Inc., as representatives of the underwriters (referred to as the representatives), or their designees, at the closing of this offering warrants to purchase an aggregate number of common shares equal to 5% of the aggregate number of shares sold in this offering. The representative’s warrants will be exercisable at any time and from time to time, in whole or in part, during the four-and-a-half-year period commencing six months after the effective date of the registration statement of which this prospectus forms a part. The exercise price of the representative’s warrants will equal 125% of the public offering price per share (subject to adjustments). See “Underwriting.”
Lock-up:	We, all of our directors and officers, and the holders of 5% or more of our outstanding common shares, have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common shares or securities convertible into or exercisable or exchangeable for our common shares for a period of 180 after this offering; provided that certain 5% or greater shareholders have agreed to different terms with the underwriters. See “Underwriting.”
Trading market and symbol:	Our common shares are quoted on the OTCQB market under the symbol “EFSH.” In connection with this offering, we received approval from NYSE American for the listing of our common shares under the symbol “EFSH.” The closing of this offering is contingent upon our uplisting to NYSE American unless such condition is waived by the representatives of the underwriters.
Transfer agent:	The transfer agent and registrar for our common shares is VStock Transfer, LLC.

(1)         The number of common shares outstanding immediately following this offering is based on 1,298,831 shares (post-split) outstanding as of            , 2022. The number of common shares outstanding immediately following this offering includes the following shares to be issued upon the conversion of certain debt at the effective time of the registration statement of which this prospectus forms a part, based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus (see “Management Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Conversion Agreements” for more information regarding these debt conversions):

•        646,154 common shares (post-split) to be issued upon the conversion of $3,360,000 of the 6% subordinated convertible promissory notes that the holders have agreed convert at a conversion price equal to the public offering price;

•        153,312 common shares (post-split) to be issued upon the conversion of $797,221 of the vesting promissory note that the holder has agreed convert at a conversion price equal to the public offering price; and

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•        230,246 common shares (post-split) to be issued upon the conversion of $1,197,280 of the accounts payable owed to Bevilacqua PLLC, our outside securities counsel, which it has agreed convert at a conversion price equal to the public offering price.

(2)         The number of common shares outstanding immediately following this offering does not include the following:

•        up to approximately 481,388 common shares (post-split) issuable upon the conversion of our outstanding series A senior convertible preferred shares;

•        up to approximately 120,397 common shares (post-split) issuable upon the conversion of our outstanding series B senior convertible preferred shares;

•        up to 2,553,303 common shares (post-split) issuable upon the exercise of outstanding warrants at a weighted average exercise price of $5.11 per share (post-split) (without giving effect to the full ratchet (or exploding) antidilution adjustment provisions that may be triggered by this offering as described in “Description of Securities — Warrants”);

•        common shares issuable upon the conversion of secured convertible promissory notes in the aggregate principal amount of $24,860,000, which are convertible into our common shares at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the conversion of a promissory note in the principal amount of $600,000, which is convertible into our common shares only upon an event of default under the promissory note at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the exchange of the remaining balance of the 6% subordinated convertible promissory notes, which are exchangeable for our common shares at an exchange price equal to the higher of $10.00 (post-split) or the 30-day volume weighted average price of our common shares (subject to adjustment); and

•        common shares issuable upon the exercise of the representative’s warrants issued in connection with this offering.

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Summary of Risk Factors

An investment in our securities involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the “Risk Factors” section immediately following this Prospectus Summary. These risks include, but are not limited to, the following:

Risks Related to Our Business and Structure

•        The COVID-19 pandemic may cause a material adverse effect on our business.

•        We have a limited operating history, and we may not be able to manage our businesses on a profitable basis.

•        Our auditors determined our ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding our future cash flows, available capital and the risk of bias in management’s judgments and assumptions in their determination.

•        We may not be able to effectively integrate the businesses that we acquire.

•        We may not be able to successfully fund acquisitions due to the unavailability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy.

•        If we are unable to generate sufficient cash flow from the anticipated dividends and interest payments that we expect to receive from our businesses, we may not be able to make distributions to our shareholders.

Risks Related to Our Retail and Appliances Business

•        If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, we may not be able to achieve profitability.

•        Our business depends on our ability to build and maintain strong brands.

•        Our business is highly competitive. Competition presents an ongoing threat to the success of our business.

•        System interruptions that impair customer access to our sites or other performance failures or incidents involving our logistics network, our technology infrastructure or our critical technology partners could damage our business, reputation and brand and substantially harm our business and results of operations.

•        We may be subject to product liability and other similar claims if people or property are harmed by the products we sell.

•        Risks associated with the suppliers from whom our products are sourced could materially adversely affect our financial performance as well as our reputation and brand.

•        Failure to comply with applicable laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.

Risks Related to Our Custom Carpentry Business

•        The loss of any of our key customers could have a materially adverse effect on our results of operations.

•        Our business primarily relies on U.S. home improvement, repair and remodel and new home construction activity levels, all of which are impacted by risks associated with fluctuations in the housing market.

•        Increases in interest rates and the reduced availability of financing for home improvements may cause our sales and profitability to decrease.

•        Difficulties in recruiting adequate personnel may have a material adverse effect on our ability to meet our growth expectations.

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•        In the event of a catastrophic loss of our key manufacturing facility, our business would be adversely affected.

•        The nature of our custom carpentry business exposes us to product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings.

•        We have historically depended on a limited number of third parties to supply key finished goods and raw materials to us.

•        Environmental requirements applicable to our facilities may impose significant environmental compliance costs and liabilities, which would adversely affect our results of operations.

Risks Related to Our Automotive Supply Business

•        If we fail to offer a broad selection of products at competitive prices or fail to maintain sufficient inventory to meet customer demands, our revenue could decline.

•        We are highly dependent upon key suppliers and an interruption in such relationships or our ability to obtain products from such suppliers could adversely affect our business and results of operations.

•        We are dependent upon relationships with manufacturers in Taiwan and China, which exposes us to complex regulatory regimes and logistical challenges.

•        If our fulfillment operations are interrupted for any significant period of time or are not sufficient to accommodate increased demand, our sales could decline and our reputation could be harmed.

•        We face exposure to product liability lawsuits.

•        Business interruptions in our facilities may affect the distribution of our products and/or the stability of our computer systems, which may affect our business.

Risks Related to Our Relationship with Our Manager

•        Termination of the management services agreement will not affect our manager’s rights to receive profit allocations and removal of our manager may cause us to incur significant fees.

•        Our manager and the members of our management team may engage in activities that compete with us or our businesses.

•        The management fee and profit allocation to be paid to our manager may significantly reduce the amount of cash available for distributions to shareholders and for operations.

•        Our manager’s influence on conducting our business and operations, including acquisitions, gives it the ability to increase its fees and compensation to our Chief Executive Officer, which may reduce the amount of cash available for distributions to our shareholders.

Risks Related to This Offering and Ownership of Our Common Shares

•        We may not be able to satisfy listing requirements of NYSE American or maintain a listing of our common shares on NYSE American.

•        An active, liquid trading market for our common shares may not be sustained.

•        Our series A senior convertible preferred shares and series B senior convertible preferred shares are senior to our common shares as to distributions and in liquidation, which could limit our ability to make distributions to our common shareholders.

•        We may issue additional debt and equity securities, which are senior to our common shares as to distributions and in liquidation, which could materially adversely affect the market price of our common shares.

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Summary Consolidated Financial Information

The following tables summarize certain financial data regarding our business and should be read in conjunction with our financial statements and related notes contained elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our summary consolidated financial data as of December 31, 2021 and 2020 and for the years then ended are derived from our audited consolidated financial statements included elsewhere in this prospectus. We derived our summary consolidated financial data as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus.

The summary financial data for High Mountain and Innovative Cabinets as of December 31, 2020 and for the year then ended are derived from the audited combined financial statements of High Mountain and Innovative Cabinets for the years ended December 31, 2020 and 2019 included elsewhere in this prospectus.

The summary financial data for Wolo as of December 31, 2020 and for the year then ended are derived from the audited combined financial statements of Wolo for the years ended December 31, 2020 and 2019 included elsewhere in this prospectus.

All financial statements included in this prospectus are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP. The summary financial information is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere herein. The financial statements contained elsewhere fully represent our financial condition and operations; however, they are not indicative of our future performance.

1847 Holdings LLC

	Three Months Ended March 31						Years Ended December 31,
Statements of Operations Data	2022			2021			2021			2020
	(unaudited)			(unaudited)
Total revenues	$	12,073,878		$	4,780,275		$	30,660,984		$	8,745,446
Total operating expenses		12,004,408			5,191,656			31,764,883			10,095,343
Income (loss) from operations		69,470			(411,381	)		(1,103,899	)		(1,349,897	)
Total other income (expense)		(873,678	)		(442,611	)		(2,399,119	)		(554,172	)
Net loss before income taxes		(804,208	)		(853,992	)		(3,503,018	)		(1,904,069	)
Income tax benefit (expense)		(123,000	)		—			(218,139	)		83,931
Net loss from continuing operations	$	(927,208	)	$	(853,992	)	$	(3,721,157	)		(1,820,138	)
Net income (loss) from discontinued operations		—			178,510			132,223			(7,838,631	)
Net loss		(927,208	)		(755,811	)		(3,588,934	)		(9,658,769	)
Less net loss attributable to non-controlling interests		(54,178	)		(25,370	)		(284,372	)		(50,120	)
Net loss available to common shareholders	$	(873,030	)	$	(730,441	)	$	(3,304,562	)	$	(9,608,649	)
Preferred share accrued dividends		(135,215	)		(188,709	)		(984,176	)		—
1847 Goedeker spin-off dividend		—			—			—			(283,257	)
Distribution – allocation shares		—			—			—			(5,985,000	)
Deemed dividend related to issuance of preferred shares		—			(1,527,086	)		(1,527,086	)		(3,051,478	)
Net loss attributable to shareholders	$	(1,008,245	)	$	(2,446,236	)	$	(5,815,824	)	$	(18,928,384	)

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Balance Sheet Data	As of March 31, 2022			As of December 31, 2021		As of December 31, 2020
	(unaudited)
Cash	$	1,638,924		$	1,383,533	$	976,538
Restricted cash		—			—		403,811
Total current assets		11,980,195			11,136,774		5,874,530
Total assets		47,612,901			47,006,547	$	19,239,940
Total current liabilities		12,904,519			12,432,466		8,083,830
Total liabilities		46,230,329			45,449,472		15,993,790
Total mezzanine equity		2,528,750			—		—
Total shareholders’ equity (deficit)		(1,146,178	)		1,557,075		3,246,150
Total liabilities, mezzanine equity and shareholders’ deficit	$	47,612,901		$	47,006,547	$	19,239,940

High Mountain and Innovative Cabinets

Statements of Income Data	Year Ended December 31, 2020
Net sales	$	17,655,250
Cost of sales		12,184,092
Gross profit		5,471,158
Total operating expenses		4,068,968
Income from operations		1,402,190
Total other income (expense)		1,213,904
Net income	$	2,616,094

Balance Sheet Data	As of December 31, 2020
Cash and cash equivalents	$	1,368,927
Total current assets		4,871,163
Total assets		5,732,580
Total current liabilities		4,758,640
Total liabilities		4,972,628
Total owners’ equity (deficit)		759,952
Total liabilities and owners’ equity	$	5,732,580

Wolo

Statements of Income Data	Year Ended December 31, 2020
Revenues	$	7,444,776
Cost of goods sold		4,095,389
Gross profit		3,349,387
Total operating expenses		2,326,859
Income from operations		1,022,528
Total other income (expense)		8,884
Income tax expense		(216,621	)
Net income	$	814,791

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Balance Sheet Data	As of December 31, 2020
Cash	$	574,983
Total current assets		4,677,672
Total assets		4,818,122
Total current liabilities		392,072
Total liabilities		506,732
Total stockholders’ equity		4,311,390
Total liabilities and stockholders’ equity	$	4,818,122

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Unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma financial information presented below sets forth the financial position and results of operations of our company after giving effect to the acquisitions of Wolo and High Mountain and Innovative Cabinets. The following unaudited pro forma consolidated financial statements were prepared in accordance with the regulations of the SEC.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2021 combines the historical statement of operations of our company with the historical statement of operations of Wolo, High Mountain and Innovative Cabinets, and was prepared as if these transactions had occurred on January 1, 2021.

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of what our company’s financial position would have been had these transactions been completed on the dates indicated or what our company’s results of operations would have been had the transactions been completed as of the beginning of the periods indicated. In addition, the pro forma consolidated financial statements do not purport to project the future financial position or operating results of our company. The pro forma consolidated financial statements include adjustments for events that are (1) directly attributable to the transactions, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results.

The pro forma financial information has been derived from and should be read in conjunction with our audited consolidated financial statements and related notes for the years ended December 31, 2021 and 2020, which are included elsewhere in this prospectus.

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1847 HOLDINGS LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2021

	1847 Holdings LLC			High Mountain and Innovative Cabinets January 1 to September 30, 2021			Wolo January 1 to March 30, 2021			Pro Forma Adjustments			Notes		Pro Forma
Revenues	$	30,660,984		$	18,501,565		$	2,426,455		$	—				$	51,589,004
Cost of revenues		20,311,724			12,697,676			1,392,333			—					34,401,733
Gross profit		10,349,260			5,803,889			1,034,122			—					17,187,271
Operating expenses:
Personnel		3,247,441			2,032,762			128,088			—					5,408,291
Depreciation and amortization		908,982			170,077			1,379			—					1,080,438
General and administrative		7,296,736			1,065,854			341,612			75,000		(m-1	)		8,779,202
											150,000		(m-2	)		150,000
Total operating expenses		11,453,159			3,268,693			471,079			225,000					15,417,931
Net income (loss) from operations		(1,103,899	)		2,535,196			563,043			(225,000	)				1,769,340
Other income (expense)
Gain on forgiveness of debt		360,302			—			173,850			—					534,152
Loss on write-down of vesting note payable – related party		(602,204	)		—			—			—					(602,204	)
Loss on extinguishment of debt		(137,692	)		—			—			—					(137,692	)
Loss on redemption of preferred shares		(4,017,553	)		—			—			—					(4,017,553	)
Gain on disposition of subsidiary		3,282,804			—			—			—					3,282,804
Gain on disposal of property and equipment		10,885			37,000			—			—					47,885
Other income		876			5			51,070			—					51,951
Interest expense		(1,296,537	)		(11,391	)		(355	)		(1,506,233	)	(p-1	)		(2,814,516	)
											(264,616	)	(p-2	)		(264,616	)
Total other income (expense)		(2,399,119	)		25,614			224,565			(1,770,848	)				(3,919,788	)
Net income (loss) before income taxes		(3,503,018	)		2,560,810			787,608			(1,995,848	)				(2,150,448	)
Income tax benefit (expense)		(218,139	)		—			(129,342	)		538,879		(a-1	)		191,398
Net income (loss) from continuing operations	$	(3,721,157	)	$	2,560,810		$	658,266		$	(1,456,969	)			$	(1,959,050	)
Net income from discontinued operations		240,405			—			—			—					240,405
Less net income from discontinued operations attributable to noncontrolling interests		108,182			—			—			—					108,182
Net income from discontinued operations attributable to common shareholders		132,223			—			—			—					132,223
Net income (loss)		(3,588,934	)		2,560,810			658,266			(1,456,969	)				(1,826,827	)
Less net income (loss) attributable to non-controlling interests		(284,372	)		—			—			121,379		(a-2	)		(162,993	)
Net income (loss) available to common shareholders	$	(3,304,562	)	$	2,560,810		$	658,266		$	(1,578,348	)			$	(1,663,834	)
Preferred share accrued dividend		(984,176	)		—			—			—					(984,176	)
Deemed dividend related to issuance of preferred shares		(1,527,086	)		—			—			—					(1,527,086	)
Net income (loss) attributable to shareholders	$	(5,815,824	)	$	2,560,810		$	658,266		$	(1,578,348	)			$	(4,175,096	)
Net loss per common share from continuing operations: basic	$	(0.78	)												$	(0.41	)
Net income per common share from discontinued operations: basic	$	0.03													$	0.03
Net loss per common share: basic	$	(0.70	)												$	(0.35	)
Net loss per common share from continuing operations diluted	$	(0.78	)												$	(0.41	)
Net income per common share from discontinued operations: diluted	$	0.01													$	0.01
Net loss per common share: diluted	$	(0.70	)												$	(0.35	)
Weighted-average common shares outstanding: basic		4,749,971														4,749,971
Weighted-average common shares outstanding: dilutive		11,175,892														11,175,892

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1847 HOLDINGS LLC
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE TRANSACTIONS

Acquisition of High Mountain and Innovative Cabinets and Related Transactions

On September 23, 2021, 1847 Cabinet entered into a securities purchase agreement with High Mountain, Innovative Cabinets, and Steven J. Parkey and Jose D. Garcia-Rendon, which was amended on October 6, 2021, pursuant to which 1847 Cabinet agreed to acquire all of the issued and outstanding capital stock or other equity securities of High Mountain and Innovative Cabinets. On October 8, 2021, closing of the acquisition was completed.

The purchase price was $15,441,173 (subject to adjustment), consisting of (i) $10,687,500 in cash (subject to adjustment) and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the amount of $4,753,673 consisting of an aggregate principal amount of $5,880,345, net of debt discount of $1,126,672.

The purchase price is subject to a post-closing working capital adjustment provision. Under this provision, the sellers delivered to 1847 Cabinet at the closing an unaudited balance sheet of High Mountain and Innovative Cabinets and a calculation of estimated net working capital of High Mountain and Innovative Cabinets as of that date. On or before the 75th day following the closing, 1847 Cabinet must deliver to the sellers an unaudited balance sheet of High Mountain and Innovative Cabinets and its calculation of the final net working capital of High Mountain and Innovative Cabinets as of the closing date. If such final net working capital exceeds the estimated net working capital, 1847 Cabinet must, within seven days, pay to the sellers an amount of cash that is equal to such excess. If the estimated net working capital exceeds the final net working capital, the sellers must, within seven days, pay to 1847 Cabinet an amount in cash equal to such excess. As of the date of this prospectus, the post-closing working capital adjustment has not been completed. We are working with the sellers to finalize the post-working capital adjustment.

6% Subordinated Convertible Promissory Notes

As noted above, a portion of the purchase price for the acquisition 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 sellers. 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. The holders may also exchange the notes or any portion thereof for securities of our company pursuant to the exchange agreement described below. The notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described below. 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 below.

Exchange Agreement

On October 8, 2021, we entered into an exchange agreement with the sellers, pursuant to which we granted the sellers and their permitted assigns the right, but not the obligation, to exchange all of the principal amount and accrued but unpaid interest under the notes as may be the outstanding from time to time or any portion thereof for a number of common shares 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 common shares on the primary national securities exchange or over the counter market on which the common shares are traded over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) $10.00 (post-split) (subject to equitable adjustments for stock splits, stock combinations, recapitalizations and similar transactions).

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Secured Convertible Promissory Notes

On October 8, 2021, our company and each of its 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 Capital LLC, pursuant to which we issued to the investors 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.

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 with such prepayment. In addition, immediately upon receipt by us or any subsidiary of any proceeds from any issuance of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by us 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, we 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 our company or a subsidiary in connection therewith (in each case, paid to non-affiliates).

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 at a conversion price equal to $5.20 (post-split) (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 we 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 us, 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 61st day after such notice is delivered to us.

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 our 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 us 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 our company and its subsidiaries.

Warrants

In connection with the loan made by Leonite Capital LLC, on October 8, 2021, we issued to Leonite Capital LLC a five-year warrant for the purchase of 62,500 common shares (post-split) with an exercise price of $0.04 per share (post-split) and a five-year warrant for the purchase of 125,000 common shares (post-split) with an exercise price of $5.20 per share (post-split). The exercise price is subject to standard adjustments, including upon any future equity offering with a lower exercise price. Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The warrants may be exercised on a cashless basis under certain circumstances and contain certain beneficial ownership limitations.

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Subsidiary Equity Issuance

In connection with the loan made by Leonite Capital LLC, on October 8, 2021, we also issued to Leonite Capital LLC a number of shares or membership units, as applicable, representing a 7.50% fully-diluted ownership interest in each of High Mountain and Innovative Cabinets. As a result, 1847 Cabinet owns 92.5% of each of these subsidiaries.

Acquisition of Wolo and Related Transactions

On December 22, 2020, we and 1847 Wolo entered into a stock purchase agreement with Wolo and Barbara Solow and Stanley Solow, which was amended on March 30, 2021, pursuant to which 1847 Wolo agreed to acquire all of the issued and outstanding stock of Wolo. On March 30, 2021, closing of the acquisition was completed.

The aggregate purchase price was $8,344,056, consisting of (i) $6,550,000 in cash, (ii) a 6% secured promissory note in the aggregate principal amount of $850,000 and (iii) cash paid to seller, net of working capital adjustment, of $944,056.

6% Secured Promissory Note

As noted above, a portion of the purchase price for the acquisition of Wolo was paid by the issuance of a 6% secured promissory note in the principal amount of $850,000 by 1847 Wolo to the sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent (6%) per annum. On October 8, 2021, the promissory note was repaid in full.

Management Services Agreement

On March 30, 2021, 1847 Wolo entered into a management services agreement with our manager. This management services agreement is an offsetting management services agreement as defined in the management services agreement with our manager.

Pursuant to the management services agreement, 1847 Wolo appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by 1847 Wolo, together with all other management fees paid or to be paid to our manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the management fee paid under the management services agreement in any fiscal quarter, then the management fee to be paid by 1847 Wolo shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to our manager under other offsetting management services agreements.

1847 Wolo shall also reimburse our manager for all costs and expenses of 1847 Wolo which are specifically approved by the board of directors of 1847 Wolo, including all out-of-pocket costs and expenses, that are actually incurred by our manager or its affiliates on behalf of 1847 Wolo in connection with performing services under the management services agreement.

The services provided by our manager include: conducting general and administrative supervision and oversight of 1847 Wolo’s day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to 1847 Wolo’s business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines.

Credit Agreement and Notes

On March 30, 2021, 1847 Wolo and Wolo entered into a credit agreement with Sterling National Bank for (i) revolving loans in an aggregate principal amount that will not exceed the lesser of (x) the borrowing base (as defined in the credit agreement) or (y) $1,000,000 and (ii) a term loan in the principal amount of $3,550,000. The revolving loan was to mature on March 29, 2022 and bore interest at a per annum rate equal to the greater of (i) the Prime Rate (as defined

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in the credit agreement) or (ii) 3.75%. The term loan was to mature on April 1, 2024 and bore interest at a per annum rate equal to the greater of (x) the Prime Rate plus 3.00% or (y) 5.00%. On October 8, 2021, the revolving loan and the term loan were repaid in full.

Unit Offering

On March 26, 2021, we entered into several securities purchase agreements with certain purchasers, pursuant to which we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, to the purchasers for an aggregate purchase price of $3,000,000. Each unit consists of (i) one (1) series A senior convertible preferred share and (ii) a three-year warrant to purchase one (1) common share at an exercise price of $5.20 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. The proceeds were used to fund, in part, the acquisition.

On March 26, 2021, we also entered into a subscription agreement with 1847 Wolo, pursuant to which 1847 Wolo issued to our company 1,000 shares of 1847 Wolo’s series A preferred stock at a price of $3,000 per share, in exchange for our contribution to 1847 Wolo of the $3,000,000 raised in the unit offering, so that 1847 Wolo would have the funds to acquire Wolo.

NOTE 2 — BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2021 combines the historical statement of operations of our company with the historical statement of operations of Wolo, High Mountain and Innovative Cabinets, and was prepared as if these transactions had occurred on January 1, 2021.

The historical financial information is adjusted in the unaudited pro forma consolidated financial information to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the combined statement of operations, expected to have a continuing impact on the combined results.

We accounted for the acquisitions using the acquisition method of accounting in accordance with Financial Accounting Standards Board ASC Topic 805 “Business Combinations”. In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition dates is measured as the difference of fair value of the net tangible assets and identifiable assets acquired over the purchase consideration.

The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the transactions described herein occurred on the dates assumed, nor are the necessarily indicative of future consolidated results of operations or financial position.

We expect to incur costs and realize benefits associated with integrating the operations of our company and Wolo, High Mountain and Innovative Cabinets. The unaudited pro forma consolidated financial statements do not reflect the costs of any integration activities or any benefits that may result from operating efficiencies or revenue synergies. The unaudited pro forma consolidated statement of operations does not reflect any non-recurring charges directly related to the acquisitions that the combined companies incurred upon completion of the acquisitions.

NOTE 3 — PURCHASE PRICE CONSIDERATION

High Mountain and Innovative Cabinets

The fair value of the purchase consideration issued to the sellers was allocated to the net tangible assets acquired. We accounted for the acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired was approximately $3,716,376. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

We are currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation will be included in our financial statements in future periods.

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The table below shows a preliminary analysis for the acquisition:

Purchase consideration at preliminary fair value:
Cash	$	10,687,500
Notes payable, net of debt discount		4,753,673
Amount of consideration	$	15,441,173
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	208,552
Accounts receivable		1,042,194
Inventory		1,848,729
Contract assets		367,177
Other current assets		80,771
Marketing intangible		1,610,000
Customer intangible		4,843,000
Property and equipment		610,882
Operating lease assets		831,951
Other assets		—
Accounts payable and accrued expenses		(1,207,424	)
Contract liabilities		(3,770,081	)
Deferred tax liabilities		(1,670,000	)
Lease liabilities		(856,377	)
Financing leases		(18,600	)
Loans payable		(204,399	)
Net tangible assets acquired	$	3,716,375
Total net assets acquired	$	3,716,375
Consideration paid		15,441,173
Preliminary goodwill	$	11,724,798

The estimated useful life remaining on the property and equipment acquired is 3 to 7 years.

Wolo

The fair value of the purchase consideration issued to the sellers was allocated to the net tangible assets acquired. We accounted for the acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired was approximately $6,606,403. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

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The table below shows an analysis for the acquisition:

Purchase consideration at fair value:
Notes payable	$	850,000
Cash		6,550,000
Net cash paid to Seller (post-closing)		944,056
Amount of consideration	$	8,344,056
Assets acquired and liabilities assumed at fair value
Cash	$	1,171,655
Accounts receivable		1,860,107
Inventory		1,944,929
Customer related intangibles		233,000
Marketing related intangibles		992,000
Technology related intangibles		623,000
Other current assets		218,154
Deferred tax liability		(325,000	)
Accounts payable and accrued expenses		(111,442	)
Net tangible assets acquired	$	6,606,403
Total net assets acquired	$	6,606,403
Consideration paid		8,344,056
Goodwill	$	1,737,653

NOTE 4 — PRO FORMA ADJUSTMENTS

The pro forma adjustments included in the unaudited pro forma combined financial statements are as follows:

Acquisition

(a-1)      Upon the acquisition, the taxable income and losses from Wolo, High Mountain and Innovative Cabinets will be included with our future corporate income tax filings.

(a-2)      Reflects the allocation of the 7.5% non-controlling interest of 1847 Wolo on the proforma adjustments.

Management Services Agreements

(m-1)     Reflects an annualized management fee paid by 1847 Wolo to our manager.

(m-2)     Reflects annualized management fee paid by 1847 Cabinet to our manager attributable to acquisitions.

Promissory Notes

(p-1)      Reflects the interest expense for the secured convertible promissory notes.

(p-2)      Reflects the interest expense for the 6% subordinated convertible promissory note.

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to Our Business and Structure

The COVID-19 pandemic may cause a material adverse effect on our business.

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

Asien’s was qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results. Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s profitability and financial condition.

Kyle’s was also qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment. Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees. Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial condition.

High Mountain was qualified as an essential business and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety.

Innovative Cabinets was also qualified as an essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities. Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher supply costs, which could adversely impact its profitability and financial condition.

Wolo qualified as an essential business and remained open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business. The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately 90% of Wolo’s vendor base is

26

located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers. We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position.

The spread of COVID-19 has also adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

We have a limited operating history, and we may not be able to manage our businesses on a profitable basis.

We were formed on January 22, 2013 and operated a management consulting business from that date through October 3, 2017. In March 2017, we acquired Neese, a provider of products and services for the agriculture, construction, lawn and garden industries, which we subsequent sold back to the original owners in April 2021. In April 2019, we acquired the assets of Goedeker Television, a one-stop e-commerce destination for home furnishings, which we subsequently spun-off pursuant our distribution of all of our shares of 1847 Goedeker that we held to our shareholders in October 2020. In May 2020, we acquired Asien’s, which provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North Bay area of Sonoma County, California. In September 2020, we acquired Kyle’s, a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. In March 2021, we acquired Wolo, which 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. In October 2021, we acquired High Mountain and Innovative Cabinets, which specialize in all aspects of finished carpentry products and services. We plan to acquire additional operating businesses in the future.

Our manager will manage the day-to-day operations and affairs of our company and oversee the management and operations of our businesses, subject to the oversight of our board of directors. If we do not develop effective systems and procedures, including accounting and financial reporting systems, to manage our operations as a consolidated public company, we may not be able to manage the combined enterprise on a profitable basis, which could adversely affect our ability to pay distributions to our shareholders.

Our auditors determined our ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding our future cash flows, available capital and the risk of bias in management’s judgments and assumptions in their determination.

Although our audited financial statements for the year ended December 31, 2021 were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2021 contains a critical audit matter description relating to our ability to continue as a going concern due to the estimation and uncertainty regarding our future cash flows, available capital and the risk of bias in management’s judgments and assumptions in their determination. We have generated losses since inception and have 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. For the year ended December 31, 2021, we incurred operating losses from continuing operations of $3,721,157 (before deducting losses attributable to non-controlling interests and excluding the income of discontinued operations), cash flows used in operating activities from continuing operations of $897,566 (excluding the cashflow from discontinued operations) and negative working capital of $1,295,692 (excluding the negative

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working capital from discontinued operations). For the three months ended March 31, 2022, we incurred operating income of $69,470 (before deducting losses attributable to non-controlling interests), cash flows used in operations of $536,260, and negative working capital of $924,324.

However, management believes, based on our operating plan, that current working capital and current and expected additional financing is sufficient to fund operations and satisfy our obligations as they come due for at least one year from the financial statement issuance date. We also believe that the proceeds from this offering will be sufficient to fund our operations for significantly more than the next year. However, we do believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $5,000,000.

Although we do not believe that we will require additional cash to continue our operations over the next twelve months, there are no assurances that we will be able to raise our revenues to a level which supports profitable operations and provides sufficient funds to pay obligations in the future. Our prior losses have had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to acquire additional businesses may be dependent on our ability to obtain additional financing in the future, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through our operations, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. If we cannot continue as a going concern, our shareholders would likely lose most or all of their investment in us.

We may not be able to effectively integrate the businesses that we acquire.

Our ability to realize the anticipated benefits of acquisitions will depend on our ability to integrate those businesses with our own. The combination of multiple independent businesses is a complex, costly and time-consuming process and there can be no assurance that we will be able to successfully integrate businesses into our business, or if such integration is successfully accomplished, that such integration will not be costlier or take longer than presently contemplated. Integration of future acquisitions may include various risks and uncertainties, including the factors discussed in the paragraph below. If we cannot successfully integrate and manage the businesses within a reasonable time, we may not be able to realize the potential and anticipated benefits of such acquisitions, which could have a material adverse effect on our share price, business, cash flows, results of operations and financial position.

We will consider other acquisitions that we believe will complement, strengthen and enhance our growth. We evaluate opportunities on a preliminary basis from time to time, but these transactions may not advance beyond the preliminary stages or be completed. Such acquisitions are subject to various risks and uncertainties, including:

•        the inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which are in diverse geographic regions) and achieve expected synergies;

•        the potential disruption of existing business and diversion of management’s attention from day-to-day operations;

•        the inability to maintain uniform standards, controls, procedures and policies;

•        the need or obligation to divest portions of the acquired companies;

•        the potential failure to identify material problems and liabilities during due diligence review of acquisition targets;

•        the potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses; and

•        the challenges associated with operating in new geographic regions.

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Our future success is dependent on the employees of our manager, our manager’s operating partners and the management team of our business, the loss of any of whom could materially adversely affect our financial condition, business and results of operations.

Our future success depends, to a significant extent, on the continued services of the employees of our manager. The loss of their services may materially adversely affect our ability to manage the operations of our businesses. The employees of our manager may leave our manager and go to companies that compete with us in the future. In addition, we depend on the assistance provided by our manager’s operating partners in evaluating, performing diligence on and managing our businesses. The loss of any employees of our manager or any of our manager’s operating partners may materially adversely affect our ability to implement or maintain our management strategy or our acquisition strategy.

The future success of our existing and future businesses also depends on the respective management teams of those businesses because we intend to operate our businesses on a stand-alone basis, primarily relying on their existing management teams for day-to-day operations. Consequently, their operational success, as well as the success of any organic growth strategy, will be dependent on the continuing efforts of the management teams of our businesses. We will seek to provide these individuals with equity incentives and to have employment agreements with certain persons we have identified as key to their businesses. However, these measures may not prevent these individuals from leaving their employment. The loss of services of one or more of these individuals may materially adversely affect our financial condition, business and results of operations.

We may experience difficulty as we evaluate, acquire and integrate businesses that we may acquire, which could result in drains on our resources, including the attention of our management, and disruptions of our on-going business.

We acquire small businesses in various industries. Generally, because such businesses are privately held, we may experience difficulty in evaluating potential target businesses as much of the information concerning these businesses is not publicly available. Therefore, our estimates and assumptions used to evaluate the operations, management and market risks with respect to potential target businesses may be subject to various risks and uncertainties. Further, the time and costs associated with identifying and evaluating potential target businesses and their industries may cause a substantial drain on our resources and may divert our management team’s attention away from the operations of our businesses for significant periods of time.

In addition, we may have difficulty effectively integrating and managing acquisitions. The management or improvement of businesses we acquire may be hindered by a number of factors, including limitations in the standards, controls, procedures and policies implemented in connection with such acquisitions. Further, the management of an acquired business may involve a substantial reorganization of the business’ operations resulting in the loss of employees and customers or the disruption of our ongoing businesses. We may experience greater than expected costs or difficulties relating to an acquisition, in which case, we might not achieve the anticipated returns from any particular acquisition.

We face competition for businesses that fit our acquisition strategy and, therefore, we may have to acquire targets at sub-optimal prices or, alternatively, forego certain acquisition opportunities.

We have been formed to acquire and manage small businesses. In pursuing such acquisitions, we expect to face strong competition from a wide range of other potential purchasers. Although the pool of potential purchasers for such businesses is typically smaller than for larger businesses, those potential purchasers can be aggressive in their approach to acquiring such businesses. Furthermore, we expect that we may need to use third-party financing in order to fund some or all of these potential acquisitions, thereby increasing our acquisition costs. To the extent that other potential purchasers do not need to obtain third-party financing or are able to obtain such financing on more favorable terms, they may be in a position to be more aggressive with their acquisition proposals. As a result, in order to be competitive, our acquisition proposals may need to be aggressively priced, including at price levels that exceed what we originally determined to be fair or appropriate. Alternatively, we may determine that we cannot pursue on a cost-effective basis what would otherwise be an attractive acquisition opportunity.

We may not be able to successfully fund acquisitions due to the unavailability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy.

In order to make acquisitions, we intend to raise capital primarily through debt financing, primarily at our operating company level, additional equity offerings, the sale of equity or assets of our businesses, offering equity in our company or our businesses to the sellers of target businesses or by undertaking a combination of any of the above. Because the

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timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive acquisition opportunities. Such funding may not be available on acceptable terms. In addition, the level of our indebtedness may impact our ability to borrow at our company level. The sale of additional shares of any class of equity will also be subject to market conditions and investor demand for such shares at prices that may not be in the best interest of our shareholders. These risks may materially adversely affect our ability to pursue our acquisition strategy.

We may change our management and acquisition strategies without the consent of our shareholders, which may result in a determination by us to pursue riskier business activities.

We may change our strategy at any time without the consent of our shareholders, which may result in our acquiring businesses or assets that are different from, and possibly riskier than, the strategy described in this prospectus. A change in our strategy may increase our exposure to interest rate and currency fluctuations, subject us to regulation under the Investment Company Act of 1940, as amended, which we refer to as the Investment Company Act, or subject us to other risks and uncertainties that affect our operations and profitability.

If we are unable to generate sufficient cash flow from the anticipated dividends and interest payments that we expect to receive from our businesses, we may not be able to make distributions to our shareholders.

Our primary business is the holding and managing of controlling interests our operating businesses. Therefore, we will be dependent upon the ability of our businesses to generate cash flows and, in turn, distribute cash to us in the form of interest and principal payments on indebtedness and distributions on equity to enable us, first, to satisfy our financial obligations and, second, to make distributions to our common shareholders. The ability of our businesses to make payments to us may also be subject to limitations under laws of the jurisdictions in which they are incorporated or organized. If, as a consequence of these various restrictions or otherwise, we are unable to generate sufficient cash flow from our businesses, we may not be able to declare, or may have to delay or cancel payment of, distributions to our common shareholders.

In addition, the put price and profit allocation will be payment obligations and, as a result, will be senior in right to the payment of any distributions to our shareholders. Further, we are required to make a profit allocation to our manager upon satisfaction of applicable conditions to payment. See “The Manager — Our Manager as an Equity Holder” for more information about our manager’s put right and profit allocation.

Our loans with third parties contain certain terms that could materially adversely affect our financial condition.

We and our subsidiaries are parties to certain loans with third parties, which are secured by the assets of our subsidiaries. The loans agreements contain customary representations, warranties and affirmative and negative financial and other covenants. If an event of default were to occur under any of these loans, the lender thereto may pursue all remedies available to it, including declaring the obligations under its respective loan immediately due and payable, which could materially adversely affect our financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further discussion regarding our borrowing activities.

In the future, we may seek to enter into other credit facilities to help fund our acquisition capital and working capital needs. These credit facilities may expose us to additional risks associated with leverage and may inhibit our operating flexibility and reduce cash flow available for payment of distributions to our shareholders.

We may seek to enter into other credit facilities with third-party lenders to help fund our acquisitions. Such credit facilities will likely require us to pay a commitment fee on the undrawn amount and will likely contain a number of affirmative and restrictive covenants.

If we violate any such covenants, our lenders could accelerate the maturity of any debt outstanding and we may be prohibited from making any distributions to our shareholders. Such debt may be secured by our assets, including the stock we may own in businesses that we acquire and the rights we have under intercompany loan agreements that we may enter into with our businesses. Our ability to meet our debt service obligations may be affected by events beyond our control and will depend primarily upon cash produced by businesses that we currently manage and may acquire in the future and distributed or paid to us. Any failure to comply with the terms of our indebtedness may have a material adverse effect on our financial condition.

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In addition, we expect that such credit facilities will bear interest at floating rates which will generally change as interest rates change. We will bear the risk that the rates that we are charged by our lenders will increase faster than we can grow the cash flow from our businesses or businesses that we may acquire in the future, which could reduce profitability, materially adversely affect our ability to service our debt, cause us to breach covenants contained in our third-party credit facilities and reduce cash flow available for distribution.

We may engage in a business transaction with one or more target businesses that have relationships with our executive officers, our directors, our manager, our manager’s employees or our manager’s operating partners, or any of their respective affiliates, which may create or present conflicts of interest.

We may decide to engage in a business transaction with one or more target businesses with which our executive officers, our directors, our manager, our manager’s employees, our manager’s operating partners, or any of their respective affiliates, have a relationship, which may create or present conflicts of interest. Regardless of whether we obtain a fairness opinion from an independent investment banking firm with respect to such a transaction, conflicts of interest may still exist with respect to a particular acquisition and, as a result, the terms of the acquisition of a target business may not be as advantageous to our shareholders as it would have been absent any conflicts of interest.

The operational objectives and business plans of our businesses may conflict with our operational and business objectives or with the plans and objective of another business we own and operate.

Our businesses operate in different industries and face different risks and opportunities depending on market and economic conditions in their respective industries and regions. A business’ operational objectives and business plans may not be similar to our objectives and plans or the objectives and plans of another business that we own and operate. This could create competing demands for resources, such as management attention and funding needed for operations or acquisitions, in the future.

If, in the future, we cease to control and operate our businesses or other businesses that we acquire in the future or engage in certain other activities, we may be deemed to be an investment company under the Investment Company Act.

We have the ability to make investments in businesses that we will not operate or control. If we make significant investments in businesses that we do not operate or control, or that we cease to operate or control, or if we commence certain investment-related activities, we may be deemed to be an investment company under the Investment Company Act. Our decision to sell a business will be based upon financial, operating and other considerations rather than a plan to complete a sale of a business within any specific time frame. If we were deemed to be an investment company, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify our investments or organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially adversely affect our financial condition, business and results of operations, materially limit our ability to borrow funds or engage in other transactions involving leverage and require us to add directors who are independent of us or our manager and otherwise will subject us to additional regulation that will be costly and time-consuming.

We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential shareholders could lose confidence in our financial statements, which would harm the trading price of our common shares.

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report of their auditors in annual reports.

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A report of our management is included under Item 9A “Controls and Procedures” of our annual report on Form 10-K for the year ended December 31, 2021. We are a smaller reporting company and, consequently, are not required to include an attestation report of our auditor in our annual report. However, if and when we become subject to the auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2021, management identified material weaknesses. These material weaknesses were associated with our lack of (i) appropriate policies and procedures to evaluate the proper accounting and disclosures of key documents and agreements, (ii) adequate segregation of duties with our limited accounting personnel and reliance upon outsourced accounting services and (iii) sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of GAAP commensurate with our financial reporting requirements. We are undertaking remedial measures, which measures will take time to implement and test, to address these material weaknesses. There can be no assurance that such measures will be sufficient to remedy the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our share price.

Risks Related to Our Retail and Appliances Business

If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, we may not be able to achieve profitability.

Our success depends on our ability to acquire and retain customers in a cost-effective manner. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. We cannot assure you that the net profit from new customers we acquire will ultimately exceed the cost of acquiring those customers. If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers. If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers or efficiencies in our logistics network, our net revenue may decrease, and our business, financial condition and operating results may be materially adversely affected.

We believe that many of our new customers originate from word-of-mouth and other non-paid referrals from existing customers. Therefore, we must ensure that our existing customers remain loyal to us in order to continue receiving those referrals. If our efforts to satisfy our existing customers are not successful, we may not be able to acquire new customers in sufficient numbers to continue to grow our business, or we may be required to incur significantly higher marketing expenses in order to acquire new customers.

Our success depends in part on our ability to increase our net revenue per active customer. If our efforts to increase customer loyalty and repeat purchasing as well as maintain high levels of customer engagement are not successful, our growth prospects and revenue will be materially adversely affected.

Our ability to grow our business depends on our ability to retain our existing customer base and generate increased revenue and repeat purchases from this customer base, and maintain high levels of customer engagement. To do this, we must continue to provide our customers and potential customers with a unified, convenient, efficient and differentiated shopping experience by:

•        providing imagery, tools and technology that attract customers who historically would have bought elsewhere;

•        maintaining a high-quality and diverse portfolio of products;

•        delivering products on time and without damage; and

•        maintaining and further developing our in-store and online platforms.

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If we fail to increase net revenue per active customer, generate repeat purchases or maintain high levels of customer engagement, our growth prospects, operating results and financial condition could be materially adversely affected.

Our business depends on our ability to build and maintain strong brands. We may not be able to maintain and enhance our brands if we receive unfavorable customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, results of operations and growth prospects.

Maintaining and enhancing our brands is critical to expanding our base of customers and suppliers. Our ability to maintain and enhance our brand depends largely on our ability to maintain customer confidence in our product and service offerings, including by delivering products on time and without damage. If customers do not have a satisfactory shopping experience, they may seek out alternative offerings from our competitors and may not return to our stores and sites as often in the future, or at all. In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our customer base and result in decreased revenue, which could adversely affect our business and financial results.

In addition, maintaining and enhancing these brands may require us to make substantial investments, and these investments may not be successful. If we fail to promote and maintain our brands, or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to provide high quality products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be able to do successfully.

Customer complaints or negative publicity about our sites, products, delivery times, customer data handling and security practices or customer support, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

Our efforts to expand our business into new brands, products, services, technologies, and geographic regions will subject us to additional business, legal, financial, and competitive risks and may not be successful.

Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographies. Launching new brands and services or expanding geographically requires significant upfront investments, including investments in marketing, information technology, and additional personnel. We may not be able to generate satisfactory revenue from these efforts to offset these costs. Any lack of market acceptance of our efforts to launch new brands and services or to expand our existing offerings could have a material adverse effect on our business, prospects, financial condition and results of operations. Further, as we continue to expand our fulfillment capability or add new businesses with different requirements, our logistics networks become increasingly complex and operating them becomes more challenging. There can be no assurance that we will be able to operate our networks effectively.

We have also entered and may continue to enter into new markets in which we have limited or no experience, which may not be successful or appealing to our customers. These activities may present new and difficult technological and logistical challenges, and resulting service disruptions, failures or other quality issues may cause customer dissatisfaction and harm our reputation and brand. Further, our current and potential competitors in new market segments may have greater brand recognition, financial resources, longer operating histories and larger customer bases than we do in these areas. As a result, we may not be successful enough in these newer areas to recoup our investments in them. If this occurs, our business, financial condition and operating results may be materially adversely affected.

If we fail to manage our growth effectively, our business, financial condition and operating results could be harmed.

To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, train and manage our employee base. We have rapidly increased employee headcount since our inception to support the growth in our business. To

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support continued growth, we must effectively integrate, develop and motivate a large number of new employees. We face significant competition for personnel. Failure to manage our hiring needs effectively or successfully integrate our new hires may have a material adverse effect on our business, financial condition and operating results.

Additionally, the growth of our business places significant demands on our operations, as well as our management and other employees. For example, we typically launch hundreds of promotional events across thousands of products each month on our sites via emails and personalized displays. These events require us to produce updates of our sites and emails to our customers on a daily basis with different products, photos and text. Any surge in online traffic and orders associated with such promotional activities places increased strain on our operations, including our logistics network, and may cause or exacerbate slowdowns or interruptions. The growth of our business may require significant additional resources to meet these daily requirements, which may not scale in a cost-effective manner or may negatively affect the quality of our sites and customer experience. We are also required to manage relationships with a growing number of suppliers, customers and other third parties. Our information technology systems and our internal controls and procedures may not be adequate to support future growth of our supplier and employee base. If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected.

Our ability to obtain continued financing is critical to the growth of our business. We will need additional financing to fund operations, which additional financing may not be available on reasonable terms or at all.

Our future growth, including the potential for future market expansion will require additional capital. We will consider raising additional funds through various financing sources, including the procurement of additional commercial debt financing. However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected. Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.

Our ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.

Our business is highly competitive. Competition presents an ongoing threat to the success of our business.

Our business is rapidly evolving and intensely competitive, and we have many competitors in different industries. Our competition includes big box retailers, such as Home Depot, Lowe’s and Costco, specialty retailers, such as TeeVax, Ferguson and Premier Bath and Kitchen, and online marketplaces, such as Amazon.

We expect competition to continue to increase. We believe that our ability to compete successfully depends upon many factors both within and beyond our control, including:

•        the size and composition of our customer base;

•        the number of suppliers and products we feature;

•        our selling and marketing efforts;

•        the quality, price and reliability of products we offer;

•        the quality and convenience of the shopping experience that we provide;

•        our ability to distribute our products and manage our operations; and

•        our reputation and brand strength.

Many of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, faster and less costly shipping, significantly greater financial, marketing and other resources and larger customer bases than we do. These factors may

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allow our competitors to derive greater net revenue and profits from their existing customer base, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate net revenue from their customer bases more effectively than we do.

Our success depends, in substantial part, on our continued ability to market our products through search engines and social media platforms.

The marketing of our products depends on our ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with search engines and social media platforms, including those operated by Google, Facebook, Bing and Yahoo!. These platforms could decide to change their terms and conditions of use at any time (and without notice) and/or significantly increase their fees. No assurances can be provided that we will be able to maintain cost-effective and otherwise satisfactory relationships with these platforms and our inability to do so in the case of one or more of these platforms could have a material adverse effect on our business, financial condition and results of operations.

We obtain a significant number of visits via search engines such as Google, Bing and Yahoo! Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search and may make other changes to the way results are displayed, which can negatively affect the placement of links and, therefore, reduce the number of visits to our website. The growing use of online ad-blocking software may also impact the success of our marketing efforts because we may reach a smaller audience and fail to bring more customers to our website, which could have a material adverse effect on our business, financial condition and results of operations.

System interruptions that impair customer access to our sites or other performance failures or incidents involving our logistics network, our technology infrastructure or our critical technology partners could damage our business, reputation and brand and substantially harm our business and results of operations.

The satisfactory performance, reliability and availability of our sites, transaction processing systems, logistics network, and technology infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as maintain adequate customer service levels.

For example, if one of our data centers fails or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could harm our business. Our systems and operations, including our ability to fulfill customer orders through our logistics network, are also vulnerable to damage or interruption from inclement weather, fire, flood, power loss, telecommunications failure, terrorist attacks, labor disputes, cyber-attacks, data loss, acts of war, break-ins, earthquake and similar events. In the event of a data center failure, the move to a back-up could take substantial time, during which time our sites could be completely shut down. Further, our back-up services may not effectively process spikes in demand, may process transactions more slowly and may not support all of our site’s functionality.

We use complex proprietary software in our technology infrastructure, which we seek to continually update and improve. We may not always be successful in executing these upgrades and improvements, and the operation of our systems may be subject to failure. In particular, we have in the past and may in the future experience slowdowns or interruptions on some or all of our sites when we are updating them, and new technologies or infrastructures may not be fully integrated with existing systems on a timely basis, or at all. Additionally, if we expand our use of third-party services, including cloud-based services, our technology infrastructure may be subject to increased risk of slowdown or interruption as a result of integration with such services and/or failures by such third parties, which are out of our control. Our net revenue depends on the number of visitors who shop on our sites and the volume of orders we can handle. Unavailability of our sites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect consumer perception of our brand.

We may experience periodic system interruptions from time to time. In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities or seasonal trends in our business, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions. If there is a substantial increase in the volume of traffic on our sites or the number of orders placed by customers, we may be required to further expand and upgrade our technology, logistics network, transaction processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our sites or expand and upgrade our systems and infrastructure

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to accommodate such increases on a timely basis. In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our sites, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations and industry standards and practices are evolving in the e-commerce industry. Accordingly, we redesign and enhance various functions on our sites on a regular basis, and we may experience instability and performance issues as a result of these changes.

Any slowdown, interruption or performance failure of our sites and the underlying technology and logistics infrastructure could harm our business, reputation and our ability to acquire, retain and serve our customers, which could materially adversely affect our results of operations.

Our failure or the failure of third-party service providers to protect our sites, networks and systems against security breaches, or otherwise to protect our confidential information, could damage our reputation and brand and substantially harm our business and operating results.

We collect, maintain, transmit and store data about our customers, employees, contractors, suppliers, vendors and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers that store, process and transmit certain proprietary, personal and confidential information on our behalf. We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit, encrypt, anonymize or pseudonymize certain confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction and personal data or other confidential and sensitive information from being breached or compromised. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, ransom-ware, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain, including payment card systems and human resources management platforms. We and our service providers may not anticipate, discover or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships.

Breaches of our security measures or those of our third-party service providers or cyber security incidents could result in unauthorized access to our sites, networks and systems; unauthorized access to and misappropriation of personal information, including consumers’ and employees’ personally identifiable information, or other confidential or proprietary information of ourselves or third parties; limited or terminated access to certain payment methods or fines or higher transaction fees to use such methods; viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment or training of additional personnel and protection technologies, responses to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory action and other potential liabilities. If any of these breaches of security occur, our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such breaches and we could be exposed to a risk of loss, litigation or regulatory action and possible liability. In addition, any party who is able to illicitly obtain a customer’s password could access that customer’s transaction data or personal information. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and operating results. We may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business.

We may be subject to product liability and other similar claims if people or property are harmed by the products we sell.

Some of the products we sell may expose us to product liability and other claims and litigation (including class actions) or regulatory action relating to safety, personal injury, death or environmental or property damage. Some of our agreements with members of our supply chain may not indemnify us from product liability for a particular product, and some members

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of our supply chain may not have sufficient resources or insurance to satisfy their indemnity and defense obligations. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

Risks associated with the suppliers from whom our products are sourced could materially adversely affect our financial performance as well as our reputation and brand.

We depend on our ability to provide our customers with a wide range of products from qualified suppliers, many of whom are located in countries outside of the U.S., in a timely and efficient manner. Political and economic instability, the financial stability of suppliers, suppliers’ ability to meet our standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, transport security, inflation, and other factors relating to our suppliers are beyond our control.

Our agreements with most of our suppliers do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually restrict such suppliers from selling products to other buyers. There can be no assurance that our current suppliers will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms. Our ability to develop and maintain relationships with reputable suppliers and offer high quality merchandise to our customers is critical to our success. If we are unable to develop and maintain relationships with suppliers that would allow us to offer a sufficient amount and variety of quality merchandise on acceptable commercial terms, our ability to satisfy our customers’ needs, and therefore our long-term growth prospects, would be materially adversely affected.

Further, we rely on our suppliers’ representations of product quality, safety and compliance with applicable laws and standards. If our suppliers or other vendors violate applicable laws, regulations or our supplier code of conduct, or implement practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation and negatively affect our operating results. Further, concerns regarding the safety and quality of products provided by our suppliers could cause our customers to avoid purchasing those products from us, or avoid purchasing products from us altogether, even if the basis for the concern is outside of our control. As such, any issue, or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand, reputation, operations and financial results.

We also are unable to predict whether any of the countries in which our suppliers’ products are currently manufactured or may be manufactured in the future will be subject to new, different, or additional trade restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from suppliers with international manufacturing operations, including the imposition of additional import restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise available to our customers and materially adversely affect our financial performance as well as our reputation and brand. Furthermore, some or all of our suppliers’ foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.

In addition, our business with foreign suppliers may be affected by changes in the value of the U.S. dollar relative to other foreign currencies. For example, any movement by any other foreign currency against the U.S. dollar may result in higher costs to us for those goods. Declines in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of our foreign suppliers. This, in turn, might cause such foreign suppliers to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to us altogether, any of which could ultimately reduce our sales or increase our costs.

Our suppliers have imposed conditions in our business arrangements with them. If we are unable to continue satisfying these conditions, or such suppliers impose additional restrictions with which we cannot comply, it could have a material adverse effect on our business, financial condition and operating results.

Our suppliers have strict conditions for doing business with them. Several are sizeable such as General Electric, Whirlpool and Riggs Distributing. If we cannot satisfy these conditions or if they impose additional or more restrictive conditions that we cannot satisfy, our business would be materially adversely affected. It would be materially

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detrimental to our business if these suppliers decided to no longer do business with us, increased the pricing at which they allow us to purchase their goods or impose other restrictions or conditions that make it more difficult for us to work with them. Any of these events could have a material adverse effect on our business, financial condition and operating results.

We may be unable to source new suppliers or strengthen our relationships with current suppliers.

We have relationships with approximately 36 suppliers. Our agreements with suppliers are generally terminable at will by either party upon short notice. If we do not maintain our existing relationships or build new relationships with suppliers on acceptable commercial terms, we may not be able to maintain a broad selection of merchandise, and our business and prospects would suffer severely.

In order to attract quality suppliers, we must:

•        demonstrate our ability to help our suppliers increase their sales;

•        offer suppliers a high quality, cost-effective fulfillment process; and

•        continue to provide suppliers with a dynamic and real-time view of our demand and inventory needs.

If we are unable to provide our suppliers with a compelling return on investment and an ability to increase their sales, we may be unable to maintain and/or expand our supplier network, which would negatively impact our business.

We depend on our suppliers to perform certain services regarding the products that we offer.

As part of offering our suppliers’ products for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory and preparing merchandise for shipment to our customers. In these instances, we may be unable to ensure that suppliers will perform these services to our or our customers’ satisfaction in a manner that provides our customer with a unified brand experience or on commercially reasonable terms. If our customers become dissatisfied with the services provided by our suppliers, our business, reputation and brands could suffer.

We depend on our relationships with third parties, and changes in our relationships with these parties could adversely impact our revenue and profits.

We rely on third parties to operate certain elements of our business. For example, we use carriers such as FedEx, UPS, DHL and the U.S. Postal Service to deliver products. As a result, we may be subject to shipping delays or disruptions caused by inclement weather, natural disasters, system interruptions and technology failures, labor activism, health epidemics or bioterrorism. We are also subject to risks of breakage or other damage during delivery by any of these third parties. We also use and rely on other services from third parties, such as retail partner services, telecommunications services, customs, consolidation and shipping services, as well as warranty, installation and design services.

We may be unable to maintain these relationships, and these services may also be subject to outages and interruptions that are not within our control. For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to provide phone support to our customers. Third parties may in the future determine they no longer wish to do business with us or may decide to take other actions or make changes to their practices that could harm our business. We may also determine that we no longer want to do business with them. If products are not delivered in a timely fashion or are damaged during the delivery process, or if we are not able to provide adequate customer support or other services or offerings, our customers could become dissatisfied and cease buying products through our sites, which would adversely affect our operating results.

The seasonal trends in our business create variability in our financial and operating results and place increased strain on our operations.

We experience surges in orders associated with promotional activities and seasonal trends. This activity may place additional demands on our technology systems and logistics network and could cause or exacerbate slowdowns or interruptions. Any such system, site or service interruptions could prevent us from efficiently receiving or fulfilling orders, which may reduce the volume or quality of goods or services we sell and may cause customer dissatisfaction and harm our reputation and brand.

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Our business may be adversely affected if we are unable to provide our customers a cost-effective shopping platform that is able to respond and adapt to rapid changes in technology.

The number of people who access the Internet through devices other than personal computers, including mobile phones, smartphones, handheld computers such as notebooks and tablets, video game consoles, and television set-top devices, has increased dramatically in the past few years. We continually upgrade existing technologies and business applications to keep pace with these rapidly changing and continuously evolving technologies, and we may be required to implement new technologies or business applications in the future. The implementation of these upgrades and changes requires significant investments and as new devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for these alternative devices and platforms. Additionally, we may need to devote significant resources to the support and maintenance of such applications once created. Our results of operations may be affected by the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure to accommodate such alternative devices and platforms. Further, in the event that it is more difficult or less compelling for our customers to buy products from us on their mobile or other devices, or if our customers choose not to buy products from us on such devices or to use mobile or other products that do not offer access to our sites, our customer growth could be harmed and our business, financial condition and operating results may be materially adversely affected.

Significant merchandise returns could harm our business.

We allow our customers to return products, subject to our return policy. If merchandise returns are significant, our business, prospects, financial condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns. Many of our products are large and require special handling and delivery. From time to time our products are damaged in transit, which can increase return rates and harm our brand.

Uncertainties in economic conditions and their impact on consumer spending patterns, particularly in the home goods segment, could adversely impact our operating results.

Consumers may view a substantial portion of the products we offer as discretionary items rather than necessities. As a result, our results of operations are sensitive to changes in macro-economic conditions that impact consumer spending, including discretionary spending. Some of the factors adversely affecting consumer spending include levels of unemployment; consumer debt levels; changes in net worth based on market changes and uncertainty; home foreclosures and changes in home values or the overall housing, residential construction or home improvement markets; fluctuating interest rates; credit availability, including mortgages, home equity loans and consumer credit; government actions; fluctuating fuel and other energy costs; fluctuating commodity prices and general uncertainty regarding the overall future economic environment. Adverse economic changes in any of the regions in which we sell our products could reduce consumer confidence and could negatively affect net revenue and have a material adverse effect on our operating results.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our net revenue and business.

Our business is highly dependent upon email and other messaging services for promoting our sites and products. If we are unable to successfully deliver emails or other messages to our subscribers, or if subscribers decline to open our emails or other messages, our net revenue and profitability would be materially adversely affected. Changes in how webmail applications organize and prioritize email may also reduce the number of subscribers opening our emails. For example, in 2013 Google Inc.’s Gmail service began offering a feature that organizes incoming emails into categories (for example, primary, social and promotions). Such categorization or similar inbox organizational features may result in our emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce the likelihood of that subscriber opening our emails. Actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact our business. From time to time, Internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails or other messages to third parties. Changes in the laws or regulations that limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications would also materially adversely impact our

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business. Our use of email and other messaging services to send communications about our products or other matters may also result in legal claims against us, which may cause us increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages. We also rely on social networking messaging services to send communications and to encourage customers to send communications. Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by customers and potential customers could materially adversely affect our business, financial condition and operating results.

We are subject to risks related to online payment methods.

We accept payments using a variety of methods, including credit card, debit card, PayPal, credit accounts and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. As our business changes, we may also be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card and debit card payments from consumers or to facilitate other types of online payments. If any of these events were to occur, our business, financial condition and operating results could be materially adversely affected.

We occasionally receive orders placed with fraudulent credit card data. We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions. If we are unable to detect or control credit card fraud, our liability for these transactions could harm our business, financial condition and results of operations.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection, Internet neutrality and gift cards. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our sites by consumers and suppliers and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. Adverse legal or regulatory developments could substantially harm our business. Further, if we enter into new market segments or geographical areas and expand the products and services we offer, we may be subject to additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions. We will incur additional costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and reputation.

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Failure to comply with applicable laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.

A variety of laws and regulations govern the collection, use, retention, sharing, export and security of personal information. Laws and regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not comply, or may not comply in the future with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any applicable privacy or consumer protection- related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease using certain data sets. Any such claim, proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties. We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of proprietary or third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. U.S. and foreign governments have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which could if widely adopted significantly reduce the effectiveness of such practices and technologies. The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially adversely affect our business, financial condition and operating results.

In addition, various federal, state and foreign legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection. Any such changes may force us to incur substantial costs or require us to change our business practices. This could compromise our ability to pursue our growth strategy effectively and may adversely affect our ability to acquire customers or otherwise harm our business, financial condition and operating results.

We rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business could be harmed.

We believe our success has depended, and continues to depend, on the members of our senior management teams. The loss of any of our senior management or other key employees could materially harm our business. Our future success also depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, particularly mid-level managers and merchandising and technology personnel. The market for such positions is competitive. Qualified individuals are in high demand, and we may incur significant costs to attract them. Our inability to recruit and develop mid-level managers could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements. All of our officers and other U.S. employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and operating results may be materially adversely affected.

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We may not be able to adequately protect our intellectual property rights.

We regard our customer lists, domain names, trade dress, trade secrets, proprietary technology and similar intellectual property as critical to our success, and we rely on trade secret protection, agreements and other methods with our employees and others to protect our proprietary rights. We might not be able to obtain broad protection for all of our intellectual property. The protection of our intellectual property rights may require the expenditure of significant financial, managerial and operational resources. We may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or proprietary rights or to establish the validity of such rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may materially adversely affect our business, financial condition and operating results. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may not be able to broadly enforce all of our intellectual property rights. Any of our intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Additionally, the process of obtaining intellectual property protections is expensive and time-consuming, and we may not be able to pursue all necessary or desirable actions at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these protections will adequately safeguard our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual property rights. We may also be exposed to claims from third parties claiming infringement of their intellectual property rights, or demanding the release or license of open source software or derivative works that we developed using such software (which could include our proprietary code) or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license, publicly release the affected portions of our source code, be limited in or cease using the implicated software unless and until we can re-engineer such software to avoid infringement or change the use of the implicated open source software.

We may be accused of infringing intellectual property rights of third parties.

The e-commerce industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted and expensive litigation for many companies. We may be subject to claims and litigation by third parties that we infringe their intellectual property rights. The costs of supporting such litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained. As our business expands and the number of competitors in our market increases and overlaps occur, we expect that infringement claims may increase in number and significance. Any claims or proceedings against us, whether meritorious or not, could be time-consuming, result in considerable litigation costs, require significant amounts of management time or result in the diversion of significant operational resources, any of which could materially adversely affect our business, financial condition and operating results.

We have received in the past, and we may receive in the future, communications alleging that certain items posted on or sold through our sites violate third-party copyrights, designs, marks and trade names or other intellectual property rights or other proprietary rights. Brand and content owners and other proprietary rights owners have actively asserted their purported rights against online companies. In addition to litigation from rights owners, we may be subject to regulatory, civil or criminal proceedings and penalties if governmental authorities believe we have aided and abetted in the sale of counterfeit or infringing products.

Such claims, whether or not meritorious, may result in the expenditure of significant financial, managerial and operational resources, injunctions against us or the payment of damages by us. We may need to obtain licenses from third parties who allege that we have violated their rights, but such licenses may not be available on terms acceptable to us, or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention.

From time to time, we are subject to litigation or claims that could negatively affect our business operations and financial position. Litigation disputes could cause us to incur unforeseen expenses, result in site unavailability, service disruptions, and otherwise occupy a significant amount of our management’s time and attention, any of which could negatively affect our business operations and financial position. We also from time to time receive inquiries and subpoenas and other types of information requests from government authorities and we may become subject

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to related claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests and related legal proceedings is difficult to predict, such matters can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, reputational harm or costs and significant payments, any of which could negatively affect our business operations and financial position.

Risks Related to Our Custom Carpentry Business

The loss of any of our key customers could have a materially adverse effect on our results of operations.

Historically, a few long-term recurring contractor customers have accounted for a majority of our revenues. There can be no assurance that we will maintain or improve the relationships with those customers. Our major customers often change each period based on when a given order is placed. If we cannot maintain long-term relationships with major customers or replace major customers from period to period with equivalent customers, the loss of such sales could have an adverse effect on our business, financial condition and results of operations.

Our business primarily relies on U.S. home improvement, repair and remodel and new home construction activity levels, all of which are impacted by risks associated with fluctuations in the housing market. Downward changes in the general economy, the housing market or other business conditions could adversely affect our results of operations, cash flows and financial condition.

Our business primarily relies on home improvement, repair and remodel and new home construction activity levels in the United States. The housing market is sensitive to changes in economic conditions and other factors, such as the level of employment, access to labor, consumer confidence, consumer income, availability of financing and interest rate levels. Adverse changes in any of these conditions generally, or in any of the markets where we operate, including due to the global pandemic, could decrease demand and could adversely impact our businesses by: causing consumers to delay or decrease homeownership; making consumers more price conscious resulting in a shift in demand to smaller, less expensive homes; making consumers more reluctant to make investments in their existing homes, including large kitchen and bath repair and remodel projects; or making it more difficult to secure loans for major renovations.

Increases in interest rates and the reduced availability of financing for home improvements may cause our sales and profitability to decrease.

In general, demand for home improvement products may be adversely affected by increases in interest rates and the reduced availability of financing. Also, trends in the financial industry which influence the requirements used by lenders to evaluate potential buyers can result in reduced availability of financing. If interest rates or lending requirements increase and consequently, the ability of prospective buyers to finance purchases of home improvement products is adversely affected, our business, financial condition and results of operations may also be adversely impacted and the impact may be material.

Our custom carpentry business is subject to seasonal and other periodic fluctuations, and affected by factors beyond our control, which may cause our sales and operating results to fluctuate significantly.

Our custom carpentry business is subject to seasonal fluctuations. We believe that we can more effectively control and balance our direct labor resources and costs during seasonal variations in our custom carpentry business, depending on the dynamics of the market served. However, extreme winter weather conditions can have an adverse effect on appointments and installations which typically occur during our fourth and first quarters and can also negatively affect our net sales and operating results. In addition, sales and revenues may decline in the fourth quarter due to the holiday season.

Difficulties in recruiting adequate personnel may have a material adverse effect on our ability to meet our growth expectations.

In order to fulfill our growth expectations, we must recruit, hire, train and retain qualified sales and installation personnel. In particular, during the pandemic, we may experience greater difficulty in fulfilling our personnel needs since our employees are not able to work remotely for installations. When new construction and remodeling are on the rise, recruiting of independent contractors to perform our installations becomes more difficult. There can be no assurance that we will have sufficient contractors or employees to fulfill our installation requirements. Our inability to fulfill our personnel needs could have a material adverse effect on our ability to meet our growth expectations.

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Increases in the cost of labor, union organizing activity and work stoppages at our facilities or the facilities of our suppliers could materially affect our financial performance.

Our business is labor intensive, and, as a result, our financial performance is affected by the availability of qualified personnel and the cost of labor. Currently, none of our employees are represented by labor unions. Strikes or other types of conflicts with personnel could arise or we may become a target for union organizing activity. Some of our direct and indirect suppliers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these suppliers could result in slowdowns or closures of facilities where components of our products are manufactured. Any interruption in the production of our products could reduce sales of our products and increase our costs.

In the event of a catastrophic loss of our key manufacturing facility, our business would be adversely affected.

While we maintain insurance covering our facility, including business interruption insurance, a catastrophic loss of the use of all or a portion of our manufacturing facility due to accident, labor issues, weather conditions, natural disaster or otherwise, whether short or long-term, could have a material adverse effect on us.

The nature of our custom carpentry business exposes us to product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings.

We are subject to product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings relating to the products we install or manufacture that, if adversely determined, could adversely affect our financial condition, results of operations and cash flows. We rely on manufacturers and other suppliers to provide us with most of the products we install. Other than for products manufactured by Kyle’s, we generally do not have direct control over the quality of such products manufactured or supplied by such third-party suppliers. As such, we are exposed to risks relating to the quality of such products. In the event that any of our products prove to be defective, we may be required to recall or redesign such products, which would result in significant unexpected costs.

We are also exposed to potential claims arising from the conduct of our employees and contractors, for which we may be contractually liable. We have in the past been, and may in the future be, subject to penalties and other liabilities in connection with injury or damage incurred in conjunction with the installation of our products.

In addition, our contracts, particularly those with large single-family and multi-family homebuilders, contain certain performance and installation schedule requirements. Many factors, some of which our outside of our control, may affect our ability to meet these requirements, including shortages of material or skilled labor, unforeseen engineering problems, work stoppages, weather interference, floods, unanticipated cost increases, and legal or political challenges. If we do not meet these requirements, we may be subject to liquidated damages or other penalties, as well as claims for breach of contract.

Product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome. In addition, lawsuits relating to construction defects typically have statutes of limitations that can run as long as ten years. Claims of this nature could also have a negative impact on customer confidence in us and our services. Although we currently maintain what we believe to be suitable and adequate insurance, we may be unable to maintain such insurance on acceptable terms or such insurance may not provide adequate protection against potential liabilities. In addition, some liabilities may not be covered by our insurance. Current or future claims could have a material adverse effect on our reputation, business, financial condition and results of operations.

If we are unable to compete successfully with our competitors, our financial condition and results of operations may be harmed.

We operate in a highly fragmented and very competitive industry. Our competitors include national and local carpentry manufacturers. These can be large, consolidated operations which house their manufacturing facilities in large and efficient plants, as well as relatively small, local cabinetmakers. Although we believe that we have superior name and reputation of direct marketing of custom designed carpentry, we compete with numerous competitors in our primary markets in which we operate, with reputation, price, workmanship and services being the principal competitive factors. Some of our competitors have achieved substantially more market penetration in certain of the markets in which we operate. Some of our competitors have greater resources available and are less highly leveraged, which may provide them with greater financial flexibility. We also compete against retail chains, including Sears, Costco, Builders Square, Sam’s Warehouse Club and other stores, which offer similar products and services through licensees. We compete, to a lesser

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extent, with small home improvement contractors and with large “home center” retailers such as Home Depot and Lowes. As a result of the implementation of our business strategy to conduct more remodel, condo/multi-family, and commercial projects in the new construction markets, we anticipate that we will compete to a greater degree with large “home center” retailers. To remain competitive, we will need to invest continuously in manufacturing, customer service and support, marketing and our dealer network. We may have to adjust the prices of some of our products to stay competitive, which would reduce our revenues or harm our financial condition and result of operations. We may not have sufficient resources to continue to make such investments or maintain our competitive position within each of the markets we serve.

We have historically depended on a limited number of third parties to supply key finished goods and raw materials to us. Failure to obtain a sufficient supply of these finished goods and raw materials in a timely fashion and at reasonable costs could significantly delay our delivery of products, which would cause us to breach our sales contracts with our customers.

We have historically purchased certain key finished goods and raw materials, such as pre-manufactured doors, cabinets, countertops, lumber and hardware, from a limited number of suppliers. We purchased finished goods and raw materials on the basis of purchase orders. In the absence of firm and long-term contracts, we may not be able to obtain a sufficient supply of these finished goods and raw materials from our existing suppliers or alternates in a timely fashion or at a reasonable cost. If we fail to secure a sufficient supply of key finished goods and raw materials in a timely fashion, it would result in a significant delay in our delivery of products, which may cause us to breach our sales contracts with our customers. Furthermore, failure to obtain sufficient supply of these finished goods and raw materials at a reasonable cost could also harm our revenue and gross profit margins.

Increased prices for finished goods or raw materials could increase our cost of sales and decrease demand for our products, which could adversely affect our revenue or profitability.

Our profitability is affected by the prices of the finished goods and raw materials used in the manufacturing and sale of our products. These prices may fluctuate based on a number of factors beyond our control, including, among others, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and, in some cases, government regulation. Increased prices could adversely affect our profitability or revenues. We do not have long-term supply contracts for the finished goods and raw materials; however, we enter into pricing agreements with certain customers which fix their pricing for specified periods ranging from one to twelve months. Significant increases in the prices of finished goods and raw materials could adversely affect our profit margins, especially if we are not able to recover these costs by increasing the prices we charge our customers for our products.

Interruptions in deliveries of finished goods and raw materials could adversely affect our revenue or profitability.

Our dependency upon regular deliveries from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made. If any of our suppliers were unable to deliver finished goods and raw materials to us for an extended period of time, as the result of financial difficulties, catastrophic events affecting their facilities or other factors beyond our control, or if we were unable to negotiate acceptable terms for the supply of finished goods and raw materials with these or alternative suppliers, our business could suffer. We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs for us. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business. Extended unavailability of a necessary finished good or raw material could cause us to cease manufacturing or selling one or more of our products for a period of time.

Environmental requirements applicable to our facilities may impose significant environmental compliance costs and liabilities, which would adversely affect our results of operations.

Our facilities are subject to numerous federal, state and local laws and regulations relating to pollution and the protection of the environment, including those governing emissions to air, discharges to water, storage, treatment and disposal of waste, remediation of contaminated sites and protection of worker health and safety. We believe we are in substantial compliance with all applicable requirements. However, our efforts to comply with environmental requirements do not remove the risk that we may be held liable, or incur fines or penalties, and that the amount of liability, fines or penalties may be material, for, among other things, releases of hazardous substances occurring on or emanating from current or formerly owned or operated properties or any associated offsite disposal location, or for contamination discovered at any of our properties from activities conducted by previous occupants.

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Changes in environmental laws and regulations or the discovery of previously unknown contamination or other liabilities relating to our properties and operations could result in significant environmental liabilities. In addition, we might incur significant capital and other costs to comply with increasingly stringent air emission control laws and enforcement policies which would decrease our cash flow.

We may fail to fully realize the anticipated benefits of our growth strategy within the multi-family and commercial properties channels.

Part of our growth strategy depends on expanding our business in the multi-family and commercial properties channels. We may fail to compete successfully against other companies that are already established providers within those channels. Demand for our products within the multi-family and commercial properties channels may not grow, or might even decline. In addition, trends within the industry change often, we may not accurately gauge consumer preferences and successfully develop, manufacture and market our products. Our failure to anticipate, identify or react to changes in these trends could lead to, among other things, rejection of a new product line, reduced demand and price reductions for our products, and could adversely affect our sales. Further, the implementation of our growth strategy may place additional demands on our administrative, operational and financial resources and may divert management’s attention away from our existing business and increase the demands on our financial systems and controls. If our management is unable to effectively manage growth, our business, financial condition or results of operations could be adversely affected. If our growth strategy is not successful then our revenue and earnings may not grow as anticipated or may decline, we may not be profitable, or our reputation and brand may be damaged. In addition, we may change our financial strategy or other components of our overall business strategy if we believe our current strategy is not effective, if our business or markets change, or for other reasons, which may cause fluctuations in our financial results.

Risks Related to Our Automotive Supply Business

If we fail to offer a broad selection of products at competitive prices or fail to maintain sufficient inventory to meet customer demands, our revenue could decline.

In order to expand our business, we must successfully offer, on a continuous basis, a broad selection of products that meet the needs of our customers, including by being the first to market with new products. In addition, to be successful, our product offerings must be broad and deep in scope, competitively priced, well-made, innovative and attractive to a wide range of consumers. We cannot predict with certainty that we will be successful in offering products that meet all of these requirements. Moreover, even if we offer a broad selection of products at competitive prices, we must maintain sufficient in-stock inventory to meet consumer demand. If our product offerings fail to satisfy our customers’ requirements or respond to changes in customer preferences or we otherwise fail to maintain sufficient in-stock inventory, our revenue could decline.

We are highly dependent upon key suppliers and an interruption in such relationships or our ability to obtain products from such suppliers could adversely affect our business and results of operations.

In 2021 and 2020, Wolo purchased a substantial portion of finished goods from four third-party vendors which comprised of 61.4% and 56% of its purchases, respectively. Our ability to acquire products from our suppliers in amounts and on terms acceptable to us is dependent upon a number of factors that could affect our suppliers and which are beyond our control. For example, financial or operational difficulties that some of our suppliers may face could result in an increase in the cost of the products we purchase from them. If we do not maintain our relationships with our existing suppliers or develop relationships with new suppliers on acceptable commercial terms, we may not be able to continue to offer a broad selection of merchandise at competitive prices and, as a result, we could lose customers and our sales could decline.

We also have limited control over the products that our suppliers purchase or keep in stock. Our suppliers may not accurately forecast the products that will be in high demand or they may allocate popular products to other resellers, resulting in the unavailability of certain products for delivery to our customers. Any inability to offer a broad array of products at competitive prices and any failure to deliver those products to our customers in a timely and accurate manner may damage our reputation and brand and could cause us to lose customers and our sales could decline.

In addition, the increasing consolidation among auto parts suppliers may disrupt or end our relationship with some suppliers, result in product shortages and/or lead to less competition and, consequently, higher prices. Furthermore, as part of our routine business, suppliers extend credit to us in connection with our purchase of their products. In the future, our suppliers may limit the amount of credit they are willing to extend to us in connection with our purchase of their

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products. If this were to occur, it could impair our ability to acquire the types and quantities of products that we desire from the applicable suppliers on acceptable terms, severely impact our liquidity and capital resources, limit our ability to operate our business and could have a material adverse effect on our financial condition and results of operations.

We are dependent upon relationships with manufacturers in Taiwan and China, which exposes us to complex regulatory regimes and logistical challenges.

Approximately 95% of our manufacturing is outsourced to contract manufacturers in China and Taiwan, resulting in additional factors could interrupt our relationships or affect our ability to acquire the necessary products on acceptable terms, including:

•        political, social and economic instability and the risk of war or other international incidents in Asia or abroad;

•        fluctuations in foreign currency exchange rates that may increase our cost of products;

•        imposition of duties, taxes, tariffs or other charges on imports;

•        difficulties in complying with import and export laws, regulatory requirements and restrictions;

•        natural disasters and public health emergencies, such as the recent COVID-19 pandemic;

•        import shipping delays resulting from foreign or domestic labor shortages, slow-downs, or stoppage; and

•        the failure of local laws to provide a sufficient degree of protection against infringement of our intellectual property;

•        imposition of new legislation relating to import quotas or other restrictions that may limit the quantity of our products that may be imported into the U.S. from countries or regions where we do business;

•        financial or political instability in any of the countries in which our products are manufactured;

•        potential recalls or cancellations of orders for any products that do not meet our quality standards;

•        disruption of imports by labor disputes or strikes and local business practices;

•        political or military conflict involving the U.S. or any country in which our suppliers are located, which could cause a delay in the transportation of our products, an increase in transportation costs and additional risk to products being damaged and delivered on time;

•        heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods;

•        inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and

•        our ability to enforce any agreements with our foreign suppliers.

If we were unable to import products from China and Taiwan or were unable to import products from China and Taiwan in a cost-effective manner, we could suffer irreparable harm to our business and be required to significantly curtail our operations, file for bankruptcy or cease operations.

From time to time, we may also have to resort to administrative and court proceedings to enforce our legal rights with foreign suppliers. However, it may be more difficult to evaluate the level of legal protection we enjoy in Taiwan and China and the corresponding outcome of any administrative or court proceedings than in comparison to our suppliers in the United States.

We depend on third-party delivery services, for both inbound and outbound shipping, to deliver our products to our distribution centers and subsequently to our customers on a timely and consistent basis, and any deterioration in our relationship with any one of these third parties or increases in the fees that they charge could harm our reputation and adversely affect our business and financial condition.

We rely on third parties for the shipment of our products, both inbound and outbound shipping logistics, and we cannot be sure that these relationships will continue on terms favorable to us, or at all. Shipping costs have increased from time to time, and may continue to increase, and we may not be able to pass these costs directly to our customers.

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Any increased shipping costs could harm our business, prospects, financial condition and results of operations by increasing our costs of doing business and reducing gross margins which could negatively affect our operating results. In addition, we utilize a variety of shipping methods for both inbound and outbound logistics. For inbound logistics, we rely on trucking and ocean carriers and any increases in fees that they charge could adversely affect our business and financial condition. For outbound logistics, we rely on “Less-than-Truckload” and parcel freight based upon the product and quantities being shipped and customer delivery requirements. These outbound freight costs have increased on a year-over-year basis and may continue to increase in the future. We also ship a number of oversized auto parts which may trigger additional shipping costs by third-party delivery services. Any increases in fees or any increased use of “Less-than-Truckload” shipping would increase our shipping costs which could negatively affect our operating results.

In addition, if our relationships with these third parties are terminated or impaired, or if these third parties are unable to deliver products for us, whether due to labor shortage, slow down or stoppage, deteriorating financial or business condition, responses to terrorist attacks or for any other reason, we would be required to use alternative carriers for the shipment of products to our customers. Changing carriers could have a negative effect on our business and operating results due to reduced visibility of order status and package tracking and delays in order processing and product delivery, and we may be unable to engage alternative carriers on a timely basis, upon terms favorable to us, or at all.

If commodity prices such as fuel, plastic and steel increase, our margins may be negatively impacted.

Our third-party delivery services have increased fuel surcharges from time to time, and such increases negatively impact our margins, as we are generally unable to pass all of these costs directly to consumers. Increasing prices in the component materials for the parts we sell may impact the availability, the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. We cannot ensure that we can recover all the increased costs through price increases, and our suppliers may not continue to provide the consistent quality of product as they may substitute lower cost materials to maintain pricing levels, all of which may have a negative impact on our business and results of operations.

If we are unable to manage the challenges associated with our international operations, the growth of our business could be limited and our business could suffer.

In addition to our relationships with foreign suppliers, we have contracts with sales representatives from thirteen regional sales companies in North America, Mexico, Puerto Rico, the U.K., Europe, the Middle East and the industrial aftermarket. We are subject to a number of risks and challenges that specifically relate to our international operations. Our international operations may not be successful if we are unable to meet and overcome these challenges, which could limit the growth of our business and may have an adverse effect on our business and operating results. These risks and challenges include:

•        difficulties and costs of staffing and managing foreign operations;

•        restrictions imposed by local labor practices and laws on our business and operations;

•        exposure to different business practices and legal standards;

•        unexpected changes in regulatory requirements;

•        the imposition of government controls and restrictions;

•        political, social and economic instability and the risk of war, terrorist activities or other international incidents;

•        the failure of telecommunications and connectivity infrastructure;

•        natural disasters and public health emergencies;

•        potentially adverse tax consequences; and

•        fluctuations in foreign currency exchange rates and relative weakness in the U.S. dollar.

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If our fulfillment operations are interrupted for any significant period of time or are not sufficient to accommodate increased demand, our sales could decline and our reputation could be harmed.

Our success depends on our ability to successfully receive and fulfill orders and to promptly deliver our products to our customers. Most of the orders for our products are filled from our inventory in our distribution centers, where all our inventory management, packaging, labeling and product return processes are performed. Increased demand and other considerations may require us to expand our distribution centers or transfer our fulfillment operations to larger or other facilities in the future. If we do not successfully expand our fulfillment capabilities in response to increases in demand, our sales could decline.

In addition, our distribution centers are susceptible to damage or interruption from human error, pandemics, fire, flood, power loss, telecommunications failures, terrorist attacks, acts of war, break-ins, earthquakes and similar events. We do not currently maintain back-up power systems at our fulfillment centers. We do not presently have a formal disaster recovery plan and our business interruption insurance may be insufficient to compensate us for losses that may occur in the event operations at our fulfillment center are interrupted. In addition, alternative arrangements may not be available, or if they are available, may increase the cost of fulfillment. Any interruptions in our fulfillment operations for any significant period of time, including interruptions resulting from the expansion of our existing facilities or the transfer of operations to a new facility, could damage our reputation and brand and substantially harm our business and results of operations.

We face intense competition and operate in an industry with limited barriers to entry, and some of our competitors may have greater resources than us and may be better positioned to capitalize on the growing auto parts market.

The aftermarket auto parts industry is competitive and highly fragmented, with products distributed through multi-tiered and overlapping channels. We compete with both online and offline retailers who offer OEMs and aftermarket auto parts. Current or potential competitors include FIAMM, Grote, Peterson Manufacturing Company, ECCO, Vixen Horns, HornBlasters and Kleinn.

Many of our current and potential competitors have longer operating histories, large customer bases, superior brand recognition and significantly greater financial, marketing, technical, management and other resources than we do. In addition, some of our competitors have used and may continue to use aggressive pricing tactics and devote substantially more financial resources to website and system development than we do. We expect that competition will further intensify in the future as Internet use and online commerce continue to grow worldwide. Increased competition may result in reduced sales, lower operating margins, reduced profitability, loss of market share and diminished brand recognition.

We rely on key personnel and may need additional personnel for the success and growth of our business.

Our business is largely dependent on the personal efforts and abilities of highly skilled executive, technical, managerial, merchandising and marketing personnel. Competition for such personnel is intense, and we cannot assure that we will be successful in attracting and retaining such personnel. The loss of any key employee or our inability to attract or retain other qualified employees could harm our business and results of operations.

If our product catalog database is stolen, misappropriated or damaged, or if a competitor is able to create a substantially similar catalog without infringing our rights, then we may lose an important competitive advantage.

We have invested significant resources and time to build and maintain our product catalog, which is maintained in the form of an electronic database. We believe that our product catalog provides us with an important competitive advantage. We cannot assure you that we will be able to protect our product catalog from unauthorized copying or theft or that our product catalog will continue to operate adequately, without any technological challenges. In addition, it is possible that a competitor could develop a catalog or database that is similar to or more comprehensive than ours, without infringing our rights. In the event our product catalog is damaged or is stolen, copied or otherwise replicated to compete with us, whether lawfully or not, we may lose an important competitive advantage and our business could be harmed.

Economic conditions have had, and may continue to have, an adverse effect on the demand for aftermarket auto parts and could adversely affect our sales and operating results.

Demand for our products has been and may continue to be adversely affected by general economic conditions. In declining economies, consumers often defer regular vehicle maintenance and may forego purchases of nonessential performance and accessories products, which can result in a decrease in demand for auto parts in general. Consumers

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also defer purchases of new vehicles, which immediately impacts performance parts and accessories, which are generally purchased in the first six months of a vehicle’s lifespan. In addition, during economic downturns, some competitors may become more aggressive in their pricing practices, which would adversely impact our gross margin. Certain suppliers may exit the industry which may impact our ability to procure parts and may adversely impact gross margin as the remaining suppliers increase prices to take advantage of limited competition.

Vehicle miles driven, vehicle accident rates and insurance companies’ willingness to accept a variety of types of parts in the repair process have fluctuated and may decrease, which could result in a decline of our revenues and negatively affect our results of operations.

We and our industry depend on the number of vehicle miles driven, vehicle accident rates and insurance companies’ willingness to accept a variety of types of parts in the repair process. Decreased miles driven reduce the number of accidents and corresponding demand for parts, and reduce the wear and tear on vehicles with a corresponding reduction in demand for vehicle repairs and parts. If consumers were to drive less in the future and/or accident rates were to decline, as a result of higher gas prices, increased use of ride-shares, the advancement of driver assistance technologies, or otherwise, our sales may decline and our business and financial results may suffer.

We will be required to collect and pay more sales taxes, and could become liable for other fees and penalties, which could have an adverse effect on our business.

We have historically collected sales or other similar taxes only on the shipment of goods to customers in the state of New York. However, following the U.S. Supreme Court decision in South Dakota v. Wayfair, we are now required to collect sales tax in any state which passes legislation requiring out-of-state retailers to collect sales tax even where they have no physical nexus. We have historically enjoyed a competitive advantage to the extent our competitors are already subject to those tax obligations. By collecting sales tax in additional states, we will lose this competitive advantage as total costs to our customers will increase, which could adversely affect our sales.

Moreover, if we fail to collect and remit or pay required sales or other taxes in a jurisdiction or qualify or register to do business in a jurisdiction that requires us to do so or if we have failed to do so in the past, we could face material liabilities for taxes, fees, interest and penalties. If various jurisdictions impose new tax obligations on our business activities, our sales and net income in those jurisdictions could decrease significantly, which could harm our business.

Higher wage and benefit costs could adversely affect our business.

Changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefit costs. Increased labor costs brought about by changes in minimum wage laws, other regulations or prevailing market conditions could increase our expenses and have an adverse impact on our profitability.

We face exposure to product liability lawsuits.

The automotive industry in general has been subject to a large number of product liability claims due to the nature of personal injuries that result from car accidents or malfunctions. As a distributor of auto parts, including parts obtained overseas, we could be held liable for the injury or damage caused if the products we sell are defective or malfunction regardless of whether the product manufacturer is the party at fault. While we carry insurance against product liability claims, if the damages in any given action were high or we were subject to multiple lawsuits, the damages and costs could exceed the limits of our insurance coverage or prevent us from obtaining coverage in the future. If we were required to pay substantial damages as a result of these lawsuits, it may seriously harm our business and financial condition. Even defending against unsuccessful claims could cause us to incur significant expenses and result in a diversion of management’s attention. In addition, even if the money damages themselves did not cause substantial harm to our business, the damage to our reputation and the brands offered on our websites could adversely affect our future reputation and our brand and could result in a decline in our net sales and profitability.

Business interruptions in our facilities may affect the distribution of our products and/or the stability of our computer systems, which may affect our business.

Weather, terrorist activities, war or other disasters, or the threat of them, may result in the closure of one or more of our facilities, or may adversely affect our ability to timely provide products to our customers, resulting in lost sales or a potential loss of customer loyalty. Most of our products are imported from other countries and these goods could

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become difficult or impossible to bring into the United States, and we may not be able to obtain such products from other sources at similar prices. Such a disruption in revenue could potentially have a negative impact on our results of operations, financial condition and cash flows.

We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers. Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches or other catastrophic events. If our systems are damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions. Such a disruption of our systems could negatively impact revenue and potentially have a negative impact on our results of operations, financial condition and cash flows.

Security threats, such as ransomware attacks, to our IT infrastructure could expose us to liability, and damage our reputation and business.

It is essential to our business strategy that our technology and network infrastructure remain secure and is perceived by our customers to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks. Information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign private parties and state actors. We may face cyber-attacks that attempt to penetrate our network security, including our data centers, to sabotage or otherwise disable our network of websites and online marketplaces, misappropriate our or our customers’ proprietary information, which may include personally identifiable information, or cause interruptions of our internal systems and services. If successful, any of these attacks could negatively affect our reputation, damage our network infrastructure and our ability to sell our products, harm our relationship with customers that are affected and expose us to financial liability.

We maintain a comprehensive system of preventive and detective controls through our security programs; however, given the rapidly evolving nature and proliferation of cyber threats, our controls may not prevent or identify all such attacks in a timely manner or otherwise prevent unauthorized access to, damage to, or interruption of our systems and operations, and we cannot eliminate the risk of human error or employee or vendor malfeasance.

In addition, any failure by us to comply with applicable privacy and information security laws and regulations could cause us to incur significant costs to protect any customers whose personal data was compromised and to restore customer confidence in us and to make changes to our information systems and administrative processes to address security issues and compliance with applicable laws and regulations. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop shopping on our sites altogether. Such events could lead to lost sales and adversely affect our results of operations. We also could be exposed to government enforcement actions and private litigation.

Failure to comply with privacy laws and regulations and failure to adequately protect customer data could harm our business, damage our reputation and result in a loss of customers.

Federal and state and regulations may govern the collection, use, sharing and security of data that we receive from our customers. In addition, we have and post on our websites our own privacy policies and practices concerning the collection, use and disclosure of customer data. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, U.S. Federal Trade Commission requirements or other federal, state or international privacy-related laws and regulations could result in proceedings or actions against us by governmental entities or others, which could potentially harm our business. Further, failure or perceived failure to comply with our policies or applicable requirements related to the collection, use or security of personal information or other privacy-related matters could damage our reputation and result in a loss of customers. The regulatory framework for privacy issues is currently evolving and is likely to remain uncertain for the foreseeable future.

Challenges by OEMs to the validity of the aftermarket auto parts industry and claims of intellectual property infringement could adversely affect our business and the viability of the aftermarket auto parts industry.

OEMs have attempted to use claims of intellectual property infringement against manufacturers and distributors of aftermarket products to restrict or eliminate the sale of aftermarket products that are the subject of the claims. The OEMs have brought such claims in federal court and with the United States International Trade Commission. We have

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received in the past, and we anticipate we may in the future receive, communications alleging that certain products we sell infringe the patents, copyrights, trademarks and trade names or other intellectual property rights of OEMs or other third parties.

The United States Patent and Trademark Office records indicate that OEMs are seeking and obtaining more design patents and trademarks than they have in the past. In some cases, we have entered into license agreements that allow us to sell aftermarket parts that replicate OEM patented parts in exchange for a royalty. In the event that our license agreements, or other similar license arrangements are terminated, or we are unable to agree upon renewal terms, we may be subject to restrictions on our ability to sell aftermarket parts that replicate parts covered by design patents or trademarks, which could have an adverse effect on our business.

Litigation or regulatory enforcement could also result in interpretations of the law that require us to change our business practices or otherwise increase our costs and harm our business. We may not maintain sufficient, or any, insurance coverage to cover the types of claims that could be asserted. If a successful claim were brought against us, it could expose us to significant liability.

If we are unable to protect our intellectual property rights, our reputation and brand could be impaired and we could lose customers.

We regard our patents, trademarks, trade secrets and similar intellectual property as important to our success. We rely on patent, trademark and copyright law, and trade secret protection, and confidentiality and/or license agreements with employees, customers, partners and others to protect our proprietary rights. We cannot be certain that we have taken adequate steps to protect our proprietary rights, especially in countries where the laws may not protect our rights as fully as in the United States. In addition, our proprietary rights may be infringed or misappropriated, and we could be required to incur significant expenses to preserve them. In the past we have filed litigation to protect our intellectual property rights. The outcome of such litigation can be uncertain, and the cost of prosecuting such litigation may have an adverse impact on our earnings. We have patent and trademark registrations for several patents and marks. However, any registrations may not adequately cover our intellectual property or protect us against infringement by others. Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our products and services may be made available online. We also currently own or control a number of Internet domain names and have invested time and money in the purchase of domain names and other intellectual property, which may be impaired if we cannot protect such intellectual property. We may be unable to protect these domain names or acquire or maintain relevant domain names in the United States and in other countries. If we are not able to protect our patents, trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand recognition and customer loyalty.

Because we are involved in litigation from time to time and are subject to numerous laws and governmental regulations, we could incur substantial judgments, fines, legal fees and other costs as well as reputational harm.

We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various reasons. The damages sought against us in some of these litigation proceedings could be substantial. Although we maintain liability insurance for some litigation claims, if one or more of the claims were to greatly exceed our insurance coverage limits or if our insurance policies do not cover a claim, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Existing or future government regulation could expose us to liabilities and costly changes in our business operations and could reduce customer demand for our products and services.

We are subject to federal and state consumer protection laws and regulations, including laws protecting the privacy of customer non-public information and regulations prohibiting unfair and deceptive trade practices, as well as laws and regulations governing businesses in general and the Internet and e-commerce and certain environmental laws. Additional laws and regulations may be adopted with respect to the Internet. These laws may cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising and promotional practices, money transfers, pricing, content and quality of products and services, taxation, electronic contracts and other communications, intellectual property rights, and information security. Furthermore, it is not clear how existing laws such as those governing issues such as property ownership, sales and other taxes, trespass, data mining and collection, and personal privacy apply to the Internet and e-commerce. To the extent we expand into international markets, we will be faced with complying with local laws and regulations, some of which may be

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materially different than U.S. laws and regulations. Any such foreign law or regulation, any new U.S. law or regulation, or the interpretation or application of existing laws and regulations to our business may have a material adverse effect on our business, prospects, financial condition and results of operations by, among other things, subjecting us to fines, penalties, damages or other liabilities, requiring costly changes in our business operations and practices, and reducing customer demand for our products and services. We may not maintain sufficient, or any, insurance coverage to cover the types of claims or liabilities that could arise as a result of such regulation.

We may be affected by global climate change or by legal, regulatory, or market responses to such change.

The growing political and scientific sentiment is that global weather patterns are being influenced by increased levels of greenhouse gases in the earth’s atmosphere. This growing sentiment and the concern over climate change have led to legislative and regulatory initiatives aimed at reducing greenhouse gas emissions which warm the earth’s atmosphere. These warmer weather conditions could result in a decrease in demand for auto parts in general. Moreover, proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered by policy makers in the United States. Laws enacted that directly or indirectly affect our suppliers (through an increase in the cost of production or their ability to produce satisfactory products) or our business (through an impact on our inventory availability, cost of sales, operations or demand for the products we sell) could adversely affect our business, financial condition, results of operations and cash flows. Significant increases in fuel economy requirements or new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell or lead to changes in automotive technology. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. Our inability to respond to such changes could adversely impact the demand for our products and our business, financial condition, results of operations or cash flows.

Possible new tariffs that might be imposed by the United States government could have a material adverse effect on our results of operations.

Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. Throughout 2018 and 2019, the U.S. imposed tariffs on imports from several countries, including China. If further tariffs are imposed on imports of our products, or retaliatory trade measures are taken by China or other countries in response to existing or future tariffs, we could be forced to raise prices on all of our imported products or make changes to our operations, any of which could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed on our products or related materials may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers.

Risks Related to Our Relationship with Our Manager

Termination of the management services agreement will not affect our manager’s rights to receive profit allocations and removal of our manager may cause us to incur significant fees.

Our manager owns all of our allocation shares, which generally will entitle our manager to receive a profit allocation as a form of preferred distribution. In general, this profit allocation is designed to pay our manager 20% of the excess of the gains upon dispositions of our subsidiaries, plus an amount equal to the net income of such subsidiaries since their acquisition by us, over an annualized hurdle rate. If our manager resigns or is removed, for any reason, it will remain the owner of our allocation shares. It will therefore remain entitled to all profit allocations while it holds our allocation shares regardless of whether it is terminated as our manager. If we terminate our manager, it may therefore be difficult or impossible for us to find a replacement to serve the function of our manager, because we would not be able to force our manager to transfer its allocation shares to a replacement manager so that the replacement manager could be entitled to a profit allocation. Therefore, as a practical matter, it may be difficult for us to replace our manager without its cooperation. If it becomes necessary to replace our manager and we are unable to replace our manager without its cooperation, we may be unable to continue to manage our operations effectively and our business may fail.

If we terminate the management services agreement with our manager, any fees, costs and expenses already earned or otherwise payable to our manager upon termination would become immediately due. Moreover, if our manager were to be removed and our management services agreement terminated by a vote of our board of directors and a majority of our common shares other than common shares beneficially owned by our manager, we would also owe a termination

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fee to our manager on top of the other fees, costs and expenses. In addition, the management services agreement is silent as to whether termination of our manager “for cause” would result in a termination fee; there is therefore a risk that the agreement may be interpreted to entitle our manager to a termination fee even if terminated “for cause”. The termination fee would equal twice the sum of the amount of the quarterly management fees calculated with respect to the four fiscal quarters immediately preceding the termination date of the management services agreement. As a result, we could incur significant management fees as a result of the termination of our manager, which may increase the risk that our business may be unable to meet its financial obligations or otherwise fail.

Mr. Ellery W. Roberts, our Chairman and Chief Executive Officer, controls our manager. If some event were to occur to cause Mr. Roberts (or his designated successor, heirs, beneficiaries or permitted assigns) not to control our manager without the prior written consent of our board of directors, our manager would be considered terminated under our agreement.

Our manager and the members of our management team may engage in activities that compete with us or our businesses.

Although our Chief Executive Officer intends to devote substantially all of his time to the affairs of our company and our manager must present all opportunities that meet our acquisition and disposition criteria to our board of directors, neither our manager nor our Chief Executive Officer is expressly prohibited from investing in or managing other entities. In this regard, the management services agreement and the obligation to provide management services will not create a mutually exclusive relationship between our manager and its affiliates, on the one hand, and our company, on the other. See “The Manager” for more information about our relationship with our manager and our management team.

Our manager need not present an acquisition opportunity to us if our manager determines on its own that such acquisition opportunity does not meet our acquisition criteria.

Our manager will review any acquisition opportunity to determine if it satisfies our acquisition criteria, as established by our board of directors from time to time. If our manager determines, in its sole discretion, that an opportunity fits our criteria, our manager will refer the opportunity to our board of directors for its authorization and approval prior to signing a letter of intent, indication of interest or similar document or agreement. Opportunities that our manager determines do not fit our criteria do not need to be presented to our board of directors for consideration. In addition, upon a determination by our board of directors not to promptly pursue an opportunity presented to it by our manager, in whole or in part, our manager will be unrestricted in its ability to pursue such opportunity, or any part that we do not promptly pursue, on its own or refer such opportunity to other entities, including its affiliates. If such an opportunity is ultimately profitable, we will have not participated in such opportunity. See “The Manager — Acquisition and Disposition Opportunities” for more information about our current acquisition criteria.

Our Chief Executive Officer, Mr. Ellery W. Roberts, controls our manager and, as a result we may have difficulty severing ties with Mr. Roberts.

Under the terms of the management services agreement, our board of directors may, after due consultation with our manager, at any time request that our manager replace any individual seconded to us, and our manager will, as promptly as practicable, replace any such individual. However, because Mr. Roberts controls our manager, we may have difficulty completely severing ties with Mr. Roberts absent terminating the management services agreement and our relationship with our manager. Further, termination of the management services agreement could give rise to a significant financial obligation, which may have a material adverse effect on our business and financial condition. See “The Manager” for more information about our relationship with our manager.

If the management services agreement is terminated, our manager, as holder of the allocation shares, has the right to cause us to purchase its allocation shares, which may have a material adverse effect on our financial condition.

If: (i) the management services agreement is terminated at any time other than as a result of our manager’s resignation, subject to (ii); or (ii) our manager resigns, our manager will have the right, but not the obligation, for one year from the date of termination or resignation, as the case may be, to cause us to purchase the allocation shares for the put price. The put price shall be equal to, as of any exercise date: (i) if we terminate the management services agreement, the sum of two separate, independently made calculations of the aggregate amount of the “base put price amount” as of such exercise date; or (ii) if our manager resigns, the average of two separate, independently made calculations of the aggregate amount of the “base put price amount” as of such exercise date. If our manager elects to cause us to

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purchase its allocation shares, we are obligated to do so and, until we have done so, our ability to conduct our business, including our ability to incur debt, to sell or otherwise dispose of our property or assets, to engage in certain mergers or consolidations, to acquire or purchase the property, assets or stock of, or beneficial interests in, another business, or to declare and pay distributions, would be restricted. These financial and operational obligations may have a material adverse effect on our financial condition, business and results of operations. See “The Manager — Our Manager as an Equity Holder — Supplemental Put Provision” for more information about our manager’s put right and our obligations relating thereto, as well as the definition and calculation of the base put price amount.

If the management services agreement is terminated, we will need to change our name and cease our use of the term “1847”, which in turn could have a material adverse impact upon our business and results of operations as we would be required to expend funds to create and market a new name.

Our manager controls our rights to the term “1847” as it is used in the name of our company. We and any businesses that we acquire must cease using the term “1847,” including any trademark based on the name of our company that may be licensed to them by our manager under the license provisions of our management services agreement, entirely in their businesses and operations within 180 days of our termination of the management services agreement. The sublicense provisions of the management services agreement would require our company and its businesses to change their names to remove any reference to the term “1847” or any reference to trademarks licensed to them by our manager. This also would require us to create and market a new name and expend funds to protect that name, which may have a material adverse effect on our business and results of operations.

We have agreed to indemnify our manager under the management services agreement that may result in an indemnity payment that could have a material adverse impact upon our business and results of operations.

The management services agreement provides that we will indemnify, reimburse, defend and hold harmless our manager, together with its employees, officers, members, managers, directors and agents, from and against all losses (including lost profits), costs, damages, injuries, taxes, penalties, interests, expenses, obligations, claims and liabilities of any kind arising out of the breach of any term or condition in the management services agreement or the performance of any services under such agreement except by reason of acts or omissions constituting fraud, willful misconduct or gross negligence. If our manager is forced to defend itself in any claims or actions arising out of the management services agreement for which we are obligated to provide indemnification, our payment of such indemnity could have a material adverse impact upon our business and results of operations.

Our manager can resign on 120 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could materially adversely affect our financial condition, business and results of operations, as well as the market price of our shares.

Our manager has the right, under the management services agreement, to resign at any time on 120 days written notice, whether we have found a replacement or not. If our manager resigns, we may not be able to contract with a new manager or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days, or at all, in which case our operations are likely to experience a disruption, our financial condition, business and results of operations, as well as our ability to pay distributions are likely to be materially adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our business is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the experience and expertise possessed by our manager and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our businesses may result in additional costs and time delays that could materially adversely affect our financial condition, business and results of operations as well as the market price of our shares.

The amount recorded for the allocation shares may be subject to substantial period-to-period changes, thereby significantly adversely impacting our results of operations.

We will record the allocation shares at the redemption value at each balance sheet date by recording any change in fair value through our income statement as a dividend between net income and net income available to common shareholders. The redemption value of the allocation shares is largely related to the value of the profit allocation that our manager, as holder of the allocation shares, will receive. The redemption value of the allocation shares may

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fluctuate on a period-to-period basis based on the distributions we pay to our common shareholders, the earnings of our businesses and the price of our common shares, which fluctuation may be significant, and could cause a material adverse effect on our results of operations. See “The Manager — Our Manager as an Equity Holder” for more information about the terms and calculation of the profit allocation and any payments under the supplemental put provisions of our operating agreement.

We cannot determine the amount of management fee that will be paid to our manager over time with certainty, which management fee may be a significant cash obligation and may reduce the cash available for operations and distributions to our shareholders.

Our manager’s management fee will be calculated by reference to our adjusted net assets, which will be impacted by the following factors:

•        the acquisition or disposition of businesses;

•        organic growth, add-on acquisitions and dispositions by our businesses; and

•        the performance of our businesses.

We cannot predict these factors, which may cause significant fluctuations in our adjusted net assets and, in turn, impact the management fee we pay to our manager. Accordingly, we cannot determine the amount of management fee that will be paid to our manager over time with any certainty, which management fee may represent a significant cash obligation and may reduce the cash available for our operations and distributions to our shareholders.

We must pay our manager the management fee regardless of our performance. Therefore, our manager may be induced to increase the amount of our assets rather than the performance of our businesses.

Our manager is entitled to receive a management fee that is based on our adjusted net assets, as defined in the management services agreement, regardless of the performance of our businesses. In this respect, the calculation of the management fee is unrelated to our net income. As a result, the management fee may encourage our manager to increase the amount of our assets by, for example, recommending to our board of directors the acquisition of additional assets, rather than increase the performance of our businesses. In addition, payment of the management fee may reduce or eliminate the cash we have available for distributions to our shareholders.

The management fee is based solely upon our adjusted net assets; therefore, if in a given year our performance declines, but our adjusted net assets remain the same or increase, the management fee we pay to our manager for such year will increase as a percentage of our net income and may reduce the cash available for distributions to our shareholders.

The management fee we pay to our manager will be calculated solely by reference to our adjusted net assets. If in a given year our performance declines, but our adjusted net assets remain the same or increase, the management fee we pay to our manager for such year will increase as a percentage of our net income and may reduce the cash available for distributions to our shareholders. See “The Manager — Our Manager as a Service Provider — Management Fee” for more information about the terms and calculation of the management fee.

The amount of profit allocation to be paid to our manager could be substantial. However, we cannot determine the amount of profit allocation that will be paid over time or the put price with any certainty.

We cannot determine the amount of profit allocation that will be paid over time or the put price with any certainty. Such determination would be dependent on, among other things, the number, type and size of the acquisitions and dispositions that we make in the future, the distributions we pay to our shareholders, the earnings of our businesses and the market value of common shares from time to time, factors that cannot be predicted with any certainty at this time. Such factors will have a significant impact on the amount of any profit allocation to be paid to our manager, especially if our share price significantly increases. See “The Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for more information about the calculation and payment of profit allocation. Any amounts paid in respect of the profit allocation are unrelated to the management fee earned for performance of services under the management services agreement.

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The management fee and profit allocation to be paid to our manager may significantly reduce the amount of cash available for distributions to shareholders and for operations.

Under the management services agreement, we will be obligated to pay a management fee to and, subject to certain conditions, reimburse the costs and out-of-pocket expenses of our manager incurred on our behalf in connection with the provision of services to us. Similarly, our businesses will be obligated to pay fees to and reimburse the costs and expenses of our manager pursuant to any offsetting management services agreements entered into between our manager and our businesses, or any transaction services agreements to which such businesses are a party. In addition, our manager, as holder of the allocation shares, will be entitled to receive a profit allocation upon satisfaction of applicable conditions to payment and may be entitled to receive the put price upon the occurrence of certain events. While we cannot quantify with any certainty the actual amount of any such payments in the future, we do expect that such amounts could be substantial. See “The Manager” for more information about these payment obligations. The management fee, put price and profit allocation are payment obligations and, as a result, will be senior in right to the payment of any distributions to our shareholders. Likewise, the profit allocation may also significantly reduce the cash available for operations.

Our manager’s influence on conducting our business and operations, including acquisitions, gives it the ability to increase its fees and compensation to our Chief Executive Officer, which may reduce the amount of cash available for distributions to our shareholders.

Under the terms of the management services agreement, our manager is paid a management fee calculated as a percentage of our adjusted net assets for certain items and is unrelated to net income or any other performance base or measure. See “The Manager — Our Manager as a Service Provider — Management Fee” for more information about the calculation of the management fee. Our manager, which Ellery W. Roberts, our Chief Executive Officer, controls, may advise us to consummate transactions, incur third-party debt or conduct our operations in a manner that may increase the amount of fees paid to our manager which, in turn, may result in higher compensation to Mr. Roberts because his compensation is paid by our manager from the management fee it receives from us.

Fees paid by our company and our businesses pursuant to transaction services agreements do not offset fees payable under the management services agreement and will be in addition to the management fee payable by our company under the management services agreement.

The management services agreement provides that businesses that we may acquire in the future may enter into transaction services agreements with our manager pursuant to which our businesses will pay fees to our manager. See “The Manager — Our Manager as a Service Provider” for more information about these agreements. Unlike fees paid under the offsetting management services agreements, fees that are paid pursuant to such transaction services agreements will not reduce the management fee payable by us. Therefore, such fees will be in addition to the management fee payable by us or offsetting management fees paid by businesses that we may acquire in the future.

The fees to be paid to our manager pursuant to these transaction service agreements will be paid prior to any principal, interest or dividend payments to be paid to us by our businesses, which will reduce the amount of cash available for distributions to our shareholders.

Our manager’s profit allocation may induce it to make decisions and recommend actions to our board of directors that are not optimal for our business and operations.

Our manager, as holder of all of the allocation shares, will receive a profit allocation based on the extent to which gains from any sales of our subsidiaries plus their net income since the time they were acquired exceed a certain annualized hurdle rate. As a result, our manager may be encouraged to make decisions or to make recommendations to our board of directors regarding our business and operations, the business and operations of our businesses, acquisitions or dispositions by us or our businesses and distributions to our shareholders, any of which factors could affect the calculation and payment of profit allocation, but which may otherwise be detrimental to our long-term financial condition and performance.

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The obligations to pay the management fee and profit allocation, including the put price, may cause us to liquidate assets or incur debt.

If we do not have sufficient liquid assets to pay the management fee and profit allocation, including the put price, when such payments are due and payable, we may be required to liquidate assets or incur debt in order to make such payments. This circumstance could materially adversely affect our liquidity and ability to make distributions to our shareholders. See “The Manager” for more information about these payment obligations.

Risks Related to Taxation

Our shareholders will be subject to taxation on their share of our taxable income, whether or not they receive cash distributions from us.

Our company is a limited liability company and is classified as a partnership for U.S. federal income tax purposes. Consequently, our shareholders are subject to U.S. federal income taxation and, possibly, state, local and foreign income taxation on their share of our taxable income, whether or not they receive cash distributions from us. There is, accordingly, a risk that our shareholders may not receive cash distributions equal to their allocated portion of our taxable income or even in an amount sufficient to satisfy the tax liability that results from that income. This risk is attributable to a number of variables, such as results of operations, unknown liabilities, government regulations, financial covenants relating to our debt, the need for funds for future acquisitions and/or to satisfy short- and long-term working capital needs of our businesses, and the discretion and authority of our board of directors to make distributions or modify our distribution policy.

As a partnership, our company itself will not be subject to U.S. federal income tax (except as may be imposed under certain recently enacted partnership audit rules), although it will file an annual partnership information return with the IRS. The information return will report the results of our activities and will contain a Schedule K-1 for each company shareholder reflecting allocations of profits or losses (and items thereof) to our members, that is, to the shareholders. Each partner of a partnership is required to report on his or her income tax return his or her share of items of income, gain, loss, deduction, credit, and other items of the partnership (in each case, as reflected on such Schedule K-1) without regard to whether cash distributions are received. Each holder will be required to report on his or her tax return his or her allocable share of company income, gain, loss, deduction, credit and other items for our taxable year that ends with or within the holder’s taxable year. Thus, holders of common shares will be required to report taxable income (and thus be subject to significant income tax liability) without a corresponding current receipt of cash if we were to recognize taxable income and not make cash distributions to the shareholders.

Generally, the determination of a holder’s distributive share of any item of income, gain, loss, deduction, or credit of a partnership is governed by the operating agreement, but is also subject to income tax laws governing the allocation of the partnership’s income, gains, losses, deductions or credits. These laws are complex, and there can be no assurance that the IRS would not successfully challenge any allocation set forth in any Schedule K-1 issued by us. Whether an allocation set forth in any particular K-1 issued to a shareholder will be accepted by the IRS also depends on a facts and circumstances analysis of the underlying economic arrangement of our shareholders. If the IRS were to prevail in challenging the allocations provided by the operating agreement, the amount of income or loss allocated to holders for U.S. federal income tax purposes could be increased or reduced or the character of allocated income or loss could be modified. See “Material U.S. Federal Income Tax Considerations” for more information.

All of our income could be subject to an entity-level tax in the United States, which could result in a material reduction in cash flow available for distribution to shareholders and thus could result in a substantial reduction in the value our shares.

Given the number of shareholders that we have, and because our shares are listed for trading on the over-the-counter market, we believe that our company will be regarded as a publicly-traded partnership. Under the federal tax laws, a publicly-traded partnership generally will be treated as a corporation for U.S. federal income tax purposes. A publicly-traded partnership will be treated as a partnership, however, and not as a corporation for U.S. federal tax purposes so long as 90% or more of its gross income for each taxable year in which it is publicly traded constitutes “qualifying income,” within the meaning of section 7704(d) of the Internal Revenue Code of 1986, as amended, or the Code, and we are not required to register under the Investment Company Act. Qualifying income generally includes dividends, interest (other than interest derived in the conduct of a lending or insurance business or interest the

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determination of which depends in whole or in part on the income or profits of any person), certain real property rents, certain gain from the sale or other disposition of real property, gains from the sale of stock or debt instruments which are held as capital assets, and certain other forms of “passive-type” income. We expect to realize sufficient qualifying income to satisfy the qualifying income exception. We also expect that we will not be required to register under the Investment Company Act.

In certain cases, income that would otherwise qualify for the qualifying income exception may not so qualify if it is considered to be derived from an active conduct of a business. For example, the IRS may assert that interest received by us from our subsidiaries is not qualifying income because it is derived in the conduct of a lending business. If we fail to satisfy the qualifying income exception or is required to register under the Investment Company Act, we will be classified as a corporation for U.S. federal (and certain state and local) income tax purposes, and shareholders would be treated as shareholders in a domestic corporation. We would be required to pay federal income tax at regular corporate rates on its income. In addition, we would likely be liable for state and local income and/or franchise taxes on our income. Distributions to the shareholders would constitute ordinary dividend income (taxable at then existing ordinary income rates) or, in certain cases, qualified dividend income (which is generally subject to tax at reduced tax rates) to such holders to the extent of our earnings and profits, and the payment of these dividends would not be deductible to us. Shareholders would receive an IRS Form 1099-DIV in respect of such dividend income and would not receive a Schedule K-1. Taxation of our company as a corporation could result in a material reduction in distributions to our shareholders and after-tax return and would likely result in a substantial reduction in the value of, or materially adversely affect the market price of, our shares.

The present U.S. federal income tax treatment of an investment in our shares may be modified by administrative, legislative, or judicial interpretation at any time, and any such action may affect investments previously made. For example, changes to the U.S. federal tax laws and interpretations thereof could make it more difficult or impossible to meet the qualifying income exception for our company to be classified as a partnership, and not as a corporation, for U.S. federal income tax purposes, necessitate that our company restructure its investments, or otherwise adversely affect an investment in our shares.

In addition, we may become subject to an entity level tax in one or more states. Several states are evaluating ways to subject partnerships to entity level taxation through the imposition of state income, franchise, or other forms of taxation. If any state were to impose a tax upon our company as an entity, our distributions to you would be reduced.

Complying with certain tax-related requirements may cause us to forego otherwise attractive business or investment opportunities or enter into acquisitions, borrowings, financings, or arrangements we may not have otherwise entered into.

In order for our company to be treated as a partnership for U.S. federal income tax purposes and not as a publicly traded partnership taxable as a corporation, we must meet the qualifying income exception discussed above on a continuing basis and must not be required to register as an investment company under the Investment Company Act. In order to effect such treatment, we may be required to invest through foreign or domestic corporations, forego attractive business or investment opportunities or enter into borrowings or financings we (or any of our subsidiaries, as the case may be) may not have otherwise entered into. This may adversely affect our ability to operate solely to maximize our cash flow. In addition, we may not be able to participate in certain corporate reorganization transactions that would be tax free to our shareholders if we were a corporation for U.S. federal income tax purposes.

Non-corporate investors who are U.S. taxpayers will not be able to deduct certain fees, costs or other expenses for U.S. federal income tax purposes.

We will pay a management fee (and possibly certain transaction fees) to our manager. We will also pay certain costs and expenses incurred in connection with activities of our manager. We intend to deduct such fees and expenses to the extent that they are reasonable in amount and are not capital in nature or otherwise nondeductible. It is expected that such fees and other expenses will generally constitute miscellaneous itemized deductions for non-corporate U.S. taxpayers who hold our shares. Under current law in effect for taxable years beginning after December 31, 2017 and before January 1, 2026, non-corporate U.S. taxpayers may not deduct any such miscellaneous itemized deductions for U.S. federal income tax purposes. A non-corporate U.S. taxpayer’s inability to deduct such items could result in such holder reporting as his or her share of company taxable income an amount that exceeds any cash actually distributed to such U.S. taxpayer for the year. U.S. holders of our shares that are corporations generally will be able to deduct these fees, costs and expenses in accordance with applicable U.S. federal income tax law.

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A portion of the income arising from an investment in our shares may be treated as unrelated business taxable income and taxable to certain tax-exempt holders despite such holders’ tax-exempt status.

We expect to incur debt with respect to certain of our investments that will be treated as “acquisition indebtedness” under section 514 of the Code. To the extent we recognize income from any investment with respect to which there is “acquisition indebtedness” during a taxable year, or to the extent we recognize gain from the disposition of any investment with respect to which there is “acquisition indebtedness,” a portion of that income will be treated as unrelated business taxable income and taxable to tax-exempt investors. In addition, if the IRS successfully asserts that we are engaged in a trade or business for U.S. federal income tax purposes (for example, if it determines we are engaged in a lending business), tax-exempt holders, and in certain cases non-U.S. holders, would be subject to U.S. income tax on any income generated by such business. The foregoing would apply only if the amount of such business income does not cause us to fail to meet the qualifying income test (which would happen if such income exceeded 10% of our gross income, and in which case such failure would cause us to be taxable as a corporation).

A portion of the income arising from an investment in our shares may be treated as income that is effectively connected with our conduct of a U.S. trade or business, which income would be taxable to holders who are not U.S. taxpayers.

If the IRS successfully asserts that we are engaged in a trade or business in the United States for U.S. federal income tax purposes (for example, if it determines we are engaged in a lending business), then in certain cases non-U.S. holders would be subject to U.S. income tax on any income that is effectively connected with such business. It could also cause the non-U.S. holder to be subject to U.S. federal income tax on a sale of his or her interest in our company. The foregoing would apply only if the amount of such business income does not cause us to fail to meet the qualifying income test (which would happen if such income exceeded 10% of our gross income, and in which case such failure would cause us to be taxable as a corporation).

Risks related to recently enacted legislation.

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. No assurance can be given as to whether, when or in what form the U.S. federal income tax laws applicable to us and our shareholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal income tax laws could adversely affect an investment in our shares.

We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be issued, nor is the long-term impact of recently enacted tax legislation clear. Prospective investors are urged to consult their tax advisors regarding the effect of potential changes to the U.S. federal income tax laws on an investment in our shares.

Risks Related to This Offering and Ownership of Our Common Shares

We may not be able to satisfy listing requirements of NYSE American or maintain a listing of our common shares on NYSE American.

Our common shares are quoted on the OTCQB market operated by OTC Markets Group Inc. In connection with this offering, we received approval from NYSE American for the listing of our common shares. The closing of this offering is contingent upon our uplisting to NYSE American unless such condition is waived by the representatives of the underwriters. In addition, we must meet certain financial and liquidity criteria to maintain the listing of our common shares on NYSE American. If we fail to meet any listing standards or if we violate any listing requirements, our common shares may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common shares from NYSE American may materially impair our shareholders’ ability to buy and sell our common shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common shares. The delisting of our common shares could significantly impair our ability to raise capital and the value of your investment.

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The market price, trading volume and marketability of our common shares may, from time to time, be significantly affected by numerous factors beyond our control, which may materially adversely affect the market price of your common shares, the marketability of your common shares and our ability to raise capital through future equity financings.

The market price and trading volume of our common shares may fluctuate significantly. Many factors that are beyond our control may materially adversely affect the market price of your common shares, the marketability of your common shares and our ability to raise capital through equity financings. These factors include the following

•        actual or anticipated variations in our periodic operating results;

•        increases in market interest rates that lead investors of our common shares to demand a higher investment return;

•        changes in earnings estimates;

•        changes in market valuations of similar companies;

•        actions or announcements by our competitors;

•        adverse market reaction to any increased indebtedness we may incur in the future;

•        additions or departures of key personnel;

•        actions by shareholders;

•        speculation in the media, online forums, or investment community; and

•        our intentions and ability to list our common shares on NYSE American and our subsequent ability to maintain such listing (if approved).

An active, liquid trading market for our common shares may not be sustained, which may cause our common shares to trade at a discount from the public offering price and make it difficult for you to sell the common shares you purchase.

We cannot predict the extent to which investor interest in us will sustain a trading market or how active and liquid that market may remain. If an active and liquid trading market is not sustained, you may have difficulty selling any of our common shares that you purchase at a price above the price you purchase it or at all. The failure of an active and liquid trading market to continue would likely have a material adverse effect on the value of our common shares. The market price of our common shares may decline below the public offering price, and you may not be able to sell your common shares at or above the price you paid or at all. An inactive market may also impair our ability to raise capital to continue to fund operations by selling securities and may impair our ability to acquire other companies or technologies by using our securities as consideration.

Our management has broad discretion as to the use of the net proceeds from this offering.

Our management will have broad discretion in the application of the net proceeds of this offering. Accordingly, you will have to rely upon the judgment of our management with respect to the use of these proceeds. We intend to use the proceeds of this offering for the payment of certain accrued liabilities and for general corporate purposes, which could include future acquisitions, capital expenditures and working capital. Our management may spend a portion or all of the net proceeds from this offering in ways that holders of our common shares may not desire or that may not yield a significant return or any return at all. Our management not applying these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from this offering in a manner that does not produce income or that loses value. See “Use of Proceeds” for more information.

You will experience immediate and substantial dilution as a result of this offering.

As of March 31, 2022, our pro forma net tangible book value (deficit) was approximately $(24,172,806), or approximately $(10.38) per share (post-split). Since the price per share being offered in this offering is substantially higher than the pro forma net tangible book value per common share, you will suffer substantial dilution with respect

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to the net tangible book value of the shares you purchase in this offering. Based on the assumed public offering price of $5.20 per share being sold in this offering, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, and our pro forma net tangible book value per share as of March 31, 2022, if you purchase shares in this offering, you will suffer immediate and substantial dilution of $9.87 per share (or $9.35 per share if the underwriters exercise the over-allotment option in full) with respect to the net tangible book value of the common shares. See “Dilution” for a more detailed discussion of the dilution you will incur if you purchase securities in this offering.

Future sales of our securities may affect the market price of our common shares and result in material dilution, especially given the effect of the “exploding” antidilution feature of some of our outstanding warrants.

We cannot predict what effect, if any, future sales of our common shares, or the availability of common shares for future sale, will have on the market price of our common shares. Notably, we are obligated to issue (i) up to approximately 481,388 common shares (post-split) upon the conversion of our outstanding series A senior convertible preferred shares, (ii) up to approximately 120,397 common shares (post-split) upon the conversion of our outstanding series B senior convertible preferred shares and (iii) up to 2,553,303 common shares (post-split) upon the exercise of outstanding warrants at a weighted average exercise price of $5.11 per share (post-split). We are also obliged to issue common shares upon the conversion of secured convertible promissory notes in the aggregate principal amount of $24,860,000 and of a promissory note in the principal amount of $600,000, which is convertible only upon an event of default under the promissory note, all of which are convertible into our common shares at a conversion price of $5.20 (post-split) (subject to adjustment). We are also obligated to issue common shares upon the exchange of promissory notes in the aggregate principal amount of $5,880,345, which are exchangeable for our common shares at an exchange price equal to the higher of $10.00 (post-split) or the 30-day volume weighted average price of our common shares (subject to adjustment).

Furthermore, a total of approximately 2,332,906 (post-split) of our outstanding warrants contain a so-called “exploding” full ratchet antidilution provision because if we issue shares (except in certain defined scenarios) at a price below the then current exercise price of these warrants (2,270,406 (post-split) of which have a current exercise price of $5.20 per share (post-split) and 62,500 (post-split) of which have a current exercise price of $0.04 per share (post-split)), the exercise price would be re-set to such new price and the number of shares underlying the warrants would be increased in the same proportion as the exercise price decrease. If the public offering price is less than $5.20 per share, the exercise price of these warrants (other than those having an exercise price of $0.04 per share (post-split)) will be reduced to such public offering price and the number of common shares underlying these warrants will be increased. This adjustment that may occur at the closing of this offering and similar adjustments that may occur thereafter, will have a material dilutive effect on our outstanding common shares to the extent these warrants are exercised in the future. See also “Description of Securities — Warrants.”

Sales of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could materially adversely affect the market price of our common shares and may make it more difficult for you to sell your common shares at a time and price which you deem appropriate.

Rule 144 sales in the future may have a depressive effect on our share price.

All of the outstanding common shares held by the present officers, directors, and affiliate shareholders (approximately 64.75% of our outstanding common shares) are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officer or director who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a company’s outstanding common shares. There is no limitation on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of six months if our company is a current, reporting company under the Exchange Act. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registration of common shares of present shareholders, may have a depressive effect upon the price of the common shares in any market that may develop.

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Our series A senior convertible preferred shares and series B senior convertible preferred shares are senior to our common shares as to distributions and in liquidation, which could limit our ability to make distributions to our common shareholders.

Holders of our series A senior convertible preferred shares and series B senior convertible preferred shares are entitled to quarterly dividends, payable in cash or in common shares, at a rate per annum of 14.0% of the stated value ($2.00 per share for our series A senior convertible preferred shares and $3.00 per share for our series B senior convertible preferred shares), subject to adjustment. In addition, upon any liquidation of our company or its subsidiaries, each holder of outstanding series A senior convertible preferred shares and series B senior convertible preferred shares will 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), before any payment shall be made to or set apart for the holders of our common shares. This could limit our ability to make regular distributions to our common shareholders or distributions upon liquidation.

We may issue additional debt and equity securities, which are senior to our common shares as to distributions and in liquidation, which could materially adversely affect the market price of our common shares.

In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our shareholders.

Any additional preferred securities, if issued by our company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make distributions to our common shareholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing.

Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your common shares and diluting your interest in us. In addition, we can change our leverage strategy from time to time without approval of holders of our common shares, which could materially adversely affect the market share price of our common shares.

Our potential future earnings and cash distributions to our shareholders may affect the market price of our common shares.

Generally, the market price of our common shares may be based, in part, on the market’s perception of our growth potential and our current and potential future cash distributions, whether from operations, sales, acquisitions or refinancings, and on the value of our businesses. For that reason, our common shares may trade at prices that are higher or lower than our net asset value per share. Should we retain operating cash flow for investment purposes or working capital reserves instead of distributing the cash flows to our shareholders, the retained funds, while increasing the value of our underlying assets, may materially adversely affect the market price of our common shares. Our failure to meet market expectations with respect to earnings and cash distributions and our failure to make such distributions, for any reason whatsoever, could materially adversely affect the market price of our common shares.

Were our common shares to be considered penny stock, and therefore become subject to the penny stock rules, U.S. broker-dealers may be discouraged from effecting transactions in our common shares.

Our common shares may be subject to the penny stock rules under the Exchange Act. These rules regulate broker-dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 per share. The penny stock rules require broker-dealers that derive more than 5% of their customer transaction revenues from transactions in penny stocks to deliver a standardized risk disclosure document that provides information about penny stocks, and the nature and level of risks in the penny stock market, to any non-institutional customer to whom the broker-dealer recommends a penny stock transaction. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with

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the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our common shares. These additional penny stock disclosure requirements are burdensome and may reduce all the trading activity in the market for our common shares. As long as our common shares are subject to the penny stock rules, holders of our common shares may find it more difficult to sell their shares.

Holders of our common shares may not be entitled to a jury trial with respect to claims arising under our operating agreement, which could result in less favorable outcomes to the plaintiffs in any such action.

Our operating agreement governing our common shares provides that, to the fullest extent permitted by law, holders of our common shares waive the right to a jury trial of any claim they may have against us arising out of or relating to our operating agreement, including any claim under the U.S. federal securities laws.

If we opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Delaware, which govern our operating agreement, by a federal or state court in the State of Delaware, which has non-exclusive jurisdiction over matters arising under the operating agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to our operating agreement. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the operating agreement.

If you or any other holders or beneficial owners of our common shares bring a claim against us in connection with matters arising under our operating agreement, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us. If a lawsuit is brought against us under our operating agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including results that could be less favorable to the plaintiffs in any such action.

Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the operating agreement with a jury trial. No condition, stipulation or provision of the operating agreement serves as a waiver by any holder or beneficial owner of our common shares or by us of compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•        our ability to effectively integrate and operate the businesses that we acquire;

•        our ability to successfully identify and acquire additional businesses;

•        our organizational structure, which may limit our ability to meet our dividend and distribution policy;

•        our ability to service and comply with the terms of indebtedness;

•        our cash flow available for distribution and our ability to make distributions to our common shareholders;

•        our ability to pay the management fee, profit allocation and put price to our manager when due;

•        labor disputes, strikes or other employee disputes or grievances;

•        the regulatory environment in which our businesses operate under;

•        trends in the industries in which our businesses operate;

•        the competitive environment in which our businesses operate;

•        changes in general economic or business conditions or economic or demographic trends in the United States including changes in interest rates and inflation;

•        our and our manager’s ability to retain or replace qualified employees of our businesses and our manager;

•        casualties, condemnation or catastrophic failures with respect to any of our business’ facilities;

•        costs and effects of legal and administrative proceedings, settlements, investigations and claims; and

•        extraordinary or force majeure events affecting the business or operations of our businesses.

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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USE OF PROCEEDS

After deducting the estimated underwriters’ commissions and offering expenses payable by us, we expect to receive net proceeds of approximately $6.6 million from this offering (or approximately $7.6 million if the underwriters exercise the over-allotment option in full), based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus.

We intend to use the proceeds of this offering for the payment of certain accrued liabilities and for general corporate purposes, which could include future acquisitions, capital expenditures and working capital.

Pending these uses, we may invest the net proceeds in short- and intermediate-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government.

Our management will retain broad discretion over the allocation of the net proceeds from this offering. See “Risk Factors — Risks Related to this Offering and the Ownership of Our Common Shares — Our management has broad discretion as to the use of the net proceeds from this offering.”

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DIVIDEND AND DISTRIBUTION POLICY

Holders of our series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value of $2.00 per share (subject to adjustment). 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 our discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common shares on our principal trading market during the five (5) trading days immediately prior to the applicable dividend payment date; provided that if our common shares are not registered, any dividends payable in common shares shall be calculated based upon the fixed price of $1.57; and provided further that we may only elect to pay dividends in common shares based upon such fixed price if the volume weighted average price for the common shares on our principal trading market during the five (5) trading days immediately prior to the applicable dividend payment date is $1.57 or higher.

Holders of our series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value of $3.00 per share (subject to adjustment). 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 our discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common shares our principal trading market during the five (5) trading days immediately prior to the applicable dividend payment date; provided that if our common shares are not registered, any dividends payable in common shares shall be calculated based upon the fixed price of $2.70; and provided further that we may only elect to pay dividends in common shares based upon such fixed price if the volume weighted average price for the common shares on our principal trading market during the five (5) trading days immediately prior to the applicable dividend payment date is $2.70 or higher

If this offering is consummated, we plan to make regular quarterly distributions on our outstanding common shares in an amount that is equal to 2.5% (or 10% per annum) of the public offering price per share for this offering (or $0.13 per quarter (post-split) ($0.52 per annum (post-split)), based upon the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus), subject to our operating subsidiaries generating sufficient cash flow to support such regular cash distributions.

Our distribution policy will be based on the liquidity and capital of our businesses and on our intention to pay out as distributions to our shareholders most of the cash resulting from the ordinary operation of the businesses, and not to retain significant cash balances in excess of what is prudent for our company or our businesses, or as may be prudent for the consummation of attractive acquisition opportunities. If our strategy is successful, we expect to maintain and increase the level of quarterly distributions to common shareholders in the future.

The declaration and payment of any monthly distribution to our common shareholders will be subject to the approval of our board of directors. Our board of directors will take into account such matters as general business conditions, our financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by us to our shareholders or by our subsidiaries to us, and any other factors that the board of directors deems relevant. However, even if our board of directors were to decide to declare and pay distributions, our ability to pay such distributions may be adversely impacted due to unknown liabilities, government regulations, financial covenants of our debt, funds needed for acquisitions and to satisfy short- and long-term working capital needs of our businesses, or if our operating subsidiaries do not generate sufficient earnings and cash flow to support the payment of such distributions. In particular, we may incur debt in the future to acquire new businesses, which debt will have substantial debt commitments, which must be satisfied before we can make distributions. These factors could affect our ability to continue to make quarterly distributions to our common shareholders.

We may use cash flow from our operating subsidiaries, capital resources, including borrowings under any third-party credit facilities that we establish, or reduction in equity to pay a distribution. See “Material U.S. Federal Income Tax Considerations” for more information about the tax treatment of distributions to our shareholders.

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2022:

•        on an actual basis;

•        on a pro forma basis to reflect (i) the issuance of 54,567 additional units in the unit offering of series B senior convertible preferred shares and warrants described elsewhere in this prospectus, which resulted in total net proceeds of $163,700, (ii) the issuance of 50,001 common shares (post-split) upon the cashless exercise of outstanding warrants, (iii) the issuance of 1,029,712 common shares (post-split) (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus) upon the conversion of $3,354,501 of debt, which shall occur at the effective time of the registration statement of which this prospectus forms a part (see “Management Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Conversion Agreements” for more information regarding the debt conversion), and (iv) the 1-for-4 reverse split of our outstanding common shares that will become effective automatically at the effective time of the registration statement of which this prospectus forms a part; and

•        on an as adjusted basis to reflect this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us (assuming no exercise of the over-allotment option).

The as adjusted information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the public offering price and other terms of this offering determined at pricing. You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	As of March 31, 2022
	Actual			Pro Forma			As Adjusted
Cash and cash equivalents	$	1,638,924		$	1,802,624		$	8,366,624
Long-term debt:
Notes payable		908,684			908,684			908,684
Convertible notes payable		26,880,029			24,062,133			24,062,133
Contingent note payable		1,001,183			203,962			203,962
Total long-term debt		28,789,896			25,174,779			25,174,779
Mezzanine equity:
Series A senior convertible preferred shares, 4,450,460 shares designated; 1,684,849 shares issued and outstanding, actual, pro forma and as adjusted		1,415,100			1,415,100			1,415,100
Series B senior convertible preferred shares, 583,334 shares designated; 426,999 shares issued and outstanding, actual; 481,566 shares issued and outstanding, pro forma and as adjusted		1,113,650			1,257,650			1,257,650
Total mezzanine equity		2,528,750			2,672,750			2,672,750
Shareholders’ equity (deficit):
Allocation shares, 1,000 shares issued and outstanding, actual, pro forma and as adjusted		1,000			1,000			1,000
Common shares, 500,000,000 shares authorized, 4,995,232 shares issued and outstanding, actual; 2,328,543 shares issued and outstanding, pro forma; and 3,770,851 shares issued and outstanding, as adjusted		4,995			2,329			3,771
Distribution receivable		(2,000,000	)		(2,000,000	)		(2,000,000	)
Additional paid-in capital		21,983,594			27,359,382			33,921,940
Accumulated deficit		(22,012,401	)		(22,012,401	)		(22,012,401	)
Total 1847 Holdings shareholders’ equity (deficit)		(2,022,812	)		3,350,310			9,914,310
Non-controlling interests		876,634			876,634			876,634
Total shareholders’ equity (deficit)		(1,146,178	)		4,226,944			10,790,944
Total mezzanine equity and shareholders’ equity (deficit)		1,382,572			6,899,694			13,463,694
Total capitalization	$	29,026,290		$	36,301,417		$	49,429,417

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Each $1.00 increase or decrease in the assumed public offering price $5.20 per share (which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus), assuming no change in the number of shares to be sold, would increase or decrease the as-adjusted cash and cash equivalents, working capital, total assets and total shareholders’ equity by approximately $1.3 million, after deducting (i) estimated underwriting discounts and commissions and (ii) estimated offering expenses, in each case, payable by us.

The table and discussion above are based on 1,298,831 common shares (post-split) outstanding as of         , 2022 and exclude:

•        up to approximately 481,388 common shares (post-split) issuable upon the conversion of our outstanding series A senior convertible preferred shares;

•        up to approximately 120,397 common shares (post-split) issuable upon the conversion of our outstanding series B senior convertible preferred shares;

•        up to 2,553,303 common shares (post-split) issuable upon the exercise of outstanding warrants at a weighted average exercise price of $5.11 per share (post-split) (without giving effect to the full ratchet (or exploding) antidilution adjustment provisions that may be triggered by this offering as described in “Description of Securities — Warrants”);

•        common shares issuable upon the conversion of secured convertible promissory notes in the aggregate principal amount of $24,860,000, which are convertible into our common shares at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the conversion of a promissory note in the principal amount of $600,000, which is convertible into our common shares only upon an event of default under the promissory note at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the exchange of the remaining balance of the 6% subordinated convertible promissory notes, which are exchangeable for our common shares at an exchange price equal to the higher of $10.00 (post-split) or the 30-day volume weighted average price of our common shares (subject to adjustment); and

•        common shares issuable upon the exercise of the representative’s warrants issued in connection with this offering.

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DILUTION

If you invest in our shares in this offering, your ownership will be diluted immediately to the extent of the difference between the public offering price per share and the as adjusted net tangible book value per common share of immediately after this offering. Dilution in net tangible book value per share to new investors is the amount by which the offering price paid by the purchasers of the shares sold in this offering exceeds the pro forma as adjusted net tangible book value per common share after this offering. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of common shares deemed to be outstanding at that date.

As of March 31, 2022, our net tangible book value (deficit) was approximately $(29,148,903), or approximately $(5.84) per share. After giving effect to (i) the issuance of 54,567 additional units in the unit offering of series B senior convertible preferred shares and warrants described elsewhere in this prospectus, which resulted in total net proceeds of $163,700, (ii) the issuance of 50,001 common shares (post-split) upon the cashless exercise of outstanding warrants, (iii) the issuance of 1,029,712 common shares (post-split) (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus) upon the conversion of $3,354,501 of debt, which shall occur at the effective time of the registration statement of which this prospectus forms a part (see “Management Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Conversion Agreements” for more information regarding the debt conversion), and (iv) the 1-for-4 reverse split of our outstanding common shares that will become effective automatically at the effective time of the registration statement of which this prospectus forms a part, the pro forma net tangible book value (deficit) of our common shares as of March 31, 2022 is approximately $(24,172,806), or approximately $(10.38) per share (post-split).

After giving effect to our sale of 1,442,308 common shares in this offering at an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value (deficit) as of March 31, 2022 would have been approximately $(17,608,806), or approximately $(4.67) per share. This amount represents an immediate increase in net tangible book value of $5.71 per share to existing shareholders and an immediate dilution in net tangible book value of $9.87 per share to purchasers of our shares in this offering, as illustrated in the following table.

Assumed public offering price per share				$	5.20
Historical net tangible book value (deficit) per share as of March 31, 2022	$	(5.84	)
Decrease per share attributable to the pro forma adjustments described above		(4.55)
Pro forma net tangible book value (deficit) per share as of March 31, 2022		(10.38	)
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this offering		5.71
Pro forma as adjusted net tangible book value (deficit) per share after this offering					(4.67	)
Dilution per share to new investors purchasing shares in this offering				$	9.87

A $1.00 increase or decrease in the assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, would increase or decrease the net tangible book value per share after this offering by approximately $0.36 and dilution in net tangible book value per share to new investors by approximately $0.64, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value (deficit) would be $(4.15) per share, and the dilution in net tangible book value per share to new investors purchasing shares in this offering would be $9.35 per share.

The table and discussion above are based on 1,298,831 common shares (post-split) outstanding as of           , 2022 and exclude:

•        up to approximately 481,388 common shares (post-split) issuable upon the conversion of our outstanding series A senior convertible preferred shares;

•        up to approximately 120,397 common shares (post-split) issuable upon the conversion of our outstanding series B senior convertible preferred shares;

•        up to 2,553,303 common shares (post-split) issuable upon the exercise of outstanding warrants at a weighted average exercise price of $5.11 per share (post-split) (without giving effect to the full ratchet (or exploding) antidilution adjustment provisions that may be triggered by this offering as described in “Description of Securities — Warrants”);

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•        common shares issuable upon the conversion of secured convertible promissory notes in the aggregate principal amount of $24,860,000, which are convertible into our common shares at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the conversion of a promissory note in the principal amount of $600,000, which is convertible into our common shares only upon an event of default under the promissory note at a conversion price of $5.20 (post-split) (subject to adjustment);

•        common shares issuable upon the exchange of the remaining balance of the 6% subordinated convertible promissory notes, which are exchangeable for our common shares at an exchange price equal to the higher of $10.00 (post-split) or the 30-day volume weighted average price of our common shares (subject to adjustment); and

•         common shares issuable upon the exercise of the representative’s warrants issued in connection with this offering.

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MARKET PRICE OF COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

Our common shares are eligible for quotation on the OTCQB market under the symbol “EFSH.” In connection with this offering, we received approval from NYSE American for the listing of our common shares. The closing of this offering is contingent upon our uplisting to NYSE American unless such condition is waived by the representatives of the underwriters.

The following table sets forth, for the periods indicated, the high and low closing prices of our common shares. These prices reflect inter-dealer prices, without retain mark-up or commission, and may not represent actual transactions.

	Closing Prices
	High		Low
Fiscal Year Ended December 31, 2020
1st Quarter	$	2.75	$	1.01
2nd Quarter		3.40		0.80
3rd Quarter		6.90		1.81
4th Quarter		5.30		1.32
Fiscal Year Ended December 31, 2021
1st Quarter		2.50		1.05
2nd Quarter		2.40		1.51
3rd Quarter		2.40		1.50
4th Quarter		2.60		1.62
Fiscal Year Ended December 31, 2022
1st Quarter		2.92		1.43
2nd Quarter		3.50		1.51
3rd Quarter (through July 25, 2022)		1.92		1.05

Number of Holders of our Common Shares

As of July 25, 2022, there were approximately 51 shareholders of record of our common shares. In computing the number of holders of record of our common shares, each broker-dealer and clearing corporation holding shares on behalf of its customers is counted as a single shareholder.

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2021, we did not have in effect any compensation plans under which our equity securities were authorized for issuance and we did not have any outstanding share options.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this prospectus. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Overview

We are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America. To date, we have completed six acquisitions and subsequently spun off two of the acquired companies.

On May 28, 2020, our subsidiary 1847 Asien acquired Asien’s. Asien’s has been in business since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and exceptional service to its customers at competitive prices.

On September 30, 2020, our subsidiary 1847 Cabinet acquired Kyle’s. Kyle’s is a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders.

On March 30, 2021, our subsidiary 1847 Wolo acquired Wolo. Headquartered in Deer Park, New York and founded in 1965, Wolo 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.

On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain and Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain 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, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as commercial clients.

Our first acquisition was on March 3, 2017, pursuant to which our subsidiary 1847 Neese acquired Neese, a business specializing in providing a wide range of land application services and selling equipment and parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners.

On April 5, 2019, our subsidiary 1847 Goedeker acquired substantially all of the assets of Goedeker Television, a one-stop e-commerce destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker.

Through our structure, we offer investors an opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increasing common shareholder value over time.

We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that

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private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.

Recent Developments

Conversion Agreements

On July 26, 2022, we entered into conversion agreements with the holders of the 6% subordinated convertible promissory notes described under “— Liquidity and Capital Resources” below, pursuant to which such holders agreed to convert an aggregate of $3,360,000 of the notes into our common shares at a conversion price equal to the public offering price at the effective time of the registration statement of which this prospectus forms a part. Based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, we will issue an aggregate of 646,154 common shares (post-split) upon conversion of these notes.

On July 26, 2022, we entered into a conversion agreement with the holder of the vesting promissory note described under “— Liquidity and Capital Resources” below, pursuant to which such holder agreed to convert $797,221 of the note into our common shares at a conversion price equal to the public offering price at the effective time of the registration statement of which this prospectus forms a part. Based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, we will issue 153,312 common shares (post-split) upon conversion of this note. In addition, the note was cancelled and we agreed to pay a sum of $558,734 to the holder on or prior to October 1, 2022.

On July 26, 2022, we also entered into a conversion agreement with Bevilacqua PLLC, our outside securities counsel, pursuant to which it agreed to convert $1,197,280 of the accounts payable owed to it at a conversion price equal to the public offering price at the effective time of the registration statement of which this prospectus forms a part. Based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, we will issue 230,246 common shares (post-split) to Bevilacqua PLLC.

Additional Closings of Series B Unit Offering

On April 20, 2022, we entered into a securities purchase agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant to which we sold 28,333 units, at a price of $3.00 per unit, for gross proceeds of $85,000. On May 12, 2022, we sold an additional 16,667 units to Mr. Roberts for gross proceeds of $50,000 and on May 19, 2022, we sold an additional 9,567 units to Mr. Roberts for gross proceeds of $28,700. Each unit consisted 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 (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

Bridge Financing

On July 8, 2022, we entered into a securities purchase agreement with Mast Hill Fund, L.P., or Mast Hill, pursuant to which we issued to Mast Hill a promissory note in the principal amount of $600,000, which includes an original issue discount in the amount of $60,000, and a five-year warrant for the purchase of 100,000 common shares (post-split) at an exercise price of $6.00 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis if the market price of our common shares is greater than the exercise price, for a total purchase price of $540,000.

The note bears interest at a rate of 12% per annum and matures on July 8, 2023; provided that any principal amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16% per annum or the maximum amount permitted by law from the due date thereof until the same is paid. The note requires monthly payments of $60,000, plus accrued interest, commencing on October 6, 2022. We may voluntarily prepay the outstanding principal amount and accrued interest in whole upon payment of a fee of $750. In addition, if at any time we receive cash proceeds of more than $1 million in the aggregate from any source or series of related or unrelated sources, including, but not limited to, the issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities pursuant to

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an equity line of credit (as defined in the note) or the sale of assets outside of the ordinary course of business, the holder shall have the right in its sole discretion to us to immediately apply up to 50% of such proceeds in excess of $1 million to repay all or any portion of the outstanding principal amount and interest then due under the note. The note is convertible into common shares at the option of the holder at any time on or following the date that an event of default (as defined in the note) occurs under the note at a conversion price of $5.20 (post-split) (subject to adjustment). The note is unsecured and has priority over all other unsecured indebtedness. The note contains customary affirmative and negative covenants and events of default for a loan of this type.

The conversion price of the note and the exercise price of the warrant are subject to standard adjustments, including a price-based adjustment in the event that we issue any common shares or other securities convertible into or exercisable for common shares at an effective price per share that is lower than the conversion or exercise price, subject to certain exceptions. In addition, the note and the warrant contain an ownership limitation, such that we shall not effect any conversion or exercise, and the holder shall not have the right to convert or exercise, or any portion of the note or the warrant to the extent that after giving effect to the issuance of common shares upon conversion or exercise, the holder, together with its affiliates and any other persons acting as a group together with the holder or any of 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 conversion or exercise.

The securities purchase agreement contains a participation right, which provides that, subject to certain exceptions, until the note is extinguished in its entirety, if we directly or indirectly offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of our debt, equity, or equity equivalent securities, or enter into any definitive agreement with regard to the foregoing, we must offer to issue and sell to or exchange with Mast Hill securities in such transaction in an amount up to the original principal amount of the note. The securities purchase agreement also provides Mast Hill with customary piggy-back registration rights for the common shares underlying the note and the warrant, and contains other customary representations and warranties and covenants for a transaction of this type.

In connection with this bridge financing, as stated above, we issued a promissory note with a conversion price of $5.20 (post-split) (subject to adjustment), and a result, the exercise price and number of shares underlying certain of our outstanding warrants were adjusted in accordance with the terms of such warrants, including the “exploding” feature of such warrants, and the conversion price of our outstanding convertible notes was reduced to $5.20 (post-split) in accordance with the terms of such convertible notes. See “Description of Securities” for more information regarding these adjustments.

Impact of Coronavirus Pandemic

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

Asien’s was qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results. Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s profitability and financial condition.

Kyle’s was also qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment.

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Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees. Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial condition.

High Mountain was qualified as an essential business and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety.

Innovative Cabinets was also qualified as an essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities. Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher supply costs, which could adversely impact its profitability and financial condition.

Wolo qualified as an essential business and remained open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business. The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately 90% of Wolo’s vendor base is located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers. We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position.

The spread of COVID-19 has also adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. See also “Risk Factors” for more information.

Management Fees

On April 15, 2013, we and our manager entered into a management services agreement, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% of our adjusted net assets for services performed (which we refer to as the parent management fee). The amount of the parent management fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by our manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) parent management fees received by (or owed to) our manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid parent management fees. We did not expense any parent management fees for the three months ended March 31, 2022 and 2021 or the years ended December 31, 2021 and 2020.

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1847 Asien entered into an offsetting management services agreement with our manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with our manager on August 21, 2020 (which was amended and restated on October 8, 2021) and 1847 Wolo entered into an offsetting management services agreement with our manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Asien appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to our manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the parent management fee in any fiscal quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to our manager under other offsetting management services agreements.

Each of these entities shall also reimburse our manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs and expenses, which are actually incurred by our manager or its affiliates on behalf of these entities in connection with performing services under the offsetting management services agreements.

1847 Asien expensed management fees of $75,000 for the three months ended March 31, 2022 and 2021, $300,000 for the year ended December 31, 2021 and $178,022 for the period from May 29, 2020 to December 31, 2020.

1847 Cabinet expensed management fees of $125,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively, $345,556 for the year ended December 31, 2021 and $75,000 for the period from October 1, 2020 to December 31, 2020.

1847 Wolo expensed management fees of $75,000 for the three months ended March 31, 2022 and $225,833 for the year ended December 31, 2021. In conjunction with acquisition of Wolo, our manager also received a fee of $110,000.

On a consolidated basis, our company expensed total management fees of $275,000 and $260,000 for the three months ended March 31, 2022 and 2021, respectively, and $981,389 and $253,022 for the years ended December 31, 2021 and 2020, respectively.

Segments

The Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its shareholders. As of December 31, 2021, we have 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.

The retail and appliances segment is comprised of the business of Asien’s, which is based in Santa Rosa, California, and provides a wide variety of appliance services including sales, 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, extended warranties, 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, New York, 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.

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We provide general corporate services to our 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.

Discontinued Operations

On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders. As a result of this distribution, 1847 Goedeker is no longer a subsidiary of our company. All financial information of 1847 Goedeker previously presented as part of retail and appliance services operations are classified as discontinued operations and not presented as part of continuing operations for the year ended December 31, 2020.

On April 19, 2021, we entered into a stock purchase agreement with the original owners of Neese, pursuant to which they purchased our 55% ownership interest in 1847 Neese for a purchase price of $325,000 in cash. As a result of this transaction, 1847 Neese is no longer a subsidiary of our company. All financial information of 1847 Neese previously presented as part of land management services operations are classified as discontinued operations and not presented as part of continuing operations for the years ended December 31, 2021 and 2020.

Results of Operations

1847 Holdings LLC

Comparison of Three Months Ended March 31, 2022 and 2021

The following table sets forth key components of our results of operations during the three months ended March 31, 2022 and 2021, both in dollars and as a percentage of our revenues.

	Three Months Ended March 31,
	2022					2021
	Amount			% of Revenues		Amount			% of Revenues
Revenues	$	12,073,878		100.0	%	$	4,780,275		100.0	%
Operating expenses
Cost of sales		7,749,130		64.2	%		3,260,682		68.2	%
Personnel		1,577,700		13.1	%		484,672		10.1	%
Depreciation and amortization		511,371		4.2	%		122,106		2.6	%
General and administrative		2,166,207		17.9	%		1,324,196		27.7	%
Total operating expenses		12,004,408		99.4	%		5,191,656		108.6	%
Income (loss) from operations		69,470		0.6	%		(411,381	)	(8.6	)%
Other income (expenses)
Other income		318		0.0	%		—		—
Interest expense		(906,743	)	(7.5	)%		(45,121	)	(0.9	)%
Gain on forgiveness of debt		—		—			360,302		7.5	%
Gain on sale of property and equipment		32,747		0.3	%		—		—
Loss on adjustment shares		—		—			(757,792	)	(15.9	)%
Total other income (expense)		(873,678	)	(7.2	)%		(442,611	)	(9.3	)%
Net loss before income taxes		(804,208	)	(6.7	)%		(853,992	)	(17.9	)%
Income expense		(123,000	)	(1.0	)%		—		—
Net loss from continuing operations	$	(927,208	)	(7.7	)%	$	(853,992	)	(17.9	)%

Revenues.    Our total revenues were $12,073,878 for the three months ended March 31, 2022, as compared to $4,780,275 for the three months ended March 31, 2021.

The retail and appliances segment generates revenue through the sales of home furnishings, including appliances and related products. Revenues from the retail and appliances segment decreased by $743,582, or 22.8%, to $2,520,784 for the three months ended March 31, 2022 from $3,264,366 for the three months ended March 31, 2021. Such decrease was primarily due to ongoing supply chain delays with appliance manufactures and the increased time it takes to receive products.

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The construction segment generates revenue through the sale 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 kitchen countertops. Revenues from the construction segment increased by $6,395,194, or 421.9%, to $7,911,103 for the three months ended March 31, 2022 from $1,515,909 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, revenues from the construction segment increased by $145,845, or 9.6%. Such increase was primarily due to increases in the average customer contract in the construction segment.

The automotive supplies segment generates revenue through the design and sale of horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), including vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. Revenues from the automotive supplies segment were $1,641,991 for the three months ended March 31, 2022.

Cost of sales.    Our total cost of sales was $7,749,130 for the three months ended March 31, 2022, as compared to $3,260,682 for the three months ended March 31, 2021.

Cost of sales for the retail and appliances segment consists of the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors. Cost of sales for the retail and appliances segment decreased by $635,202, or 25.3%, to $1,871,450 for the three months ended March 31, 2022 from $2,506,652 for the three months ended March 31, 2021. Such decrease was primarily due to corresponding the decrease in revenues from the retail and appliance segment. As a percentage of retail and appliances revenues, cost of sales for the retail and appliances segment was 74.2% and 76.8% for the three months ended March 31, 2022 and 2021, respectively.

Cost of sales for the construction segment consists of finished goods, lumber, hardware and materials and plus direct labor and related costs, net of any material discounts from vendors. Cost of sales for the construction segment increased by $4,125,561, or 547.1%, to $4,879,591 for the three months ended March 31, 2022 from $754,030 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, cost of sales for the construction segment increased by $151,350, or 20.1%. Such increase was primarily due to corresponding the increase in revenues from the construction segment, as well as increased product and delivery costs. As a percentage of construction revenues, cost of sales for the construction segment was 54.5% and 49.7% for the three months ended March 31, 2022 and 2021, respectively.

Cost of sales for the automotive supplies segment consists of the costs of purchased finished goods plus freight and tariff costs. Cost of sales for the automotive supplies segment was $998,089 for the three months ended March 31, 2022. As a percentage of automotive supplies revenues, cost of sales for the automotive supplies segment was 60.8% for the three months ended March 31, 2022.

Personnel costs.    Personnel costs include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and training costs. Our total personnel costs were $1,577,700 for the three months ended March 31, 2021, as compared to $484,672 for the three months ended March 31, 2021.

Personnel costs for the retail and appliances segment decreased by $22,695, or 9.0%, to $230,388 for the three months ended March 31, 2022 from $253,083 for the three months ended March 31, 2021. Such decrease was primarily due to decreased employee headcount as a result of decreased operations from the retail and appliances segment. As a percentage of retail and appliances revenue, personnel costs for the retail and appliances segment were 9.1% and 7.8% for the three months ended March 31, 2022 and 2021, respectively.

Personnel costs for the construction segment increased by $902,621, or 389.8%, to $1,134,210 for the three months ended March 31, 2022 from $231,589 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, personnel costs for the construction segment decreased by $26,290, or 11.4%. Such

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decrease was primarily due to decreased office personnel headcount in the construction segment. As a percentage of construction revenue, personnel costs for the construction segment were 12.4% and 15.3% for the three months ended March 31, 2022 and 2021, respectively.

Personnel costs for the automotive supplies segment were $300,328 for the three months ended March 31, 2022. As a percentage of automotive supplies revenue, personnel costs for the automotive supplies segment were 18.3% for the three months ended March 31, 2022.

Depreciation and amortization.    Our total depreciation and amortization expense was $511,371 for the three months ended March 31, 2022, as compared to $122,106 for the three months ended March 31, 2022.

General and administrative expenses.    Our general and administrative expenses consist primarily of professional advisor fees, stock-based compensation, bad debts reserve, rent expense, advertising, bank fees, and other expenses incurred in connection with general operations. Our total general and administrative expenses were $2,166,207 for the three months ended March 31, 2022, as compared to $1,324,196 for the three months ended March 31, 2021.

General and administrative expenses for the retail and appliances segment increased by $14,907, or 3.4%, to $449,494 for the three months ended March 31, 2022 from $434,587 for the three months ended March 31, 2021. Such increase was primarily due to increased marketing and professional fees. As a percentage of retail and appliances revenue, general and administrative expenses for the retail and appliances segment were 17.8% and 13.3% for the three months ended March 31, 2022 and 2021, respectively.

General and administrative expenses for the construction segment increased by $901,247, or 418.6%, to $1,116,558 for the three months ended March 31, 2022 from $215,311 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, general and administrative expenses for the construction segment increased by $45,097, or 20.9%. Such increase was primarily due to increased rent from a new facility lease, as well as increased professional fees in the construction segment. As a percentage of construction revenue, general and administrative expenses for the construction segment were 15.7% and 14.2% for the three months ended March 31, 2022 and 2021, respectively.

General and administrative expenses for the automotive supplies segment were $386,781 for the three months ended March 31, 2022. As a percentage of automotive supplies revenue, general and administrative expenses for the automotive supplies segment were 23.6% for the three months ended March 31, 2022.

General and administrative expenses for our holding company increased by $137,371, or 180.7%, to $213,374 for the three months ended March 31, 2022 from $76,003 for the three months ended March 31, 2021. Such increase was primarily due to increased corporate costs and professional fees.

Total other income (expense).    We had $873,678 in total other expense, net, for the three months ended March 31, 2022, as compared to other expense, net, of $442,611 for the three months ended March 31, 2021. Other expense, net, for the three months ended March 31, 2022 consisted of $906,743 of interest expense, offset by a gain on disposal of property of equipment of $32,747 and other income of $318, while other expense, net, for the three months ended March 31, 2021 consisted of loss on adjustment shares of $757,792 and interest expense of $45,121, offset by a gain on forgiveness of debt of $360,302.

Income tax expense.    We had an income tax expense of $123,000 for the three months ended March 31, 2022, as compared to $0 for the three months ended March 31, 2021.

Net loss from continuing operations.    As a result of the cumulative effect of the factors described above, our net loss from continuing operations was $927,208 for the three months ended March 31, 2022, as compared to a net loss of $853,992 for the three months ended March 31, 2021.

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Comparison of Years Ended December 31, 2021 and 2020

The following table sets forth key components of our results of operations during the years ended December 31, 2021 and 2020, both in dollars and as a percentage of our revenues.

	Years Ended December 31,
	2021					2020
	Amount			% of Revenues		Amount			% of Revenues
Revenues
Furniture and appliances	$	12,741,064		41.6	%	$	7,625,222		87.2	%
Construction		12,203,890		39.8	%		1,120,224		12.8	%
Automotive supplies		5,716,030		18.6	%		—		—
Total revenues		30,660,984		100.0	%		8,745,446		100.0	%
Operating expenses
Cost of sales		20,311,724		66.2	%		6,531,435		74.7	%
Personnel costs		3,247,441		10.6	%		734,867		8.4	%
Depreciation and amortization		908,982		3.0	%		176,612		2.0	%
General and administrative		7,296,736		23.8	%		2,652,429		30.3	%
Total operating expenses		31,764,883		103.6	%		10,095,343		115.4	%
Net loss from operations		(1,103,899	)	(3.6	)%		(1,349,897	)	(15.4	)%
Other income (expense)
Gain on forgiveness of debt		360,302		1.2	%		—		—
Loss on write-down of vesting note payable – related party		(602,204	)	(2.0	)%		—		—
Loss on extinguishment of debt		(137,692	)	(0.4	)%		(286,350	)	(3.3	)%
Loss on redemption of preferred shares		(4,017,553	)	(13.1	)%		—		—
Gain on disposition of subsidiary		3,282,804		10.7	%		—		—
Gain on sale of property and equipment		10,885		—			—		—
Other income and (expense)		876		—			(18,196	)	(0.2	)%
Interest expense		(1,296,537	)	(4.2	)%		(249,626	)	(2.9	)%
Total other income (expense)		(2,399,119	)	(7.8	)%		(554,172	)	(6.3	)%
Net loss before income taxes		(3,503,018	)	(11.4	)%		(1,904,069	)	(21.8	)%
Income tax benefit (expense)		(218,139	)	(0.7	)%		83,931		1.0	%
Net loss from continuing operations	$	(3,721,157	)	(12.1	)%	$	(1,820,138	)	(20.8	)%

Total revenues.    Our total revenues were $30,660,984 for the year ended December 31, 2021, as compared to $8,745,446 for the year ended December 31, 2020.

Revenues from the retail and appliances segment were $12,741,064 for the year ended December 31, 2021 and $7,625,222 for the period from May 29, 2020 to December 31, 2020 following the acquisition of Asien’s.

Revenues from the construction segment were $12,203,890 for the year ended December 31, 2021, including revenue from the acquisitions of High Mountain and Innovative Cabinets of $6,766,540 for the period of October 9, 2021 to December 31, 2021, and $1,120,224 for the period from October 1, 2020 to December 31, 2020 following the acquisition of Kyle’s.

Revenues from the automotive supplies segment were $5,716,030 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo.

Cost of sales.    Our total cost of sales was $20,311,724 for the year ended December 31, 2021, as compared to $6,531,435 for the year ended December 31, 2020.

Cost of sales for the retail and appliances segment was $9,773,371 for the year ended December 31, 2021 and $5,866,413 for the period from May 29, 2020 to December 31, 2020 following the acquisition of Asien’s. As a percentage of retail and appliances revenues, cost of sales for the retail and appliances segment was 76.7% for the year ended December 31, 2021 and 76.9% for the period from May 29, 2020 to December 31, 2020.

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Cost of sales for the construction segment was $6,966,064 for the year ended December 31, 2021, including costs from the acquisitions of High Mountain and Innovative Cabinets of $3,899,268 for the period of October 9, 2021 to December 31, 2021, and $665,022 for the period from October 1, 2020 to December 31, 2020 following the acquisition of Kyle’s. As a percentage of construction revenues, cost of sales for the construction segment was 57.1% for the year ended December 31, 2021 and 59.4% for the period from October 1, 2020 to December 31, 2020.

Cost of sales for the automotive supplies segment was $3,572,289 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo. As a percentage of automotive supplies revenues, cost of sales for the automotive supplies segment was 62.5% for the period from April 1, 2021 to September 30, 2021.

Personnel costs.    Our total personnel costs were $3,247,442 for the year ended December 31, 2021, as compared to $734,867 for the year ended December 31, 2020.

Personnel costs for the retail and appliances segment were $1,013,992 for the year ended December 31, 2021 and $525,346 for the period from May 29, 2020 to December 31, 2020 following the acquisition of Asien’s. As a percentage of retail and appliances revenue, personnel costs for the retail and appliances segment were 8.0% for the year ended December 31, 2021 and 6.9% for the period from May 29, 2020 to December 31, 2020.

Personnel costs for the construction segment were $1,518,643 for the year ended December 31, 2021, including costs from the acquisitions of High Mountain and Innovative Cabinets of $522,560 for the period of October 9, 2021 to December 31, 2021, and $209,521 for the period from October 1, 2020 to December 31, 2020 following the acquisition of Kyle’s. As a percentage of construction revenue, personnel costs for the construction segment were 12.4% for the year ended December 31, 2021 and 18.7% for the period from October 1, 2020 to December 31, 2020.

Personnel costs for the automotive supplies segment were $714,807 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo. As a percentage of automotive supplies revenue, personnel costs for the automotive supplies segment were 12.5% for the period from April 1, 2021 to December 31, 2021.

Depreciation and amortization.    Our total depreciation and amortization expense was $908,982 for the year ended December 31, 2021, as compared to $176,612 for the year ended December 31, 2020.

General and administrative expenses.    Our total general and administrative expenses were $7,296,736 for the year ended December 31, 2021, as compared to $2,652,429 for the year ended December 31, 2020.

General and administrative expenses for the retail and appliances segment were $1,696,267 for the year ended December 31, 2021 and $1,362,169 for the period from May 29, 2020 to December 31, 2020 following the acquisition of Asien’s. As a percentage of retail and appliances revenue, general and administrative expenses for the retail and appliances segment were 13.3% for the year ended December 31, 2021 and 17.9% for the period from May 29, 2020 to December 31, 2020.

General and administrative expenses for the construction segment were $2,064,918 for the year ended December 31, 2021, including costs from the acquisitions of High Mountain and Innovative Cabinets of $1,133,747 for the period of October 9, 2021 to December 31, 2021, and $394,168 for the period from October 1, 2020 to December 31, 2020 following the acquisition of Kyle’s. As a percentage of construction revenue, general and administrative expenses for the construction segment were 16.9% for the year ended December 31, 2021 and 22.9% for the period from October 1, 2020 to December 31, 2020.

General and administrative expenses for the automotive supplies segment were $2,248,738 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo. As a percentage of automotive supplies revenue, general and administrative expenses for the automotive supplies segment were 39.3% for the period from April 1, 2021 to December 31, 2021.

General and administrative expenses for our holding company increased by $390,718, or 43.6%, to $1,286,813 for the year ended December 31, 2021 from $896,092 for the year ended December 31, 2020. The increase was due to an increase in corporate costs, professional fees and an officer severance expense, offset by stock compensation of $436,386 issued in the prior year period.

Total other income (expense).    We had $2,399,119 in total other expense, net, for the year ended December 31, 2021, as compared to other expense, net, of $554,172 for the year ended December 31, 2020. Other expense, net, for the year ended December 31, 2021 consisted of a loss on redemption of preferred shares of $4,017,553, interest expense of $1,296,537, a loss on write-down of vesting note payable of $602,204 and a loss on extinguishment of debt

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of $137,692, offset by a gain on disposition of subsidiary of $3,282,804 related to the disposition of Neese, a gain on forgiveness of debt of $360,302, a gain on sale of property and equipment of $10,885 and other income of $876, while total other expense, net, for the year ended December 31, 2020 consisted of a loss on extinguishment of debt of $286,350, interest expense of $249,626 and other expense of $18,196.

Income tax benefit (expense).    We had an income tax expense of $218,139 for the year ended December 31, 2021, as compared to an income tax benefit of $83,931 for the year ended December 31, 2020.

Net loss from continuing operations.    As a result of the cumulative effect of the factors described above, our net loss from continuing operations was $3,721,157 for the year ended December 31, 2021, as compared to $1,820,138 for the year ended December 31, 2020.

High Mountain and Innovative Cabinets

Comparison of Years Ended December 31, 2020 and 2019

The following table sets forth key components of the results of operations of High Mountain and Innovative Cabinets during the years ended December 31, 2020 and 2019, both in dollars and as a percentage of net sales.

	December 31, 2020					December 31, 2019
	Amount			% of Net Sales		Amount			% of Net Sales
Net sales	$	17,655,250		100.00	%	$	15,249,851		100.00	%
Cost of sales		12,184,092		69.01	%		11,380,264		74.63	%
Gross profit		5,471,158		30.99	%		3,869,587		25.37	%
Operating expenses
General and administrative		964,366		5.46	%		481,457		3.16	%
Personnel		2,552,683		14.46	%		1,961,307		12.86	%
Occupancy		341,093		1.93	%		326,509		2.14	%
Depreciation and amortization		210,826		1.19	%		173,829		1.14	%
Total operating expenses		4,068,968		23.05	%		2,943,102		19.30	%
Income from operations		1,402,190		7.94	%		926,485		6.08	%
Other income (expense)
Other income		220		—			883		0.01	%
Gain on forgiveness of PPP loans		1,191,424		6.75	%		—		—
Interest expense		(21,830	)	(0.12	)%		(12,908	)	(0.08	)%
Gain (loss) on disposal of property and equipment		44,090		0.25	%		(11,401	)	(0.07	)%
Total other income (expense)		1,213,904		6.88	%		(23,426	)	(0.15	)%
Net income	$	2,616,094		14.82	%	$	903,059		5.92	%

Net sales.    Net sales increased by $2,405,399, or 15.77%, to $17,655,250 for the year ended December 31, 2020 from $15,249,851 for the year ended December 31, 2019. The increase was due an increase in the number of customers, an increase in the average contract price, as well as the overall significant increase in the Reno housing market, which contributed to an increase in sales to new home builders.

Cost of sales.    Cost of sales increased by $803,828, or 7.06%, to $12,184,092 for the year ended December 31, 2020 from $11,380,264 for the year ended December 31, 2019. As a percentage of net sales, cost of sales decreased to 69.01% for the year ended December 31, 2020 from 74.63% for the year ended December 31, 2019. Such decrease was due to increased growth and efficiency and an increase in the average contract price.

Gross profit.    As a result of the foregoing, gross profit increased by $1,601,571, or $41.39%, to $5,471,158 for the year ended December 31, 2020 from $3,869,587 for the year ended December 31, 2019. Gross margin (percent of net sales) increased to 30.99% for the year ended December 31, 2020 from 25.37% for the year ended December 31, 2019.

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Operating expenses.    Total operating expenses increased by $1,125,866, or 38.25%, to $4,068,968 for the year ended December 31, 2020 from $2,943,102 for the year ended December 31, 2019. Such increase was due to a 100.30% increase in general and administrative expenses relating to consulting and other professional fees, increased repairs and maintenance expenses, and insurance, a 30.15% increase in personnel expenses relating to additional employees and increased wages, salaries, and payroll taxes, a 4.47% increase in occupancy expenses relating to increased taxes, insurance, and operating costs from the building leases and a 21.28% increase in depreciation and amortization. As a percentage of net sales, total operating expenses were 23.05% and 19.30% for the year ended December 31, 2020 and 2019, respectively.

Other income (expense).    Total other income, net, was $1,213,904 for the year ended December 31, 2020, as compared to a total other expense, net, of $23,426 for the year ended December 31, 2019. Total other income, net, for the year ended December 31, 2020 consisted of a gain on the forgiveness of PPP loans of $1,191,424, a gain on disposal of property and equipment of $44,090 and other income of $220, offset by interest expense of $21,830, while total other expense, net, for the year ended December 31, 2019 consisted of interest expense of $12,908 and a loss on disposal of property and equipment of $11,401, offset by other income of $883.

Net income.    As a result of the cumulative effect of the factors described above, net income increased by $1,713,035, or 189.69%, to $2,616,094 for the year ended December 31, 2020 from $903,059 for the year ended December 31, 2019.

Wolo

Comparison of Years Ended December 31, 2020 and 2019

The following table sets forth key components of the results of operations of Wolo during the years ended December 31, 2020 and 2019, both in dollars and as a percentage of revenues.

	December 31, 2020					December 31, 2019
	Amount			% of Revenues		Amount			% of Revenues
Revenues	$	7,444,776		100.00	%	$	7,640,304		100.00	%
Cost of goods sold		4,095,389		55.01	%		4,399,717		57.59	%
Gross profit		3,349,387		44.99	%		3,240,587		42.41	%
Operating expenses
Personnel		584,852		7.86	%		752,149		9.84	%
General and administrative		1,736,058		23.32	%		1,868,530		24.46	%
Depreciation and amortization		5,949		0.08	%		6,031		0.08	%
Total operating expenses		2,326,859		31.25	%		2,626,710		34.38	%
Income from operations		1,022,528		13.73	%		613,877		8.03	%
Other income (expense)
Settlement income		—		—			80,794		1.06	%
Interest income		10		—			39		—
Interest expense		(1,140	)	(0.02	)%		(635	)	(0.01	)%
Gain on forgiveness of debt		10,000		0.13	%		—		—
Other income		14		—			212		—
Total other income (expense)		8,884		0.12	%		80,410		1.05	%
Net income before income taxes		1,031,412		13.85	%		694,287		9.09	%
Income tax expense		(216,621	)	(2.91	)%		(145,376	)	(1.90	)%
Net income	$	814,791		10.94	%		548,911		7.18	%

Revenues.    Wolo generates revenue through the sales of horn and safety products, including vehicle emergency and safety warning lights. Revenues decreased by $195,528, or 2.56%, to $7,444,776 for the year ended December 31, 2020 from $7,640,304 for the year ended December 31, 2019. We believe that such decrease was primarily due to the COVID-19 pandemic, as some customers did not see sales return to 2019 levels and smaller customers closed their business.

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Cost of goods sold.    Cost of goods sold includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor. Cost of goods sold decreased by $304,328, or 6.92%, to $4,095,389 for the year ended December 31, 2020 from $4,399,717 for the year ended December 31, 2019. As a percentage of revenues, cost of goods sold decreased to 55.01% for the year ended December 31, 2020 from 57.59% for the year ended December 31, 2019. Such decrease was due to decreased sales and shipping delays for merchandise purchased but not shipped in 2020.

Gross profit.    As a result of the foregoing, gross profit increased by $108,800, or $3.36%, to $3,349,387 for the year ended December 31, 2020 from $3,240,587 for the year ended December 31, 2019. Gross margin (percent of revenue) increased to 44.99% for the year ended December 31, 2020 from 42.41% for the year ended December 31, 2019.

Operating expenses.    Operating expenses include personnel expenses (including employee salaries and bonuses, payroll taxes, health insurance premiums, and recruitment and training costs), general and administrative expenses (including advertising expenses, rent expenses other general operating costs) and depreciation and amortization. Total operating expenses decreased by $299,851, or 11.42%, to $2,326,859 for the year ended December 31, 2020 from $2,626,710 for the year ended December 31, 2019. Such decrease was due to a 22.24% decrease in personnel expenses, largely due to the resignation of a national sales manager in February 2020 who was not replaced, a 7.09% decrease in general and administrative expenses due the reduction in rent for purchased merchandise stored at an off-site facility (the off-site facility holds excess inventory and purchased merchandise in 2020 was reduced due to the COVID-19 pandemic), and a 1.36% decrease in depreciation and amortization. As a percentage of revenue, total operating expenses were 31.25% and 34.38% for the years ended December 31, 2020 and 2019, respectively.

Other income (expense).    Total other income, net, was $8,884 for the year ended December 31, 2020, as compared to $80,410 for the year ended December 31, 2019. Total other income for the year ended December 31, 2020 consisted of a gain on forgiveness of debt of $10,000, interest income of $10 and other income of $14, offset by interest expense of $1,140. Total other income for the year ended December 31, 2019 consisted of settlement income of $80,794, interest income of $39 and other income of $212, offset by interest expense of $635.

Income tax expense.    Income tax expenses were $216,621 and $145,376 for the years ended December 31, 2020 2019, respectively.

Net income.    As a result of the cumulative effect of the factors described above, net income increased by $265,880, or 48.44%, to $814,791 for year ended December 31, 2020 from $548,911 for the year ended December 31, 2019.

Liquidity and Capital Resources

1847 Holdings LLC

As of March 31, 2022, we had cash and cash equivalents of $1,638,924. To date, we have financed our operations primarily through revenue generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders.

Although we do not believe that we will require additional cash to continue our operations over the next twelve months, we do believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $5,000,000. We will seek growth as funds become available from cash flow, borrowings, additional capital raised privately or publicly, or seller retained financing.

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Our primary use of funds will be for future acquisitions, public company expenses, including regular distributions to our shareholders, investments in future acquisitions, payments to our manager pursuant to the management services agreement, potential payment of profit allocation to our manager and potential put price to our manager in respect of the allocation shares it owns. The management fee, expenses, potential profit allocation and potential put price are paid before distributions to shareholders and may be significant and exceed the funds we hold, which may require us to dispose of assets or incur debt to fund such expenditures. See “The Manager” for more information concerning the management fee, the profit allocation and put price.

The amount of management fee paid to our manager by us is reduced by the aggregate amount of any offsetting management fees, if any, received by our manager from any of our businesses. As a result, the management fee paid to our manager may fluctuate from quarter to quarter. The amount of management fee paid to our manager may represent a significant cash obligation. In this respect, the payment of the management fee will reduce the amount of cash available for distribution to shareholders.

Our manager, as holder of 100% of our allocation shares, is entitled to receive a twenty percent (20%) profit allocation as a form of preferred equity distribution, subject to an annual hurdle rate of eight percent (8%), as follows. Upon the sale of a subsidiary, our manager will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high-water mark plus (ii) the subsidiary’s net income since its acquisition by us exceeds the 8% hurdle rate. The 8% hurdle rate is the product of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by us, multiplied by (iii) the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according to GAAP with certain adjustments). In certain circumstances, after a subsidiary has been held for at least 5 years, our manager may also trigger a profit allocation with respect to such subsidiary (determined based solely on the subsidiary’s net income since its acquisition). The amount of profit allocation may represent a significant cash payment and is senior in right to payments of distributions to our shareholders. Therefore, the amount of profit allocation paid, when paid, will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. See “The Manager—Our Manager as an Equity Holder—Manager’s Profit Allocation” for more information on the calculation of the profit allocation.

Our operating agreement also contains a supplemental put provision, which gives our manager the right, subject to certain conditions, to cause us to purchase the allocation shares then owned by our manager upon termination of the management services agreement. The amount of put price under the supplemental put provision is determined by assuming all of our subsidiaries are sold at that time for their fair market value and then calculating the amount of profit allocation would be payable in such a case. If the management services agreement is terminated for any reason other than our manager’s resignation, the payment to our manager could be as much as twice the amount of such hypothetical profit allocation. As is the case with profit allocation, the calculation of the put price is complex and based on many factors that cannot be predicted with any certainty at this time. See “The 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.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for the period indicated:

	Three Months Ended March 31,						Years Ended December 31,
	2022			2021			2021			2020
Net cash provided by (used in) operating activities from continuing operations	$	(536,260	)	$	(360,719	)	$	(897,566	)	$	137,500
Net cash provided by (used in) investing activities from continuing operations		(31,055	)		945,704			(15,684,770	)		1,060,872
Net cash provided by financing activities from continuing operations		822,706			173,559			16,585,520			181,977
Net increase in cash and cash equivalents from continuing operations		255,391			758,544			3,184			1,380,349
Cash and cash equivalents at beginning of period		1,383,533			1,380,349			1,380,349			—
Cash and cash equivalent at end of period	$	1,638,924		$	2,138,893		$	1,383,533		$	1,380,349

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Net cash used in operating activities from continuing operations was $536,260 for the three months ended March 31, 2022, as compared to $360,719 for the three months ended March 31, 2021. For the three months ended March 31, 2022, the net loss from continuing operations of $927,208, changes in receivables of $539,818, inventory of $378,192, contract liabilities of $851,454, and operating lease liabilities of $83,729, offset by changes in depreciation and amortization of $511,371, amortization and of debt discounts of $249,374, amortization of right-of-use assets of $98,031, prepaid expenses and other current assets of $311,511, accounts payable and accrued expenses of $964,586, and customer deposits of $212,284, were the primary drivers of the net cash used in operating activities. For the three months ended March 31, 2021, the net loss from continuing operations of $755,811, changes in receivables of $124,065, inventory of $115,545, prepaids and other costs of $62,071, contract liabilities of $122,247, and non-cash forgiveness of debt of $360,302, offset by an changes in accounts payable and accrued expenses of $65,969, customer deposits of $328,580, depreciation and amortization of $122,106, and loss on adjustment shares of $757,792 in common share issuances, were the primary drivers of the net cash provided by operating activities.

Net cash used in operating activities from continuing operations was $897,566 for the year ended December 31, 2021, as compared to net cash provided by operating activities from continuing operations of $137,500 for the year ended December 31, 2020. For the year ended December 31, 2021, the net loss of $3,588,934, a gain of disposition of subsidiary of $3,282,804, a change in contract liabilities of $950,640 and a gain on forgiveness of debt of $360,302, offset by a loss on redemption of series A senior convertible preferred shares of $4,017,553, non-cash depreciation and amortization of $908,982, an increase in accounts payable and accrued expenses of $719,890, a loss on write-down of contingent notes payable of $602,204, a decrease in inventory of $389,110 and a change in debt discounts of $382,565, were the primary drivers of the net cash used in operating activities. For the year ended December 31, 2020, the net loss of $9,658,769, a decrease in prepaids and other costs of $495,831 and an increase in inventory of $565,264, offset by a gain from discontinued operations of $7,838,631, an increase in accounts payable and accrued expenses of $962,464 and an increase in customer deposits of $965,254, were the primary drivers of the net cash provided by operating activities.

Net cash used in investing activities from continuing operations was $31,055 for the three months ended March 31, 2022, as compared to net cash provided by investing activities from continuing operations of $945,704 for the three months ended March 31, 2021. Net cash used in investing activities for the three months ended March 31, 2022 consisted of purchases of property and equipment of $66,291 and investments in certificates of deposit of $262, offset by proceeds from the disposal of property of equipment of $35,498, while net cash provided by investing actives for the three months ended March 31, 2021 consisted of net cash acquired from the acquisition of Wolo of $1,094,524, offset by the purchase of equipment and vehicles of $148,820.

Net cash used in investing activities from continuing operations was $15,684,770 for the year ended December 31, 2021, as compared to net cash provided by investing activities from continuing operations of $1,060,872 for the year ended December 31, 2020. Net cash used in investing activities for the year ended December 31, 2021 consisted of net cash acquired in (paid for) acquisitions (Wolo, High Mountain and Innovative Cabinets) of $15,857,295 and purchase of equipment and vehicles of $177,475, offset by proceeds from disposition of subsidiary of $325,000 and proceeds from the sale of property and equipment of $25,000, while net cash provided by investing activities for the year ended December 31, 2020 consisted of net cash acquired in (paid for) acquisitions (Asien’s and Kyle’s) of $1,409,936, offset by investments in certificates of deposits of $276,270 and purchases of equipment in the amount of $72,794.

Net cash provided by financing activities from continuing operations was $822,706 for the three months ended March 31, 2022, as compared to $173,559 for the three months ended March 31, 2021. Net cash provided by financing activities for the three months ended March 31, 2022 consisted of net proceeds from the issuance of series B senior convertible preferred shares of $1,266,000, offset by repayments of notes payables and finance lease liabilities of $58,317, dividends on preferred shares of $135,215, and dividends on common shares of $249,762, while net cash provided by financing activities for the three months ended March 31, 2021 consisted of net proceeds of $3,000,000 from the sale of units described below, net line of credit proceeds of $569,395 and proceeds from vehicle loans of $123,405, offset by the repayments of notes payable and finance lease liabilities of $143,432, payments to Wolo’s seller of $3,000,000 and to Kyle’s seller of $33,630, payments of preferred dividends of $176,950 and the payment of financing costs of $165,229.

Net cash provided by financing activities from continuing operations was $16,585,520 for the year ended December 31, 2021, as compared to $181,977 for the year ended December 31, 2020. Net cash provided by financing activities for the year ended December 31, 2021 consisted of net proceeds on convertible notes payable of $23,744,975, proceeds on notes payable of $3,550,000 and proceeds of $3,000,000 from the sale of units described below, offset by redemption

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of preferred shares of $6,054,241, net payments on notes payable of $5,021,511, payments of preferred dividends of $1,032,806, net payments due to the Wolo and Asien’s sellers of $977,686, net repayment on lines of credit of $301,081, financing fees of $165,230, payment of vesting note payable of $100,000 and repayment of grid note of $56,900. Net cash provided by financing activities for the year ended December 31, 2020 consisted of net proceeds of $4,921,315 from the sale of units described below, proceeds from line of credit of $301,081, proceeds from the exercise of stock options and warrants of $212,500 and proceeds from vehicle loans of $21,968, offset by the payment to Kyle’s seller of $4,356,162, repayment of notes payable of $856,225 and grid note payments of $62,500.

Series A Unit Offering

On September 30, 2020, we sold an aggregate of 2,189,835 units, at a price of $1.90 per unit, for aggregate gross proceeds of $4,160,684. On October 26, 2020, we sold an additional 442,443 units for an aggregate purchase price of $840,640.

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. 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.

Each unit consisted 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 $5.20 per common share (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

In exchange for the consent of the holders of the series A senior convertible preferred shares issued in 2020 to the issuance of the units on March 26, 2021 at a lower purchase price than such holders paid for their shares, we issued an aggregate of 99,710 common shares (post-split) to such holders.

On October 12, 2021, we redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645.

Series B Unit Offering

On February 24, 2022, we sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, we sold an additional 106,666 units for aggregate gross proceeds of $320,000. Each unit consisted 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 $5.20 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

Subscription Agreement

On March 29, 2021, we entered into a subscription agreement with 1847 Wolo, pursuant to which 1847 Wolo issued to us 1,000 shares of its series A preferred stock, for gross proceeds to 1847 Wolo of $3,000,000. The series A preferred stock has no voting rights and is not convertible into the common stock or any other securities of 1847 Wolo. Dividends at the rate per annum of 16.0% of the stated value of $3,000 per share shall accrue on the series A preferred stock (subject to adjustment) and shall accrue from day to day, whether or not declared, and shall be cumulative. Accruing dividends are payable quarterly in arrears on each of the following dividend payment dates: January 15, April 15, July 15 and October 15 beginning on April 15, 2021. Upon any liquidation, dissolution or winding up of 1847 Wolo, before any payment shall be made to the holders of 1847 Wolo’s common stock, the series A preferred stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to 1847 Wolo’s stockholders an amount per share equal to the stated value of $3,000 per share, plus any accrued, but unpaid dividends.

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 Capital LLC, or Leonite, pursuant to which we issued to these purchasers secured convertible promissory notes

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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 750,000 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 included within noncontrolling interest on the consolidated balance sheet. The remaining principal balance of the notes at March 31, 2022 is $21,948,421, net of debt discounts of $2,911,579, and they have accrued interest of $489,698.

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 with such prepayment. In addition, immediately upon receipt by our 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 our 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, we 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 our company or a subsidiary in connection therewith (in each case, paid to non-affiliates).

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 our common shares at a conversion price equal to $5.20 (post-split) (subject to standard adjustments, including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations.

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 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 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 our 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 sellers of High Mountain and Innovative Cabinets. The remaining principal balance of the notes at March 31, 2022 is $4,931,608, net of debt discount at $948,738, and they have accrued interest of $196,468.

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, we entered into an exchange agreement with the holders, pursuant to which we granted them the right to exchange all of the principal

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amount and accrued but unpaid interest under the notes or any portion thereof for a number of our common shares 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 our common shares on the primary national securities exchange or over-the-counter market on which our common shares are traded over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) $10.00 (post-split) (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.

6% Amortizing Promissory Note

On July 29, 2020, 1847 Asien entered into a securities purchase agreement with Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992, or the Asien’s Seller, pursuant to which the Asien’s Seller sold 415,000 of our common shares to 1847 Asien a purchase price of $2.50 per share. As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, 1847 Asien and the Asien’s Seller entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described above, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon. The note is unsecured and contains customary events of default. The remaining principal balance of the note at March 31, 2022 was $581,963 and it had accrued interest of $40,880.

Vesting Promissory Note

A portion of the purchase price for the acquisition of Kyle’s on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to Stephen Mallatt, Jr. and Rita Mallatt in the principal amount of $1,050,000, which increased to a principal amount of up to $1,260,000 pursuant to the vested percentage calculation described below. Payment of the principal and accrued interest on the note is subject to vesting as described below. The note bears interest 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.

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 $1,553,561, resulting in a vested amount of approximately $388,390. For the year ended December 31, 2021, EBITDA of 1847 Cabinet was approximately $1,642,335, resulting in an additional vested amount of approximately $410,584. As of March 31, 2022, 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.

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The note contains customary events of default. The right of the holders 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.

Financing Leases

On February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, which matures on January 19, 2024. The balance payable was $9,792 as of March 31, 2022.

On April 10, 2019, High Mountain entered in an equipment financing lease to purchase equipment for $67,577, which matures on April 1, 2024. The balance payable was $30,961 as of March 31, 2022.

On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, which matures on May 2, 2024. The balance payable was $5,187 as of March 31, 2022.

On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, which matures on December 1, 2027. The balance payable was $258,821 as of March 31, 2022.

On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,375, which matures on December 1, 2027. The balance payable was $228,842 as of March 31, 2022.

On March 28, 2022, Kyle’s entered in an equipment financing lease to purchase equipment for $245,395, which matures on January 28, 2028. The balance payable was $239,208 as of March 31, 2022.

On March 28, 2022, Kyle’s entered in an equipment financing lease to purchase equipment for $71,403, which matures on January 28, 2028. The balance payable was $69,463 as of March 31, 2022.

Vehicle Loans

Asien’s has entered into seven retail installment sale contracts pursuant to which Asien’s agreed to finance its delivery trucks at rates ranging from 3.74% to 8.72% with an aggregate remaining principal amount of $136,781 as of March 31, 2022.

Kyle’s has entered into two retail installment sale contracts pursuant to which Kyle’s agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of $61,022 as of March 31, 2022.

High Mountain has entered into twelve retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.34% with an aggregate remaining principal amount of $110,285 as of March 31, 2022.

Innovative Cabinets has entered into two retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment at rates of 3.74% with an aggregate remaining principal amount of $18,633 as of March 31, 2022.

Total Debt

The following table shows aggregate figures for the total debt, net of discounts, described above that is coming due in the short and long term as of March 31, 2022. See the above disclosures for more details regarding these loans.

	Short-Term		Long-Term		Total Debt
Secured Convertible Promissory Notes	$	—	$	21,948,421	$	21,948,421
6% Subordinated Convertible Promissory Notes		—		4,931,608		4,931,608
6% Amortizing Promissory Note		581,961		—		581,961
Vesting Promissory Note		—		1,011,183		1,011,183
Financing Leases		143,865		698,409		842,274
Vehicle Loans		104,322		222,399		326,721
Total	$	830,148	$	28,812,020	$	29,642,168

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High Mountain and Innovative Cabinets

As of December 31, 2020, High Mountain and Innovative Cabinets had cash and cash equivalents of $1,368,927. High Mountain and Innovative Cabinets have historically financed their operations primarily through cash flow from operations.

The following table provides detailed information about net cash flow for all financial statement periods presented in this prospectus:

	Years Ended December 31,
	2020			2019
Net cash provided by operating activities	$	1,059,816		$	1,121,130
Net cash used in investing activities		(75,468	)		(149,748	)
Net cash used in financing activities		(828,393	)		(467,293	)
Net increase in cash and cash equivalents		155,955			504,089
Cash and cash equivalents at beginning of year		1,212,972			708,883
Cash and cash equivalent at end of year	$	1,368,927		$	1,212,972

Net provided by operating activities was $1,059,816 for the year ended December 31, 2020, as compared to $1,121,130 for the year ended December 31, 2019. For the year ended December 31, 2020, the net income of $2,616,094 and an increase in contract liabilities of $1,203,074, offset by a gain on forgiveness of PPP loans of $1,191,424 and a decrease in contract receivables of $983,382, were the primary drivers of the net cash provided by operating activities. For the year ended December 31, 2019, the net income of $903,059, an increase in contract liabilities of $326,310, amortization of operating lease right-of-use assets of $245,291 and an increase in inventory of $216,543, offset by a decrease in contract receivables of $412,432 and a decrease in operating lease liabilities of $239,600, were the were the primary drivers of the net cash provided by operating activities.

Net cash used in investing activities $75,468 and $149,748 for the years ended December 31, 2020 and 2019, respectively. The net cash used in financing activities for all periods consisted entirely of purchases of property and equipment.

Net cash used in financing activities was $828,393 for the year ended December 31, 2020, as compared to $467,293 for the year ended December 31, 2019. The net cash used in financing activities for the year ended December 31, 2020 consisted of distributions of $1,930,000, repayments of notes payable of $77,046 and repayments of finance lease liabilities of $5,799, offset by proceeds from notes payable of $1,184,452, while the net cash used in financing activities for the year ended December 31, 2019 consisted of distributions of $332,000, repayments of notes payable of $131,366 and repayments of finance lease liabilities of $3,927.

Wolo

As of December 31, 2020, Wolo had cash and cash equivalents of $574,983. Wolo has financed its operations primarily through cash flow from operations and related party loans.

The following table provides detailed information about net cash flow for all financial statement periods presented in this prospectus:

	Years Ended December 31,
	2020			2019
Net cash provided by operating activities	$	1,036,287		$	885,237
Net cash used in investing activities		—			(5,939	)
Net cash used in financing activities		(1,552,650	)		(575,000	)
Net increase (decrease) in cash and cash equivalents		(516,363	)		304,298
Cash and cash equivalents at beginning of period		1,091,346			787,048
Cash and cash equivalent at end of period	$	574,983		$	1,091,346

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Net provided by operating activities was $1,036,287 for the year ended December 31, 2020, as compared to $885,237 for the year ended December 31, 2019. For the year ended December 31, 2020, the net income of $814,791, an increase in inventory of $141,234, amortization of right-of-use assets of $75,150, an increase in accounts payable and accrued expenses of $66,853 and an increase in prepaid expenses and other current assets of $62,504, offset by decreases in operating lease liability of $75,150 and accounts receivable of $54,740, were the primary drivers of the net cash provided by operating activities. For the year ended December 31, 2019, the net income of $548,911, an increase in prepaid expenses and other current assets of $214,746, an increase in accounts receivable of $172,710 and amortization of right-of-use assets of $75,176, offset by decreases in operating lease liability of $75,176 and inventory of $50,922, were the primary drivers of the net cash provided by operating activities.

There were no investing activities for the year ended December 31, 2020. Net cash used in investing activities was $5,939 for the year ended December 31, 2019, which consisted entirely of purchases of property and equipment.

Net cash used in financing activities was $1,552,650 for the year ended December 31, 2020, as compared to $575,000 for the year ended December 31, 2019. Net cash used in financing activities for the year ended December 31, 2020 consisted of distributions to stockholders of $1,725,000, offset by proceeds of PPP loans of $172,350, while net cash used in financing activities for the year ended December 31, 2019 consisted of distributions to stockholders of $500,000 and net proceeds from related party notes of $75,000.

Contractual Obligations

Our principal commitments consist mostly of obligations under the loans described above, the operating leases described under “Business” and other contractual commitments described below. 

We have engaged our manager to manage our day-to-day operations and affairs. Our relationship with our manager will be governed principally by the following agreements:

•        the management services agreement and offsetting management services agreements relating to the management services our manager will perform for us and the businesses we own and the management fee to be paid to our manager in respect thereof; and

•        our operating agreement setting forth our manager’s rights with respect to the allocation shares it owns, including the right to receive profit allocations from us, and the supplemental put provision relating to our manager’s right to cause us to purchase the allocation shares it owns.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The following discussion relates to critical accounting policies for our consolidated company. The preparation of financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial

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statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Revenue Recognition and Cost of Revenue

On January 1, 2018, we adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. Our adoption of this ASU resulted in no change to our results of operations or balance sheet.

Retail and Appliances Segment

We collect 100% of the payment for special-order models including tax and 50% of the payment for non-special orders from the customer at the time the order is placed. We do not incur incremental costs obtaining purchase orders from customers, however, if we 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 we recognize arises from orders we receive from customers. Our performance obligations under the customer orders correspond to each sale of merchandise that we make 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, our 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, we have satisfied our performance obligation and we recognize revenue.

Transaction Price — We agree with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In our contracts with customers, we allocate 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 we collect 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 us. 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. We have a diverse customer base with no one client accounting for more than 5% of total revenue.

Customer deposits — We record customer deposits when payments are received in advance of the delivery of the merchandise. We expect that substantially all of the customer deposits will be recognized within six months as the performance obligations are satisfied.

Construction Segment

Our construction segment revenues are derived primarily through contracts with customers whereby we specialize in all aspects of products and services relating to finished carpentry, custom cabinetry, and countertops. We recognize revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when we have approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

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A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Since most contracts are bundled to include both material and installation services, we combine these items into one performance obligation as the overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. We do offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For any contracts that are not complete at the reporting date, we recognize revenue over time, because of the continuous transfer of control to the customer as work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. We utilize the cost-to-cost measure of progress method as we believe this best depicts the transfer of control of assets to the customer, which occurs as costs are incurred. When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, cash flow, and profitability from a particular contract may be adversely affected.

An insignificant portion of sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability and excluded from revenue on a net basis.

Contracts can be subject to modification to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

All contracts are billed either contractually or as work is performed. Billing on long-term contracts occurs primarily on a monthly basis throughout the contract period whereby we submit progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some contracts, the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered a significant financing component.

Cost of revenues earned include all direct material and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying the performance obligation.

Contract Assets and Contract Liabilities

We record a contract asset when we have satisfied our performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of our performance obligation. The difference between the beginning and ending balances of contract assets and liabilities primarily results from the timing of our performance and the customer’s payment. At times, we have a right to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included in contract assets or contract liabilities, as determined on a contract-by-contract basis.

Automotive Supplies Segment

Our automotive supplies segment 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. Focused on the automotive and industrial after-market, we sell our products to big-box national retail chains, through specialty and industrial distributors, as well as online/mail order retailers and original equipment manufacturers.

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We collect 100% of the payment for internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the agreed upon terms.

Performance Obligations — The revenue that we recognize arises from orders we receive from contracts with customers. Our performance obligations under the customer orders correspond to each sale of merchandise that we make to customers and each 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, our products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment of the order. Once this occurs, we have satisfied our performance obligation and we recognize revenue.

Transaction Price — We agree with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In our contracts with customers, we allocate 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 we collect concurrently with revenue-producing activities are excluded from revenue.

Cost of sales includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor to us.

Warranties vary and are typically 90 days to consumers and manufacturing defect warranty to are available to resellers. At times, depending on the product, we can also offer a warranty up to 12 months.

Receivables

Receivables consist of trade accounts receivable from customer, credit card transactions in the process of settlement, and vendor rebates receivable. Vendor rebates receivable represent amounts due from manufactures from whom we purchase products. Rebates receivables are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on our assessment of the credit history with manufacturers, we have concluded that there should be no allowance for uncollectible accounts. We historically collect substantially all of our outstanding rebates receivable. Retainage receivables represent the amount retained by customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered at risk. Uncollectible balances are expensed in the periods they are determined to be uncollectible.

Inventory

For Asien’s, inventory mainly consists of appliances that are acquired for resale and is valued at the average cost determined on a specific item basis. Inventory also consists of parts that are used in service and repairs and may or may not be charged to the customer depending on warranty and contractual relationship. Kyle’s typically orders inventory on a job-by-job basis and those jobs are put into production within hours of being received. The inventory in production is accounted for in the contract assets and liabilities and follows the percentage completion methodology. Inventories consisting of materials and supplies are stated at lower of costs or market. High Mountain and Innovative Cabinets’ inventory mainly consists of doors, door frames, baseboards, crown molding, cabinetry, countertops, custom cabinets, closet shelving, and other related products. We value inventory at each balance sheet date to ensure that it is carried at the lower of cost or net realizable value with cost determined based on the average cost basis. Wolo’s inventory consists of finished goods acquired for resale and is valued at the weighted-average cost determined on a specific item basis. We periodically evaluate the value of items in inventory and provide write-downs to inventory based on our estimate of market conditions.

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Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3 – 7
Trucks and Vehicles	3 – 6

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5 – 15
Marketing-Related	Straight-line basis	5

Long-Lived Assets

We review our property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating 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.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, certificates of deposit and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed.

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 three-level hierarchy is as follows:

Level 1 —  Quoted market prices in active markets for identical assets or liabilities.

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Level 2 —  Observable market-based inputs or inputs that are corroborated by market data.

Level 3 —  Unobservable inputs that are not corroborated by market date.

Our held to maturity securities are comprised of certificates of deposit.

Derivative Instrument Liability

We account for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.

Stock-Based Compensation

We record stock-based compensation in accordance with ASC 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.

Operating Leases

ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use, or ROU, assets and lease liabilities. ROU assets represent our right to use underlying assets for the lease terms and lease liabilities represent our obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As our leases do not provide an implicit rate, we used our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

We recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. We have elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

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CORPORATE HISTORY AND STRUCTURE

Our company is a Delaware limited liability company that was formed on January 22, 2013. Your rights as a holder of common shares, and the fiduciary duties of our board of directors and executive officers, and any limitations relating thereto, are set forth in the operating agreement governing our company and differ from those applying to a Delaware corporation. However, subject to certain exceptions, the documents governing our company specify that the duties of our directors and officers will be generally consistent with the duties of directors and officers of a Delaware corporation.

Our company is classified as a partnership for U.S. federal income tax purposes. Under the partnership income tax provisions, our company is not expected to incur any U.S. federal income tax liability; rather, each of our shareholders will be required to take into account his or her allocable share of company income, gain, loss, deduction and credit. As a holder of our shares, you may not receive cash distributions sufficient in amount to cover taxes in respect of your allocable share of our net taxable income. We will file a partnership return with the IRS and will issue you with tax information, including a Schedule K-1, setting forth your allocable share of our income, gain, loss, deduction, credit and other items. The U.S. federal income tax rules that apply to partnerships are complex, and complying with the reporting requirements may require significant time and expense. See “Material U.S. Federal Income Tax Considerations” for more information.

We currently have four classes of limited liability company interests — the common shares, the series A senior convertible preferred shares, the series B senior convertible preferred shares and the allocation shares. All of our allocation shares have been and will continue to be held by our manager. See “Description of Securities” for more information about our shares.

On March 3, 2017, our newly formed wholly-owned subsidiary 1847 Neese acquired all of the issued and outstanding capital stock of Neese for an aggregate purchase price of $6,655,000, consisting of: (i) $2,225,000 in cash; (ii) 450 shares of the common stock of 1847 Neese, constituting 45% of its capital stock; (iii) the issuance of a vesting promissory note in the principal amount of $1,875,000 (which was determined to have a fair value of $395,634) due June 30, 2020; and (iv) the issuance of a short-term promissory note in the principal amount of $1,025,000 due March 3, 2018. On April 19, 2021, we entered into a stock purchase agreement with the original owners of Neese, pursuant to which they purchased our 55% ownership interest in 1847 Neese for a purchase price of $325,000 in cash. As a result of this transaction, 1847 Neese is no longer a subsidiary of our company.

On April 5, 2019, our newly formed indirect wholly-owned subsidiary 1847 Goedeker acquired substantially all of the assets of Goedeker Television for an aggregate purchase price of $6,200,000 consisting of: (i) $1,500,000 in cash; (ii) the issuance of a promissory note in the principal amount of $4,100,000; and (iii) up to $600,000 in earn out payments. As additional consideration, our newly formed wholly-owned subsidiary 1847 Goedeker Holdco Inc., or 1847 Holdco, issued to each of the stockholders of Goedeker Television a number of shares of its common stock equal to a 11.25% non-dilutable interest in all of the issued and outstanding stock of 1847 Holdco as of the closing date. On August 4, 2020, 1847 Holdco distributed all of its shares of 1847 Goedeker to its stockholders in accordance with their pro rata ownership in 1847 Holdco, after which time 1847 Holdco was dissolved. On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders. As a result of this distribution, 1847 Goedeker is no longer a subsidiary of our company.

On May 28, 2020, our newly formed wholly-owned subsidiary 1847 Asien acquired all of the issued and outstanding capital stock of Asien’s for an aggregate purchase price of $1,918,000 consisting of: (i) $233,000 in cash; (ii) the issuance of an amortizing promissory note in the principal amount of $200,000; (iii) the issuance of a demand promissory note in the principal amount of $655,000; and (iv) 415,000 common shares of our company, having a mutually agreed upon value of $830,000 and a fair value of $1,037,500, which could be repurchased by 1847 Asien for a period of one year following the closing at a purchase price of $2.50 per share. The shares were repurchased by 1847 Asien on July 29, 2020. As a result of this transaction, we own 95% of 1847 Asien, with the remaining 5% held by Leonite, and 1847 Asien owns 100% of Asien’s. 1847 Asien was formed in the State of Delaware on March 24, 2020 and Asien’s was formed in the State of California on February 6, 2004.

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On September 30, 2020, our newly formed wholly-owned subsidiary 1847 Cabinet acquired all of the issued and outstanding capital stock of Kyle’s for an aggregate purchase price of up to $6,839,792, consisting of (i) $4,389,792 in cash, (ii) an 8% contingent subordinated note in the aggregate principal amount of up to $1,050,000, and (iii) 700,000 common shares of our company, having a mutually agreed upon value of $1,400,000 and a fair value of $3,675,000. As a result of this transaction, we own 92.5% of 1847 Cabinet, with the remaining 7.5% held by Leonite, and 1847 Cabinet owns 100% of Kyle’s. 1847 Cabinet was formed in the State of Delaware on August 21, 2020 and Kyle’s was formed in the State of Idaho on May 7, 1991.

On March 30, 2021, our newly formed wholly-owned subsidiary 1847 Wolo acquired all of the issued and outstanding capital stock of Wolo for an aggregate purchase price of $8,344,056, consisting of (i) $6,550,000 in cash, (ii) a 6% secured promissory note in the aggregate principal amount of $850,000 and (iii) cash paid to seller, net of working capital adjustment, of $944,056. As a result of this transaction, we own 92.5% of 1847 Wolo, with the remaining 7.5% held by Leonite, and 1847 Wolo owns 100% of Wolo Mfg. Corp and Wolo Industrial Horn & Signal, Inc. 1847 Wolo was formed in the State of Delaware on December 3, 2020. Wolo Mfg. Corp. was formed in the State of New York on August 6, 1965 and Wolo Industrial Horn & Signal, Inc. was formed in the State of New York on January 28, 1999.

On October 8, 2021, 1847 Cabinet acquired all of the issued and outstanding capital stock or other equity securities of High Mountain and Innovative Cabinets for an aggregate purchase price of $15,441,173 (subject to adjustment), consisting of (i) $10,687,500 in cash (subject to adjustment) and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the amount of $4,753,673, consisting of an aggregate principal amount of $5,880,345, net of debt discount of $1,126,672.

The purchase price is subject to a post-closing working capital adjustment provision. Under this provision, the sellers delivered to 1847 Cabinet at the closing an unaudited balance sheet of High Mountain and Innovative Cabinets and a calculation of estimated net working capital of High Mountain and Innovative Cabinets as of that date. On or before the 75th day following the closing, 1847 Cabinet must deliver to the sellers an unaudited balance sheet of High Mountain and Innovative Cabinets and its calculation of the final net working capital of High Mountain and Innovative Cabinets as of the closing date. If such final net working capital exceeds the estimated net working capital, 1847 Cabinet must, within seven days, pay to the sellers an amount of cash that is equal to such excess. If the estimated net working capital exceeds the final net working capital, the sellers must, within seven days, pay to 1847 Cabinet an amount in cash equal to such excess. As of the date of this prospectus, the post-closing working capital adjustment has not been completed notwithstanding the fact that the date of this prospectus is past the 75th day following closing. As of the date of this prospectus, the parties have not yet finalized the post-working capital adjustment.

As a result of this transaction, 1847 Cabinet acquired 92.5% of High Mountain and Innovative Cabinets, with the remaining 7.5% held by Leonite. 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 Leonite. High Mountain was formed in the State of Nevada on April 4, 2014 and Innovative Cabinets was formed in the State of Nevada on June 17, 2008.

On May 14, 2021, we formed 1847 HQ Inc. as a wholly-owned subsidiary in the State of Delaware to manage our benefit plans.

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The following chart depicts our current organizational structure:

See “The Manager” for more details regarding the ownership of our manager.

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THE MANAGER

Overview of Our Manager

Our manager, 1847 Partners LLC, is a Delaware limited liability company. It has two classes of limited liability interests known as Class A interests and Class B interests. The Class A interests, which give the holder the right to the profit allocation received by our manager as a result of holding our allocation shares, are owned in their entirety by 1847 Partners Class A Member LLC; and the Class B interests, which give the holder the right to all other profits or losses of our manager, including the management fee payable to our manager by us, are owned in their entirety by 1847 Partners Class B Member LLC. 1847 Partners Class A Member LLC is owned 52% by Ellery W. Roberts, our Chief Executive Officer, 38% by 1847 Founders Capital LLC, which is owned by Edward J. Tobin, and approximately 9% by Louis A. Bevilacqua, the managing member of Bevilacqua PLLC, our outside counsel, with the balance being owned by a former contractor to such law firm. 1847 Partners Class B Member LLC is owned 54% by Ellery W. Roberts, 36% by 1847 Founders Capital LLC and 10% by Louis A. Bevilacqua. Mr. Roberts is also the sole manager of both entities. In the future, Mr. Roberts may cause 1847 Partners Class A Member LLC or 1847 Partners Class B Member LLC to issue units to employees of our manager to incentivize those employees by providing them with the ability to participate in our manager’s incentive allocation and management fee.

Key Personnel of Our Manager

The key personnel of our manager are Ellery W. Roberts, our Chief Executive Officer, and Edward J. Tobin. Each of these individuals will be compensated entirely by our manager from the management fees it receives. As employees of our manager, these individuals devote a substantial majority of their time to the affairs of our company.

Collectively, the management team of our manager has more than 60 years of combined experience in acquiring and managing small businesses and has overseen the acquisitions and financing of over 50 businesses.

Acquisition and Disposition Opportunities

Our manager has exclusive responsibility for reviewing and making recommendations to our board of directors with respect to acquisition and disposition opportunities. If our manager does not originate an opportunity, our board of directors will seek a recommendation from our manager prior to making a decision concerning such opportunity. In the case of any acquisition or disposition opportunity that involves an affiliate of our manager or us, our nominating and corporate governance committee, or, if we do not have such a committee, the independent members of our board of directors, will be required to authorize and approve such transaction.

Our manager will review each acquisition or disposition opportunity presented to our manager to determine if such opportunity satisfies the acquisition and disposition criteria established by our board of directors. The acquisition and disposition criteria provide that our manager will review each acquisition opportunity presented to it to determine if such opportunity satisfies our acquisition and disposition criteria, and if it is determined, in our manager’s sole discretion, that an opportunity satisfies the criteria, our manager will refer the opportunity to our board of directors for its authorization and approval prior to the consummation of any such opportunity.

Our investment criteria include the following:

•        Revenue of at least $5.0 million

•        Current year EBITDA/Pre-tax Income of at least $1.5 million with a history of positive cash flow

•        Clearly identifiable “blueprint” for growth with the potential for break-out returns

•        Well-positioned companies within our core industry categories (consumer-driven, business-to-business, light manufacturing and specialty finance) with strong returns on capital

•        Opportunities wherein building management team, infrastructure and access to capital are the primary drivers of creating value

•        Headquartered in North America

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We believe we will be able to acquire small businesses for multiples ranging from three to six times EBITDA. With respect to investment opportunities that do not fall within the criteria set forth above, our manager must first present such opportunities to our board of directors. Our board of directors and our manager will review these criteria from time to time and our board of directors may make changes and modifications to such criteria as we make additional acquisitions and dispositions.

If an acquisition opportunity is referred to our board of directors by our manager and our board of directors determines not to timely pursue such opportunity in whole or in part, any part of such opportunity that we do not promptly pursue may be pursued by our manager or may be referred by our manager to any person, including affiliates of our manager. In this case, our manager is likely to devote a portion of its time to the oversight of this opportunity, including the management of a business that we do not own.

If there is a disposition, our manager must use its commercially reasonable efforts to manage a process through which the value of such disposition can be maximized, taking into consideration non-financial factors such as those relating to competition, strategic partnerships, potential favorable or adverse effects on us, our businesses, or our investments or any similar factors that may reasonably perceived as having a short- or long-term impact on our business, results of operations and financial condition.

Management Services Agreement

The management services agreement sets forth the services performed by our manager. Our manager performs such services subject to the oversight and supervision of our board of directors.

In general, our manager performs those services for us that would be typically performed by the executive officers of a company. Specifically, our manager performs the following services, which we refer to as the management services, pursuant to the management services agreement:

•        manage our day-to-day business and operations, including our liquidity and capital resources and compliance with applicable law;

•        identify, evaluate, manage, perform due diligence on, negotiate and oversee acquisitions of target businesses and any other investments;

•        evaluate and oversee the financial and operational performance of our businesses, including monitoring the business and operations of such businesses, and the financial performance of any other investments that we make;

•        provide, on our behalf, managerial assistance to our businesses;

•        evaluate, manage, negotiate and oversee dispositions of all or any part of any of our property, assets or investments, including disposition of all or any part of our businesses;

•        provide or second, as necessary, employees of our manager to serve as our executive officers or other employees or as members of our board of directors; and

•        perform any other services that would be customarily performed by executive officers and employees of a publicly listed or quoted company.

We and our manager have the right at any time during the term of the management services agreement to change the services provided by our manager. In performing management services, our manager has all necessary power and authority to perform, or cause to be performed, such services on our behalf, and, in this respect, our manager is the only provider of management services to us. Nonetheless, our manager is required to obtain authorization and approval of our board of directors in all circumstances where executive officers of a corporation typically would be required to obtain authorization and approval of a corporation’s board of directors, including, for example, with respect to the consummation of an acquisition of a target business, the issuance of securities or the entry into credit arrangements.

While our Chief Executive Officer, Mr. Ellery W. Roberts, intends to devote substantially all of his time to the affairs of our company, neither Mr. Roberts, nor our manager, is expressly prohibited from investing in or managing other entities. In this regard, the management services agreement does not require our manager and its affiliates to provide management services to us exclusively.

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Secondment of Our Executive Officers

In accordance with the terms of the management services agreement, our manager may second to us our executive officers, which means that these individuals will be assigned by our manager to work for us during the term of the management services agreement. Our board of directors has appointed Mr. Roberts as an executive officer of our company. Although Mr. Roberts is an employee of our manager, he will report directly, and be subject, to our board of directors. In this respect, our board of directors may, after due consultation with our manager, at any time request that our manager replace any individual seconded to us and our manager will, as promptly as practicable, replace any such individual; however, our Chief Executive Officer, Mr. Roberts, controls our manager, which may make it difficult for our board of directors to completely sever ties with Mr. Roberts. Our manager and our board of directors may agree from time to time that our manager will second to us one or more additional individuals to serve on our behalf, upon such terms as our manager and our board of directors may mutually agree.

Indemnification by our Company

We have agreed to indemnify and hold harmless our manager and its employees and representatives, including any individuals seconded to us, from and against all losses, claims and liabilities incurred by our manager in connection with, relating to or arising out of the performance of any management services. However, we will not be obligated to indemnify or hold harmless our manager for any losses, claims and liabilities incurred by our manager in connection with, relating to or arising out of (i) a breach by our manager or its employees or its representatives of the management services agreement, (ii) the gross negligence, willful misconduct, bad faith or reckless disregard of our manager or its employees or representatives in the performance of any of its obligations under the management services agreement, or (iii) fraudulent or dishonest acts of our manager or its employees or representatives with respect to our company or any of its businesses.

Termination of Management Services Agreement

Our board of directors may terminate the management services agreement and our manager’s appointment if, at any time:

•        a majority of our board of directors vote to terminate the management services agreement, and the holders of at least a majority of the outstanding shares (other than shares beneficially owned by our manager) then entitled to vote also vote to terminate the management services agreement;

•        neither Mr. Roberts nor his designated successor controls our manager, which change of control occurs without the prior written consent of our board of directors;

•        there is a finding by a court of competent jurisdiction in a final, non-appealable order that (i) our manager materially breached the terms of the management services agreement and such breach continued unremedied for 60 days after our manager receives written notice from us setting forth the terms of such breach, or (ii) our manager (x) acted with gross negligence, willful misconduct, bad faith or reckless disregard in performing its duties and obligations under the management services agreement, or (y) engaged in fraudulent or dishonest acts in connection with our business or operations;

•        our manager has been convicted of a felony under federal or state law, our board of directors finds that our manager is demonstrably and materially incapable of performing its duties and obligations under the management services agreement, and the holders of at least 662/3% of the then outstanding shares, other than shares beneficially owned by our manager, vote to terminate the management services agreement; or

•        there is a finding by a court of competent jurisdiction that our manager has (i) engaged in fraudulent or dishonest acts in connection with our business or operations or (ii) acted with gross negligence, willful misconduct, bad faith or reckless disregard in performing its duties and obligations under the management services agreement, and the holders of at least 662/3% of the then outstanding shares (other than shares beneficially owned by our manager) vote to terminate the management services agreement.

In addition, our manager may resign and terminate the management services agreement at any time upon 120 days prior written notice to us, and this right is not contingent upon the finding of a replacement manager. However, if our manager resigns, until the date on which the resignation becomes effective, it will, upon request of our board of directors, use reasonable efforts to assist our board of directors to find a replacement manager at no cost and expense to us.

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Upon the termination of the management services agreement, seconded officers, employees, representatives and delegates of our manager and its affiliates who are performing the services that are the subject of the management services agreement will resign their respective position with us and cease to work at the date of such termination or at any other time as determined by our manager. Any director appointed by our manager may continue serving on our board of directors, subject to the terms of the operating agreement.

If we terminate the management services agreement, we have agreed to cease using the term “1847”, including any trademarks based on the name of our company that may be licensed to them by our manager, under the licensing provisions of the management services agreement, entirely in our business and operations within 180 days of such termination. Such licensing provisions of the management services agreement would require our company and its businesses to change their names to remove any reference to the term “1847” or any reference to trademarks licensed to them by our manager. In this respect, our right to use the term “1847” and related intellectual property is subject to licensing provisions between our manager, on the one hand, and our company, on the other hand.

Except with respect to the termination fee payable to our manager due to a termination of the management services agreement based solely on a vote of our board of directors and our shareholders, no other termination fee is payable upon termination of the management services agreement for any other reason. See “— Our Manager as a Service Provider — Termination Fee” for more information about the termination fee payable upon termination of the management services agreement.

While termination of the management services agreement will not affect any terms and conditions, including those relating to any payment obligations, that exist under any offsetting management services agreements or transaction services agreements, such agreements will be terminable by our businesses upon 60 days prior written notice and there will be no termination or other similar fees due upon such termination. Notwithstanding termination of the management services agreement, our manager will maintain its rights with respect to the allocation shares it then owns, including its rights under the supplemental put provision of our operating agreement. See “— Our Manager as an Equity Holder — Supplemental Put Provision” for more information on our manager’s put right with respect to the allocation shares.

Our Relationship with Our Manager, Manager Fees and Manager Profit Allocation

Our relationship with our manager is based on our manager having two distinct roles: first, as a service provider to us and, second, as an equity holder of the allocation shares.

As a service provider, our manager performs a variety of services for us, which entitles it to receive a management fee. As holder of our allocation shares, our manager has the right to a preferred distribution in the form of a profit allocation upon the occurrence of certain events. Our manager paid $1,000 for the allocation shares. In addition, our manager will have the right to cause us to purchase the allocation shares then owned by our manager upon termination of the management services agreement.

These relationships with our manager are governed principally by the following agreements:

•        the management services agreements relating to the services our manager performs for us and our businesses; and

•        our operating agreement relating to our manager’s rights with respect to the allocation shares it owns and which contains the supplemental put provision relating to our manager’s right to cause us to purchase the allocation shares it owns.

We also expect that our manager will enter into offsetting management services agreements and transaction services agreements with our businesses directly. These agreements, and some of the material terms relating thereto, are discussed in more detail below. The management fee, profit allocation and put price under the supplemental put provision will be our payment obligations and, as a result, will be paid, along with other company obligations, prior to the payment of distributions to common shareholders.

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The following table provides a simplified description of the fees and profit allocation rights held by our manager. Further detail is provided in the following subsections.

Description	Fee Calculation	Payment Term
Management Fees
Determined by management services agreement	0.5% of adjusted net assets (2.0% annually)	Quarterly
Determined by offsetting management services agreement	Payment of fees by our subsidiary businesses that result in a dollar for dollar reduction of manager fees paid by us to our manager such that our manager cannot receive duplicate fees from both us and our subsidiary	Quarterly
Termination fee — determined by management services agreement	Accumulated management fee paid in the preceding 4 fiscal quarters multiplied by 2. Paid only upon termination by our board and a majority in interest of our shareholders
Determined by management services agreement	Reimbursement of manager’s costs and expenses in providing services to us, but not including: (1) costs of overhead; (2) due diligence and other costs for potential acquisitions our board of directors does not approve pursuing or that are required by acquisition target to be reimbursed under a transaction services agreement; and (3) certain seconded officers and employees	Ongoing
Transaction Services Fees
Acquisition services of target businesses or disposition of subsidiaries — fees determined by transaction services agreements	2.0% of aggregate purchase price up to $50 million; plus 1.5% of aggregate purchase price in excess of $50 million and up to and equal to $100 million; plus 1.0% of aggregate purchase price in excess of $100 million	Per transaction
Manager profit allocation determined by our operating agreement	20% of certain profits and gains on a sale of subsidiary after clearance of the 8% annual hurdle rate 8% hurdle rate determined for any subsidiary by multiplying the subsidiary’s average quarterly share of our assets by an 8% annualized rate	Sale of a material amount of capital stock or assets of one of our businesses or subsidiaries. Holding event: at the option of our manager, for the 30 day period following the 5th anniversary of an acquired business (but only based on historical profits of the business)

Our Manager as a Service Provider

Management Fee

We will pay our manager a quarterly management fee equal to 0.5% (2.0% annualized) of its adjusted net assets, as discussed in more detail below (which we refer to as the parent management fee).

Subject to any adjustments discussed below, for performing management services under the management services agreement during any fiscal quarter, we will pay our manager a management fee with respect to such fiscal quarter. The management fee to be paid with respect to any fiscal quarter will be calculated as of the last day of such fiscal quarter, which we refer to as the calculation date. The management fee will be calculated by an administrator, which will be our manager so long as the management services agreement is in effect. The amount of any management fee payable by us as of any calculation date with respect to any fiscal quarter will be (i) reduced by the aggregate amount

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of any offsetting management fees, if any, received by our manager from any of our businesses with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) management fees received by (or owed to) our manager as of such calculation date, and (iii) increased by the amount of any outstanding accrued and unpaid management fees.

The management fee will be paid prior to the payment of distributions to our common shareholders. If we do not have sufficient liquid assets to pay the management fee when due, we may be required to liquidate assets or incur debt in order to pay the management fee.

Offsetting Management Services Agreements

Pursuant to the management services agreement, we have agreed that our manager may, at any time, enter into offsetting management services agreements with our businesses pursuant to which our manager may perform services that may or may not be similar to management services. Any fees to be paid by one of our businesses pursuant to such agreements are referred to as offsetting management fees and will offset, on a dollar-for-dollar basis, the management fee otherwise due and payable by us under the management services agreement with respect to a fiscal quarter. The management services agreement provides that the aggregate amount of offsetting management fees to be paid to our manager with respect to any fiscal quarter shall not exceed the management fee to be paid to our manager with respect to such fiscal quarter.

Our manager entered into offsetting management services agreements with 1847 Neese, 1847 Goedeker, 1847 Asien, 1847 Cabinet and 1847 Wolo. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management Fees” for a description of these agreements. Our manager may also enter into offsetting management services agreements with our future subsidiaries, which agreements would be in the form prescribed by our management services agreement. The offsetting management fee paid to our manager for providing management services to a future subsidiary will vary.

The services that our manager provides under the offsetting management services agreements include: conducting general and administrative supervision and oversight of the subsidiary’s day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to our business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines. If our manager and the subsidiary do not enter into an offsetting management services agreement, our manager will provide these services for our subsidiaries under our management services agreement.

Example of Calculation of Management Fee with Adjustment for Offsetting Management Fees

In order to better understand how the management fee is calculated, we are providing the following example:

		(in thousands)
Quarterly management fee:
1	Consolidated total assets	$	100,000
2	Consolidated accumulation amortization of intangibles		5,000
3	Total cash and cash equivalents		5,000
4	Adjusted total liabilities		(10,000	)
5	Adjusted net assets (Line 1 + Line 2 – Line 3 – Line 4)		90,000
6	Multiplied by quarterly rate		0.5	%
7	Quarterly management fee	$	450
Offsetting management fees:
8	Acquired company A offsetting management fees	$	(100	)
9	Acquired company B offsetting management fees		(100	)
10	Acquired company C offsetting management fees		(100	)
11	Acquired company D offsetting management fees		(100	)
12	Total offsetting management fees (Line 8 + Line 9 – Line 10 – Line 11)		(400	)
13	Quarterly management fee payable by Company (Line 7 + Line 12)	$	50

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The foregoing example provides hypothetical information only and does not intend to reflect actual or expected management fee amounts.

For purposes of the calculation of the management fee:

•        “Adjusted net assets” will be equal to, as of any calculation date, the sum of (i) our consolidated total assets (as determined in accordance with U.S. generally accepted accounting principles, or GAAP) as of such calculation date, plus (ii) the absolute amount of our consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) as of such calculation date, minus (iii) total cash and cash equivalents, minus (iv) the absolute amount of our adjusted total liabilities as of such calculation date.

•        “Adjusted total liabilities” will be equal to, as of any calculation date, our consolidated total liabilities (as determined in accordance with GAAP) as of such calculation date after excluding the effect of any outstanding third-party indebtedness.

•        “Quarterly management fee” will be equal to, as of any calculation date, the product of (i) 0.5%, multiplied by (ii) our adjusted net assets as of such calculation date; provided, however, that with respect to any fiscal quarter in which the management services agreement is terminated, we will pay our manager a management fee with respect to such fiscal quarter equal to the product of (i) (x) 0.5%, multiplied by (y) our adjusted net assets as of such calculation date, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the first day of such fiscal quarter to but excluding the date upon which the management services agreement is terminated and the denominator of which is the number of days in such fiscal quarter.

•        “Total offsetting management fees” will be equal to, as of any calculation date, fees paid to our manager by the businesses that we acquire in the future under separate offsetting management services agreements.

Transaction Services Agreements

Pursuant to the management services agreement, we have agreed that our manager may, at any time, enter into transaction services agreements with any of our businesses relating to the performance by our manager of certain transaction-related services in connection with the acquisitions of target businesses by us or dispositions of our property or assets. These services may include those customarily performed by a third-party investment banking firm or similar financial advisor, which may or may not be similar to management services, in connection with the acquisition of target businesses by us or our subsidiaries or disposition of subsidiaries or any of our property or assets or those of our subsidiaries. In connection with providing transaction services, our manager will generally receive a fee equal to the sum of (i) 2.0% of the aggregate purchase price of the target business up to and equal to $50 million, plus (ii) 1.5% of the aggregate purchase price of the target business in excess of $50 million and up to and equal to $100 million, plus (iii) 1.0% of the aggregate purchase price over $100 million, subject to annual review by our board of directors. The purchase price of a target business shall be defined as the aggregate amount of consideration, including cash and the value of any shares issued by us on the date of acquisition, paid for the equity interests of such target business plus the aggregate principal amount of any debt assumed by us of the target business on the date of acquisition or any similar formulation. The other terms and conditions relating to the performance of transaction services will be established in accordance with market practice.

Our manager may enter into transaction services agreements with our subsidiaries and future subsidiaries, which agreements would be in the form prescribed by our management services agreement.

The services that our manager will provide to our subsidiaries and future subsidiaries under the transaction services agreements will include the following services that would be provided in connection with a specific transaction identified at the time that the transaction services agreement is entered into: reviewing, evaluating and otherwise familiarizing itself and its affiliates with the business, operations, properties, financial condition and prospects of the future subsidiary and its target acquisition and preparing documentation describing the future subsidiary’s operations, management, historical financial results, projected financial results and any other relevant matters and presenting such documentation and making recommendations with respect thereto to certain of our manager’s affiliates.

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Any fees received by our manager pursuant to such a transaction services agreement will be in addition to the management fee payable by us pursuant to the management services agreement and will not offset the payment of such management fee. A transaction services agreement with any of our businesses may provide for the reimbursement of costs and expenses incurred by our manager in connection with the acquisition of such businesses.

Transaction services agreements will be reviewed, authorized and approved by our board of directors on an annual basis.

Reimbursement of Expenses

We are responsible for paying costs and expenses relating to its business and operations. We agreed to reimburse our manager during the term of the management services agreement for all costs and expenses that are incurred by our manager or its affiliates on our behalf of, including any out-of-pocket costs and expenses incurred in connection with the performance of services under the management services agreement, and all costs and expenses the reimbursement of which are specifically approved by our board of directors.

We will not be obligated or responsible for reimbursing or otherwise paying for any costs or expenses relating to our manager’s overhead or any other costs and expenses relating to our manager’s conduct of its business and operations. Also, we will not be obligated or responsible for reimbursing our manager for costs and expenses incurred by our manager in the identification, evaluation, management, performance of due diligence on, negotiation and oversight of potential acquisitions of new businesses for which we (or our manager on our behalf) fail to submit an indication of interest or letter of intent to pursue such acquisition, including costs and expenses relating to travel, marketing and attendance of industry events and retention of outside service providers relating thereto. In addition, we will not be obligated or responsible for reimbursing our manager for costs and expenses incurred by our manager in connection with the identification, evaluation, management, performance of due diligence on, negotiating and oversight of an acquisition by us if such acquisition is actually consummated and the business so acquired entered into a transaction services agreement with our manager providing for the reimbursement of such costs and expenses by such business. In this respect, the costs and expenses associated with the pursuit of add-on acquisitions may be reimbursed by any businesses so acquired pursuant to a transaction services agreement.

All reimbursements will be reviewed and, in certain circumstances, approved by our board of directors on an annual basis in connection with the preparation of year-end financial statements.

Termination Fee

We will pay our manager a termination fee upon termination of the management services agreement if such termination is based solely on a vote of our board of directors and our shareholders; no other termination fee will be payable to our manager in connection with the termination of the management services agreement for any other reason. The termination fee that is payable to our manager will be equal to the product of (i) two (2) multiplied by (ii) the sum of the amount of the quarterly management fees calculated with respect to the four fiscal quarters immediately preceding the termination date of the management services agreement. The termination fee will be payable in eight equal quarterly installments, with the first such installment being paid on or within five (5) business days of the last day of the fiscal quarter in which the management services agreement was terminated and each subsequent installment being paid on or within five (5) business days of the last day of each subsequent fiscal quarter, until such time as the termination fee is paid in full to our manager.

Our Manager as an Equity Holder

Manager’s Profit Allocation

Our manager owns 100% of our allocation shares, which generally will entitle our manager to receive a 20% profit allocation as a form of preferred distribution. Upon the sale of a subsidiary, our manager will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high-water mark plus (ii) the subsidiary’s net income since its acquisition by us exceeds the 8% hurdle rate. The 8% hurdle rate is the product of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by us, multiplied by (iii) the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according to GAAP with certain adjustments). In certain circumstances, after a subsidiary has been held for at least 5 years,

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our manager may also trigger a profit allocation with respect to such subsidiary (determined based solely on the subsidiary’s net income since its acquisition). The calculation of the profit allocation and the rights of our manager, as the holder of the allocation shares, are governed by the operating agreement.

Our board will have the opportunity to review and approve the calculation of manager’s profit allocation when it becomes due and payable. Our manager will not receive a profit allocation on an annual basis. Instead, our manager will be paid a profit allocation only upon the occurrence of one of the following events, which we refer to collectively as the trigger events:

•        the sale of a material amount, as determined by our manager and reasonably consented to by a majority of our board of directors, of the capital stock or assets of one of our subsidiaries or a subsidiary of one of our subsidiaries, including a distribution of our ownership of a subsidiary to our shareholders in a spin-off or similar transaction, which event we refer to as a sale event; or

•        at the option of our manager, for the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business, which event we refer to as a holding event. If our manager elects to forego declaring a holding event with respect to such business during such period, then our manager may only declare a holding event with respect to such business during the 30-day period following each anniversary of such fifth anniversary date with respect to such business. Once declared, our manager may only declare another holding event with respect to a business following the fifth anniversary of the calculation date with respect to a previously declared holding event.

We believe this payment timing, rather than a method that provides for annual allocation payments, more accurately reflects the long-term performance of each of our businesses and is consistent with our intent to hold, manage and grow our businesses over the long term. We refer generally to the obligation to make this payment to our manager as the “profit allocation” and, specifically, to the amount of any particular profit allocation as the “manager’s profit allocation.”

Definitions used in, and an example of the calculation of profit allocation, are set forth in more detail below.

The amount of our manager’s profit allocation will be based on the extent to which the “total profit allocation amount” (as defined below) with respect to any business, as of the last day of any fiscal quarter in which a trigger event occurs, which date we refer to as the “calculation date”, exceeds the relevant hurdle amounts (as described below) with respect to such business, as of such calculation date. Our manager’s profit allocation will be calculated by an administrator, which will be our manager so long as the management services agreement is in effect, and such calculation will be subject to a review and approval process by our board of directors. For this purpose, “total profit allocation amount” will be equal to, with respect to any business as of any calculation date, the sum of:

•        the contribution-based profit (as described below) of such business as of such calculation date, which will be calculated upon the occurrence of any trigger event with respect to such business; plus

•        the excess of our cumulative gains and losses (as described below) over the high-water mark (as described below) as of such calculation date, which will only be calculated upon the occurrence of a sale event with respect to such business, and not on a holding event (we generally expect this component to be the most significant component in calculating total profit allocation amount).

Specifically, manager’s profit allocation will be calculated and paid as follows:

•        manager’s profit allocation will not be paid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such business does not exceed such business’ level 1 hurdle amount (based on an 8% annualized hurdle rate, as described below), as of such calculation date; and

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•        manager’s profit allocation will be paid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such business exceeds such business’ level 1 hurdle amount, as of such calculation date. Our manager’s profit allocation to be paid with respect to such calculation date will be equal to the sum of the following:

•        100% of such business’ total profit allocation amount, as of such calculation date, with respect to that portion of the total profit allocation amount that exceeds such business’ level 1 hurdle amount (but is less than or equal to such business’ level 2 hurdle amount (which is based on a 10% annualized hurdle rate, as described below), in each case, as of such calculation date. We refer to this portion of the total profit allocation amount as the “catch-up.” The “catch-up” is intended to provide our manager with an overall profit allocation of 20% of the business’ total profit allocation amount until such business’ level 2 hurdle amount has been reached; plus

•        20% of the total profit allocation amount, as of such calculation date, that exceeds such business’ level 2 hurdle amount as of such calculation date; minus

•        the high-water mark allocation, if any, as of such calculation date. The effect of deducting the high-water mark allocation is to take into account profit allocations our manager has already received in respect of past gains attributable to previous sale events.

The administrator will calculate our manager’s profit allocation on or promptly following the relevant calculation date, subject to a “true-up” calculation upon availability of audited or unaudited consolidated financial statements, as the case may be, to the extent not available on such calculation date. Any adjustment necessitated by the true-up calculation will be made in connection with the next calculation of manager’s profit allocation. Because of the length of time that may pass between trigger events, there may be a significant delay in our ability to realize the benefit, if any, of a true-up of our manager’s profit allocation.

Once calculated, the administrator will submit the calculation of our manager’s profit allocation, as adjusted pursuant to any true-up, to our board of directors for its review and approval. The board of directors will have ten business days to review and approve the calculation, which approval shall be automatic absent disapproval by the board of directors. Our manager’s profit allocation will be paid ten business days after such approval.

If the board of directors disapproves of the administrator’s calculation of manager’s profit allocation, the calculation and payment of manager’s profit allocation will be subject to a dispute resolution process, which may result in our manager’s profit allocation being determined, at our cost and expense, by two independent accounting firms. Any determination by such independent accounting firms will be conclusive and binding on us and our manager.

We will also pay a tax distribution to our manager if our manager is allocated taxable income by us but does not realize distributions from us at least equal to the taxes payable by our manager resulting from allocations of taxable income. Any such tax distributions will be paid in a similar manner as profit allocations are paid.

For any fiscal quarter in which a trigger event occurs with respect to more than one business, the calculation of our manager’s profit allocation, including the components thereof, will be made with respect to each business in the order in which controlling interests in such businesses were acquired or obtained by us and the resulting amounts shall be aggregated to determine the total amount of manager’s profit allocation. If controlling interests in two or more businesses were acquired at the same time and such businesses give rise to a calculation of manager’s profit allocation during the same fiscal quarter, then manager’s profit allocation will be further calculated separately for each such business in the order in which such businesses were sold.

The profit allocations and tax distributions will be paid prior to the payment of distributions to our shareholders. If we do not have sufficient liquid assets to pay the profit allocations or tax distributions when due, we may be required to liquidate assets or incur debt in order to pay such profit allocation. Our manager will have the right to elect to defer the payment of our manager’s profit allocation due on any payment date. Once deferred, our manager may demand payment thereof upon 20 business days’ prior written notice.

Termination of the management services agreement, by any means, will not affect our manager’s rights with respect to the allocation shares that it owns, including its right to receive profit allocations, unless our manager exercises its put right to sell such allocation shares to us.

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Example of Calculation of Manager’s Profit Allocation

Our manager will receive a profit allocation at the end of the fiscal quarter in which a trigger event occurs, as follows (all dollar amounts are in millions):

Assumptions

Year 1:

Acquisition of Company A

Acquisition of Company B

Year 4:

Company A (or assets thereof) sold for $25 capital gain (as defined below) over its net book value of assets at time of sale, which is a qualifying trigger event

Company A’s average allocated share of our consolidated net equity over its ownership is $50

Company A’s holding period in quarters is 12 (assuming that Company A is acquired on the first day of the year)

Company A’s contribution-based profit since acquisition is $5

Year 6:

Company B’s contribution-based profit since acquisition is $7

Company B’s average allocated share of our consolidated net equity over its ownership is $25

Company B’s holding period in quarters is 20

Company B’s cumulative gains and losses are $20

Manager elects to have holding period measured for purposes of profit allocation for Company B

Profit Allocation Calculation:		Year 4 A, due to sale		Year 6 B, due to 5 year hold
1	Contribution-based profit since acquisition for respective subsidiary	$	5	$	7
2	Gain/Loss on sale of company		25		0
3	Cumulative gains and losses		25		20
4	High-water mark prior to transaction		0		20
5	Total Profit Allocation Amount (Line 1 + Line 3)		30		27
6	Business’ holding period in quarters since ownership or last measurement due to holding event		12		20
7	Business’ average allocated share of consolidated net equity		50		25
8	Business’ level 1 hurdle amount (2.00% * Line 6 * Line 7)		12		10
9	Business’ excess over level 1 hurdle amount (Line 5 – Line 8)		18		17
10	Business’ level 2 hurdle amount (125% * Line 8)		15		12.5
11	Allocated to manager as “catch-up” (Line 10 – Line 8)		3		2.5
12	Excess over level 2 hurdle amount (Line 9 – Line 11)		15		14.5
13	Allocated to manager from excess over level 2 hurdle amount (20% * Line 12)		3		2.9
14	Cumulative allocation to manager (Line 11 + Line 13)		6		5.4
15	High-water mark allocation (20% * Line 4)		0		4
16	Manager’s Profit Allocation for Current Period (Line 14 – Line 15,> 0)	$	6	$	1.4

For purposes of calculating profit allocation:

•        An entity’s “adjusted net assets” will be equal to, as of any date, the sum of (i) such entity’s consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the absolute amount of such entity’s consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) as of such date, minus (iii) the absolute amount of such entity’s adjusted total liabilities as of such date.

•        An entity’s “adjusted total liabilities” will be equal to, as of any date, such entity’s consolidated total liabilities (as determined in accordance with GAAP) as of such date after excluding the effect of any outstanding third-party indebtedness of such entity.

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•        A business’ “allocated share of our overhead” will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of such business’ quarterly share of our overhead for each fiscal quarter ending during such measurement period.

•        A business’ “average allocated share of our consolidated equity” will be equal to, with respect to any measurement period as of any calculation date, the average (i.e., arithmetic mean) of a business’ quarterly allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.

•        “Capital gains” (i) means, with respect to any entity, capital gains (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net sales price of such capital stock or assets, as the case may be, exceeded (y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on our consolidated balance sheet prepared in accordance with GAAP; provided, that such amount shall not be less than zero.

•        “Capital losses” (i) means, with respect to any entity, capital losses (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on our consolidated balance sheet prepared in accordance with GAAP, exceeded (y) the net sales price of such capital stock or assets, as the case may be; provided, that such absolute amount thereof shall not be less than zero.

•        Our “consolidated net equity” will be equal to, as of any date, the sum of (i) our consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the aggregate amount of asset impairments (as determined in accordance with GAAP) that were taken relating to any businesses owned by us as of such date, plus (iii) our consolidated accumulated amortization of intangibles (as determined in accordance with GAAP), as of such date minus (iv) our consolidated total liabilities (as determined in accordance with GAAP) as of such date.

•        A business’ “contribution-based profits” will be equal to, for any measurement period as of any calculation date, the sum of (i) the aggregate amount of such business’ net income (as determined in accordance with GAAP and as adjusted for minority interests) with respect to such measurement period (without giving effect to (x) any capital gains or capital losses realized by such business that arise with respect to the sale of capital stock or assets held by such business and which sale gave rise to a sale event and the calculation of profit allocation or (y) any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement, in each case, to the extent included in the calculation of such business’ net income), plus (ii) the absolute aggregate amount of such business’ loan expense with respect to such measurement period, minus (iii) the absolute aggregate amount of such business’ allocated share of our overhead with respect to such measurement period.

•        Our “cumulative capital gains” will be equal to, as of any calculation date, the aggregate amount of capital gains realized by us as of such calculation date, after giving effect to any capital gains realized by us on such calculation date, since its inception.

•        Our “cumulative capital losses” will be equal to, as of any calculation date, the aggregate amount of capital losses realized by us as of such calculation date, after giving effect to any capital losses realized by us on such calculation date, since its inception.

•        Our “cumulative gains and losses” will be equal to, as of any calculation date, the sum of (i) the amount of cumulative capital gains as of such calculation date, minus (ii) the absolute amount of cumulative capital losses as of such calculation date.

•        The “high-water mark” will be equal to, as of any calculation date, the highest positive amount of capital gains and losses as of such calculation date that were calculated in connection with a qualifying trigger event that occurred prior to such calculation date.

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•        The “high-water mark allocation” will be equal to, as of any calculation date, the product of (i) the amount of the high-water mark as of such calculation date, multiplied by (ii) 20%.

•        A business’ “level 1 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.00% (8% annualized), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.

•        A business’ “level 2 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.5% (10% annualized, which is 125% of the 8% annualized hurdle rate), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.

•        A business’ “loan expense” will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of all interest or other expenses paid by such business with respect to indebtedness of such business to either our company or other company businesses with respect to such measurement period.

•        The “measurement period” will mean, with respect to any business as of any calculation date, the period from and including the later of (i) the date upon which we acquired a controlling interest in such business and (ii) the immediately preceding calculation date as of which contribution-based profits were calculated with respect to such business and with respect to which profit allocation were paid (or, at the election of the allocation member, deferred) by us up to and including such calculation date.

•        Our “overhead” will be equal to, with respect to any fiscal quarter, the sum of (i) that portion of our operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement to the extent included in the calculation of our operating expenses), including any management fees actually paid by us to our manager, with respect to such fiscal quarter that are not attributable to any of the businesses owned by us (i.e., operating expenses that do not correspond to operating expenses of such businesses with respect to such fiscal quarter), plus (ii) our accrued interest expense (as determined in accordance with GAAP) on any outstanding third-party indebtedness with respect to such fiscal quarter, minus (iii) revenue, interest income and other income reflected in our unconsolidated financial statements as prepared in accordance with GAAP.

•        A “qualifying trigger event” will mean, with respect to any business, a trigger event that gave rise to a calculation of total profit allocation with respect to such business as of any calculation date and (ii) where the amount of total profit allocation so calculated as of such calculation date exceeded such business’ level 2 hurdle amount as of such calculation date.

•        A business’ “quarterly allocated share of our consolidated equity” will be equal to, with respect to any fiscal quarter, the product of (i) our consolidated net equity as of the last day of such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the sum of (x) our adjusted net assets as of the last day of such fiscal quarter, minus (y) the aggregate amount of any cash and cash equivalents as such amount is reflected on our consolidated balance sheet as prepared in accordance with GAAP that is not taken into account in the calculation of any business’ adjusted net assets as of the last day of such fiscal quarter.

•        A business’ “quarterly share of our overhead” will be equal to, with respect to any fiscal quarter, the product of (i) the absolute amount of our overhead with respect to such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is our adjusted net assets as of the last day of such fiscal quarter.

•        An entity’s “third-party indebtedness” means any indebtedness of such entity owed to any third-party lenders that are not affiliated with such entity.

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Supplemental Put Provision

In addition to the provisions discussed above, in consideration of our manager’s acquisition of the allocation shares, our operating agreement contains a supplemental put provision pursuant to which our manager will have the right to cause us to purchase the allocation shares then owned by our manager upon termination of the management services agreement.

If the management services agreement is terminated at any time or our manager resigns, then our manager will have the right, but not the obligation, for one year from the date of such termination or resignation, as the case may be, to elect to cause us to purchase all of the allocation shares then owned by our manager for the put price as of the put exercise date.

For purposes of this provision, the “put price” is equal to, as of any exercise date, (i) if we terminate the management services agreement, the sum of two separate, independently made calculations of the aggregate amount of manager’s profit allocation as of such exercise date or (ii) if our manager resigns, the average of two separate, independently made calculations of the aggregate amount of manager’s profit allocation as of such exercise date, in each case, calculated assuming that (x) all of the businesses are sold in an orderly fashion for fair market value as of such exercise date in the order in which the controlling interest in each business was acquired or otherwise obtained by us, (y) the last day of the fiscal quarter ending immediately prior to such exercise date is the relevant calculation date for purposes of calculating manager’s profit allocation as of such exercise date. Each of the two separate, independently made calculations of our manager’s profit allocation for purposes of calculating the put price will be performed by a different investment bank that is engaged by us at our cost and expense. The put price will be adjusted to account for a final “true-up” of our manager’s profit allocation.

We and our manager can mutually agree to permit us to issue a note in lieu of payment of the put price when due; provided, that if our manager resigns and terminates the management services agreement, then we will have the right, in our sole discretion, to issue a note in lieu of payment of the put price when due. In either case the note would have an aggregate principal amount equal to the put price, would bear interest at a rate of LIBOR plus 4.0% per annum, would mature on the first anniversary of the date upon which the put price was initially due, and would be secured by the then-highest priority lien available to be placed on our equity interests in each of our businesses.

Our obligations under the put provision of our operating agreement are absolute and unconditional. In addition, we will be subject to certain obligations and restrictions upon exercise of our manager’s put right until such time as our obligations under the put provision of our operating agreement, including any related note, have been satisfied in full, including:

•        subject to our right to issue a note in the circumstances described above, we must use commercially reasonable efforts to raise sufficient debt or equity financing to permit us to pay the put price or note when due and obtain approvals, waivers and consents or otherwise remove any restrictions imposed under contractual obligations or applicable law or regulations that have the effect of limiting or prohibiting us from satisfying our obligations under the supplemental put agreement or note;

•        our manager will have the right to have a representative observe meetings of our board of directors and have the right to receive copies of all documents and other information furnished to the board of directors;

•        our company and its businesses will be restricted in their ability to sell or otherwise dispose of their property or assets or any businesses they own and in their ability to incur indebtedness (other than in the ordinary course of business) without granting a lien on the proceeds therefrom to our manager, which lien will secure our obligations under the put provision of our operating agreement or note; and

•        we will be restricted in our ability to (i) engage in certain mergers or consolidations, (ii) sell, transfer or otherwise dispose of all or a substantial part of our business, property or assets or all or a substantial portion of the stock or beneficial ownership of our businesses or a portion thereof, (iii) liquidate, wind-up or dissolve, (iv) acquire or purchase the property, assets, stock or beneficial ownership or another person, or (v) declare and pay distributions to our common shareholders.

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We have also agreed to indemnify our manager for any losses or liabilities it incurs or suffers in connection with, arising out of or relating to its exercise of its put right or any enforcement of terms and conditions of the supplemental put provision of our operating agreement.

The put price will be paid prior to the payment of distributions to our shareholders. If we do not have sufficient liquid assets to pay the put price when due, we may be required to liquidate assets or incur debt in order to pay the put price.

Termination of the management services agreement, by any means, will not affect our manager’s rights with respect to the allocation shares that it owns. In this regard, our manager will retain its put right and its allocation shares after ceasing to serve as our manager. As a result, if we terminate our manager, regardless of the reason for such termination, it would retain the right to exercise the put right and demand payment of the put price.

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BUSINESS

Overview

We are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America. To date, we have completed six acquisitions and subsequently spun off two of the acquired companies.

On May 28, 2020, our subsidiary 1847 Asien acquired Asien’s. Asien’s has been in business since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and exceptional service to its customers at competitive prices.

On September 30, 2020, our subsidiary 1847 Cabinet acquired Kyle’s. Kyle’s is a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders.

On March 30, 2021, our subsidiary 1847 Wolo acquired Wolo. Headquartered in Deer Park, New York and founded in 1965, Wolo 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.

On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain and Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain 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, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as commercial clients.

Our first acquisition was on March 3, 2017, pursuant to which our subsidiary 1847 Neese acquired Neese, a business specializing in providing a wide range of land application services and selling equipment and parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners.

On April 5, 2019, our subsidiary 1847 Goedeker acquired substantially all of the assets of Goedeker Television, a one-stop e-commerce destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker.

Through our structure, we offer investors an opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increasing common shareholder value over time.

We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.

Our Market Opportunity

We acquire and manage small businesses, which we characterize as those that have an enterprise value of less than $50 million. We believe that the merger and acquisition market for small businesses is highly fragmented and provides significant opportunities to purchase businesses at attractive prices. For example, according to GF Data, platform acquisitions with enterprise values greater than $50.0 million commanded valuation premiums 30% higher than platform acquisitions with enterprise values less than $50.0 million (8.2x trailing twelve month adjusted EBITDA versus 6.3x trailing twelve month adjusted EBITDA, respectively).

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We believe that the following factors contribute to lower acquisition multiples for small businesses:

•        there are typically fewer potential acquirers for these businesses;

•        third-party financing generally is less available for these acquisitions;

•        sellers of these businesses may consider non-economic factors, such as continuing board membership or the effect of the sale on their employees; and

•        these businesses are generally less frequently sold pursuant to an auction process.

We believe that our management team’s strong relationships with business brokers, investment and commercial bankers, accountants, attorneys and other potential sources of acquisition opportunities offers us substantial opportunities to purchase small businesses. See “Management” for more information about our management team.

We also believe that significant opportunities exist to improve the performance of the businesses upon their acquisition. In the past, our manager has acquired businesses that are often formerly owned by seasoned entrepreneurs or large corporate parents. In these cases, our manager has frequently found that there have been opportunities to further build upon the management teams of acquired businesses. In addition, our manager has frequently found that financial reporting and management information systems of acquired businesses may be improved, both of which can lead to substantial improvements in earnings and cash flow. Finally, because these businesses tend to be too small to have their own corporate development efforts, we believe opportunities exist to assist these businesses in meaningful ways as they pursue organic or external growth strategies that were often not pursued by their previous owners.

Our Strategy

Our long-term goals are to make and grow regular distributions to our common shareholders and to increase common shareholder value over the long-term. We plan to continue focusing on acquiring businesses. Therefore, we intend to continue to identify, perform due diligence on, negotiate and consummate platform acquisitions of small businesses in attractive industry sectors.

Unlike buyers of small businesses that rely on significant leverage to consummate acquisitions (as demonstrated by the data presented by total enterprise value, or TEV, below), we plan to limit the use of third-party (i.e., external) acquisition leverage so that our debt will not exceed the market value of the assets we acquire and so that our debt to EBITDA ratio will not exceed 1.25x to 1 for our operating subsidiaries. We believe that limiting leverage in this manner will avoid the imposition on stringent lender controls on our operations that would otherwise potentially hamper the growth of our operating subsidiaries and otherwise harm our business even during times when we have positive operating cash flows. Additionally, in our experience, leverage rarely leads to “break-out” returns and often creates negative return outcomes that are not correlated with the profitability of the business.

Source: GF Data ®

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Source: GF Data ®

Management Strategy

Our management strategy involves the identification, performance of due diligence, negotiation and consummation of acquisitions. After acquiring businesses, we attempt to grow the businesses both organically and through add-on or bolt-on acquisitions. Add-on or bolt-on acquisitions are acquisitions by a company of other companies in the same industry. Following the acquisition of companies, we seek to grow the earnings and cash flow of acquired companies and, in turn, grow regular distributions to our common shareholders and to increase common shareholder value over time. We believe we can increase the cash flows of our businesses by applying our intellectual capital to improve and grow our businesses.

We seek to acquire and manage small businesses. We believe that the merger and acquisition market for small businesses is highly fragmented and provides opportunities to purchase businesses at attractive prices. We believe we will be able to acquire small businesses for multiples ranging from three to six times EBITDA. We also believe, and our manager has historically found, that significant opportunities exist to improve the performance of these businesses upon their acquisition.

In general, our manager oversees and supports the management team of our businesses by, among other things:

•        recruiting and retaining managers to operate our businesses by using structured incentive compensation programs, including minority equity ownership, tailored to each business;

•        regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems;

•        assisting the management teams of our businesses in their analysis and pursuit of prudent organic growth strategies;

•        identifying and working with business management teams to execute on attractive external growth and acquisition opportunities;

•        identifying and executing operational improvements and integration opportunities that will lead to lower operating costs and operational optimization;

•        providing the management teams of our businesses the opportunity to leverage our experience and expertise to develop and implement business and operational strategies; and

•        forming strong subsidiary level boards of directors to supplement management teams in their development and implementation of strategic goals and objectives.

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We also believe that our long-term perspective provides us with certain additional advantages, including the ability to:

•        recruit and develop management teams for our businesses that are familiar with the industries in which our businesses operate;

•        focus on developing and implementing business and operational strategies to build and sustain shareholder value over the long term;

•        create sector-specific businesses enabling us to take advantage of vertical and horizontal acquisition opportunities within a given sector;

•        achieve exposure in certain industries in order to create opportunities for future acquisitions; and

•        develop and maintain long-term collaborative relationships with customers and suppliers.

We intend to continually increase our intellectual capital as we operate our businesses and acquire new businesses and as our manager identifies and recruits qualified operating partners and managers for our businesses.

Acquisition Strategy

Our acquisition strategies involve the acquisition of small businesses in various industries that we expect will produce positive and stable earnings and cash flow, as well as achieve attractive returns on our invested capital. In this respect, we expect to make acquisitions in industries wherein we believe an acquisition presents an attractive opportunity from the perspective of both (i) return on assets or equity and (ii) an easily identifiable path for growing the acquired businesses. We believe that attractive opportunities will increasingly present themselves as private sector owners seek to monetize their interests in longstanding and privately held businesses and large corporate parents seek to dispose of their “non-core” operations.

We believe that the greatest opportunities for generating consistently positive annual returns and, ultimately, residual returns on capital invested in acquisitions will result from targeting capital light businesses operating in niche geographical markets with a clearly identifiable competitive advantage within the following industries: business services, consumer services, consumer products, consumable industrial products, industrial services, niche light manufacturing, distribution, alternative/specialty finance and in select cases, specialty retail. While we believe that the professional experience of our management team within the industries identified above will offer the greatest number of acquisition opportunities, we will not eschew opportunities if a business enjoys an inarguable moat around its products and services in an industry which our management team may have less familiarity.

From a financial perspective, we expect to make acquisitions of small businesses that are stable, have minimal bad debt, and strong accounts receivable. In addition, we expect to acquire companies that have been able to generate positive pro forma cash available for distribution for a minimum of three years prior to acquisition. Our previous acquisitions met these acquisition criteria.

We benefit from our manager’s ability to identify diverse acquisition opportunities in a variety of industries. In addition, we rely upon our management teams’ experience and expertise in researching and valuing prospective target businesses, as well as negotiating the ultimate acquisition of such target businesses. In particular, because there may be a lack of information available about these target businesses, which may make it more difficult to understand or appropriately value such target businesses, our manager will:

•        engage in a substantial level of internal and third-party due diligence;

•        critically evaluate the management team;

•        identify and assess any financial and operational strengths and weaknesses of any target business;

•        analyze comparable businesses to assess financial and operational performances relative to industry competitors;

•        actively research and evaluate information on the relevant industry; and

•        thoroughly negotiate appropriate terms and conditions of any acquisition.

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The process of acquiring new businesses is time-consuming and complex. Our manager has historically taken from 2 to 24 months to perform due diligence on, negotiate and close acquisitions. Although we expect our manager to be at various stages of evaluating several transactions at any given time, there may be significant periods of time during which it does not recommend any new acquisitions to us.

Upon an acquisition of a new business, we rely on our manager’s experience and expertise to work efficiently and effectively with the management of the new business to jointly develop and execute a business plan.

While primarily seek to acquire controlling interests in a business, we may also acquire non-control or minority equity positions in businesses where we believe it is consistent with our long-term strategy.

As discussed in more detail below, we intend to raise capital for additional acquisitions primarily through debt financing, primarily at our operating company level, additional equity offerings by our company, the sale of all or a part of our businesses or by undertaking a combination of any of the above.

Our primary corporate purpose is to own, operate and grow our operating businesses. However, in addition to acquiring businesses, we expect to sell businesses that we own from time to time. Our decision to sell a business will be based upon financial, operating and other considerations rather than a plan to complete a sale of a business within any specific time frame. We may also decide to own and operate some or all of our businesses in perpetuity if our board believes that it makes sense to do so. Upon the sale of a business, we may use the resulting proceeds to retire debt or retain proceeds for future acquisitions or general corporate purposes. Generally, we do not expect to make special distributions at the time of a sale of one of our businesses; instead, we expect that we will seek to gradually increase regular common shareholder distributions over time.

There are several risks associated with our acquisition strategy, including the following risks, which are described more fully in “Risk Factors — Risks Related to Our Business and Structure”:

•        we may not be able to successfully fund future acquisitions of new businesses due to the unavailability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy;

•        we may experience difficulty as we evaluate, acquire and integrate businesses that we may acquire, which could result in drains on our resources, including the attention of our management, and disruptions of our on-going business;

•        we face competition for businesses that fit our acquisition strategy and, therefore, we may have to acquire targets at sub-optimal prices or, alternatively, forego certain acquisition opportunities; and

•        we may change our management and acquisition strategies without the consent of our shareholders, which may result in a determination by us to pursue riskier business activities.

Strategic Advantages

Based on the experience of our manager and its ability to identify and negotiate acquisitions, we believe that we are strongly positioned to acquire additional businesses. Our manager has strong relationships with business brokers, investment and commercial bankers, accountants, attorneys and other potential sources of acquisition opportunities. In negotiating these acquisitions, we believe our manager will be able to successfully navigate complex situations surrounding acquisitions, including corporate spin-offs, transitions of family-owned businesses, management buy-outs and reorganizations.

We believe that the flexibility, creativity, experience and expertise of our manager in structuring transactions provides us with strategic advantages by allowing us to consider non-traditional and complex transactions tailored to fit a specific acquisition target.

Our manager also has a large network of deal intermediaries who expose us to potential acquisitions. Through this network, we have a substantial pipeline of potential acquisition targets. Our manager also has a well-established network of contacts, including professional managers, attorneys, accountants and other third-party consultants and advisors, who may be available to assist us in the performance of due diligence and the negotiation of acquisitions, as well as the management and operation of our businesses once acquired.

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Valuation and Due Diligence

When evaluating businesses or assets for acquisition, we perform a rigorous due diligence and financial evaluation process. In doing so, we seek to evaluate the operations of the target business as well as the outlook for the industry in which the target business operates. While valuation of a business is, by definition, a subjective process, we define valuations under a variety of analyses, including:

•        discounted cash flow analyses;

•        evaluation of trading values of comparable companies;

•        expected value matrices;

•        assessment of competitor, supplier and customer environments; and

•        examination of recent/precedent transactions.

One outcome of this process is an effort to project the expected cash flows from the target business as accurately as possible. A further outcome is an understanding of the types and levels of risk associated with those projections. While future performance and projections are always uncertain, we believe that our detailed due diligence review process allows us to more accurately estimate future cash flows and more effectively evaluate the prospects for operating the business in the future. To assist us in identifying material risks and validating key assumptions in our financial and operational analysis, in addition to our own analysis, we engage third-party experts to review key risk areas, including legal, tax, regulatory, accounting, insurance and environmental. We may also engage technical, operational or industry consultants, as necessary.

A further critical component of the evaluation of potential target businesses is the assessment of the capability of the existing management team, including recent performance, expertise, experience, culture and incentives to perform. Where necessary, and consistent with our management strategy, we actively seek to augment, supplement or replace existing members of management who we believe are not likely to execute the business plan for the target business. Similarly, we analyze and evaluate the financial and operational information systems of target businesses and, where necessary, we actively seek to enhance and improve those existing systems that are deemed to be inadequate or insufficient to support our business plan for the target business.

Financing

We finance acquisitions primarily through additional equity and debt financings. We believe that having the ability to finance most, if not all, acquisitions with the general capital resources raised by our company, rather than financing relating to the acquisition of individual businesses, provides us with an advantage in acquiring attractive businesses by minimizing delay and closing conditions that are often related to acquisition-specific financings. In this respect, we believe that, at some point in the future, we may need to pursue additional debt or equity financings, or offer equity in our company or target businesses to the sellers of such target businesses, in order to fund acquisitions.

Our Competitive Advantages

We believe that our manager’s collective investment experience and approach to executing our investment strategy provide us with several competitive advantages. These competitive advantages, certain of which are discussed below, have enabled our management to generate very attractive risk- adjusted returns for investors in their predecessor firms.

Robust Network.    Through their activities with their predecessor firms and their comprehensive marketing capabilities, we believe that the management team of our manager has established a “top of mind” position among investment bankers and business brokers targeting small businesses. By employing an institutionalized, multi-platform marketing strategy, we believe our manager has established a robust national network of personal relationships with intermediaries, seasoned operating executives, entrepreneurs and managers, thereby firmly establishing our presence and credibility in the small business market. In contrast to many other buyers of and investors in small businesses, we believe that we can buy businesses at value-oriented multiples and through our asset management activities with a group of professional, experienced and talented operating partners, create appreciable value. We believe our experience, track record and consistent execution of our marketing and investment activities will allow us to maintain a leadership position as the preferred partner for today’s small business market.

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Disciplined Deal Sourcing.    We employ an institutionalized, multi-platform approach to sourcing new acquisition opportunities. Our deal sourcing efforts include leveraging relationships with more than 3,000 qualified deal sources through regular calling, mail and e-mail campaigns, assignment of regional marketing responsibilities, in-person visits and high-profile sponsorship of important conferences and industry events. We supplement these activities by retaining selected intermediary firms to conduct targeted searches for opportunities in specific categories on an opportunistic basis. As a result of the significant time and effort spent on these activities, we believe we established close relationships and unique “top of mind” awareness with many of the most productive intermediary sources for small business acquisition opportunities in the United States. While reinforcing our market leadership, this capability enables us to generate a large number of attractive acquisition opportunities.

Differentiated Acquisition Capabilities in the Small Business Market.    We deploy a differentiated approach to acquiring businesses in the small business market. Our management concentrates their efforts on mature companies with sustainable value propositions, which can be supported by our resources and institutional expertise. Our evaluation of acquisition opportunities typically involves significant input from a seasoned operating partner with relevant experience, which we believe enhances both our diligence and ongoing monitoring capabilities. In addition, we approach every acquisition opportunity with creative structures, which we believe enables us to engineer mutually attractive scenarios for sellers, whereas competing buyers may be limited by their rigid structural requirements. We believe our commitment to conservative capital structures and valuation will enhance each acquired operating subsidiary’s ability to deliver consistent levels of cash available for distribution, while additionally supporting reinvestment for growth.

Value Proposition for Business Owners.    We employ a creative, flexible approach by tailoring each acquisition structure to meet the specific liquidity needs and certain qualitative objectives of the target’s owners and management team. In addition to serving as an exit pathway for sellers, we seek to align our interests with the sellers by enabling them to retain and/or earn (through incentive compensation) a substantial economic interest in their businesses following the acquisition and by typically allowing the incumbent management team to retain operating control of the acquired operating subsidiary on a day-to-day basis. We believe that our company is an appealing buyer for small business owners and managers due to our track record of capitalizing portfolio companies conservatively, enhancing our ability to execute on its strategic initiatives and adding equity value. As a result, we believe business owners and managers will find our company to be a dynamic, value-added buyer that brings considerable resources to achieve their strategic, capital and operating needs, resulting in substantial value creation for the operating subsidiary.

Operating Partner.    Our manager has consistently worked with a strong network of seasoned operating partners — former entrepreneurs and executives with extensive experience building, managing and optimizing successful small businesses across a range of industries. We believe that our operating partner model will enable us to make a significant improvement in the operating subsidiary, as compared to other buyers, such as traditional private equity firms, which rely principally upon investment professionals to make acquisition/investment and monitoring decisions regarding not only the business, financial and legal due diligence aspects of a business but also the more operational aspects including industry dynamics, management strength and strategic growth initiatives. We typically engage an operating partner soon after identifying a target business for acquisition, enhancing our acquisition judgment and building the acquisition team’s relationship with the subsidiary’s management team. Operating partners usually serve as a member of the board of directors of an operating subsidiary and spend two to four days per month working with the subsidiary’s management team. We leverage the operating partner’s extensive experience to build the management team, improve operations and assist with strategic growth initiatives, resulting in value creation.

Small Business Market Experience.    We believe the history and experience of our manager’s partnering with companies in the small business market allows us to identify highly attractive acquisition opportunities and add significant value to our operating subsidiaries. Our manager’s investment experience in the small business market prior to forming our company has further contributed to our institutional expertise in the acquisition, strategic and operational decisions critical to the long-term success of small businesses. Since 2000, the management team of our manager has collectively been presented with several thousand investment opportunities and actively worked with more than 30 small businesses on all facets of their strategy, development and operations, which we have successfully translated into unique, institutionalized capabilities directed towards creating value in small businesses.

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Intellectual Property

Our manager owns certain intellectual property relating to the term “1847.” Our manager has granted our company a license to use the term “1847” in its business.

Facilities

Our principal office is located at 590 Madison Avenue, 21st Floor, New York, NY 10022. We entered into an office service agreement with Regus Management Group, LLC for use of office space at this location effective January 22, 2013. Under the agreement, in exchange for our right to use the office space at this location, we are required to pay a monthly fee of $479 (excluding taxes).

We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

Employees

As of March 31, 2022, our company had five full-time employees (excluding our operating subsidiaries described below).

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not currently aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Retail and Appliances Business

Our retail and appliances business is operated by Asien’s. This business segment, which was acquired in the second quarter of 2020, accounted for approximately 20.9% and 68.3% of our total revenues for the three months ended March 31, 2022 and 2021, respectively, and 41.6% and 87.2% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

Overview

Since 1948, we have been providing a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North Bay area of Sonoma County, California. Our main focus is delivering personal sales and exceptional service to our customers at competitive prices.

We operate one of the area’s oldest appliance stores and are well known and highly respected throughout the North Bay area. We have strong, established relationships with customers and contractors in the community. We provide products and services to a diverse group of customers, including homeowners, builders, and designers. As a member of BrandSource, a buying group that offers vendor programs, factory direct deals, marketing support, opportunity buys, close-outs, consumer rebates, finance offers, and similar benefits, we offer a full line of top brands from U.S. and international manufacturers.

Products and Services

Appliance Sales

With a showroom display area of approximately 6,000 square feet, we offer a complete line of home and kitchen appliances to residential customers, including:

•        Cooking:    Products include cooktops, microwaves, warming drawers, ventilation, wall ovens, ranges and range tops. Major brands include Beko, BlueStar, Café, DCS, Fisher Paykel, Five Star, Fulgor Milano, GE, Haier, Jenn-Air, KitchenAid, Maytag, Miele, Monogram, Sub-Zero, Viking, Whirlpool and Wolf.

•        Refrigeration:    Products include a wide variety of refrigerator configurations, freezers and ice makers, and wine and beer coolers. Major brands include Fisher Paykel, Jenn-Air, KitchenAid, Liebherr, Miele, Monogram, Perlick, Sub-Zero, Viking and Whirlpool.

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•        Laundry:    Products include washers, dryers and laundry extras. Major brands include Amana, ASKO, Beko, Fisher & Paykel, GE, Maytag, Miele, Speed Queen and Whirlpool.

•        Clean Up:    Products include dishwashers, trash compactors, and in-sink food waste disposers. Major brands include AGA, Amana, ASKO, Beko, Café, Cove, Crosley, Fisher Paykel, GE, Hot Point, Jenn-Air, KitchenAid, Maytag, Miele, Monogram, Viking and Whirlpool.

•        Outdoor:    Products include outdoor grills, refrigeration, and storage. Major brands include DCS, Green Mountain Grills, LYNX, Marvel, Perlick, Sub-Zero, Viking and Wolf.

Appliance Services

We also offer a variety of appliance services, including delivery, installation, warranty service and appliance repair and maintenance. We are the largest independent appliance service company in Sonoma County. Our service technicians are experts, averaging 15 years of field experience with factory training. They are vendor certified to handle our customers’ kitchen appliance, laundry, and outdoor appliance service needs. We also offer extended warranties.

Pricing

We provide premium and super premium products to the North Bay customer. A significant number of the appliances in our 5,700 SKU catalog are subject to a unilateral minimum retail price policy, or UMRP, or minimum advertised pricing restrictions. UMRP restricts a reseller from discounting the customer price for an appliance below a vendor published UMRP and product promotions are solely those specified by the vendor and unilaterally available. We thrive in the premium market by providing the customer with a higher overall perceived value as well as a competitive total invoice cost by offering premium service at reasonable rates. Our sales associates are industry professionals with an average more than 15 years of experience selling appliances. This team of six averages over eleven years seniority with the senior member having been with us for 26 years. The premium appliance market requires this expertise as very often sales and customer service teams are interacting with designers, builders, and contractors, as well as our core customer, the homeowner. Our hard earned reputation for this expertise in sales, installation and service accretes to our advantage when we compete directly across product lines that are also available from other local resellers and big box competitors. Our merchant and sales team are responsible to ensure that pricing and promotion for these appliances are competitive.

Vendor/Supplier Relationships

We offer more than 36 brands and approximately 5,700 SKUs available for purchase. This depth of vendor relationships gives consumers numerous options in all product categories. Our top vendors and suppliers are listed in the table below.

Supplier	Total Purchases (2020)		Total Purchases (2021)		Percent of Purchases (2021)
Riggs Distributing, Inc.	$	2,960,523	$	2,558,915	28.4	%
Whirlpool		942,525		1,203,187	13.3	%
General Electric		977,695		2,411,825	26.7	%
Middleby/Viking Range		759,735		786,557	8.7	%
Miele		746,920		383,245	4.3	%
Fisher Paykel		202,258		455,073	5.0	%
R&B		214,246		132,625	1.5	%
Blue Star		440,784		349,615	3.9	%
Zephyr		268,579		212,444	2.4	%
Beko Appliances		117,915		248,323	2.8	%

Products are purchased from all suppliers on an at-will basis. We have no long-term purchase agreements with any supplier. Relationships with suppliers are subject to change from time to time. Changes in relationships with suppliers occur periodically and could positively or negatively impact our net sales and operating profits. We believe that we can be successful in mitigating negative effects resulting from unfavorable changes in the relationships with suppliers through, among other things, the development of new or expanded supplier relationships. Please see “Risk Factors — Risks

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Related to Our Retail and Appliances Business” and “Risk Factors — Risks Related to Our Business and Structure — The COVID-19 pandemic may cause a material adverse effect on our business” for a description of the risks related to our supplier relationships, including those associated with the COVID-19 pandemic.

BrandSource Membership

We are part of the member-owned buying group, BrandSource, which has an internal marketing company as well as a company to finance their purchases from some brands.

Members of BrandSource can compete with box stores by banding together under the buying group; the dealers/members own the buying group/co-op. Simply put, the group aids members in helping them buy better, reduce costs, drive business into their stores and educate them in a way an independent dealer could not do it alone.

We believe that the benefits of our membership with this group include:

•        $19 billion dollar buying power allowing members to compete on the price of products (same as box store);

•        BrandSource finance through Progressive Leasing so members can get credit approved to purchase goods;

•        BrandSource marketing so members can compete for consumer store traffic. This includes turnkey websites, digital and social marketing, as well as print and video marketing. This allows members to actually out-market the box stores locally;

•        National and regional education forums for members to be “in the know” on industry trends, vendor product knowledge and idea exchange; and

•        BrandSource AVB retail technology solutions and consulting.

Marketing

We market our products through a variety of methods, both digital and traditional. Some examples include digital advertising, radio, billboards and “go local” marketing.

Digital Advertising

We participate in pay-per-click ads, digital banner ads, YouTube videos, Facebook posts, and similar digital media, through our membership in BrandSource. We also have a professional and easy-to-use website (www.asiensappliance.com), which allows customers to research, compare, and order products online. This site is hosted and maintained by BrandSource.

Radio

We run radio spots on various stations throughout the year, with most spots promoting our brand. These advertisements strive to promote our experience, expertise, service, local ownership, and more than 70 years in business. Some radio spots are paid for by appliance manufacturers, in which case we will promote the quality of the brand, rather than the price.

Billboards

We have secured two prominent billboards in Sonoma County:

•        Northbound 101 across from the Corby Avenue auto row in Santa Rosa. We advertise on it half the year at different intervals.

•        Southbound 101 in Petaluma near the Petaluma Village Premium Outlets.

In many cases, as with the radio ads, appliance manufacturers will pay for advertising on the billboards.

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“Go Local” Marketing

We also participate in the “GO LOCAL” marketing organization for locally-owned independent businesses. Members of this organization use a shared brand, targeted advertising, and a rewards card to increase sales and gain market share.

Customers and Markets

We currently serve customers in the areas of Sonoma, Napa, Marin, Lake and Mendocino counties, California. The large majority of customers are homeowners and their contractors, with the homeowner being key in the final decisions. We have a diverse customer base, with no one customer accounting for more than 5% of total revenue.

Customer Support

Customer Service is of critical importance to our success. We primarily conduct customer service in person or on the telephone, although web-initiated chat, text and email are available and rapidly growing coordination and communication. We believe in allowing our customer to set the preferred method for communication. Our role in providing premium appliances can often require substantial pre-sales support, such as when quoting a multi-appliance bid package for a builder. Since 2020, there has been a material shift toward online sales and the appliance industry is no exception. In 2019, the most popular search terms for the appliance industry ended with the modifier “near me” and in 2020 that modifier was replaced with “delivered.” Confirming availability, managing backordered product and coordinating delivery and installation are all critical service functions for us in the extended COVID-19 environment.

Our customer service is available to field inbound customer calls from 8:00 am to 5:30 pm PST, Monday through Friday and Saturday from 9:00 am to 5:00 pm.

Logistics

The large majority of our inventory consists of customers’ completed orders, most of which are selected from models on display in our extensive showroom. We do, however, maintain a supply of common and in-demand appliances for walk-in customers who are looking to make same-day purchases.

We take ownership of inventory when it is delivered to our warehouse. At this point, warehouse staff unloads the product, determines the delivery location and arranges for delivery of the product. Customers may arrange for a delivery service or their third-party installers and contractors to pick-up their appliances at our warehouse or have it scheduled for drop-off or installation. We will coordinate third-party delivery or recommend factory trained third-party installation services when necessary. We also offer installation services. Another important service is haul-away of a customer’s used appliances. This service is included with drop-off or installation. We contract with a local third-party recycling firm to ensure that used appliances receive optimum recycling and appropriate disposal.

Our return and exchange policy is designed to be as worry-free and customer friendly as possible. A customer may cancel or exchange an item that is on order or is not subject to a vendor mandated restocking fee. We may pass any supplier assessed restocking fee on to the customer in the event a special ordered appliance is returned or exchanged without defect.

Competition

We compete with big box retailers, independent appliance retailers, hybrid retail and direct-to-consumer companies and web only companies. As a hybrid retail and direct-to-consumer company, we have the ability to successfully rival the offerings of each competitor, utilizing impressions from both online and traditional marketing, our consultative selling practice and customer service expertise, and a curated assortment of premier brands to attract and retain new customers.

The U.S. appliance market in general is highly fragmented with thousands of local and regional retailers competing for share. Our primary competitors in the appliance market include big box retailers, such as Home Depot, Lowe’s and Costco; specialty retailers, such as TeeVax, Ferguson and Premier Bath and Kitchen; and online marketplaces, such as Amazon.

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The shifting landscape to online sales in the segment is providing a significant market share capture and positioning opportunity for companies. We are rapidly evolving our business processes to capitalize on this market shift. While premium brands continue to place restrictions on the pure ecommerce distribution models, we are adapting the concierge selling available on our showroom floor for the web customer at home. The COVID-19 pandemic has accelerated this shift and is rewarding the entrepreneurial innovation necessary for this transition. This ongoing adaptation and continual process improvement will allow us to continue to enjoy a preferred reseller status with the premium brands that differentiate our offerings.

Competitive Strengths

Based on management’s belief and experience in the industry, we believe that the following competitive strengths enable us to compete effectively.

•        Name and reputation.    We believe that we enjoy a long-standing (more than 70 years) reputation with vendors and customers for our focus on offering a full line of appliances, including premium brands unavailable from the competition, with consultative selling, competitive pricing and superior customer service.

•        Highly experienced management and personnel.    We believe that our personnel are its most important asset. We have an experienced management team with decades of industry knowledge and a team of experienced, knowledgeable and skilled field personnel.

•        Diverse product and service offerings.    We offer a full line of top brands from U.S. and international manufacturers. We currently offer approximately 5,700 appliance SKU’s. We also offer delivery, installation and repair and maintenance services provided by our highly knowledgeable personnel.

•        Inventory discipline.    Resellers in the appliance industry are experiencing unprecedented supply chain issues with backorder on many appliance categories. Increasingly, the most success in appliance sales is found for those with available inventory on hand. We react quickly to the expression of customer demand by confirming availability for products and placing orders to reserve potential stock needs. Our curated assortment allows us to react to micro-trends and adjust assortment and buying decisions quickly. On the showroom floor, our experienced team has quickly pivoted to first sell what is available and then over-communicate with the customer when an item is on backorder. As a result, we are maintaining a low cancelation rate. Customer service processes and resources to allow more efficient ongoing customer communication and coordination will allow us to earn loyalty within our market by exceeding the service levels customers receive from other specialty retailers.

•        Extended repair, delivery, and loaner services.    Approximately 60%-70% of our sales are “duress” sales to replace broken or antiquated equipment. It is not uncommon for service to provide a gateway sales. A customer looking to replace their appliance still wants a quality product and they need it quickly. This is where the value of our full-service approach wins customer loyalty.

•        Online sales expertise.    We believe that our ability to transact online, big ticket, home delivery sales give us strategic positioning and capability to sell more products to our current customer base, as well as to add new big ticket product categories.

•        Membership in BrandSource.    As discussed in more detail above, we believe that our membership in BrandSource provides us with a number of competitive advantages.

Growth Strategies

We will strive to grow our business by pursuing the following growth strategies:

•        Digital strategy.    We plan to implement best-in-class solutions from parallel industries focused on a click-to-brick digital strategy. This includes enhancing our web presence and digital advertising while providing tools to facilitate consultation, guided customer support and service. We also plan to enhance the full-cycle customer relationship including loyalty, incentives for referral, and long-tail satisfaction surveys. We also plan to enhance our geographic reach through installation partnerships.

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•        Increase local marketing spend.    We plan to increase our local marketing spending. Outreach messaging will increase the emphasis on us as a trusted community resource and other local first values. We plan to build incrementally on ad spending where a return is measurable. This involves first optimizing local market internet search and digital advertising campaigns, while at the same time innovating a COVID-19 appropriate approach to what was traditionally outside sales by more regularly engaging builders, designers, and contractors and encouraging regular digital meeting place. We plan to provide local leadership by being efficient and providing secure online tools to enable project management and data exchange.

•        Store growth.    We are actively looking for underserved and growing communities on the west coast that echo the attributes that serve our success in the current Sonoma County location.

Intellectual Property

We do not own any registered intellectual property for our retail and appliances business. The agreements with our suppliers generally provide us with a limited, non-exclusive license to use the supplier’s trademarks, service marks and trade names for the sole purpose of promoting and selling their products.

To protect intellectual property, we rely on a combination of laws and regulations, as well as contractual restrictions. We rely on the protection of laws regarding unregistered copyrights for certain content we create. We also rely on trade secret laws to protect our proprietary technology and other intellectual property. To further protect our intellectual property, we enter into confidentiality agreements with our executive officers and directors.

Facilities

Asien’s is located at 1801 Piner Rd., Santa Rosa, CA 95401. The site is approximately 11,000 square feet in total and consists of a 6,000 square foot showroom display area as well as a general office, accounting office, service department and 4,000 square foot warehouse. We lease this site on a month-to-month basis for approximately $9,700 per month. We also rent an additional 3,000 square feet of warehouse and office space in an adjacent building for $2,000 per month.

We believe that all of our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

Employees

As of March 31, 2022, we employed 22 full-time employees. The following table sets forth the number of employees by function.

Department/Function	Employees
Accounting/Finance	2
Sales and Marketing	7
Customer Service	6
Warehouse and Delivery	5
Administrative	2
TOTALS	22

None of our employees are represented by labor unions, and we believe that we have an excellent relationship with our employees.

Regulation

Our business is subject a variety of laws and regulations applicable to companies that are conducting business on the Internet. Jurisdictions vary as to how, or whether, existing laws governing areas such as personal privacy and data security, consumer protection or sales and other taxes, among other areas, apply to the Internet and e-commerce, and these laws are continually evolving. For example, certain applicable privacy laws and regulations require us to provide customers with our policies on sharing information with third parties, and advance notice of any changes to these policies. Related laws may govern the manner in which we transfer sensitive information or impose obligations on us in the event of a security breach or inadvertent disclosure of such information. Additionally, tax regulations in jurisdictions where we do

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not currently collect state or local taxes may subject us to the obligation to collect and remit such taxes, or to additional taxes, or to requirements intended to assist jurisdictions with their tax collection efforts. New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and e-commerce generally could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that impose additional compliance burdens on companies doing business on the Internet.

Custom Carpentry Business

Our custom carpentry business is operated through our subsidiaries Kyle’s, High Mountain and Innovative Cabinets. Kyle’s was acquired in the third quarter of 2020 and High Mountain and Innovative Cabinets were acquired in the fourth quarter of 2021. This business segment accounted for approximately 65.5% and 31.7% of our total revenues for the three months ended March 31, 2022 and 2021, respectively, and 39.8% and 12.8% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

Overview

We specialize 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. We also install windows and kitchen countertops. We primarily service large homebuilders and homeowners of single-family homes and commercial and multi-family developers in the greater Reno-Sparks-Fernley metro area in Nevada and in the Boise, Idaho area.

Products and Services

We provide a wide variety of finished carpentry products and services to single-family homeowners and builders, builders of multi-family homes, as well as commercial clients in the greater Reno-Sparks-Fernley metro area in Nevada, which is one of the fastest growing economic regions in the Western U.S. This includes selling and installing doors, door frames, basic trim, base boards, crown molding, kitchen and bathroom cabinets and countertops, walk-in closets, bookcases, fireplace mantles, even staircases, staircase handles and spindles.

We also install windows in this market. Revenue from window installation is projected to grow significantly. Window installation does not require any manufacturing or assembly of windows and minimal inventory levels of product is needed. We can simply either install the windows that have already been purchased by the client or buy them for a specific job and install them.

We also build cabinets for every area of a home — kitchen and bath cabinets, fireplace mantels and surrounds, entertainment systems and wall units, bookcases and office cabinets — in Boise, Idaho and the surrounding area, for builders, designers and homeowners when they are building a new home or conduct remodeling. In this market, most of the focus has been on supplying custom or semi-custom builders of residential properties.

Manufacturing

Most of our services consist of design, assembly, and installation services. As a result, we do not manufacture most of our products, although we do have limited manufacturing operations consisting of value-add activities such as drilling pre-manufactured doors for holes and attaching hinges

In the Boise, Idaho market, Kyle’s operates a cabinet shop that is equipped with state-of-the-art tools operated by skilled cabinetmakers.It manufactures its cabinets using its computer numerical control machinery in order to maximize efficiency. The details of each custom cabinet it makes are created by its own employees, from hand sanding to staining and painting to adding a wide array of specialty finishes, coatings, distressing and glazing.

Pricing

Our strategy has been to deliver quality and performance at a value-based price target. Our pricing model is generally offering better features or efficiencies than general market competitors in each product category to our builder markets.

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Supplier Relationships

We source products and raw materials from multiple regional, national and foreign suppliers. Certain of our products and materials come from Asian-based suppliers. Products and materials from Asian-based suppliers may be subjected to import tariffs, depending on various foreign policies of the US government. As such, we continue to explore partnership or supplier opportunities to optimize our costs.

The primary raw materials used in the manufacture of Kyle’s products are melamine and veneered sheet goods, lumber, doors and hardware. Cost of these raw materials is a key factor in pricing its products.

We have historically purchased certain key products and raw materials from a limited number of suppliers. We purchase products and raw materials on the basis of purchase orders. While we believe that there is an ample supply of most of the products and raw materials that we need, in the absence of firm and long-term contracts, we may not be able to obtain a sufficient supply of these products and raw materials from our existing suppliers or alternates in a timely fashion or at a reasonable cost. If we fail to secure a sufficient supply of key products and raw materials in a timely fashion, it would result in a significant delay in delivering our products and services, which may cause us to breach our sales contracts with our customers. Furthermore, failure to obtain sufficient supply of these products and raw materials at a reasonable cost could also harm our revenue and gross profit margins. Please see “Risk Factors — Risks Related to Our Custom Carpentry Business” for a description of the risks related to our supplier relationships.

Furthermore, the COVID-19 pandemic has had and may continue to have an adverse impact on the overall supply chain, including labor shortages at sawmills, shipping delays, and increased prices, all of which may negatively affect our profitability and financial condition. See “Risk Factors — Risks Related to Our Business and Structure — The COVID-19 pandemic may cause a material adverse effect on our business.”

Sales and Marketing

In the Reno-Sparks-Fernley, Nevada market, we primarily work with large homebuilders of single-family homes, single-family homeowners and commercial and multi-family developers with revenue that is well diversified across multiple large homebuilding companies such as Mountain West, MSL, DR Horton, Tanamera, Allco Construction, Artisan Communities, Toll Brothers and Lennar, to name several of the more prominent commercial relationships we maintain.

In the Boise, Idaho market, we primarily work with custom or semi-custom home builders, but due to strong housing demands in the area, we are also tapping into the residential multi-family, new construction segment of the market.

We have high customer retention levels and have generated a considerable number of broader revenue opportunities through direct and specific interaction with our customer base. We have negotiated pricing with several long-term recurring contractor customers, which have accounted for a majority of our revenues. There can be no assurance that we will maintain or improve the relationships with those customers. If we cannot maintain long-term relationships with major customers or replace major customers from period to period with equivalent customers, the loss of such sales could have an adverse effect on our business, financial condition and results of operations. Please also see “Risk Factors — Risks Related to Our Custom Carpentry Business — The loss of any of our key customers could have a materially adverse effect on our results of operations.”

We primarily rely on direct consumer marketing and our extensive relationships with local builders to market our products. We also maintain websites at www.kylescabinets.com and www.innovativecabinetsanddesign.com and conduct social media marketing through Facebook pages.

Competition

The finished carpentry industry consists of contractors that provide specialist finish carpentry services, such as on-site construction and the installation of doors, windows, stairs, shelving, cupboards, cabinets and decks. Carpenters experience steep competition from do-it-yourself (DIY) homeowners in the housing alterations and additions market and from other skilled tradespeople in the new building construction market, such as general building contractors’ in-house staff.

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We compete with numerous competitors in our primary markets, with reputation, price, workmanship and services being the principal competitive factors. We primarily compete with other specialty builders in our markets, such as Franklin’s, Western Idaho, and to a lesser extent against national retail chains such as Home Depot and Lowes. Barriers to entry exist from other similar companies coming into the regions given the pool of available labor working in finished carpentry in the regions, and the close working relationships that exist between industry players in the regions. These barriers to entry are also experienced by larger competitors from outside the regions, providing them with substantial challenges in establishing a foothold. As a result of the implementation of our business strategy, which is delivering high value, quality products and customized solutions and installations, we anticipate that we will continue to effectively compete against the aforementioned competition.

Competitive Strengths

Based on management’s belief and experience in the industry, we believe that the following competitive strengths enable us to compete effectively.

•        Superior name and reputation.    We are well established in our markets (including for over 40 years in the Boise market), and have built strong reputations for best-in-class processes, product quality, and timeliness. We have strong visibility both online and among industry professionals. Over our many years in business, we have established a stellar reputation for integrity, superior service, and genuine concern for our clients and their businesses.

•        Established blue-chip clients.    We have customer lists that include many regional contractors in the areas that we service, many of whom have used us as their go-to vendors for many years.

•        Streamlined operations.    We believe that our processes and operational systems have led to higher than average efficiencies, accuracy and profitability.

•        Diversified capabilities.    We have diversified capabilities to support large homebuilders of single-family homes and commercial and multi-family developers, providing flexibility toward trending markets and growth opportunities.

•        Outstanding growth opportunities.    Our portfolio, brand and reputation, and streamlined operational platform can be leveraged for expansion, both in existing regions, and other high-value surrounding areas.

•        Strong regional presence.    We operate in the in the greater Reno-Sparks-Fernley metro area, which is one of the fastest growing economic regions in the Western U.S. due to its day drive distance to many of the largest commercial centers and port facilities in the United States and favorable tax and business regulation environment. There are multiple national homebuilders and multi-family developers are active in the region. We are among the largest custom carpentry companies in this region.

Growth Strategies

We will strive to grow our business by pursuing the following growth strategies.

•        Product line expansion.    There are a number of opportunities to expand our product and servicing offerings. Notably, as discussed above, we intend to expand our window installation services, which has a large market potential.

•        Geographic expansion.    With more service requests in the surrounding area, there is immediate opportunities for expansion to homeowners and contractors located near Twin Falls, McCall, and Sun Valley areas of Idaho, as well as Northern Nevada. We believe that we are well positioned to expand into these surrounding areas.

•        Expansion to commercial projects.    There are opportunities for us to exploit additional opportunities in the commercial real estate sector. That could be office buildings and hotel and resort properties. In the Boise market, we primarily focus on the residential single family, new construction segment of the construction market. Evidence of market demand is ongoing for multi-family projects, both within our current customer markets and within other potential customers. Given appropriate infrastructure to support the market’s volume, immediate market penetration for multi-family projects could be achieved.

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•        Capacity and infrastructure expansion.    In the Boise market, we plan to purchase more machinery and build a separate finishing facility with automated spray finishing for stains, clear lacquers and pigmented lacquers. In the Reno market, we are in the process expanding our warehouse space and operations.

Facilities

Kyle’s is located at 10849 W. Emerald St. Boise, ID 83713. It operates from a 6,600 square foot facility, which includes corporate offices, administration, production floor, warehouse, and employee areas. On September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, the sellers of Kyle’s. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On June 9, 2021, Kyle’s entered into a lease agreement for an additional facility located at 11193 W. Emerald St. Boise, ID 83713. The facility consists of 9,530 square feet of office and warehouse space. The lease commenced on January 1, 2022 and is for a term of 62 months, with an option for a renewal term of five years, and provides for a base rent of $3,336 for months 3-4 (with no payments for the first two months), with gradual increases to $7,508 for final year. In addition, Kyle’s is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

High Mountain is located at 4935 Brookside Ct, Reno, NV 89502. It operates from a 23,115 square foot facility, which includes corporate offices, a production floor and warehouse space, that it leases. The existing lease for this property commenced on January 1, 2018 and was for a period of 48 months, expiring on December 31, 2021. High Mountain is continuing to pay on a month-to-month basis until the new facility described below is ready. The base rent is $12,767 per month. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs. The lease agreement contains customary events of default, representations, warranties and covenants.

On October 29, 2021, High Mountain entered into a lease for a new 42,000 square foot facility located at 8895 Double Diamond Pkwy, Reno, NV 89521. The term of the lease will commence upon the completion of work, which is expected in March or April 2022, and is for a period of 61 months. The base rent is $29,400 for months 2-13 (with no payments for the first month), with gradual increases to $34,394 for months 50-61. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

Innovative Cabinets is headquartered at 4690 Longley Lane, Suite 29, Reno, NV 89509. It operates from a 4,078 square foot facility, which includes corporate offices, showroom and warehouse space. The term of the lease commenced on April 1, 2020 and is for a period of 36 months. The base rent is $2,936 for the first year, with gradual increases to $3,140 for the final year. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

Innovative Cabinets also leases a 24,000 square foot facility located at 875 East Patriot Boulevard, Suite 280, Reno, NV 89511, consisting of warehouse and production space. The term of the lease commenced on January 1, 2021 and is for a period of 61 months. The base rent is $15,600 for 2021, with gradual increases to $18,085 for 2026. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

We believe that all of these properties have been adequately maintained, are generally in good condition, and are suitable and adequate for its business.

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Employees

As of March 31, 2022, our custom carpentry companies employed 138 full-time employees. The following table sets forth the number of employees by function.

Department/Function	Employees
Management	11
Office Employees	17
Design	8
Front End/Build	11
Finish	5
Load/Deliver	15
Install	70
Specialty	1
TOTALS	138

None of the employees are represented by labor unions, and we believe that our custom carpentry companies have excellent relationships with their employees.

Regulation

The facility in Boise, Idaho is subject to Idaho Department of Environmental Quality in connection with air quality and regulations relating to pollution and the protection of the environment, including those governing emissions to air, discharges to water, storage, treatment and disposal of waste, remediation of contaminated sites and protection of worker health and safety.

We believe that we are in substantial compliance with all applicable requirements. However, our efforts to comply with environmental requirements do not remove the risk that we may be held liable, or incur fines or penalties, and that the amount of liability, fines or penalties may be material, for, among other things, releases of hazardous substances occurring on or emanating from current or formerly owned or operated properties or any associated offsite disposal location, or for contamination discovered at any of our properties from activities conducted by previous occupants.

Permits are required for certain of our operations, and these permits are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations, and violations may result in the payment of fines or the entry of injunctions, or both.

Changes in environmental laws and regulations or the discovery of previously unknown contamination or other liabilities relating to our properties and operations could result in significant environmental liabilities. In addition, we might incur significant capital and other costs to comply with increasingly stringent air emission control laws and enforcement policies which would decrease our cash flow.

Automotive Supplies Business

Our automotive supplies business is operated by Wolo. This business segment, which was acquired at the end of the first quarter of 2021, accounted for approximately 13.6% our total revenues for the three months ended March 31, 2022 and 18.6% of our total revenues for the year ended December 31, 2021.

Overview

Our automotive supplies business is headquartered in Deer Park, New York and was founded in 1965. We design and sell horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), and offer vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. Focused on the automotive and industrial after-market, we sell our products to big-box national retail chains, through specialty and industrial distributors, as well as on-line/mail order retailers and OEMs. With a stellar reputation for innovative design, our current product line consists of over 455 products, including 54 patented products, as well as over 90 exclusive trademarks.

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Products

We design and sell over 455 products comprised of branded vehicle horns, warning lights, sirens, back-up alarms and accessories.

Horns

We design and sell an innovative and extensive selection of electromechanical, air and electronic-speaker horns. The horns are used in many industries such as: heavy duty truck, motorcycle, marine, industrial and the automotive aftermarket. We also sell hand-held gas horns which can be used for sporting events, as well as marine, construction sites and outdoor activities.

Our top-selling product is the Bad Boy horn, which has a one-piece design that requires no hoses. It installs in minutes by simply transferring the vehicle’s factory horn wires to the compressor, and mounts with one bolt included in kit. The Bad Boy produces a powerful dual tone air horn sound that is two times louder than the factory horn. It is compact in size to fit any car, truck, motorcycle and any 12-volt vehicle that wants a loud air horn sound. A heavy-duty maintenance free compressor provides years of dependable service.

In the past three years, we have brought a number of new and innovative horn products to the markets to which we sell. Some highlights include:

•        Midnight Express.    A high-pressure truck train horn that is three trumpets, all metal and painted semi-gloss black. Train horns are purchased by the vehicle owner that wants the ultra-powerful sound of a train.

•        Quadraphonic Express.    Four metal trumpets that are triple chrome plated, produce an ultra-powerful train horn sound that will be heard and will dress-up the appearance of any vehicle.

•        Nexgen Express Train Horn.    A totally new design by us, a state-of-the-art fully electronic train horn, compact in size and produces more than 150-watts output. Engineered to fit into the engine compartment of cars, SUVs and even compact vehicles with a simple two wire hook-up, Nexgen offers two distinctive train horn sounds controlled by a wireless key fab.

•        Mighty Mo.    An industrial equipment horn designed to withstand off-road and construction site conditions, while being able to penetrate noisy environments and still be heard.

Compressor and Tank Systems

We also sell air compressor systems, consisting of air storage tanks, compressors and everything needed to hookup a high-pressure air horn. Two years ago, we started offering complete kits of train horns and choice of high-pressure air systems. Additionally, we offer replacement parts for all products.

Electric Sirens and Speakers

We have an array of emergency electronic sirens with built-in public address systems used by emergency responders.

Back-Up Alarms

We offer a variety of back-up alarm systems from basic beep-style horn sold in all aftermarket retailers, to hi-tech intelligent alarms that adjust audio output to be louder than surrounding ambient noise. Our Model BA-697 has three super bright 1-watt LEDs that flash while the vehicle is in reverse and the auditable warning sound is turned on. In addition, we have a selection of white noise “Psss Psss” sound alarms required in the state of California.

Warning Lights

We offer a large selection of warning lights for road assistance as well as emergency vehicles, construction, road safety and snow plowing vehicles. Warning lights come in a variety of types, sizes and shapes such as rotating, strobe and state-of-the-art LED models ranging in sizes from 8 inches to fifty-seven 57 inches. A recent addition to warning

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lights that has become an everyday bestseller for us is the new WATCHMAN®, which is a 24-inch magnet light bar that can be converted to permanent mounting in minutes with no special tools. Because of the products’ popularity, we designed a larger 48” version of the Watchman, which has seen very good acceptance in the market.

Another recent addition is Luminous, a high-performance, low profile linear light bar designed with the latest state-of-the-art electronic circuitry that has low power consumption and will provide years of reliable service. Luminous produces an intense beam of light which can be seen 360 degrees even in bright daylight. Available in three lengths in color amber, blue, red, green and any combination of colors. Luminous is certified SAE J845 Class 1 and California Title 13.

Manufacturing

Approximately 95% of our manufacturing is outsourced to contract manufacturers in China and Taiwan. The additional 5% of in-house manufacturing consists of changes to fully assembled products, as per custom orders. For example, converting the voltage of a horn for truck use, or the standard color of a particular warning light.

We have implemented a strict quality control program which is run by our warehouse/production manager. We believe that our high quality standards assure customers that they are getting the best and most reliable products in the market. Our manufacturing operations are designed to allow low-cost production of a wide variety of products while maintaining a high level of customer service and quality.

We believe that our manufacturing facilities generally have sufficient capacity to meet our current business requirements and our currently anticipated sales.

Vendor/Supplier Relationships

We have developed long term relationships with our 22 contact manufacturers based in China and Taiwan. All materials are sourced by the contract manufacturers. Our top 10 vendors and suppliers are listed in the table below.

Supplier	Product	Total Purchases (2020)		Total Purchases (2021)		Percent of Purchases (2021)
Zhongshan Yonglong Car Accessories	Warning Lights & Horns	$	493,583	$	331,322	13.0	%
E-Own Corp	Horns		405,821		430,937	16.9	%
Wenzhou Jinzheng	Warning Lights		283,063		224,975	8.8	%
Changgzhou Jiajia	Horns		253,843		429,459	16.9	%
Jn Horns	Horns		174,285		178,324	7.0	%
Zhejiang Jiejia	Warning Lights		142,346		162,491	6.4	%
Changzhou Wushi	Horns		130,439		372,582	14.6	%
Wenzhou Hongda	Warning Lights		127,950		29,712	1.2	%
Yuyao	Warning Lights		54,384		104,767	4.1	%
Jian Tang	Warning Lights		50,466		65,158	2.6	%

We have established relationships with our vendors, with many of these relationships spanning more than 15 years. We implement vendor agreements with all our major accounts and some mid-size accounts. The typical length of a vendor agreement is 2-3 years, and in most cases automatically renew.

We have also established volume discounts with our suppliers which help to offset increased material, tariffs’ and increased labor costs domestically and overseas. With the unstable world market, we have carefully started to engage secondary suppliers to make sure we have no interruptions in the supply chain and to be sure we maintain a competitive price.

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We believe that our strong relationships with suppliers yield high quality, competitive pricing and overall good service to our customers. Although we cannot be sure that our sources of supply will be adequate in all circumstances, we believe that we can develop alternate sources in a timely and cost-effective manner if our current sources become inadequate. Due to availability of numerous alternative suppliers, we do not believe that the loss of any single supplier would have a material adverse effect on our consolidated financial condition or results of operations. See “Risk Factors — Risks Related to Our Automotive Supply Business” for a description of the risks related to our supplier relationships.

Sales and Marketing

Our sales team consists of an in-house national sales manager who coordinates with contracted sales representatives from thirteen regional sales companies in North America, Mexico, Puerto Rico, the U.K., Europe, the Middle East and the industrial aftermarket. The sales representative’s agreement with us is limited to automotive, internet-based companies and occasionally motorcycle aftermarket distributors.

Sales representatives are responsible for the solicitation and development of new accounts, as well as working with existing customers to develop promotions and incentives for our products. We have had relationships with these regional sales companies for 13 to 15 years on-average. All major customers are serviced frequently by their sales representatives.

Our innovative retail product packaging design is also a highly effective marketing tool in direct-to-consumer selling. Featuring quick response (QR) barcode technology, customers are able to scan product packaging using their smart phone or mobile device to instantly see product information, watch demonstration videos, or even hear horn demos. There is no need for special in-store displays or additional shelf space as all information is accessible directly by scanning the product packaging. It is like having a virtual sales associate in-store. Packaging also features scan-back’s, an instant rebate that is applied at the register upon checkout.

Additional marketing programs include in-store promotional programs for customers, e-commerce via our website, as well as email blasts and customer print catalogs. We mail print and/or electronic CD catalogs to established accounts every 18 months with new product information inserted via supplemental sell-sheets. The full product catalog was last updated in 2019 and a new 2021-2022 catalog will be finished and ready to be mailed in the first or second quarter of 2022. There will also be a digital version of the catalog available for download. New product launches and updates are also sent to customers via email blast periodically.

We exhibit at key industry and customer tradeshows and belongs to the National Marine Manufacturers Association and American Boat and Yacht Council.

Customers

We sell products to the automobile aftermarket, national retailers, direct-to-consumer, mail order, web-based retailers, public safety equipment wholesalers, industrial wholesalers, as well as the motorcycle and marine aftermarkets.

We serve approximately 220 customers, including Amazon, AutoZone, Advanced Auto Parts, CarQuest, Aries, das, Grainger, FleetFarm and J&P Cycles. Internationally, we sell products in Canada, Mexico, Europe, and Amsterdam. Most of our online customers such as Amazon ship direct internationally. A majority of our sales are made to repeat customers, with many of our customer relationships spanning more than 10 years. We believe that our customers appreciate the ease of doing business with all orders placed electronically via electronic data interchange, or EDI.

Sales agreements are in place with about 25% of our customers, including all national and midsize accounts. Sales agreements specify new store allowances, terms of sale (discounts), annual stock adjustment, freight routing, company trade shows, rebates and advertising programs. Agreement lengths and renewal terms are based on the individual customer relationship.

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In recent years, we have entered into the motorcycle and industrial (fleet maintenance) aftermarkets, as well a product line of horns for the marine parts aftermarket. The following diagram illustrates our target markets.

Order Fulfillment

Our efficient fulfillment process uses an intergraded EDI system for receiving orders, advanced shipping notices and invoicing. The custom software is integral in reducing manual order entry, as well the prevention of errors.

Implementing an EDI system has allowed us to maintain the minimum fulfillment threshold rate of 95%, as well as avoid fines from customers for order fulfillment errors and fill rate. The following diagram illustrates our order fulfillment process.

Research and Development

For the development of new products, we have implemented a streamlined R&D process. The average R&D process from initial design to sending a product sample for tooling is approximately 6-12 months.

•        Step 1:    Identify and confirm a problem and/or need for a product

•        Step 2:    Draw up many possible solutions and discuss with sales manager and warehouse manager, whose focus in on the market demand

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•        Step 3:    Narrow down to the three best options and create handmade prototype to test which solution works best.

•        Step 4:    Send sample prototype to patent attorney to determine ability to patent and send hand sample to a draftsman for 3D drawing

•        Step 5:    The 3D drawing is approved, and a 3D print is made. The 3D print sample is tested, and any necessary modifications are made

•        Step 6:    The 3D drawing and printed sample are sent to one of our suppliers to start the tooling process

Competition

The sale of automotive aftermarket items is highly competitive in many areas, including customer service, product availability, store location, brand recognition and price. We believe that we have established our brand as an industry-leader in developing innovative products for the automobile aftermarket industry, especially in horn design and technology (electric, air, truck, marine, motorcycle and industrial equipment). Current competitors in related industries are FIAMM, Grote, Peterson Manufacturing Company, ECCO, Vixen Horns, HornBlasters and Klienn.

Competitive Advantages

Based on management’s belief and experience in the industry, we believe that the following competitive strengths enable us to compete effectively.

•        Established name and reputation.    We believe that we have maintained our excellent reputation in the industry for over 55 years through bringing exclusive products and designs to market to meet current and future needs.

•        Patents and trademarks.    We have been granted 54 patents from the U.S., China, Taiwan and the EU with three additional patents pending. About half of our patents are utility patents, which protect a products’ methods of functionality. Utility patents are a difficult barrier for competitors to overcome, therefore these products have a higher profit margin. The other half of our patents are design patents.

•        Long-term supplier and customer relationships.    We have established relationships with our vendors, with many of these relationships spanning more than 15 years, and a majority of our sales are made to repeat customers, with many of our customer relationships spanning more than 10 years.

•        International licensing agreements.    We have a licensing agreement with a large wholesale supplier of auto parts in the U.K. for our patented Bad Boy Horn. The U.K. supplier also has retail chain stores and this agreement has been generating year-over-year sales growth for us.

Expansion Opportunities

Management sees the below as the key initiatives for our continued growth strategy:

•        Increase sales through new products and online marketing.    We are aggressively pursuing our current market share and building sales by adding new products to existing accounts. Additionally, we will continue to expand our online sales platforms which include Wolo-mfg.com, Wolo-USA.com, Autozone.com, Amazon.com, BestAutoAccessories.com and Autoaccessoriesgarage.com, among others. There also exists significant growth potential in the purchasing of available key URL’s and implementing enhanced search engine optimization strategies.

•        Expand into traditional market and original equipment replacement horns.    The automotive aftermarket has multiple channels of distribution, and one in which we have limited distribution is the traditional channel. This channel distributes products through wholesale warehouse distributors such as Federated Auto Parts, Pronto Auto Parts, Bumper-To-Bumper and Auto Value. Traditional distribution primarily

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services the DIFM (Do-It-For-Me) or professional installers. Most of the products sold are direct original equipment replacement parts which are researched based on year/make/model of the vehicle needing parts. We have limited distribution into the traditional channel, primarily due to the fact that there are no original equipment replacement horns in our product offerings. We believe that with minor product enhancements, we can offer products to serve this channel and improve market share into the traditional channel.

•        Expand into growing international markets.    Currently, we sell our products in the US, Canada, Mexico, Europe and the Middle East. There is great growth opportunity in Mexico, where AutoZone currently has over 550 stores, and is continuing to expand aggressively. Additionally, we have identified Canada and the Netherlands as expansion markets specifically for our Motorcycle Air Horn.

•        Additional focus on the municipal and public safety markets.    We have identified a significant demand for certified warning lights within the municipal and public safety markets. The certification of existing products is immediately possible and very cost effective.

•        Grow presence within the marine marketplace.    We see immediate growth opportunities existing within the marine market with certified horns that meet US Coast Guard regulations and other regulatory standards.

Intellectual Property

We have been granted 54 patents from the United States, China, Taiwan and the EU with three additional patents pending. About half of our patents are utility patents, which protect a product’s methods of functionality. Utility patents are a difficult barrier for competitors to overcome, therefore these products have a higher profit margin. The other half of our patents are design patents.

We have trademarks registered in the United States and various countries for some of our core properties, including Taiwan, amongst others.

Our intellectual property, including patents, trademarks, service marks, domain names, copyrights and trade secrets, is an important part of our business. To protect our intellectual property, we rely on a combination of laws and regulations, in addition to intellectual property rights in the United States and other jurisdictions, including patents, trademarks, copyrights, and trade secret laws, together with contractual provisions and technical measures that we have implemented. To protect our trade secrets, we maintain strict control access to our proprietary systems and technology. We also enter into confidentiality and invention assignment agreements with employees and consultants, as well as confidentiality and non-disclosure agreements with third parties that provide products and services to us.

Facilities

Wolo is located at 1 Saxwood St., Deer Park, NY 11729. This 10,000 square foot facility houses our offices, production space and stored inventory. The term of the lease for this space commenced in 1978 and has been extended numerous times. Pursuant to the latest amendment entered into in July 2020, the lease expires on July 31, 2022 and provides for rent of $6,897 from August 8, 2021 to July 31, 2022. The lease agreement contains customary events of default representations, warranties and covenants.

We believe that all of our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for its business.

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Employees

As of March 31, 2022, we employed 15 employees, including 12 hourly employees. The following table sets forth the number of full-time employees by function.

Department/Function	Employees
Management	2
Sales Manager	1
Warehouse manager	1
Bookkeeper & office (Hourly)	3
Warehouse (Hourly)	8
TOTALS	15

None of our employees are represented by labor unions, and we believe that we have an excellent relationship with our employees.

Regulation

We are subject to various federal, state and local laws and governmental regulations relating to the operation of our business, including those related to labor and employment, discrimination, anti-bribery/anti-corruption, product quality and safety standards, data privacy and taxes. Compliance with any such laws and regulations has not had a material adverse effect on our operations to date.

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MANAGEMENT

Directors and Executive Officers

The following sets forth information about our directors and executive officers:

Name	Age	Position
Ellery W. Roberts	52	Chairman, Chief Executive Officer and President
Vernice L. Howard	51	Chief Financial Officer
Eric VanDam	51	Chief Operating Officer
Robert D. Barry	78	Director
Paul A. Froning	51	Director
Clark R. Crosnoe	53	Director(1)
Tracy S. Harris	58	Director(1)
Glyn C. Milburn	51	Director(1)
Lawrence X. Taylor	57	Director(1)

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(1)      Appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part.

Ellery W. Roberts.    Mr. Roberts has been our Chairman, Chief Executive Officer and President since our inception on January 22, 2013. Mr. Roberts brings over 20 years of private equity investing experience to us.  In July 2011, Mr. Roberts formed The 1847 Companies LLC, a company that is no longer active, where he began investing his own personal capital and capital of high net worth individuals in select transactions. Prior to forming The 1847 Companies LLC, Mr. Roberts was the co-founder and was co-managing principal from October 2009 to June 2011 of RW Capital Partners LLC, the recipient of a “Green Light” letter from the U.S. Small Business Administration permitting RW Capital Partners LLC to raise capital in pursuit of the Small Business Investment Company license with the preliminary support of the Small Business Administration. Mr. Roberts was a founding member of Parallel Investment Partners, LP (formerly SKM Growth Investors, LP), a Dallas-based private equity fund focused on re-capitalizations, buyouts and growth capital investments in lower middle market companies throughout the United States. Previously, Mr. Roberts served as Principal with Lazard Group LLC (LAZ), a Senior Financial Analyst at Colony Capital, Inc., and a Financial Analyst with the Corporate Finance Division of Smith Barney Inc. (now known as Morgan Stanley Smith Barney LLC).  Mr. Roberts has also served as the chairman of the board of 1847 Goedeker (GOED) since April 2019 and has also been a director of Western Capital Resources, Inc. (WCRS) since May 2010. Mr. Roberts received his B.A. degree in English from Stanford University. We believe Mr. Roberts is qualified to serve on our board of directors due to his extensive senior management experience in the industry in which we operate, having served as founder or executive of various other management, investment and corporate advisory companies for over 15 years.

Vernice L. Howard.    Ms. Howard has served as our Chief Financial Officer since September 2021. Ms. Howard has over 30 years of experience in the fields of finance and accounting. Prior to joining us, she worked for Independent Electrical Contractors, Inc. and its affiliates for over eleven years as Chief Financial Officer, where she was responsible for providing leadership to the organization in the areas of finance, human resources and general facilities administration, in addition to setting policies, procedures, strategies, practices and overseeing the organization’s assets. The foundation of Ms. Howard’s accounting and finance experience began with public accounting for several years gaining experience in tax and auditing in the entertainment and nonprofit sectors as Chief Financial Officer for The Cronkite Ward Company, a television production company, and Director of Finance for Community Action Group (CAG), a nonprofit organization. Before her work with Independent Electrical Contractors, Inc., Ms. Howard’s professional background established an emphasis in forensic accounting. Ms. Howard is a Founding Member of Chief, which is a DC based vetted network of C-level or rising VP’s supporting and connecting exceptional women. Ms. Howard holds a Master of Business Administration in Finance from Trinity Washington University Graduate School of Business Management and Bachelor of Science in Accounting from Duquesne University.

Eric VanDam.    Mr. VanDam has served as our Chief Operating Officer since January 2022. Mr. VanDam brings 30 years of experience leading operations from a diverse range of positions. He worked for over 20 years at companies holding a direct coaching relationship with Toyota implementing the Toyota Production System within the furniture, automotive, and agriculture industries. In August 2018, he began his own consulting practice, VanDam Consulting, LLC. He also served as Vice President of Operations at Crenlo, LLC, a leading manufacturer within the commercial

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cab and enclosure industries, from December 2018 to November 2019. Prior to that, he worked at Heritage Home Group, LLC, a leader in designing, manufacturing, sourcing and retailing home furnishings, from May 2016 to July 2018, holding the positions of Vice President of Business Improvement and Vice President of Contract Furniture Division. He also held multiple positions, including, among others, General Manager of Holland Campus Operations, Executive Account Manager and Director of Operations of Greenhouse Seating Operations, at Herman Miller, Inc., a leading global company that designs, manufactures and distributes interior furnishings, from 2000 to 2016.

Robert D. Barry.    Mr. Barry has been a member of our board of directors since January 2014. He has also served as the Chief Accounting Officer of 1847 Goedeker since July 2021 and previously served as its Chief Financial Officer from January 2019 to July 2021. He also served as the Controller of Neese from July 2017 until our sale of Neese in April 2021. From April 2013 until August 2016, Mr. Barry was Chief Executive Officer and Chief Financial Officer of Pawn Plus Inc., a chain of five retail pawn stores in suburban Philadelphia and one pawn store in northeastern Ohio. Prior to that, Mr. Barry served as Executive Vice President and Chief Financial Officer of Regional Management Corp., a consumer loan company based in Greenville, South Carolina, from March 2007 to January 2013. Prior to joining Regional Management Corp., Mr. Barry was the Managing Member of AccessOne Mortgage Company, LLC in Raleigh, North Carolina, from 1997 to 2007. During this time, he also served as part-time Chief Financial Officer for Patriot State Bank, in Fuquay-Varina, North Carolina, from March 2006 to March 2007 and Nuestro Banco, Raleigh, North Carolina, from July 2006 to March 2007. Prior to his time at AccessOne, Mr. Barry was Executive Vice President and Chief Financial Officer for Regional Acceptance Corporation, a consumer finance company based in Greenville, North Carolina and prior to that he was a financial institutions partner in the Raleigh, North Carolina office of KPMG LLP. Mr. Barry is a Certified Public Accountant licensed in North Carolina and Georgia. We believe Mr. Barry is qualified to serve on our board of directors due to his years of relevant financial and business expertise.

Paul A. Froning.    Mr. Froning has been a member of our board of directors since April 2013. In 2009, Mr. Froning co-founded Focus Healthcare Partners LLC, a Chicago-based private equity investment, advisory and asset management firm targeting the senior housing and healthcare sectors. Prior to that, from February 2008 to October 2009, Mr. Froning was a Managing Director in the private equity department of Fortress Investment Group LLC, a publicly-traded New York-based private investment firm.  Prior to that, Mr. Froning was the Chief Investment Officer and Executive Vice President of Brookdale Senior Living Inc., a publicly-traded affiliate of Fortress Investment Group LLC, from 2005 to 2008.  Previously, Mr. Froning held senior investment positions at the private equity investment arms of Lazard Group LLC and Security Capital Group, prior to its acquisition by GE Capital Corp., in addition to investment banking experience at Salomon Brothers, prior to its acquisition by Travelers Group, and the securities subsidiary of Principal Financial Group.  Mr. Froning also serves on the board of directors of 1847 Goedeker. Mr. Froning has a B.A. degree from the University of Notre Dame. We believe Mr. Froning is qualified to serve on our board of directors due to his twenty years of private equity, investment and advisory experience.

Clark R. Crosnoe.    Mr. Crosnoe has been appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part. In 2009, Mr. Crosnoe founded CRC Capital LLC, a registered investment advisor and manager of the CRC Investment Fund LP, a private investment partnership focused on publicly-traded equity securities. As managing member of CRC Capital LLC, Mr. Crosnoe is responsible for strategy, oversight and the day-to-day investment decisions of the fund. The portfolio typically includes investments in the consumer, financial, healthcare, industrial and energy sectors. In 1999, Mr. Crosnoe was a founding employee of Parallel Investment Partners where he was named partner in 2003. As a partner, he was responsible for sourcing, evaluating, structuring, executing and monitoring investments, and also dedicated a substantial portion of his time to marketing activities for the firm. Mr. Crosnoe began his career in investment banking at Wasserstein Perella & Co. and also gained valuable experience at multi-billion dollar hedge fund HBK Investments. Mr. Crosnoe also serves on the board of directors of 1847 Goedeker. Mr. Crosnoe holds undergraduate degrees from the University of Texas at Austin and earned an MBA from Harvard Business School in 1996. We believe Mr. Crosnoe is qualified to serve on our board due to his approximately 24 years of private and public investment and advisory experience.

Tracy S. Harris.    Ms. Harris has been appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part. Ms. Harris is an accomplished executive, board member, and advisor with over 20 years of broad operational and finance experience. Since July 2021, Ms. Harris has served as Executive Vice President, Chief Financial Officer and Treasurer of MIB Group, LLC, a membership corporation owned by insurance companies in the US and Canada. Prior to that, she was the Chief Financial Officer for UMGC\Ventures, the venture fund that invests in education technology companies for the University of Maryland Global Campus, from December 2019 to May 2021, and the Chief Financial Officer and Chief Business Officer of

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Bullis LLC, an independent college preparatory K-12 day school, from July 2015 to November 2019. She previously worked on the financial turnarounds of Philadelphia and the District of Columbia as a municipal finance expert. She also worked in the heavily regulated financial services industries for over ten years in banking and insurance. Since April 2019, she has served as chair of the audit and compliance committee and on the investment and benefits committees of the District of Columbia Retirement Board, where she evaluates private equity, real estate, alternative assets and international investments for the $11 billion pension fund and monitors state and regulatory compliance, as well as portfolio performance and asset allocation. Since October 2020, she has served as a board member of CareFirst Blue Cross Blue Shield, and its subsidiary companies, where serves on the finance, audit and governance committees. Previously, she served on the boards and committees (finance, investment and audit) of multiple companies. Ms. Harris is a Governance Fellow with the National Association of Corporate Directors, or NACD, since 2015 and was the first recipient of the Washington Business Journal’s Financial Excellence Award in 2007. After earning an MPA from the University of Pennsylvania, Mr. Harris completed the General Management Program at Harvard Business School. She received an MBA from St. Louis University and a BS in Marketing from Fontbonne University. We believe that Ms. Harris is qualified to serve on our board due to her extensive finance and governance experience.

Glyn C. Milburn.    Mr. Milburn has been appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part.  Since February 2016, Mr. Milburn has served as a Partner at Jimmy Blackman & Associates, a full-service Government and Public Affairs firm, where he is responsible for business strategy, client management, communications and campaign management for a client portfolio comprised of large public safety labor unions, banking/finance companies, and hotel operators across the State of California. From April 2013 to January 2016, Mr. Milburn served as a Special Assistant in the City of Los Angeles where he held two positions in the City of Los Angeles, one in the Office of Los Angeles Mayor Eric Garcetti’s Office of Economic Development and another in the Office of Los Angeles Councilman Dennis Zine.  From August 2012 to March 2013, Mr. Milburn co-Founded Provident Investment Advisors LLC, a special investment vehicle for energy, technology and healthcare ventures, where he served as Managing Member.  Mr. Milburn also serves on the board of directors of 1847 Goedeker. Mr. Milburn holds a B.A. degree in Public Policy from Stanford University.  We believe Mr. Milburn is qualified to serve on our board of directors due to his valuable background in policy development, regulatory and strategic planning experience.

Lawrence X. Taylor.    Mr. Taylor has been appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part. As a C-level executive, advisor, and board member with more than 30 years of business experience, he has guided organizations through complex restructurings, acquisitions, corporate development activities and capital transactions totaling over $20 billion. His experience spans start-ups to private companies to publicly traded companies and includes diverse companies across multiple industries including casino gaming, hospitality, manufacturing, aviation, real estate, retail, and healthcare. Since 2004, Mr. Taylor has served as President of Taylor Strategy Group, a business consulting practice he owns and operates. From 2004 to 2013, Mr. Taylor was a Partner and Managing Director with Odyssey Capital Group, a Phoenix based business. Since 2021, he has served on the board of Item 9 Labs, a public company, where he serves as the lead independent director and on the audit committee (as chair), compensation committee (as chair) and nominating and governance committee. Since 2021, he has also served on the board and finance committee of Two Second Media. From 2018 to present, Mr. Taylor has served on the board of Barrie House Coffee, and from 2014 to present, he has served on the board of CLP Holdings III, LLC. At Barrie House Coffee, he chairs the M&A committee and serves on the strategic planning committee. Previously, he served on the boards and committees (M&A, strategic planning, restructuring, finance and compensation) of multiple companies. Mr. Taylor is an NACD Board Leadership Fellow. Additionally, he was recognized as a “Director to Watch 2020” by the Private Company Director Magazine. Mr. Taylor holds a Bachelor of Science degree in Finance from Louisiana Tech University. We believe that Mr. Taylor is qualified to serve on our board due to his deep financial expertise, strategy, and governance experience.

Our directors currently have terms which will end at our next annual meeting of the shareholders or until their successors are elected and qualify, subject to their prior death, resignation or removal. Officers serve at the discretion of the board of directors.

Pursuant to our operating agreement, as holder of the allocation shares, our manager has the right to appoint one director to our board of directors for every four members constituting the entire board of directors. Any such director will not be required to stand for election by the shareholders. Ellery W. Roberts is the designated director of our manager. Otherwise, there is no arrangement or understanding between any director or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee or officer.

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Family Relationships

There are no family relationships among any of our officers or directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years:

•        been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

•        had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

•        been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

•        been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

•        been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

•        been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Corporate Governance

Governance Structure

Currently, our Chief Executive Officer is also our Chairman. Our board believes that, at this time, having a combined Chief Executive Officer and Chairman is the appropriate leadership structure for our company. In making this determination, the board considered, among other matters, Mr. Robert’s experience and tenure of having founded our company in 2013, and believed that Mr. Roberts is highly qualified to act as both Chairman and Chief Executive Officer due to his experience, knowledge, and personality. Among the benefits of a combined Chief Executive Officer/Chairman considered by the board is that such structure promotes clearer leadership and direction for our company and allows for a single, focused chain of command to execute our strategic initiatives and business plans.

The Board’s Role in Risk Oversight

The board of directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board’s oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.

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While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration; however, much of the work is delegated to committees, which will meet regularly and report back to the full board. The audit committee oversees risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee evaluates risk associated with management decisions and strategic direction.

Independent Directors

NYSE American’s rules generally require that a majority of an issuer’s board of directors must consist of independent directors. Our board of directors currently consists of three (3) directors, Ellery W. Roberts, Robert D. Barry and Paul A. Froning, of whom only Mr. Froning is independent within the meaning of NYSE American’s rules. We have entered into independent director agreements with Clark R. Crosnoe, Tracy S. Harris, Glyn C. Milburn and Lawrence X. Taylor, pursuant to which they have been appointed to serve as independent directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part. As a result of these appointments, we anticipate that our board of directors will consist of seven (7) directors, five (5) of whom will be independent within the meaning of NYSE American’s rules.

Committees of the Board of Directors

Our board has established an audit committee, a compensation and nominating and corporate governance committee, each with its own charter to be approved by the board. Upon completion of this offering, we intend to make each committee’s charter available on our website at www.1847holdings.com.

In addition, our board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.

Audit Committee

Paul A. Froning, Clark R. Crosnoe and Tracy S. Harris, each of whom satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and NYSE American’s rules, have been appointed to serve on our audit committee, effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part, with Mr. Froning serving as the chairman. Messrs. Froning and Crosnoe qualify as “audit committee financial experts.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.

The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; (viii) reviewing and approving the calculation of profit allocation due to the holders our allocation shares when due and payable; (ix) reviewing conflicts of interests that may arise between our company and our manager; (x) reviewing and approving related party transactions; and (xi) reviewing and assessing annually the audit committee’s performance and the adequacy of its charter.

Compensation Committee

Paul A. Froning, Clark R. Crosnoe and Lawrence X. Taylor, each of whom satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and NYSE American’s rules, have been appointed to serve on our compensation committee, effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part, with Mr. Crosnoe serving as the chairman. The members of the compensation committee are also “non-employee directors” within the meaning of Section 16 of the Exchange Act. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.

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The compensation committee is responsible for, among other things: (i) reviewing and approving the compensation paid to our manager; (ii) reviewing and approving the remuneration of our executive officers; (iii) determining the compensation of our independent directors; (iv) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (v) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.

Nominating and Corporate Governance Committee

Tracy S. Harris, Glyn C. Milburn and Lawrence X. Taylor, each of whom satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and NYSE American’s rules, have been appointed to serve on our nominating and corporate governance committee, effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part, with Mr. Milburn serving as the chairman. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.

The nominating and corporate governance committee is responsible for, among other things: (i) recommending the number of directors to comprise our board; (ii) identifying and evaluating individuals qualified to become members of the board and soliciting recommendations for director nominees from the chairman and chief executive officer of our company; (iii) recommending to the board the director nominees for each annual stockholders’ meeting; (iv) recommending to the board the candidates for filling vacancies that may occur between annual stockholders’ meetings; (v) reviewing independent director compensation and board processes, self-evaluations and policies; (vi) overseeing compliance with our code of ethics; and (vii) monitoring developments in the law and practice of corporate governance.

The nominating and corporate governance committee’s methods for identifying candidates for election to our board of directors (other than those proposed by our shareholders, as discussed below) will include the solicitation of ideas for possible candidates from a number of sources — members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.

In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate’s experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which we operate.

Our operating agreement provides that holders of common shares seeking to bring business before an annual meeting of members or to nominate candidates for election as directors at an annual meeting of members must provide notice thereof in writing to our company not less than 120 days and not more than 150 days prior to the anniversary date of the preceding year’s annual meeting of members or as otherwise required by requirements of the Exchange Act. In addition, the holders of common shares furnishing such notice must be a holder of record on both (i) the date of delivering such notice and (ii) the record date for the determination of members entitled to vote at such meeting. The operating agreement specifies certain requirements as to the form and content of a member’s notice. These provisions may preclude members from bringing matters before members at an annual meeting or from making nominations for directors at an annual or special meeting.

Code of Ethics

We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. This code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code.

We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.

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EXECUTIVE COMPENSATION

Summary Compensation Table — Years Ended December 31, 2021 and 2020

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

Name and Principal Position	Year	Salary ($)	Bonus ($)	All Other Compensation ($)	Total ($)
Ellery W. Roberts, Chief Executive Officer(1)	2021	—	—	522,450	522,450
	2020	—	—	304,678	304,678
Jay Amond, former Chief Financial Officer(2)	2021	150,000	—	114,249	264,249
	2020	—	—	—	—

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(1)      Ellery W. Roberts, our Chief Executive Officer and our former Chief Financial Officer from inception until January 14, 2021, is employed by our manager and is seconded to our company. Our manager, and not our company, pays any compensation to Mr. Roberts who is seconded to us under the management services agreement. We do not reimburse our manager for any compensation paid to Mr. Roberts in his capacity as our Chief Executive Officer. We pay our manager a quarterly management fee, and our manager may use the proceeds from the management fee, in part, to pay compensation to Mr. Roberts. For the years ended December 31, 2021 and 2020, the management fee expense for our manager amounted to $981,389 and $503,022, respectively. Mr. Roberts did not receive any compensation as an employee of our manager for the years ended December 31, 2021 and 2020. However, Mr. Roberts, as a holder of limited liability company interests in our manger, received $522,450 and $304,678 for the years ended December 31, 2021 and 2020, respectively, as a result of distributions from our manger to its interest holders, which is included in “Other Compensation” in the table above. See “The Manager — Overview of Our Manager” for information regarding the ownership of our manager.

(2)      Jay Amond served as our Chief Financial Officer from January 14, 2021 until September 5, 2021. “Other Compensation” for Mr. Amond includes severance from September 5, 2021 to December 31, 2021 pursuant to the separation agreement described below.

Employment Agreements

As noted above, Mr. Roberts is not an employee of our company.

On January 14, 2021, we entered into an employment agreement with Jay Amond, our former Chief Financial Officer, setting forth the terms of Mr. Amond’s employment. Pursuant to the terms of the employment agreement, we agreed to pay Mr. Amond an annual base salary of $240,000, consisting of $80,000 for each of our three portfolio companies (Asien’s, Kyle’s and Wolo), up to a maximum aggregate annual base salary of $300,000 upon the addition of a fourth portfolio company. He was also eligible for an annual incentive bonus of up to 50% of base salary based on earnings targets to be determined by our board of directors. Mr. Amond was also eligible to participate in all employee benefit plans, including health insurance, commensurate with his position. Mr. Amond’s employment was at-will and could be terminated by us at any time or by Mr. Amond upon 90 days’ notice. Pursuant to the employment agreement, if we terminated Mr. Amond’s employment without cause, he was entitled to six months of base compensation. The employment agreement contains customary confidentiality provisions and restrictive covenants prohibiting Mr. Amond from (i) owning or operating a business that competes with our company during the term of his employment and for a period of one year following the termination of his employment or (ii) soliciting our employees for a period of two years following the termination of his employment.

On September 6, 2021, we entered into a separation agreement and release with Mr. Amond providing for the separation of his employment effective as of September 5, 2021. Under the separation agreement, we agreed, subject to Mr. Amond’s compliance with each and every provision of the separation agreement, to pay Mr. Amond a severance payment equal to nine (9) months of his base salary at his current level ($240,000 per year), less applicable statutory deductions and authorized withholdings, payable in equal installments on our regular payroll dates during the period commencing on September 6, 2021 and ending on June 6, 2022. We also agreed to continue to pay our share of Mr. Amond’s health care costs under all medical, dental or vision plans in which Mr. Amond participates for a period beginning as of October 1, 2021 and ending as of December 31, 2021; provided, however, that Mr. Amond will be

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responsible for the full amount of the applicable employee contribution as determined and periodically modified by us. The separation agreement includes a customary release of claims by Mr. Amond in favor of our company and its affiliates, as well as customary confidentiality and non-disparagement provisions.

Outstanding Equity Awards at Fiscal Year-End

No executive officer named above had any unexercised options, stock that has not vested or equity incentive plan awards outstanding as of December 31, 2021.

Additional Narrative Disclosure

Retirement Benefits

We have not maintained, and do not currently maintain, a defined benefit pension plan, nonqualified deferred compensation plan or other retirement benefits.

Potential Payments Upon Termination or Change in Control

As described under “— Employment Agreements” above, Mr. Amond is entitled severance as described in the separation agreement.

Director Compensation

No member of our board of directors received any compensation for his services as a director during the fiscal year ended December 31, 2021.

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CURRENT RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following includes a summary of transactions since the beginning of our 2020 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation” above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

Transactions with Our Manager

Our Chief Executive Officer, Ellery W. Roberts, controls our manager. Our relationship with our manager is governed principally by the following two agreements: (1) the management services agreement and offsetting management services agreements relating to the management services our manager will perform for us and the businesses we own and the management fee to be paid to our manager in respect thereof; and (2) our operating agreement setting forth our manager’s rights with respect to the allocation shares it owns, including the right to receive payments of profit allocation from us and our manager’s right to cause us to purchase the allocation shares it owns. Our manager has also entered into an offsetting management services agreement with 1847 Asien, 1847 Cabinet and 1847 Wolo and we expect that our manager will enter into offsetting management services agreements and transaction services agreements with our future businesses directly. See “The Manager for detailed descriptions of these agreements.

The management fee expense for our manager amounted to $275,000 and $260,000 for the three months ended March 31, 2022 and 2021, respectively, and $981,389 and $253,022 for the years ended December 31, 2021 and 2020, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management Fees” for more information regarding the management fees.

As of March 31, 2022, December 31, 2021 and December 31, 2020, our manager has funded $74,928, $74,928 and $71,358, respectively, in related party advances to our company. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

Our manager owns certain intellectual property relating to the term “1847.” Pursuant to the management services agreement, our manager has granted us a non-exclusive, royalty free right to use the following intellectual property in connection with our business and operations or as may be required to comply with applicable law: (i) 1847 Holdings LLC; (ii) 1847 Partners LLC; (iii) www.1847holdings.com; and (iv) www.1847partners.com. We are permitted to sublicense the use of this intellectual property to any of our subsidiaries to use in connection with their business or as may be required by law. Our company and any businesses that we acquire must cease using the intellectual property described above entirely in their businesses and operations within 180 days of our termination of the management services agreement. The sublicense provisions of the management services agreement would require our company and its businesses to change their names to remove any reference to the term “1847” or any reference to the intellectual property licensed to them by our manager. This also would require us to create and market a new name and expend funds to protect that name.

On January 3, 2018, we issued a grid promissory note to our manager in the initial principal amount of $50,000. The note provided that we could request additional advances from our manager up to an aggregate additional amount of $150,000. On December 7, 2020, parties amended and restated the note for a new principal amount of $56,900 and maturity date of December 7, 2021. Interest on the note accrued on the unpaid portion of the principal amount and the outstanding portion of all advances at a fixed rate of 8% per annum. The note was unsecured and contained customary events of default. As of December 31, 2020, our manager had advanced $56,900 of the note and it had accrued interest of $25,159. On October 8, 2021, the grid note was repaid in full and terminated.

Transactions with Significant Shareholder

On September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, who are officers of Kyle’s and significant shareholders of our company. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which

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will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

A portion of the purchase price for the acquisition of Kyle’s on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to Stephen Mallatt, Jr. and Rita Mallatt. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a description of this note.

Other Transactions

From time to time, we have received advances from Mr. Roberts to meet short-term working capital needs. As of March 31, 2022, December 31, 2021 and December 31, 2020, a total of $118,834 in advances are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common shares (post-split) as of 2022 for (i) each of our named executive officers and directors; (ii) all of our named executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner of more than 5% of our outstanding common shares. The following table assumes that the underwriters have not exercised the over-allotment option.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares that such person or any member of such group has the right to acquire within sixty (60) days. For purposes of computing the percentage of outstanding shares of our common shares held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of , 2022 are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person. The share ownership numbers after the offering for the beneficial owners indicated below exclude any potential purchases that may be made by such persons in this offering.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o our company, 590 Madison Avenue, 21st Floor, New York, NY 10022.

Name of Beneficial Owner	Common Shares Beneficially Owned Prior to this Offering(1)			Common Shares Beneficially Owned After this Offering(2)
	Shares	%		Shares	%
Ellery W. Roberts, Chairman and Chief Executive Officer(3)	364,000	29.15	%	364,000	9.65	%
Vernice L. Howard, Chief Financial Officer	—	—		—	—
Eric VanDam, Chief Operating Officer	—	—		—	—
Robert D. Barry, Director	4,375	*		4,375	*
Paul A. Froning, Director	15,000	1.20	%	15,000	*
Clark R. Crosnoe, Director Nominee	—	—		—	—
Tracy S. Harris, Director Nominee	—	—		—	—
Glyn C. Milburn, Director Nominee	—	—		—	—
Lawrence X. Taylor, Director Nominee	—	—		—	—
All executive officers and directors (9 persons)	383,375	30.70	%	383,375	10.17	%
Edward J. Tobin(4)	250,250	20.04	%	250,250	6.64	%
Stephen Mallatt, Jr. and Rita Mallatt(5)	175,000	14.01	%	328,312	8.71	%
Avi Geller(6)	116,401	9.32	%	116,401	3.09	%
Louis A. Bevilacqua(7)	84,375	6.76	%	314,621	8.34	%
Jose Garcia-Rendon(8)	—	—		323,077	8.57	%
Steven Parkey(9)	—	—		323,077	8.57	%

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*        Less than 1%

(1)      Based on 1,298,831 common shares (post-split) issued and outstanding as of , 2022.

(2)      Based on 3,770,851 common shares (post-split) issued and outstanding after this offering.

(3)      Does not include 58,234 series B senior convertible preferred shares and warrants for the purchase of 14,560 common shares (post-split) held by Mr. Roberts. As described in more detail below under “Description of Securities,” our series B senior convertible preferred shares and warrants contain ownership limitations, such that we shall not effect any conversion of these securities to the extent that after giving effect to the issuance of common shares upon conversion thereof, such 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 such common shares, which such limitation may be waived by us upon no fewer than 61 days’ prior notice. As a result, these securities are not currently convertible within 60 days.

(4)      The address of Edward J. Tobin is 235 West End Ave, #17B, New York, NY 10023.

(5)      The number of shares outstanding after this offering includes 153,312 common shares (post-split) to be issued upon the conversion of $797,221 of the vesting promissory note issued to Stephen Mallatt, Jr. and Rita Mallatt at the effective time of the registration statement of which this prospectus forms a part (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus). The address of Stephen Mallatt, Jr. and Rita Mallatt is 2950 E. Lucca Dr., Meridian, ID 83642.

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(6)      Includes 114,393 common shares (post-split) held by Leonite Capital LLC and 2,008 common shares (post-split) held by Leonite LLC. Leonite Capital LLC also holds 1,079,394 series A senior convertible preferred shares and warrants for the purchase of 1,439,614 common shares (post-split) and Leonite LLC also holds 15,152 series A senior convertible preferred shares and warrants for the purchase of 32,766 common shares (post-split). Leonite Capital LLC also holds a secured convertible promissory note in the principal amount of $100,000, as described under “Description of Securities” below. Avi Geller is the Chief Investment Officer of Leonite Capital LLC and Leonite LLC and has voting and investment power over the securities held by them. Mr. Geller disclaims beneficial ownership of the shares held by Leonite Capital LLC and Leonite LLC except to the extent of his pecuniary interest, if any, in such shares. As described in more detail below under “Description of Securities,” our series A senior convertible preferred shares, warrants and secured convertible promissory notes contain ownership limitations, such that we shall not effect any conversion of these securities to the extent that after giving effect to the issuance of common shares upon conversion thereof, such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% in the case of Leonite Capital LLC) of the number of common shares outstanding immediately after giving effect to the issuance of such common shares, which such limitation may be waived by us upon no fewer than 61 days’ prior notice.

(7)      Includes 84,375 common shares (post-split) held by Mr. Bevilacqua and 230,246 common shares (post-split) to be issued to Bevilacqua PLLC upon the conversion of $1,197,280 of the accounts payable owed to it at the effective time of the registration statement of which this prospectus forms a part (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus). Mr. Bevilacqua is the Managing Member of Bevilacqua PLLC and has voting and investment power over the shares held by it. Mr. Bevilacqua disclaims beneficial ownership of such shares except to the extent of his pecuniary interest, if any, in such shares. The address of Louis A. Bevilacqua is 1050 Connecticut Ave., NW, Suite 500, Washington, DC 20036.

(8)      The number of shares outstanding after this offering includes 323,077 common shares (post-split) to be issued upon the conversion of $1,680,000 of the 6% subordinated convertible promissory note issued to Jose Garcia-Rendon at the effective time of the registration statement of which this prospectus forms a part (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus). The address of Jose Garcia-Rendon is 1763 Back Country Rd., Reno, NV 89521.

(9)      The number of shares outstanding after this offering includes 323,077 common shares (post-split) to be issued upon the conversion of $1,680,000 of the 6% subordinated convertible promissory note issued to Steven Parkey at the effective time of the registration statement of which this prospectus forms a part (based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus). The address of Steven Parkey is 332 E. 7th Street, Unit 1, Reno, NV 89512.

We do not currently have any arrangements which if consummated may result in a change of control of our company.

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DESCRIPTION OF SECURITIES

General

The following is a summary of the material terms of our shares. The operating agreement provides for the issuance of our shares, the terms relating to distributions with respect to our shares and the voting rights of holders of our shares. In addition, the terms of the series A senior convertible preferred shares are governed by an amended and restated share designation, dated March 26, 2021, as amended, and the terms of the series B senior convertible preferred shares are governed by a share designation, dated February 17, 2022.

The following description is subject to the provisions of the Delaware Limited Liability Company Act. Certain provisions of the operating agreement are intended to be consistent with the General Corporation Law of the State of Delaware, and the powers of our company, the governance processes and the rights of the holders of our shares are generally intended to be similar in many respects to those that would exist if our company was a Delaware corporation under the General Corporation Law of the State of Delaware, with certain exceptions.

The statements that follow are subject to and are qualified in their entirety by reference to all of the provisions of the operating agreement and the share designations, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part.

We are authorized to issue up to 500,000,000 common shares, 4,450,460 series A senior convertible preferred shares, 583,334 series B senior convertible preferred shares and 1,000 allocation shares. As of the date of this prospectus, we had 1,298,831 common shares (post-split), 1,684,849 series A senior convertible preferred shares and 481,566 series B senior convertible preferred shares issued and outstanding. In connection with the formation of our company, our manager acquired 100% of the allocation shares for a capital contribution of $1,000 by our manager. Other than the allocation shares held by our manager, our company will not be authorized to issue any other allocation shares.

Common Shares

Distribution Rights.    Holders of common shares are entitled to receive ratably those distributions, if any, as may be declared from time to time by the board of directors out of legally available funds.

Liquidation Rights.    Upon our liquidation, dissolution or winding up in accordance with the terms of the operating agreement, the then holders of common shares will be entitled to share in the assets of our company legally available for distribution, following payment to creditors and our series A senior convertible preferred shares, in accordance with the positive balance in such holders’ tax-based capital accounts required by the operating agreement, after giving effect to all contributions, distributions and allocations for all periods.

Voting Rights.    The holders of common shares are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders. Under the operating agreement, any action to be taken by vote of shareholders other than for election of directors shall be authorized by the affirmative vote of the majority of shares present or represented by proxy and entitled to vote. Directors are elected by a plurality of votes cast.

Other Rights.    Holders of common shares have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common shares.

Series A Senior Convertible Preferred Shares

Ranking.    The series A senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series A senior convertible preferred shares; (ii) on parity with our series B senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against our company and each other class or series that is expressly made senior to the series A senior convertible preferred shares.

Dividend Rights.    Holders of series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($2.00 per share, subject to adjustment). 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

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date in cash or common shares at our discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common shares on our principal trading market, or the VWAP, 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 we 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.

Liquidation Rights.    Subject to the rights of our creditors and the holders of any senior securities or parity securities (in each case, as defined in the share designation), upon any liquidation of our company or its subsidiaries, before any payment or distribution of the assets of our 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 our company, including our common shares and allocation shares, 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, the assets, 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, 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 it holds any series A senior convertible preferred shares, voting as a separate class (which we refer to herein as the Requisite Holders), 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 such holders shall be required prior to our 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 our 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 we 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 ($2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $7.00 per share (post-split); 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. 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 us.

Redemption Rights.    We 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. On October 12, 2021, we redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645.

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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 our assets, mergers, consolidations or similar transactions. In addition, the share designation provides that if, but only if, the Requisite Holders provide us 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 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 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, we are 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 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. We are 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 such 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 initial 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 us upon the acquisition of Kyle’s and Wolo, respectively.

Other Rights.    Holders of series A senior convertible preferred shares have no preemptive or subscription rights for additional securities of our company.

Series B Senior Convertible Preferred Shares

Ranking.    The series B senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series B senior convertible preferred shares; (ii) on parity with our series A senior convertible preferred shares and each other class or series that is not expressly subordinated or

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made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against our company and each other class or series that is expressly made senior to the series B senior convertible preferred shares.

Dividend Rights.    Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 our discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the VWAP for the common shares our 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; provided further, that we 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 $2.70 or higher.

Liquidation Rights.    Subject to the rights of our creditors and the holders of any senior securities or parity securities (in each case, as defined in the share designation), upon any liquidation of our company or its subsidiaries, before any payment or distribution of the assets of our company (whether capital or surplus) shall be made to or set apart for the holders of securities that are junior to the series B senior convertible preferred shares as to the distribution of assets on any liquidation of our company, including our common shares and allocation shares, each holder of outstanding series B 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, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B 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, then such assets, or the proceeds thereof, shall be distributed among the holders of series B senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

Voting Rights.    The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the share designation or (ii) our creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

Conversion Rights.    Each series B 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $12.00 per share (post-split); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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 us.

Redemption Rights.    We may redeem in whole (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms of the series B senior convertible preferred shares.

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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 our assets, mergers, consolidations or similar transactions. In addition, the share designation provides that the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

•        On the first day of the 12th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). In addition, if any legislation or rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act for convertible securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible securities like the series B 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.

Registration Rights.    We are required to file a registration statement with the SEC under the Securities Act covering the resale of all shares issuable upon conversion of the series B senior convertible preferred shares and exercise of the warrants issued in connection therewith with thirty (30) days after the closing and use our commercially reasonable efforts to have the registration statement declared effective by the SEC as soon as practicable, but in no event later than (i) ninety (90) days after the closing of the unit offering in the event that the SEC does not review the registration statement, or (ii) one hundred fifty (150) days after the closing in the event that the SEC reviews the registration statement (but in any event, no later than two (2) business days from the SEC indicating that it has no further comments on the registration statement).

Allocation Shares

Distribution Rights.    Under the terms of the operating agreement, we will pay a profit allocation to our manager, as holder of the allocation shares. See “The Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for a description of the profit allocation to be paid to our manager and an example of the calculation of the profit allocation.

Liquidation Rights.    Upon a liquidation of our company, any accrued, but unpaid profit allocation due to our manager as a result of our manager’s ownership of the allocation shares would be paid to our manager before any payment is made of any amounts due upon a liquidation to the holders of our common shares but after payment is made to the holders of our series A senior convertible preferred shares and series B senior convertible preferred shares.

Voting Rights.    The operating agreement provides that the holder of allocation shares will not be entitled to any voting rights, except that the holder of the allocation shares will have:

•        voting rights in connection with the merger or consolidation of our company, the sale, lease or exchange of all or substantially all of our assets and certain other business combinations or transactions;

•        a veto right with respect to the dissolution of our company in certain circumstances;

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•        a veto right with respect to the amendment of the provisions providing for distributions to the holders of allocation shares;

•        a veto right to any amendment to the provisions entitling the holders of allocation shares to appoint and remove directors who will serve on our board of directors;

•        a veto right to any amendment to the provision regarding the quorum and voting requirements for board meetings;

•        a veto right to any amendment to the provisions regarding the indemnification and liability of directors;

•        a veto right with respect to any amendment of the provision of the operating agreement governing amendments thereof; and

•        a veto right with respect to any amendment that would adversely affect the holder of allocation shares.

In addition, the holder of the allocation shares has the right to appoint one (1) director to our board of directors for every four (4) members constituting the entire board of directors. Any director appointed to our board of directors by the holder of the allocation shares will not be required to stand for election by the holders of our common shares and will not have any special voting rights.

Other Rights.    Holders of allocation shares have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the allocation shares.

Warrants

Unit Offering Warrants

In connection with the series A unit offering described elsewhere in this prospectus, we issued warrants for the purchase of an aggregate of 2,139,656 common shares (post-split), of which 2,030,021 common shares (post-split) remain outstanding, which are exercisable within three years at an exercise price of $5.20 per common share (post-split) (subject to adjustment, including a full ratchet antidilution adjustment), and may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable. The antidilution provision of these warrants is a so-called “exploding” full ratchet antidilution provision because if we issue shares (except in certain defined scenarios) at a price below the then current exercise price, the exercise price would be re-set to such new price and the number of shares underlying the warrants would be increased in the same proportion as the exercise price decrease. If the public offering price is less than $5.20 per share, the exercise price of these warrants will be reduced to such public offering price and the number of common shares underlying these warrants will be increased. This adjustment would occur at the closing of this offering.

In connection with the series B unit offering described elsewhere in this prospectus, we issued warrants for the purchase of an aggregate of 120,397 common shares (post-split), which are exercisable within three years at an exercise price of $5.20 per common share (post-split) (subject to adjustment, including a price based antidilution adjustment), and may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable. These warrants do not contain an exploding antidilution feature. Instead, if we issue shares (except in certain defined scenarios) at a price below the then current exercise price, the exercise price would be re-set to such new price, but the number of common shares underlying the warrants would not increase.

We may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) our company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of our common shares exceeds 200% of the exercise price, as adjusted and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period.

We may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.

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The warrants also contain an ownership limitation, such that we shall not effect any exercise of any warrant, and the holder shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to issuance of common shares upon exercise such warrant, such holder, together with its affiliates, and any other persons acting as a group together with such holder or any of 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 issuable upon exercise of such warrant. Upon no fewer than 61 days’ prior notice to us, a purchaser may increase or decrease such beneficial ownership limitation provisions and any such increase or decrease will not be effective until the 61st day after such notice is delivered to us.

Other Warrants

October 8, 2021, we issued to Leonite a five-year warrant for the purchase of 62,500 common shares (post-split) with an exercise price of $0.04 per share (post-split) and a five-year warrant for the purchase of 240,385 common shares (post-split) with an exercise price of $5.20 per share (post-split). The exercise price is subject to standard adjustments, including a full ratchet antidilution adjustment, and the warrants may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable. The antidilution provision of these warrants is a so-called “exploding” full ratchet antidilution provision because if we issue shares (except in certain defined scenarios) at a price below the then current exercise price, the exercise price would be re-set to such new price and the number of shares underlying the warrants would be increased in the same proportion as the exercise price decrease. If the public offering price is less than $5.20 per share, the exercise price of these warrants will be reduced to such public offering price and the number of common shares underlying these warrants will be increased. This adjustment would occur at the closing of this offering.

On July 8, 2022, we issued to Mast Hill a five-year warrant for the purchase of 100,000 common shares (post-split) at an exercise price of $6.00 per share (post-split). The exercise price is subject to standard adjustments, including a price based antidilution adjustment, and the warrants may be exercised on a cashless basis if the market price of our common shares is greater than the exercise price.

All of these warrants contains an ownership limitation, such that we shall not effect any exercise of any warrant, and the holder shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to issuance of common shares upon exercise such warrant, such 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 issuable upon exercise of such warrant. In the case of the warrant issued to Leonite, upon no fewer than 61 days’ prior notice to us, it may increase or decrease such beneficial ownership limitation provisions (up to a maximum of 9.99%) and any such increase or decrease will not be effective until the 61st day after such notice is delivered to us.

Convertible Promissory Notes

On October 8, 2021, we issued to two institutional investors, including Leonite, secured convertible promissory notes in the aggregate principal amount of $24,860,000. 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. 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 our common shares at a conversion price equal to $5.20 (post-split) (subject to standard adjustments, including a full ratchet antidilution adjustment).

On July 8, 2022, we issued to Mast Hill a promissory note in the principal amount of $600,000, which includes an original issue discount in the amount of $60,000. The note bears interest at a rate of 12% per annum and matures on July 8, 2023; provided that any principal amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16% per annum or the maximum amount permitted by law from the due date thereof until the same is paid. The note is convertible into common shares at the option of the holder at any time on or following the date that an event of default (as defined in the note) occurs under the note at a conversion price of $5.20 (post-split) (subject to adjustment, including a price based antidilution adjustment).

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The foregoing notes contain a beneficial ownership limitation, which provides that we 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. In the case of the secured convertible promissory notes, upon no fewer than 61 days’ prior notice to us, 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 61st day after such notice is delivered to us.

Exchangeable Promissory Notes

On October 8, 2021, our subsidiary 1847 Cabinet issued 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345 to the sellers of High Mountain and Innovative Cabinets. 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. The notes are convertible into shares of common stock of 1847 Cabinet. In addition, on October 8, 2021, we entered into an exchange agreement with the sellers, pursuant to which we granted them and their permitted assigns the right to exchange all of the principal amount and accrued but unpaid interest under the notes as may be the outstanding from time to time or any portion thereof for a number of our common shares 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 our common shares on the primary national securities exchange or over-the-counter market on which our common shares are traded over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) $10.00 (post-split) (subject to equitable adjustments for stock splits, stock combinations, recapitalizations and similar transactions).

On July 26, 2022, we entered into conversion agreements with the holders of the 6% subordinated convertible promissory notes, pursuant to which such holders agreed to convert an aggregate of $3,360,000 of the notes into our common shares at a conversion price equal to the public offering price at the effective time of the registration statement of which this prospectus forms a part. Based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus, we will issue an aggregate of 646,154 common shares (post-split) upon conversion of these notes.

Agreement to be Bound by our Operating Agreement; Power of Attorney

By purchasing our shares, you will be admitted as a member of our company and will be deemed to have agreed to be bound by the terms of the operating agreement. Pursuant to the operating agreement, each shareholder and each person who acquires a share from a shareholder grants to certain of our officers (and, if appointed, a liquidator) a power of attorney to, among other things, execute and file documents required for our qualification, continuance or dissolution. The power of attorney also grants certain of our officers the authority to make certain amendments to, and to make consents and waivers under and in accordance with, our operating agreement.

Ratification of Agreements

The operating agreement provides that each holder, by acquiring shares, ratifies and confirms the various agreements entered into by us, including but not limited to, the management services agreement, the supplemental put provision of the operating agreement, and that the execution of any of these agreements does not constitute a breach of any duty existing under the operating agreement or otherwise existing at law, in equity or otherwise by any persons, including our manager, approving, negotiating or executing such agreements on our behalf.

Waiver of Jury Trial

Our operating agreement provides that, to the extent permitted by law, holders of common shares waive the right to a jury trial of any claim they may have against us arising out of or relating to our operating agreement, including any claim under the U.S. federal securities laws. If we opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable under the facts and circumstances of that case in accordance with applicable case law. See “Risk Factors — Risks Related to This Offering and Ownership of Our Common Shares — Holders of our common shares may not be entitled to a jury trial with respect to claims arising under our operating agreement, which could result in less favorable outcomes to the plaintiffs in any such action.”

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Election by Our Company

The operating agreement provides that our board of directors may, without the vote of holders of our shares, cause our company to elect to be treated as a corporation for United States federal income tax purposes if the board receives an opinion from a nationally recognized financial advisor to the effect that our market valuation is expected to be significantly lower as a result of our continuing to be treated as a partnership for United States federal income tax purposes than if our company instead elected to be treated as a corporation for United States federal income tax purposes.

Amendment of the Operating Agreement

The operating agreement may be amended by a majority vote of our board of directors, except that amending the following provisions requires an affirmative vote of at least a majority of the then outstanding common shares:

•        the purpose or powers of our company;

•        an increase in the number of common shares authorized for issuance;

•        the distribution rights of the common shares;

•        the voting rights relating to the common shares;

•        the hiring of a replacement manager following the termination of the management services agreement;

•        the merger or consolidation of our company, the sale, lease or exchange of all or substantially all of our assets and certain other business combinations or transactions;

•        the right of our shareholders to vote on the dissolution, winding up and liquidation of our company; and

•        the provision of the operating agreement governing amendments thereof.

Anti-Takeover Provisions

Certain provisions of the management services agreement and the operating agreement may make it more difficult for third parties to acquire control of our company by various means. These provisions could deprive our shareholders of opportunities to realize a premium on the shares owned by them. In addition, these provisions may adversely affect the prevailing market price of our shares. These provisions are intended to:

•        protect our manager and its economic interests in our company;

•        protect the position of our manager and its rights to manage the business and affairs of our company under the management services agreement;

•        enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by our board of directors;

•        discourage certain types of transactions which may involve an actual or threatened change in control of our company;

•        discourage certain tactics that may be used in proxy fights;

•        encourage persons seeking to acquire control of our company to consult first with our board of directors to negotiate the terms of any proposed business combination or offer; and

•        reduce the vulnerability of our company to an unsolicited proposal for a takeover that does not contemplate the acquisition of all of the outstanding shares or that is otherwise unfair to our shareholders.

Anti-Takeover Effects of the Management Services Agreement

The limited circumstances in which our manager may be terminated means that it will be very difficult for a potential acquirer of our company to take over the management and operation of our business. Under the terms of the management services agreement, our manager may only be terminated by us in certain limited circumstances. Furthermore, our manager has the right to resign and terminate the management services agreement upon 120 days’ notice.

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Upon the termination of the management service agreement, seconded officers, employees, representatives and delegates of our manager and its affiliates who are performing the services that are the subject of the management services agreement, will resign their respective position with us and cease to work at the date of our manager’s termination or at any other time as determined by our manager. Any director on our board of directors appointed by the holder of the allocation shares may continue serving on our board of directors subject to our manager’s continued ownership of the allocation shares and subject to such director’s removal by the holder of the allocation shares.

If we terminate the management services agreement, our company and its businesses must cease using the term “1847,” including any trademarks based on the name of our company that may be licensed to them by our manager under a license grant in the management services agreement, entirely in their businesses and operations within 180 days of our termination of the management services agreement. The license grant requires our company and its businesses to change their names to remove any reference to the term “1847” or any reference to trademarks licensed to them by our manager upon termination of the license which would occur upon termination of the management services agreement.

See “The Manager — Termination of Management Services Agreement” for more information about the termination provisions set forth in the management services agreement.

Anti-Takeover Provisions in the Operating Agreement

A number of provisions of the operating agreement also could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from acquiring, control of our company. The operating agreement prohibits the merger or consolidation of our company with or into any limited liability company, corporation, statutory trust, business trust or association, real estate investment trust, common-law trust or any other unincorporated business, including a partnership, or the sale, lease or exchange of all or substantially all of our property or assets unless, in each case, our board of directors adopts a resolution by a majority vote approving such action and unless such action is approved by the affirmative vote of the holders of a majority of each of the outstanding common shares and allocation shares entitled to vote thereon.

In addition, the operating agreement contains provisions based generally on Section 203 of the General Corporation Law of the State of Delaware which prohibits us from engaging in a business combination with an interested holder of our common shares unless such business combination is approved by the affirmative vote of the holders of 662/3% of each of the outstanding common shares and allocation shares, excluding shares held by the interested holder or any affiliate or associate of the interested holder of interests.

Subject to the right of our manager to appoint directors and any successor in the event of a vacancy, the operating agreement authorizes our board of directors to increase the size of the board of directors and to fill vacancies on our board of directors. This provision could prevent a holder of common shares from effectively obtaining an indirect majority representation on our board of directors by permitting the existing board of directors to increase the number of directors and to fill the vacancies with its own nominees. The operating agreement also provides that directors may be removed, with or without cause, only by the affirmative vote of holders of two-thirds of the then outstanding common shares. A director appointed by our manager may only be removed by our manager, as holder of the allocation shares.

The operating agreement provides that special meetings may only be called by the chairman of our board of directors or by resolution adopted by our board of directors.

The operating agreement also provides that holders of common shares seeking to bring business before an annual meeting of members or to nominate candidates for election as directors at an annual meeting of members must provide notice thereof in writing to us not less than 120 days and not more than 150 days prior to the anniversary date of the preceding year’s annual meeting of members or as otherwise required by requirements of the Exchange Act. In addition, the holders of common shares furnishing such notice must be a holder of record on both (i) the date of delivering such notice and (ii) the record date for the determination of members entitled to vote at such meeting. The operating agreement specifies certain requirements as to the form and content of a member’s notice. These provisions may preclude members from bringing matters before members at an annual meeting or from making nominations for directors at an annual or special meeting.

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Authorized but unissued shares are available for future issuance, without further approval of our shareholders. These additional shares may be utilized for a variety of purposes, including future public offerings to raise additional capital or to fund acquisitions, as well as option plans for our employees. The existence of authorized but unissued shares could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.

In addition, our board of directors has broad authority to amend the operating agreement, as discussed above. Our board of directors could, in the future, choose to amend the operating agreement to include other provisions which have the intention or effect of discouraging takeover attempts.

Transfer Agent and Registrar

The transfer agent and registrar for our common shares is VStock Transfer, LLC. The address for VStock Transfer, LLC is 18 Lafayette Pl, Woodmere, NY 11598, and the telephone number is (212) 828-8436.

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SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of our common shares, including shares issued upon the conversion of convertible notes, the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common shares to fall or impair our ability to raise equity capital in the future.

Immediately following the closing of this offering, we will have 3,770,851 common shares (post-split) issued and outstanding. In the event the underwriters exercise the over-allotment option in full, we will have 3,987,197 common shares (post-split) issued and outstanding. The common shares sold in this offering will be freely tradable without restriction or further registration or qualification under the Securities Act.

Previously issued common shares that were not offered and sold in this offering, as well as shares issuable upon the exercise of previously issued warrants and subject to employee stock options, are or will be upon issuance, “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.

Rule 144

In general, a person who has beneficially owned restricted shares for at least twelve months, or at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:

•        1% of the number of common shares then outstanding; or

•        1% of the average weekly trading volume of our common shares during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale;

provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least ninety (90) days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.

Rule 701

In general, Rule 701 allows a shareholder who purchased shares pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding ninety (90) days to sell those shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares, however, are required to wait until ninety (90) days after the date of this prospectus before selling shares pursuant to Rule 701.

Lock-Up Agreements

We, all of our directors and officers, and the holders of 5% or more of our outstanding common shares, have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common shares or securities convertible into or exercisable or exchangeable for our common shares for a period of 180 after this offering; provided that certain 5% or greater shareholders have agreed to different terms with the underwriters. See “Underwriting — No Sales of Similar Securities; Lock-Up.”

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

This section summarizes certain material U.S. federal income tax considerations that may be associated with the purchase, ownership, and disposition of our common shares by U.S. holders (as defined below) and non-U.S. holders (as defined below). This summary is not intended to be a complete summary of the U.S. federal income tax consequences to purchasers of our shares, and does not discuss any state, local or other tax consequences, of an investment in our company. Moreover, this summary addresses only shares that are held as capital assets by holders who acquire our shares in this offering. The discussion does not discuss all of the U.S. federal income tax consequences that may be relevant to a potential investor in our company in light of such investor’s particular circumstances or to investors subject to special rules, such as brokers and dealers in securities, certain financial institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, insurance companies, persons holding our shares as part of a hedging, integrated, or conversion transaction or a straddle, or as part of any other risk reduction transaction, traders in securities that elect to use a mark-to-market method of accounting for their share holdings, partnerships or other entities treated as partnerships for U.S. federal income tax purposes, persons who hold directly or constructively at least 5% of our shares, or persons liable for the alternative minimum tax or the Medicare tax on certain investment income. This summary does not address any tax law other than the U.S. federal income tax law, including any estate tax law or any foreign, state or local income tax law.

Each potential investor is urged and expected to consult his, her or its own tax advisors prior to acquiring any of our shares to discuss his, her or its own tax and financial situation, including the application and effect of U.S. federal, state, local, and other tax laws and any possible changes in the tax laws that may occur after the date of this prospectus. This section is not to be construed as tax advice or as a substitute for careful tax planning.

The discussion herein is based on existing law as contained in the Code, currently applicable Treasury Regulations thereunder, or the Regulations, administrative rulings and court decisions as of the date hereof, all of which are subject to change by legislative, judicial and administrative action, which change may in any given instance have a retroactive effect. No rulings have been or will be requested from the IRS or any other taxing authority concerning any of the tax matters discussed herein. Furthermore, no statutory, administrative, or judicial authority directly addresses many of the U.S. federal income tax issues pertaining to the treatment of our shares or instruments similar to our shares. As a result, we cannot assure you that the IRS or the courts will agree with the tax consequences described in this summary. The IRS or a court may disagree with the following discussion or with any of the positions taken by the company for U.S. federal income tax reporting purposes, including the positions taken with respect to, for example, the classification of our company as a partnership. A different treatment of our common shares or our company from that described below could adversely affect the amount, timing, character, and manner for reporting of income, gain, or loss in respect of an investment in our shares.

As used herein, the term “U.S. holder” means a beneficial owner of our shares that is (i) an individual who is a citizen or resident of the United States, (ii) a corporation that is created or organized in the United States or under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is includible in its gross income for U.S. federal income tax purposes, regardless of its source, (iv) a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (v) a U.S. state, a local government or any instrumentality thereof.

As used herein, the term “non-U.S. holder” means any beneficial owner of our shares (other than a partnership or other entity treated as a partnership) that is not a U.S. holder.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our company, the U.S. tax treatment of any partner in such partnership (or other entity) will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership (or similarly treated entity) that acquires, holds, or sells our shares, we urge you to consult your own tax adviser, as to the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of shares, as well as any consequences to you arising under the laws of any other taxing jurisdiction.

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Status of our Company

Pursuant to current law, and subject to the discussion of “publicly traded partnerships” herein, our company expects to be classified as a partnership for U.S. federal income tax purposes, and, accordingly, expects that no U.S. federal income tax will be payable by it as an entity. Instead, each holder of our shares will be required to take into account his, her or its distributive share of the items of income, gain, loss, deduction, credit and tax preferences of our company.

If our company were not classified as a partnership and, instead, were to be classified as an association taxable as a corporation for U.S. federal income tax purposes, our company would be subject to federal income tax on its taxable income at regular corporate tax rates (currently at a maximum tax rate of 21%), which would reduce the amount of cash available for distribution to the shareholders. In that event, the holders of our shares would not be entitled to take into account their distributive shares of our company’s losses or deductions in computing their taxable income. Nor would they be subject to tax on their respective shares of our company’s income or gains. Distributions to a holder would be treated as (i) dividends to the extent of our company’s current or accumulated earnings and profits, (ii) a return of capital to the extent of each holder’s adjusted basis in his, her or its shares, and (iii) gain from the sale or exchange of property to the extent that any remaining distribution exceeds the holder’s adjusted basis in his, her or its shares. Overall, treatment of our company as an association taxable as a corporation may substantially reduce the anticipated benefits of an investment in our company.

Given the number of shareholders we may have as a result of this offering, and because our shares are listed on the over-the-counter market, we believe that our company will be regarded as a publicly traded partnership. Under U.S. federal income tax law, a publicly traded partnership generally will be treated as a corporation for U.S. federal income tax purposes. A publicly traded partnership will be treated as a partnership, however, and not as a corporation, for U.S. federal income tax purposes, so long as 90% or more of its gross income for each taxable year in which it is publicly traded constitutes “qualifying income,” within the meaning of section 7704(d) of the Code, and it is not required to register under the Investment Company Act. Qualifying income generally includes dividends, interest (other than interest derived in the conduct of a lending or insurance business or interest the determination of which depends in whole or in part on the income or profits of any person), certain real property rents, certain gain from the sale or other disposition of real property, gains from the sale of shares or debt instruments which are held as capital assets, and certain other forms of “passive-type” income. Our company expects to realize sufficient qualifying income to satisfy the qualifying income exception. Our company also expects that we will not be required to register under the Investment Company Act.

There can be no assurance that the IRS would not prevail in asserting that our company should be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. No ruling has been or will be sought from the IRS, and the IRS has made no determination as to the status of our company for U.S. federal income tax purposes or whether our company will have sufficient qualifying income under Section 7704(d) of the Code. Whether our company will continue to meet the qualifying income exception is dependent on our company’s continuing activities and the nature of the income generated by those activities. We intend to take the position that any loans we make to any of our subsidiaries are not being made as part of a lending business we conduct. There can be no assurance the IRS will not successfully challenge any such position. We also intend to take the position that we will not otherwise be directly engaged in any trade or business for U.S. federal income tax purposes, but again there can be no assurance that this position will not be challenged by the IRS. This discussion assumes we are not, and will not be, engaged in any trade or business (including a lending business) for U.S. federal income tax purposes. In addition, whether offsetting management services agreements (if any) between our manager and the operating businesses may give rise to management fee income to our company is not clear. In any event, our company’s board of directors intends to cause our company to conduct its activities in such manner as is necessary for our company to continue to meet the qualifying income exception.

If at the end of any year in which we would be considered to be a publicly traded partnership, our company fails to meet the qualifying income exception, our company may still qualify as a partnership for federal income tax purposes if our company is entitled to relief under the Code for an inadvertent termination of partnership status. This relief will be available if (i) the failure to meet the qualifying income exception is cured within a reasonable time after discovery, (ii) the failure is determined by the IRS to be inadvertent, and (iii) our company and each of the holders of our shares (during the failure period) agree to make such adjustments or to pay such amounts as are required by the IRS. The remainder of this discussion of the material U.S. federal income tax considerations assumes we would not be classified as a publicly traded partnership treated as a corporation.

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If in any year in which we would be considered to be a publicly traded partnership, our company fails to satisfy the qualifying income exception in a particular taxable year (other than a failure which is determined by the IRS to be inadvertent and which is cured within a reasonable period of time after the discovery of such failure) or is required to register under the Investment Company Act, our company will be treated as if it had (i) transferred all of its assets, subject to its liabilities, to a newly-formed corporation on the first day of that year in which it fails to satisfy the exception, in return for stock in that corporation, and (ii) then distributed that stock to the holders in liquidation of their shares in our company. This contribution and liquidation should be tax-free to holders and our company so long as our company, at that time, does not have liabilities in excess of its tax basis in its assets. Thereafter, our company would be classified as a corporation for U.S. federal income tax purposes.

The balance of this discussion assumes that our company is not engaged in a trade or business, and that it will be treated as a partnership for U.S. federal income tax purposes.

Tax Considerations Applicable to Both U.S. Holders and Non-U.S. Holders

Tax Treatment of Our Company

On the basis that our company is properly classified as a partnership, our company itself will not be subject to U.S. federal income tax (except as may be imposed as a result of certain audit adjustments, as contemplated by the partnership audit rules) although it will file an annual partnership information return with the IRS. The information return will report the results of our company’s activities and will contain schedules reflecting allocations of profits or losses (and items thereof) to members of our company, that is, to the shareholders. In addition, to meet the terms of certain recordkeeping requirements under the Code, our company must annually obtain from each shareholder the names and addresses of any and all ultimate beneficial owners of our company shares and, to the extent a shareholder is not, in whole or in part, the ultimate beneficial owner, such ultimate beneficial owner’s direct or indirect fractional ownership share in our company, and the amount of any distribution(s) received by such ultimate beneficial owner by reason of his, her or its direct or indirect fractional ownership share in our company.

Tax Treatment of Company Income to Holders

Each partner of a partnership is required to report on his, her or its income tax return his, her or its share of items of income, gain, loss, deduction and credit of the partnership without regard to whether cash distributions are received. Each holder will be required to report on his, her or its tax return his, her or its allocable share of company income, gain, loss, deduction and credit for our company’s taxable year that ends with or within the holder’s taxable year. Each item of company income, gain, loss, deduction or credit will generally have the same character (e.g., capital or ordinary) as it would if the holder had recognized the item directly. Thus, holders of our shares may be required to report taxable income without a corresponding current receipt of cash if our company were to recognize taxable income and not make cash distributions to the shareholders.

Allocation of Company Profits and Losses

The determination of a holder’s distributive share of any item of income, gain, loss, deduction, or credit of a partnership is governed by the operating agreement, provided that the allocation has “substantial economic effect” or reflects the “partners’ interests in the partnership.” Subject to the discussion below, it is intended that the allocations under the operating agreement should have “substantial economic effect” or be respected as reflecting the “partners’ interests in the partnership.” Whether an allocation is considered to reflect the partners’ interests in the partnership is a facts and circumstances analysis of the underlying economic arrangement.

In general, under the operating agreement, items of ordinary income and loss will be allocated among the holders of our shares and our manager on the basis of their relative rights to receive distributions from our company. If the IRS were to prevail in challenging the allocations provided by the operating agreement, the amount of income or loss allocated to holders for U.S. federal income tax purposes could be increased or reduced or the character of the income or loss could be modified.

The U.S. federal income tax rules that apply to partnership allocations are complex, and their application, particularly to publicly traded partnerships, is not always clear. Our company will apply certain conventions and assumptions intended to achieve general compliance with the intent of these rules, and to report items of income and loss in a manner that

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generally reflects each holder’s economic gains and losses; however, these conventions and assumptions may not be considered to comply with all aspects of U.S. federal income tax law. It is, therefore, possible that the IRS will prevail in asserting that certain of the allocations, conventions or assumptions are not acceptable, and may require items of company income, gain, loss, deduction or credit to be reallocated in a manner that could be adverse to a holder of our shares.

Treatment of Distributions

Distributions of cash (or in certain cases, marketable securities) made by our company to the shareholders will generally not be taxable to a shareholder to the extent that the amount of cash (or the value of such marketable securities) distributed to the shareholder does not exceed such shareholder’s adjusted tax basis in his, her or its shares immediately before the distribution. To the extent that a shareholder receives an amount of cash in excess of his, her or its adjusted tax basis (or in certain cases marketable securities with a value in excess of such basis), with such basis determined immediately before the distribution, that shareholder will recognize gain equal to such excess (see the section entitled “— Disposition of Shares” below). Such distributions of cash or marketable securities will reduce the tax basis of the shares held by a shareholder receiving such a distribution by the amount of such cash or the value of such marketable securities, as the case may be.

Tax Basis

A holder’s initial tax basis in his, her or its shares acquired in this offering will generally equal to the purchase price plus such holder’s share of our company’s liabilities at the time of his, her or its purchase of the shares. A holder’s tax basis in his, her or its shares will be increased from time to time by (a) the holder’s share of our company’s taxable income, including capital gain, (b) the holder’s share of our company’s income, if any, that is exempt from tax, (c) any increase in the holder’s share of our company’s liabilities, and (d) any additional capital contributions by such holder to our company. A holder’s tax basis in his, her or its shares will generally be decreased from time to time (but not below zero) by (a) the amount of any cash and the adjusted basis of any property distributed (or deemed distributed) to the holder, (b) the holder’s share of our company’s losses and deductions, (c) the holder’s share of our company’s expenditures that are neither deductible nor properly chargeable to a capital account, and (d) any decrease in the holder’s share of our company’s liabilities.

Holding Period

A holder’s holding period for the shares purchased in this offering will begin on the day after the date of such purchase.

Tax Considerations for U.S. Holders

Tax Treatment of Company Income to U.S. Holders

Our company’s taxable income is expected to consist principally of interest income, capital gains and dividends from our C corporation subsidiaries. Interest income will be earned upon the funds loaned by our company (if any) to the operating subsidiaries and from temporary investments of our company, and will be taxable to the holders at ordinary income rates. Long-term capital gains will be reported upon the sale of capital assets by our company held for more than one year, and short-term capital gains will be reported upon the sale of capital assets by our company held for one year or less. Under current law, long-term capital gains allocated to non-corporate U.S. holders may qualify for a reduced rate of tax. Capital gains allocated to corporate U.S. holders will be taxed at ordinary income tax rates. Any dividends received by our company from its domestic corporate holdings may constitute qualified dividend income in the hands of certain non-corporate U.S. holders, which will, under current law, qualify for a reduced rate of tax provided various technical requirements are satisfied. Any dividends received by our company that do not constitute qualified dividend income will be taxed to U.S. holders at the tax rates generally applicable to ordinary income. Dividend income of our company from its domestic operating subsidiaries that is allocated to corporate holders of our shares may qualify for a dividends received deduction, provided ownership thresholds and certain other requirements are met.

Disposition of Shares

Upon the transfer of shares by a U.S. holder in a sale or other taxable disposition, the holder will generally recognize gain or loss equal to the difference between (i) the proceeds realized on such sale (plus the U.S. holder’s share of company liabilities allocable to its shares) and (ii) such holder’s adjusted tax basis in the shares sold (as described

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in “— Tax Considerations Applicable to Both U.S. Holders and Non-U.S. Holders — Tax Basis”). Such gain or loss recognized on the sale of shares by a non-corporate U.S. holder who has held such shares for more than 12 months will be taxable as long-term capital gain or loss, except that in the case of gains attributable to taxable dispositions of our shares, the portion of the selling shareholder’s gain allocable to (or amount realized, in excess of tax basis, attributable to) “inventory items” and “unrealized receivables” of the company as defined in Section 751 of the Code will be treated as ordinary income. Capital gain or loss of non-corporate U.S. holders where the shares sold are considered held for 12 months or less is taxable as short-term capital gain or loss. Short-term capital gain is generally subject to U.S. federal income tax at ordinary income tax rates. Capital gain of corporate U.S. holders is taxed at the same rate as ordinary income. Any capital loss recognized by a U.S. holder on a sale of shares will generally be deductible only against capital gains, except that a non-corporate U.S. holder may also offset up to $3,000 per year of ordinary income. Non-corporate U.S. holders may carry excess capital losses forward indefinitely until the loss is fully absorbed or deducted. Corporate U.S. holders may carry capital losses back three years and forward five years. Capital losses may be subject to various other limitations under the Code, and U.S. holders are urged to consult their tax advisors regarding the deductibility of any particular loss in their circumstances.

If a U.S. holder acquires company shares at different prices and sells less than all of his, her or its shares, the holder will not be entitled to specify particular shares as having been sold (as it could do if our company were a corporation). Rather, the holder should determine his, her or its gain or loss on the sale by using an “equitable apportionment” method to allocate a portion of his, her or its “unified basis” in his, her or its shares sold.

A U.S. holder selling shares in our company is urged to consult the holder’s tax advisor to determine the proper application of these rules in light of the holder’s particular circumstances.

Treatment of Loans

A U.S. holder whose shares are loaned to a “short seller” to cover a short sale of share may be considered to have disposed of those shares. In such case, the holder would no longer be regarded as a beneficial owner of those shares during the period of the loan and may recognize gain or loss from the disposition. As a result, during the period of the loan (i) company income, gain, loss, deduction or other items with respect to those shares would not be includible or reportable by the holder, and (ii) cash distributions received by the holder with respect to those shares could be fully taxable, likely as ordinary income. A holder intending to participate in any such transaction is urged to consult with his, her or its tax adviser.

Limitations on Interest Deductions

The deductibility of a non-corporate U.S. holder’s “investment interest expense” is generally limited to the amount of such holder’s “net investment income.” Investment interest expense would generally include interest expense incurred by the company, if any, and interest expense incurred by the U.S. holder on any margin account borrowing or other loan incurred to purchase or carry shares of our company. Net investment income includes gross income from property held for investment and amounts treated as portfolio income, such as dividends and interest, under the passive activity loss rules, less deductible expenses, other than interest, directly connected with the production of investment income. For this purpose, any long-term capital gain or qualifying dividend income taxable at long-term capital gains rates is excluded from net investment income unless the holder elects to pay tax on such gain or dividend income at ordinary income rates.

Limitations on Deductibility of Losses; Management Fees and Other Expenses

A U.S. holder’s ability to deduct for U.S. federal income tax purposes his, her or its distributive share of any company losses or expenses will be limited to the lesser of (i) the adjusted tax basis in such holder’s shares, or (ii) in the case of a holder that is an individual or a closely-held corporation (a corporation where more than 50% of the value of its stock is owned directly or indirectly by five or fewer individuals or certain tax-exempt organizations), the amount which the holder is considered to be “at risk” with respect to certain activities of our company. In general, the amount “at risk” includes the holder’s actual amount paid for the shares and any share of company debt that constitutes “qualified nonrecourse financing.” The amount “at risk” excludes any amount the holder borrows to acquire or hold his, her or its shares if the lender of such borrowed funds owns shares or can look only to the borrower’s shares for repayment.

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Losses in excess of the amount at risk must be deferred until years in which our company generates taxable income against which to offset such losses. The deductibility of losses may be further limited by U.S. federal income tax law, and U.S. holders should discuss such limitations with their own tax advisors.

Our company will pay a management fee (and possibly certain transaction fees) to our manager. Our company will also pay certain costs and expenses incurred in connection with activities of our manager. Our company intends to deduct such fees and expenses to the extent that they are reasonable in amount and are not capital in nature or otherwise nondeductible. It is expected that such fees and other expenses will generally constitute miscellaneous itemized deductions for non-corporate U.S. holders of our shares. Under current law in effect for taxable years beginning after December 31, 2017 and before January 1, 2026, non-corporate U.S. holders may not deduct any such miscellaneous itemized deductions for federal income tax purposes. A non-corporate U.S. holder’s inability to deduct such items could result in such holder reporting as his, her or its share of company taxable income an amount that exceeds any cash actually distributed to such U.S. holder for the year. Corporate U.S. holders of our shares generally will be able to deduct these fees, costs and expenses in accordance with applicable U.S. federal income tax law.

Non-U.S. Holders

Taxation of Income or Gains Allocated to Non-U.S. Holders

Subject to the discussion below, a non-U.S. holder will not be subject to U.S. federal income tax on such holder’s distributive share of our company’s income or gains, provided that such income or gain is not considered to be effectively connected with the conduct of a trade or business within the United States. If the income or gain from our company is treated as effectively connected with a U.S. trade or business (and, if certain income tax treaties apply, is attributable to a U.S. permanent establishment), then a non-U.S. holder’s share of any company income (and possibly gain realized upon the sale or exchange of our shares, as discussed below) will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens and residents and domestic corporations, and such non-U.S. holder will be subject to tax return filing requirements in the U.S. Non-U.S. holders that are corporations may also be subject to a 30% branch profits tax (or lower treaty rate, if applicable) on such effectively connected income. We intend to take the position that, except to the extent as may be required by law for income or gain attributable to “U.S. real property interests” as described below, our company will not be engaged in a U.S. trade or business for these purposes and our income will not be effectively connected with any such U.S. trade or business. However, there can be no assurance that the IRS will not successfully challenge this position. The balance of this discussion assumes that our company will not be engaged in a U.S. trade or business.

While generally not subject to U.S. federal income tax as discussed above, a non-U.S. holder would be subject to U.S. federal withholding tax at the rate of 30% (or, under certain circumstances, at a reduced rate provided by an applicable income tax treaty) in respect of such holder’s distributive share of dividends, interest, and other fixed or determinable annual or periodical income from sources within the United States realized by our company that are not effectively connected with the conduct of a U.S. trade or business. Amounts withheld on behalf of a non-U.S. holder will be treated as being distributed to such non-U.S. holder.

Non-U.S. holders will be required to timely and accurately complete an applicable IRS Form W-8 (or other applicable form) and provide such form to our company for withholding tax purposes. Non-U.S. holders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in our company.

Taxation of Distributions Received by Non-U.S. Holders

In general, the tax consequences of the receipt of distributions of cash from us to a non-U.S. holder will be the same as set forth above under “— Tax Considerations Applicable to Both U.S. Holders and Non-U.S. Holders — Treatment of Distributions,” except that any taxable gain that arises as a result of such distributions and that are attributable to “U.S. real property interests” (as defined below) will generally be taxed as described below under “— Taxation of Gains From Sales or Other Taxable Distributions of U.S. Real Property Interests.”

Disposition of Shares

Upon the sale or other taxable disposition of shares, a non-U.S. holder will recognize a capital gain or loss for U.S. tax purposes only if the gain or loss is (i) effectively connected with the conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. Holder maintains a permanent establishment in the United States to which such gain or loss is attributable) or (ii) treated as a gain or loss from sources within the United States and the non-U.S. Holder is present 183 days or more in the taxable year of disposition and certain other conditions are met.

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Taxation of Gains from Sales or Other Taxable Dispositions of U.S. Real Property Interests

In general, non-U.S. holders will be subject to U.S. withholding and federal income taxes on gains attributable to a taxable sale or other disposition (i) by our company of a “U.S. real property interest”, or USRPI, that are allocable to a non-U.S. holder, or (ii) by a non-U.S. holder of our shares (A) if the shares sold are USRPIs or (B) to the extent such gains are attributable to USRPIs we hold at the time of such disposition. Gains from taxable sales or other dispositions of USRPIs are generally subject to U.S. federal income tax as if such gains were effectively connected with the conduct of a U.S. trade or business. Moreover, a withholding tax is imposed with respect to such gain. For this purpose, a USRPI includes an interest (other than solely as a creditor) in (i) certain U.S. real property, (ii) a “U.S. real property holding corporation” (in general, a U.S. corporation, at least 50% of whose real estate and trade or business assets, measured by fair market value, consists of USRPIs), and (iii) a partnership that holds USRPIs. We have made no determination as to whether any of our company’s investments will constitute a USRPI and there can be no assurance that we will not own or acquire USRPIs in the future.

Certain Other Considerations for Both U.S. Holders and Non-U.S. Holders

Tax Reporting by Our Company

Information returns will be filed by our company with the IRS, as required, with respect to income, gain, loss, deduction, credit and other items derived from our company’s activities. Our company will file a partnership return with the IRS and will use reasonable efforts to issue tax information that describes your allocable share of our income, gain, loss, deduction, and credit, including a Schedule K-1, to you (and to our manager) as promptly as possible. In preparing this information, our company will use various accounting and reporting conventions to determine your allocable share of income, gain, loss, deduction and credit. Delivery of this information by our company will be subject to delay in the event of, among other reasons, the late receipt of any necessary tax information from an investment in which our company holds an interest. It is therefore possible that, in any taxable year, our shareholders will need to apply for extensions of time to file their tax returns. In addition, the IRS may prevail in asserting that certain of our reporting conventions are impermissible, which could result in an adjustment to your income or loss.

It is possible that our company may engage in transactions that subject our company and, potentially, the holders of our shares, to other information reporting requirements with respect to an investment in our company. You may be subject to substantial penalties if you fail to comply with such information reporting requirements. You should consult with your tax advisors regarding such information reporting requirements.

Audits and Adjustments to Tax Liability

A challenge by the IRS, such as in a tax audit, to the tax treatment by a partnership of any item generally must be conducted at the partnership, rather than at the partner, level. For tax years beginning after December 31, 2017, a partnership must designate a “partnership representative” to serve as the person to receive notices and to act on behalf of the partnership and the partners in the conduct of such a challenge or audit by the IRS. Our company has designated Ellery W. Roberts to be the partnership representative for tax years beginning after December 31, 2017, and we refer to Mr. Roberts in such capacity as the “partnership representative.”

Our partnership representative, who is required by the operating agreement to notify all holders of any U.S. federal income tax audit of our company, will have the authority under the operating agreement to conduct and respond to any IRS audit of our company’s tax returns or other tax-related administrative or judicial proceedings, and, if appropriate, to contest (including by pursuing litigation) any proposed adjustments by the IRS, and, if considered appropriate, to settle such proposed adjustments. A final determination of U.S. tax matters in any proceeding initiated or contested by the partnership representative will be binding on all holders of our shares who held their shares during the period under audit. The partnership representative will have the right on behalf of all holders to extend the statute of limitations relating to the holders’ U.S. federal income tax liabilities with respect to company items. In addition, in his capacity as the “partnership representative” the partnership representative will have significant authority under applicable law to bind our shareholders to audit adjustments applicable to the company and its shareholders. Moreover, in the case of an audit adjustment that results in an adjustment to items of partnership income, gain, loss or deduction for any particular year, the IRS may assess an “imputed underpayment” amount against our company unless the company makes a valid election to have such imputed underpayment assessed against the relevant shareholders (or former shareholders) to which such assessment relates. We will not make a determination as to whether we will pay any imputed underpayment that may be assessed against us or whether we will make the election to have the imputed underpayment assessed against our shareholders or former shareholders until such time as any such assessment may occur.

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A U.S. federal income tax audit of our company’s information return may result in an audit of the tax return of a holder of our shares, which, in turn, could result in adjustments to a holder’s items of income, gain, loss, deduction, and credit that are unrelated to our company as well as to company-related items. There can be no assurance that the IRS, upon an audit of an information return of our company or of an income tax return of a holder, might not take a position that differs from the treatment thereof by our company or by such holder, possibly resulting in a tax deficiency. A holder would also be liable for interest on any tax deficiency that resulted from any such adjustments. Potential holders should also recognize that they might be forced to incur legal and accounting costs in resisting any challenge by the IRS to items in their individual returns, even if the challenge by the IRS should prove unsuccessful.

Reportable Transaction Disclosure Rules

If our company were to engage in a “reportable transaction,” our company (and possibly others, including U.S. holders) would be required to make a detailed disclosure of the transaction to the IRS in accordance with rules governing tax shelters and other potentially tax-motivated transactions. A transaction may be a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a “listed transaction” or that it produces certain kinds of losses in excess of a threshold amount computed without regard to offsetting gains or other income or limitations. An investment in our company may be considered a “reportable transaction” if, for example, we recognize significant losses in the future. In certain circumstances, a holder of our shares who disposes of all or part of the shares in a transaction resulting in the recognition by such holder of significant losses in excess of certain threshold amounts may be obligated to disclose his, her or its participation in such transaction. Our participation in a reportable transaction also could increase the likelihood that our U.S. federal income tax information return (and possibly holders’ tax returns) would be audited by the IRS. Certain of these rules are currently unclear, and it is possible that they may be applicable in situations other than significant loss transactions.

Moreover, if our company were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, holders may be subject to (i) significant accuracy-related penalties with a broad scope, (ii) for those persons otherwise entitled to deduct interest on federal tax deficiencies, non-deductibility of interest on any resulting tax liability, and (iii) in the case of a listed transaction, an extended statute of limitations. Our company does not intend to engage in any reportable transaction. However, we urge U.S. holders to consult their tax advisers regarding the reportable transaction disclosure rules and the possible application of these rules to them.

Information Reporting Requirements and Related Withholding Taxes

Under the “backup withholding” rules, a holder of our shares may be subject to backup withholding (currently at the rate of 24%) with respect to any taxable income or gain attributable to such shares unless the holder:

•        is a corporation or qualifies for certain other exempt categories and, when required, certifies this fact; or

•        provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

A holder of our shares who does not provide us with a correct taxpayer identification number also may be subject to penalties imposed by the IRS.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the shareholder’s federal income tax liability if certain required information is furnished to the IRS. Investors should consult their own tax advisors regarding application of backup withholding to them and the availability of, and procedure for obtaining an exemption from, backup withholding.

Pursuant to U.S. federal legislation known as the Foreign Account Tax Compliance Act, or FATCA, we may be subject to additional information reporting and withholding obligation requirements with respect to any shareholder that is a “foreign financial institution,” or an FFI, or a “non-financial foreign entity,” or an NFFE, as each such term is defined by FATCA. In general, under these requirements, U.S. federal withholding tax at a 30% rate may apply to certain U.S. source income earned by us which is allocable to an FFI or NFFE unless (i) in the case of an FFI, such FFI registers with the IRS, and (ii) in the case of either an FFI or NFFE, such entities disclose the identity of their U.S. owners or account holders and annually report certain information about such accounts. This 30% withholding tax may also apply to taxable sales or other dispositions of our shares.

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UNDERWRITING

We are offering the common shares described in this prospectus through the underwriters listed below. Craft Capital Management LLC is acting as the sole bookrunner of this offering and Craft Capital Management LLC and R.F. Lafferty & Co., Inc, or the representatives, are acting as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares listed next to its name in the following table:

Underwriter	Number of Shares
Craft Capital Management LLC
R.F. Lafferty & Co., Inc.
Total	1,442,308

The underwriters are committed to purchase all of the shares offered by us other than those shares covered by the over-allotment option described below, if it purchases any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Over-Allotment Option

We have granted to the underwriters an option to purchase from us up to an additional 216,346 common shares, representing 15% of the common shares sold in this offering, assuming a public offering price of $5.20 per share (which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus), solely to cover over-allotments, if any. The common shares to be purchased pursuant to the over-allotment option will be acquired at the public offering price, less the underwriting discounts. The underwriters may exercise this option, in whole or in part, any time during the 45-day period after the closing date of the offering, but only to cover over-allotments, if any. To the extent the underwriters exercise the option, the underwriters will become obligated, subject to certain conditions, to purchase the shares for which they exercise the option.

Underwriting Discount

The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment.

	Per Share	Without Over-Allotment Option	With Over-Allotment Option
Public offering price	$	$	$
Underwriting discounts and commissions (6%)
Non-accountable expense allowance (1%)
Proceeds, before expenses, to us	$	$	$

The underwriters propose to offer the shares offered by us to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares to other securities dealers at such price less a concession of $            per share. If all of the shares offered by us are not sold at the public offering price, the representatives may change the offering price and other selling terms by means of a supplement to this prospectus.

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We have also agreed to pay all of the reasonable and out-of-pocket expenses of the representatives relating to the offering up to $125,000, including: (a) all filing fees and expenses relating to the registration of the shares with the SEC; (b) all fees and expenses relating to the listing of our common shares on NYSE American; (c) all fees, expenses and disbursements relating to the registration or qualification of the securities under the “blue sky” securities laws of such states and foreign jurisdictions as the representatives may reasonably designate, including the reasonable fees and disbursements of its “blue sky” counsel; (d) all fees, expenses and disbursements relating to the registration, qualification or exemption of the securities under the securities laws of such foreign jurisdictions as the representatives may reasonably designate; (e) the costs of all mailing and printing of the offering documents; (f) transfer and/or stamp taxes, if any, payable upon the transfer of securities from us to the representatives; (g) the fees and expenses of our accountants; (h) fees and expenses of the transfer agent; and (i) “road show,” diligence, and reasonable legal fees and disbursements for the representatives’ counsel, of which we have paid an advance of $15,000 which will be applied towards such out-of-pocket accountable expenses and returned to us to the extent not actually incurred by the representatives.

We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount and the nonaccountable expense reimbursement which is based on the amount raised, will be approximately $411,000.

Representative’s Warrants

We have agreed to issue to the representatives or their designees at the closing of this offering warrants to purchase an aggregate number of common shares equal to 5% of the aggregate number of shares sold in this offering. The warrants will be exercisable at any time and from time to time, in whole or in part, during the four-and-a-half-year period commencing six months after the date of the commencement of the sales of the public securities. The warrants will be exercisable at a per share price equal to 125% of the public offering price per share in the offering. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The representatives (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days after the date of the commencement of the sales of the public securities. The warrants and the common shares underlying the warrants are being registered as a part of the registration statement of which this prospectus forms a part and will be freely tradable upon the declaration of the effectiveness of such registration statement by the SEC.

The warrants will provide for registration rights (including a one-time demand registration right and unlimited piggyback rights) and customary anti-dilution provisions (for share dividends and splits and recapitalizations) and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganization, mergers and similar events). The demand registration rights will not be greater than five years from the effective date of the registration statement related to this offering in compliance with FINRA Rule 5110(G)(8)(C). The piggyback registration rights will not be greater than seven years from the effective date of the registration statement related to this offering in compliance with FINRA Rule 5110(G)(8)(D).

Tail Financing

Each of the representatives will be entitled to a cash fee equal to six percent (6%) of the aggregate purchase price paid by each purchaser of securities with respect to any public or private offering or other financing or capital-raising transaction of any kind (referred to as a Tail Financing) to the extent that such financing or capital-raising transaction is provided to us by investors whom such representative had introduced, directly or indirectly, to us while engaged by us if such Tail Financing is consummated at any time up until 6 months following the termination or expiration of the representatives’ engagement.

No Sales of Similar Securities; Lock-Up

We have agreed with the underwriters that we will not, without the prior written consent of the representatives and subject to certain exceptions, for a period of 180 days after the closing of this offering: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any classes of our shares or any securities convertible into or exercisable or exchangeable for classes of our shares; (ii) file or caused to be filed any registration statement with the

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SEC, relating to the offering of any classes of our shares or any securities convertible into or exercisable or exchangeable for any classes of our shares; (iii) complete any offering of debt securities, other than entering into a line of credit with a traditional bank; or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any classes of our shares, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of any classes of our shares or such other securities, in cash or otherwise.

In addition, each of our directors, officers and holders of 5% or more of our outstanding common shares have agreed that they will not, without the prior written consent of the representatives and subject to certain exceptions, for a period of 180 days after the closing of this offering: (i) offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, encumber, assign, borrow or otherwise dispose of any of our common shares or any securities convertible into or exercisable or exchangeable for our common shares held by them, or otherwise publicly disclose the intention to do so, or (ii) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to such securities (in each case within the meaning of Section 16 of the Exchange Act and the rules and regulations thereunder) with respect to any such security or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of any such security, whether or not such transaction is to be settled by the delivery of such securities, other securities, cash or other consideration, or otherwise publicly disclose the intention to do so.

Notwithstanding the foregoing, the underwriters have agreed that the lock-up period for the holders of our secured convertible promissory notes, Leonite and SILAC Insurance Company, shall be 120 days after the closing of this offering and that for an additional 60 days after such period, such holders may not sell more than one-third of their shares currently held, subject to a maximum sale on any trading day of 3% of the daily volume.

Indemnification

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

Determination of Public Offering Price

The public offering price of the common shares offered by this prospectus has been determined by negotiation between us and the underwriters. Among the factors considered in determining the public offering price of the common shares were:

•        the current price of our common shares on the OTCQB market;

•        our history and our prospects;

•        our financial information and historical performance;

•        the industries in which we operate;

•        the status and development prospects for our products and services;

•        the experience and skills of our executive officers; and

•        the general condition of the securities markets at the time of this offering.

The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of our common shares. That price is subject to change as a result of market conditions and other factors, and we cannot assure you that our common shares can be resold at or above the public offering price.

Price Stabilization, Short Positions and Penalty Bids

To facilitate this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common shares during and after the offering. Specifically, the underwriters may over-allot or otherwise create a short position in our common shares for their own account by selling more securities than we have sold to the underwriters. The underwriters may close out any short position by either exercising their option to purchase additional securities or purchasing securities in the open market.

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In addition, the underwriters may stabilize or maintain the price of our common shares by bidding for or purchasing securities in the open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to broker-dealers participating in this offering are reclaimed if securities previously distributed in this offering are repurchased, whether in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of our common shares at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of our common shares to the extent that it discourages resales of our common shares. The magnitude or effect of any stabilization or other transactions is uncertain. These transactions may be effected on NYSE American or otherwise and, if commenced, may be discontinued at any time.

In connection with this offering, the underwriters and selling group members, if any, may also engage in passive market making transactions in our common shares on NYSE American. Passive market making consists of displaying bids on NYSE American by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of our common stock at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common shares. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

Affiliations

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Each of the underwriters may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. The underwriters may in the future receive customary fees and commissions for these transactions.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve our securities and/or instruments. The underwriters and respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Electronic Offer, Sale and Distribution

In connection with this offering, the underwriters or certain of the securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, the underwriters may facilitate Internet distribution for this offering to certain of their internet subscription customers. The underwriters may allocate a limited number of shares for sale to their online brokerage customers. An electronic prospectus is available on the Internet websites maintained by any such underwriters. Other than the prospectus in electronic format, the information on the websites of the underwriters are not part of this prospectus.

Listing

Our common shares are quoted on the OTCQB market operated by OTC Markets Group Inc. under the symbol “EFSH.” In connection with this offering, we received approval from NYSE American for the listing of our common shares under the symbol “EFSH.” The closing of this offering is contingent upon our uplisting to NYSE American unless such condition is waived by the representatives of the underwriters.

178

Selling Restrictions

Canada.    The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45 106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the underwriters are not required to comply with the disclosure requirements of NI 33 105 regarding underwriter conflicts of interest in connection with this offering.

European Economic Area.    In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, an offer to the public of any of the securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any of the securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

•        to any legal entity which is a qualified investor as defined in the Prospectus Directive;

•        to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

•        in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of the securities shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any of the securities to be offered so as to enable an investor to decide to purchase the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom.    Each of the underwriters have represented and agreed that:

•        it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and

•        it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

Switzerland.    The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX listing rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

179

Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of the securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of the securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of the securities.

Australia.    No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering.

This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the securities may only be made to persons (referred to as Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.

The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

Israel.    In the State of Israel, this prospectus shall not be regarded as an offer to the public to purchase securities under the Israeli Securities Law, 5728 — 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 — 1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions, or the Addressed Investors; or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728 — 1968, subject to certain conditions, or the Qualified Investors. The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. Our company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 — 1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our securities to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.

Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728 — 1968. In particular, we may request, as a condition to be offered securities, that Qualified Investors will each represent, warrant and certify to us or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728 — 1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728 — 1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 — 1968 and the regulations promulgated thereunder in connection with the offer to be issued securities; (iv) that the securities that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728 — 1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 — 1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.

180

LEGAL MATTERS

Certain legal matters with respect to the shares offered hereby will be passed upon by Bevilacqua PLLC,
Washington, DC. Carmel, Milazzo & Feil LLP is acting as counsel to the underwriters.

As of the date of this prospectus, Louis A. Bevilacqua, the managing member of Bevilacqua PLLC, owns 84,375 common shares (post-split), representing approximately 6.50% of our outstanding common shares. As described above, Bevilacqua PLLC has agreed to convert $1,197,280 of the accounts payable owed to it into 230,246 common shares (post-split) at the effective time of the registration statement of which this prospectus forms a part, based on an assumed public offering price of $5.20 per share, which is the midpoint of the estimated range of the public offering price shown on the cover page of this prospectus. Mr. Bevilacqua also owns approximately 9% of 1847 Partners Class A Member LLC and 10% of 1847 Partners Class B Member LLC. Mr. Bevilacqua received these securities as partial consideration for legal services previously provided to us.

EXPERTS

The financial statements of our company for the years ended December 31, 2021 and 2020, the combined financial statements of High Mountain and Innovative Cabinets for the years ended December 31, 2020 and 2019, and the combined financial statements of Wolo for the years ended December 31, 2020 and 2019 included in this prospectus have been audited by Sadler, Gibb & Associates, LLC, an independent registered public accounting firm, to the extent and for the periods set forth in their reports appearing elsewhere in this prospectus, and are included in reliance on such reports, given the authority of said firm as an expert in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC relating to this offering. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with the registration statement. For further information pertaining to us and the common shares to be sold in this offering, you should refer to the registration statement and its exhibits. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents.

We file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above. Additionally, we will make these filings available, free of charge, on our website at www.1847holdings.com as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings, is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.

181

FINANCIAL STATEMENTS

	Page
Unaudited Condensed Consolidated Financial Statements of 1847 Holdings LLC for the Three Months Ended March 31, 2022 and 2021(1)
Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021	F-3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	F-5
Condensed Consolidated Statements of Mezzanine Equity and Shareholders’ Deficit for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	F-6
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	F-7
Notes to Condensed Consolidated Financial Statements (Unaudited)	F-9
Audited Consolidated Financial Statements of 1847 Holdings LLC for the Years Ended December 31, 2021 and 2020(1)
Report of Independent Registered Public Accounting Firm	F-26
Consolidated Balance Sheets as of December 31, 2021 and 2020	F-28
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020	F-29
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2021 and 2020	F-31
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020	F-32
Notes to Consolidated Financial Statements	F-34
Audited Combined Financial Statements of High Mountain Door & Trim Inc. and Sierra Homes, LLC (d/b/a Innovative Cabinets & Design) for the Years Ended December 31, 2020 and 2019
Report of Independent Registered Public Accounting Firm	F-82
Combined Balance Sheets as of December 31, 2020 and 2019	F-84
Combined Statements of Income and Changes in Owners’ Equity for the Years Ended December 31, 2020 and 2019	F-85
Combined Statements of Cash Flows for the Years Ended December 31, 2020 and 2019	F-86
Notes to Combined Financial Statements	F-87
Audited Combined Financial Statements of Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. for the Years Ended December 31, 2020 and 2019
Report of Independent Registered Public Accounting Firm	F-99
Combined Balance Sheets as of December 31, 2020 and 2019	F-100
Combined Statements of Income and Changes in Stockholders’ Equity for the Years Ended December 31, 2020 and 2019	F-101
Combined Statements of Cash Flows for the Years Ended December 31, 2020 and 2019	F-102
Notes to Combined Financial Statements	F-103

____________

(1)      Since the reverse split will not become effective until this registration statement is declared effective by the SEC, the financial statements have not been adjusted retrospectively to reflect the reverse split.

F-1

1847 HOLDINGS LLC

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

1847 HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	1,638,924	$	1,383,533
Investments		276,691		276,429
Receivables, net		3,918,814		3,378,996
Contract assets		69,735		88,466
Inventories, net		5,805,494		5,427,302
Prepaid expenses and other current assets		270,537		582,048
Total Current Assets		11,980,195		11,136,774
Property and equipment, net		1,920,967		1,695,311
Operating lease right-of-use assets		3,094,573		3,192,604
Goodwill		19,452,270		19,452,270
Intangible assets, net		11,079,205		11,443,897
Other long-term assets		85,691		85,691
TOTAL ASSETS	$	47,612,901	$	47,006,547
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	5,911,576	$	4,818,672
Contract liabilities		1,696,449		2,547,903
Customer deposits		3,677,543		3,465,259
Due to related parties		193,762		193,762
Current portion of operating lease liabilities		595,039		613,696
Current portion of finance lease liabilities		143,865		100,652
Current portion of notes payable, net		686,285		692,522
Total Current Liabilities		12,904,519		12,432,466
Operating lease liabilities, net of current portion		2,542,790		2,607,862
Finance lease liabilities, net of current portion		698,409		455,905
Notes payable, net of current portion		222,399		251,401
Convertible notes payable, net of current portion		26,880,029		26,630,655
Contingent note payable, net of current portion		1,001,183		1,001,183
Deferred tax liability, net		1,981,000		2,070,000
TOTAL LIABILITIES		46,230,329		45,449,472
Mezzanine Equity
Series A senior convertible preferred shares, 4,450,460 shares designated; 1,684,849 and 1,818,182 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,415,100		1,655,404
Series B senior convertible preferred shares, 583,334 shares designated; 426,999 and zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,113,650		—
TOTAL MEZZANINE EQUITY		2,528,750		1,655,404

F-3

1847 HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

	March 31, 2022			December 31, 2021
	(Unaudited)
Shareholders’ Deficit
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021		1,000			1,000
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,995,232 and 4,842,851 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		4,995			4,843
Distribution receivable		(2,000,000	)		(2,000,000	)
Additional paid-in capital		21,983,594			21,719,410
Accumulated deficit		(22,012,401	)		(20,754,394	)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT		(2,022,812	)		(1,029,141	)
NON-CONTROLLING INTERESTS		876,634			930,812
TOTAL SHAREHOLDERS’ DEFICIT		(1,146,178	)		(98,329	)
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT	$	47,612,901		$	47,006,547

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended March 31,
	2022			2021
Revenues	$	12,073,878		$	4,780,275
Operating Expenses
Cost of sales		7,749,130			3,260,682
Personnel		1,577,700			484,672
Depreciation and amortization		511,371			122,106
General and administrative		2,166,207			1,324,196
Total Operating Expenses		12,004,408			5,191,656
INCOME (LOSS) FROM OPERATIONS		69,470			(411,381	)
Other Income (Expenses)
Other income		318			—
Interest expense		(906,743	)		(45,121	)
Gain on forgiveness of debt		—			360,302
Gain on disposal of property and equipment		32,747			—
Loss on adjustment shares		—			(757,792	)
Total Other Income (Expenses)		(873,678	)		(442,611	)
NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(804,208	)		(853,992	)
INCOME TAX EXPENSE ON CONTINUING OPERATIONS		(123,000	)		—
NET LOSS FROM CONTINUING OPERATIONS	$	(927,208	)	$	(853,992	)
NET INCOME FROM DISCONTINUED OPERATIONS		—			178,510
NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		—			80,329
NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS		—			98,181
NET LOSS	$	(927,208	)		(755,811	)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		(54,178	)		(25,370	)
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS	$	(873,030	)	$	(730,441	)
PREFERRED SHARE DIVIDENDS		(135,215	)		(188,709	)
DEEMED DIVIDEND RELATED TO ISSUANCE OF PREFERRED SHARES		—			(1,527,086	)
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS	$	(1,008,245	)	$	(2,446,236	)
EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS
LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS – BASIC AND DILUTED	$	(0.21	)	$	(0.19	)
EARNINGS PER COMMON SHARE FROM DISCONTINUED OPERATIONS – BASIC AND DILUTED		—			0.02
LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(0.21	)	$	(0.55	)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		4,915,655			4,466,171

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-5

1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF
MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT
(UNAUDITED)

Three Months Ended March 31, 2022

	Series A Senior Convertible Preferred Shares					Series B Senior Convertible Preferred Shares			Allocation Shares		Common Shares			Distribution Receivable			Additional Paid-In Capital		Accumulated Deficit			Non- Controlling Interests			Total Shareholders’ (Deficit)
	Shares		Amount			Shares	Amount				Shares	Amount
Balance at December 31, 2021	1,818,182		$	1,655,404		—	$	—	$	1,000	4,842,851	$	4,843	$	(2,000,000	)	$	21,719,410	$	(20,754,394	)	$	930,812		$	(98,329	)
Issuance of common shares upon conversion of series A preferred shares	(133,333	)		(111,986	)	—		—		—	152,381		152		—			111,834		—			—			111,986
Issuance of series B convertible preferred shares and warrants	—			—		426,999		1,113,650		—	—		—		—			152,350		—			—			152,350
Dividends – common shares	—			—		—		—		—	—		—		—			—		(249,762	)		—			(249,762	)
Dividends – series A senior convertible preferred shares	—			(128,318	)	—		—		—	—		—		—			—		(121,455	)		—			(121,455	)
Dividends – series B senior convertible preferred shares	—			—		—		—		—	—		—		—			—		(13,760	)		—			(13,760	)
Net loss	—			—		—		—		—	—		—		—			—		(873,030	)		(54,178	)		(927,208	)
Balance at March 31, 2022	1,684,849		$	1,415,100		426,999	$	1,113,650	$	1,000	4,995,232	$	4,995	$	(2,000,000	)	$	21,983,594	$	(22,012,401	)	$	876,634		$	(1,146,178	)

Three Months Ended March 31, 2021

	Series A Senior Convertible Preferred Shares			Series B Senior Convertible Preferred Shares			Allocation Shares		Common Shares			Distribution Receivable			Additional Paid-In Capital		Accumulated Deficit			Non- Controlling Interests			Total Shareholders’ (Deficit)
	Shares	Amount		Shares	Amount				Shares	Amount
Balance at December 31, 2020	2,633,278	$	2,971,427	—	$	—	$	1,000	4,444,013	$	4,444	$	(2,000,000	)	$	17,005,491	$	(13,856,973	)	$	(879,239	)	$	274,723
Issuance of series A senior convertible preferred shares and warrants	1,818,182		1,527,086	—		—		—	—		—		—			3,000,000		(1,527,086	)		—			1,472,914
Issuance of common adjustment shares	—		—	—		—		—	398,838		399		—			757,393		—			—			757,792
Dividends – series A senior convertible preferred shares	—		11,759	—		—		—	—		—		—			—		(188,709	)		—			(188,709	)
Net loss	—		—	—		—		—	—		—		—			—		(730,441	)		54,959			(675,482	)
Balance at March 31, 2021	4,451,460	$	4,510,272	—	$	—	$	1,000	4,842,851	$	4,843	$	(2,000,000	)	$	20,762,884	$	(16,303,209	)	$	(824,280	)	$	1,641,238

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-6

1847 HOLDINGS LLC
ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(927,208	)	$	(755,811	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Income from discontinued operations		—			(98,181	)
Gain on forgiveness of debt		—			(360,302	)
Gain on disposal of property and equipment		(32,747	)		—
Loss on redemption of series A senior convertible preferred shares		—			757,792
Deferred tax asset (liability)		(89,000	)		—
Depreciation and amortization		511,371			122,106
Amortization of debt discounts		249,374			—
Amortization of right-of-use assets		98,031			16,928
Changes in operating assets and liabilities:
Receivables		(539,818	)		(124,065	)
Contract assets		18,731			—
Inventories		(378,192	)		(115,545	)
Prepaid expenses and other current assets		311,511			(62,071	)
Accounts payable and accrued expenses		964,586			65,969
Contract liabilities		(851,454	)		(122,247	)
Customer deposits		212,284			328,580
Due to related parties		—			1,785
Operating lease liabilities		(83,729	)		(15,657	)
Net cash used in operating activities from continuing operations		(536,260	)		(360,719	)
Net cash used in operating activities from discontinued operations		—			(123,086	)
Net cash used in operating activities		(536,260	)		(483,805	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash acquired in acquisitions		—			1,094,524
Purchases of property and equipment		(66,291	)		(148,820	)
Proceeds from disposal of property and equipment		35,498			—
Investments in certificates of deposit		(262	)		—
Net cash (used in) provided by investing activities from continuing operations		(31,055	)		945,704
Net cash provided by investing activities from discontinued operations		—			534,343
Net cash (used in) provided by investing activities		(31,055	)		1,480,047

F-7

1847 HOLDINGS LLC
ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(UNAUDITED)

	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		—			123,405
Net proceeds from issuance of series A senior convertible preferred shares		—			3,000,000
Net proceeds from issuance of series B senior convertible preferred shares		1,266,000			—
Proceeds from line of credit		—			569,395
Repayments of notes payable and finance lease liabilities		(58,317	)		(143,432	)
Repayments to sellers		—			(3,033,630	)
Cash paid for financing costs		—			(165,229	)
Dividends on series A senior convertible preferred shares		(121,455	)		(176,950	)
Dividends on series B senior convertible preferred shares		(13,760	)		—
Dividends on common shares		(249,762	)		—
Net cash provided by financing activities from continuing operations		822,706			173,559
Net cash used in financing activities from discontinued operations		—			(119,197	)
Net cash provided by financing activities		822,706			54,362
NET CHANGE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS		255,391			758,544
NET CHANGE IN CASH AND CASH EQUIVALENT FROM DISCONTINUED OPERATIONS		—			292,060
CASH AND CASH EQUIVALENTS AVAILABLE FROM DISCONTINUED OPERATIONS		—			(292,060	)
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS
Beginning of the period		1,383,533			1,380,349
End of the period	$	1,638,924		$	2,138,893
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	484,360		$	—
Cash paid for income taxes	$	—		$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common shares upon conversion of series A preferred shares	$	111,986		$	—
Financed purchases of property and equipment	$	316,798		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-8

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of 1847 Holdings LLC (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Reclassifications

Certain reclassifications within property and equipment, notes payable, and preferred shares 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.

Sequencing

Under ASC 815-40-35 (“ASC 815”), the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest maturity date of potentially dilutive instruments first, with the earliest maturity date of grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities to the Company’s employees and directors, or to compensate grantees in a share-based payment arrangement, are not subject to the sequencing policy.

NOTE 2 — RECENT ACCOUNTING PRONOUCEMENTS

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our condensed consolidated financial statements.

F-9

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 2 — RECENT ACCOUNTING PRONOUCEMENTS (cont.)

In August 2020, the FASB issued ASU 2020-06 Accounting for Convertible Instruments and Contracts In An Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. Entities may adopt the ASU 2020-06 using either a full or modified retrospective approach, and it is effective for interim and annual reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2020. The Company adopted this guidance on January 1, 2022.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company adopted this guidance on January 1, 2022. The adoption of this standard does not have a material impact on our condensed consolidated financial statements.

NOTE 3 — LIQUIDITY AND GOING CONCERN ASSESSMENT

Management assesses liquidity and going concern uncertainty in the Company’s condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

As of March 31, 2022, we had cash and cash equivalents of $1,638,924. For the three months ended March 31, 2022, the Company incurred operating income of $69,470 (before deducting losses attributable to non-controlling interests), cash flows used in operations of $536,260, and negative working capital of $924,324. 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.

Management has prepared estimates of operations for fiscal year 2022 and 2023 believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of these condensed consolidated financial statements, which indicate improved operations and the Company’s ability to continue operations as a going concern. The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of these condensed consolidated financial statements. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

F-10

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 4 — DISAGGREGATION OF REVENUES AND SEGMENT REPORTING

The Company has three reportable segments:

The Retail and Appliances Segment 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 provides finished carpentry products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace mantles, windows, and custom design and build of cabinetry and countertops).

The Automotive Supplies Segment provides 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.

The Company’s revenues for the three months ended March 31, 2022 and 2021 are disaggregated as follows:

	Three Months Ended March 31, 2022
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,204,625	$	—	$	—	$	2,204,625
Appliance accessories, parts, and other		316,159		—		—		316,159
Automotive horns		—		—		1,199,856		1,199,856
Automotive lighting		—		—		442,135		442,135
Custom cabinets and countertops		—		4,167,801		—		4,167,801
Finished carpentry		—		3,743,302		—		3,743,302
Total Revenues	$	2,520,784	$	7,911,103	$	1,641,991	$	12,073,878

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,899,361	$	—	$	—	$	2,899,361
Appliance accessories, parts, and other		365,005		—		—		365,005
Automotive horns		—		—		—		—
Automotive lighting		—		—		—		—
Custom cabinets and countertops		—		1,515,909		—		1,515,909
Finished carpentry		—		—		—		—
Total Revenues	$	3,264,366	$	1,515,909	$	—	$	4,780,275

F-11

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 4 — DISAGGREGATION OF REVENUES AND SEGMENT REPORTING (cont.)

Segment information for the three months ended March 31, 2022 and 2021 is as follows:

	Three Months Ended March 31, 2022
	Retail and Appliances			Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	2,520,784		$	7,911,103	$	1,641,991		$	—		$	12,073,878
Operating expenses										—
Cost of sales		1,871,450			4,879,591		998,089			—			7,749,130
Personnel		230,388			1,134,210		300,328			(87,226	)		1,577,700
Depreciation and amortization		79,797			379,704		51,870			—			511,371
General and administrative		449,494			1,116,558		386,781			213,374			2,166,207
Total Operating Expenses		2,631,129			7,510,063		1,737,068			126,148			12,004,408
Income (Loss) from Operations	$	(110,345	)	$	401,040	$	(95,077	)	$	(126,148	)	$	69,470

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	3,264,366	$	1,515,909	$	—		$	—		$	4,780,275
Operating expenses						—			—
Cost of sales		2,506,652		754,030		—			—			3,260,682
Personnel		253,083		231,589		—			—			484,672
Depreciation and amortization		44,675		77,431		—			—			122,106
General and administrative		434,587		215,311		598,295			76,003			1,324,196
Total Operating Expenses		3,238,997		1,278,361		598,295			76,003			5,191,656
Income (Loss) from Operations	$	25,369	$	237,548	$	(598,295	)	$	(76,003	)	$	(411,381	)

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Equipment and machinery	$	1,127,897		$	808,592
Office furniture and equipment		107,903			105,203
Transportation equipment		901,426			864,121
Leasehold improvements		123,651			112,356
Total property and equipment		2,260,877			1,890,272
Less: Accumulated depreciation		(339,910	)		(194,961	)
Property and equipment, net	$	1,920,967		$	1,695,311

Depreciation expense for the three months ended March 31, 2022 and 2021 was $146,679 and $24,309, respectively.

F-12

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 6 — INTANGIBLE ASSETS

Intangible assets at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Customer relationships	$	5,791,000		$	5,791,000
Marketing related		5,917,000			5,917,000
Technology related		623,000			623,000
Total intangible assets		12,331,000			12,331,000
Less: accumulated amortization		(1,251,795	)		(887,103	)
Intangible assets, net	$	11,079,205		$	11,443,897

Amortization expense for the three months ended March 31, 2022 and 2021 was $364,692 and $97,797, respectively.

Estimated amortization expense for intangible assets for the next five years consists of the following as of March 31, 2022:

Year Ending December 31,	Amount
2022 – remaining	$	1,094,088
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,079,205

NOTE 7 — SELECTED ACCOUNT INFORMATION

Receivables at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Trade accounts receivable	$	3,235,644		$	2,691,702
Vendor rebates receivable		12,194			126,118
Credit card payments in process of settlement		—			116,187
Retainage		1,029,976			803,989
Total receivables		4,277,814			3,737,996
Allowance for doubtful accounts		(359,000	)		(359,000	)
Accounts receivable, net	$	3,918,814		$	3,378,996

F-13

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 7 — SELECTED ACCOUNT INFORMATION (cont.)

Inventories at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Appliances	$	2,554,539		$	2,206,336
Automotive		1,824,260			2,064,834
Construction		1,814,543			1,543,980
Total inventories		6,193,342			5,815,150
Less reserve for obsolescence		(387,848	)		(387,848	)
Total inventories, net	$	5,805,494		$	5,427,302

Inventory balances are composed of finished goods. Raw materials and work in process inventory are immaterial to the condensed consolidated financial statements.

Accounts payable and accrued expenses at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022		December 31, 2021
Trade accounts payable	$	3,810,165	$	3,117,825
Credit cards payable		80,536		52,300
Accrued payroll liabilities		397,717		263,590
Accrued interest		853,402		711,258
Accrued dividends		384,977		242,160
Other accrued liabilities		384,779		431,539
Total accounts payable and accrued expenses	$	5,911,576	$	4,818,672

NOTE 8 — LEASES

Operating Leases

The following was included in our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021:

	March 31, 2022			December 31, 2021
Operating lease right-of-use assets	$	3,094,573		$	3,192,604
Lease liabilities, current portion		595,039			613,696
Lease liabilities, long-term		2,542,790			2,607,862
Total operating lease liabilities	$	3,137,829		$	3,221,558
Weighted-average remaining lease term (months)		54			59
Weighted average discount rate		4.29	%		4.29	%

Operating lease expense was expense was $235,438 and $85,924 for the three months ended March 31, 2022 and March 31, 2021, respectively.

F-14

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 8 — LEASES (cont.)

As of March 31, 2022, maturities of operating lease liabilities were as follows:

Year Ending December 31,	Amount
2022 – remaining	$	524,519
2023		738,690
2024		753,868
2025		747,860
2026		495,994
Thereafter		212,580
Total		3,473,511
Less: imputed interest		(335,682	)
Total operating lease liabilities	$	3,137,829

Finance Leases

During the period ending March 31, 2022, the Company entered in an equipment financing lease to purchase machinery and equipment totaling $316,798, maturing in January 2028.

As of March 31, 2022, maturities of finance lease liabilities were as follows:

Year Ending December 31,	Amount
2022 – remaining	$	137,882
2023		184,711
2024		168,254
2025		161,487
2026		161,487
Thereafter		166,688
Total payments		980,509
Less: amount representing interest		(138,235	)
Present value of minimum finance lease payments	$	842,274

As of March 31, 2022, the weighted-average remaining lease term for all finance leases is 5.50 years.

NOTE 9 — ACQUISITIONS

On March 30, 2021, the Company acquired 100% of the outstanding capital stock of Wolo Mfg. Corp and Wolo Industrial Horn & Signal, Inc. (“Wolo”) for an aggregate purchase price of $8,344,056.

Wolo contributed revenue of $1,661,754 and net loss from continuing operations of $325,417, which are included in our condensed consolidated statements of operations for the three months ended March 31, 2022.

On October 8, 2021, the Company acquired 100% of the outstanding capital stock of High Mountain Door & Trim, Inc. (“High Mountain”) and Sierra Homes, LLC (“Sierra Homes”) for an aggregate purchase price of $15,441,173.

High Mountain and Sierra Homes contributed revenue of $6,249,349 and net loss from continuing operations of $271,647, which are included in our condensed consolidated statements of operations for the three months ended March 31, 2022.

F-15

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 9 — ACQUISITIONS (cont.)

Pro Forma Information

The following unaudited pro forma results presented below include the effects of the Wolo, High Mountain and Sierra Homes acquisitions as if they had been consummated as of January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the acquisitions.

	March 31, 2022			March 31, 2021
Revenues	$	12,073,878		$	13,373,918
Net income (loss)		(927,208	)		317,547
Net loss attributable to 1847 Holdings common shareholders’		(1,008,245	)		(1,398,248	)
Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted	$	(0.21	)	$	(0.29	)

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

NOTE 10 — RELATED PARTIES

Management Services Agreement

On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the three months ended March 31, 2022 and 2021.

Offsetting Management Services Agreements

The Company’s subsidiary 1847 Asien Inc. (“1847 Asien”) entered into an offsetting management services agreement with the Manager on May 28, 2020, the Company’s subsidiary 1847 Cabinet Inc. (“1847 Cabinet”) entered into an offsetting management services agreement with the Manager on August 21, 2020 (which was amended and restated on October 8, 2021) and the Company’s subsidiary 1847 Wolo Inc. (“1847 Wolo”) entered into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the Parent Management Fee in any fiscal quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to the Manager under other offsetting management services agreements.

F-16

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 10 — RELATED PARTIES (cont.)

1847 Asien expensed management fees of $75,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Cabinet expensed management fees of $125,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Wolo expensed management fees of $75,000 and $0 for the three months ended March 31, 2022 and 2021, respectively.

On a consolidated basis, the Company expensed total management fees of $275,000 and $260,000 for the three months ended March 31, 2022 and 2021, respectively.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of March 31, 2022 and December 31, 2021, a total of $118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of March 31, 2022 and December 31, 2021, the Manager has funded the Company $74,928 and $74,928 in related party advances, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

Building Lease

On September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, who are officers of Kyle’s and principal shareholders of the Company. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term.

The total rent expense under this related party leases was $21,776 for the three months ended March 31, 2022.

NOTE 11 — MEZZANINE EQUITY

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.

Ranking.    The series A senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series A senior convertible preferred shares; (ii) on parity with the series B senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series A senior convertible preferred shares.

Dividend Rights.    Holders of series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($2.00 per share, subject to adjustment). 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

F-17

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 11 — MEZZANINE EQUITY (cont.)

based on a price equal to eighty percent (80%) of the volume weighted average price for the common shares on the Company’s principal trading market (the “VWAP”) 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 Rule 144 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.

Liquidation Rights.    Subject to the rights of 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, including the common shares and allocation shares, 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, the assets, 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, 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 Capital LLC so long as it 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 creation or issuance by the Company or by its subsidiaries Kyle’s Custom Wood Shop, Inc. (“Kyle’s”) and Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (together, “Wolo”) 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 will be used 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 ($2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $1.75 per share (subject to adjustment); 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. 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.

F-18

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 11 — MEZZANINE EQUITY (cont.)

Redemption Rights.    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. On October 12, 2021, the Company redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645.

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 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 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 such 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 initial additional equity

F-19

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 11 — MEZZANINE EQUITY (cont.)

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.

As of March 31, 2022 and December 31, 2021, the Company had 1,684,849 and 1,818,182 series A senior convertible preferred shares issued and outstanding, respectively.

During the three months ended March 31, 2022, the Company accrued dividends attributable to the series A senior convertible preferred shares in the amount of $121,455 and paid prior period accrued dividends of $128,318.

On February 16, 2022, 133,333 shares of series A senior convertible preferred shares were converted into 152,381 common shares.

Series B Senior Convertible Preferred Shares

On February 17, 2022, the Company executed a share designation to designate 583,334 of its shares as series B senior convertible preferred shares. Following is a description of the rights of the series B senior convertible preferred shares.

Ranking.    The series B senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series B senior convertible preferred shares; (ii) on parity with the series A senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series B senior convertible preferred shares.

Dividend Rights.    Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 VWAP 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; 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 $2.70 or higher.

Liquidation Rights.    Subject to the rights of 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 B senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, including the common shares and allocation shares, each holder of outstanding series B 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, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B 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, then such assets, or the proceeds thereof, shall be distributed among the holders of series B senior convertible preferred

F-20

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 11 — MEZZANINE EQUITY (cont.)

shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

Voting Rights.    The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the share designation or (ii) the Company’s creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

Conversion Rights.    Each series B 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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 Rights.    The Company may redeem in whole (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms of the series B 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 the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

•        On the first day of the 12th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.

F-21

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 11 — MEZZANINE EQUITY (cont.)

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). 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 B 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.

On February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of approximately $320,000. The Company had issuance costs relating to the offering of approximately $15,000, resulting in net proceeds of $1,266,000. 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 $3.00 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. The embedded conversion options of the series B senior convertible preferred shares and warrants were clearly and closely related to the equity host and did not require bifurcation. The $1,266,000 of net proceeds were allocated on a relative fair value basis of $1,113,650 to the series B preferred shares and $152,350 to the warrants. The series B preferred shares fair value was derived using an Option Pricing Method and the warrants fair value was derived using a Monte Carlo Simulation Model.

As of March 31, 2022 and December 31, 2021, the Company had 426,999 and 0 series B senior convertible preferred shares issued and outstanding, respectively.

During the three months ended March 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares in the amount of $13,760.

Mezzanine Equity Classification

We applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”), in order to determine the appropriate classification for both the series A senior convertible preferred shares and the series B senior convertible preferred shares.

ASC 480 requires equity instruments to be evaluated on an ongoing basis for mezzanine equity (temporary equity) vs permanent equity classification. As a result of the maximum number of common shares that may be issuable (upon conversion of the preferred securities) exceeded the number of authorized but unissued common shares available, temporary equity classification is required. As of March 31, 2022 and December 31, 2021, there were 1,684,849 and 1,818,182 series A senior convertible preferred shares presented in mezzanine equity, respectively. As of March 31, 2022 and December 31, 2021, there were 426,999 and 0 series B senior convertible preferred shares presented in mezzanine equity, respectively.

NOTE 12 — SHAREHOLDERS’ DEFICIT

Common Shares

As of March 31, 2022, the Company was authorized to issue 500,000,000 common shares. As of March 31, 2022 and December 31, 2021, the Company had 4,995,232 and 4,842,851 common shares issued and outstanding, respectively.

On February 16, 2022, the Company issued 152,851 common shares upon the conversion of 133,333 series A senior convertible preferred shares.

On March 23, 2022, the Company declared a common share dividend of $0.05 per share, or $249,762, to shareholders of record as of March 31, 2022. This dividend was paid on April 15, 2022.

F-22

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 12 — SHAREHOLDERS’ DEFICIT (cont.)

Warrants

On February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of $320,000. 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 $3.00 per common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free interest rate of 0.31%; (iv) expected life of three years; (v) estimated fair value of the common shares of $1.94 per share; and (vi) various probability assumptions related to redemption, calls and price resets. The fair value of the warrants was $379,533 or $0.89 per warrant, resulting in the amount allocated to the warrants, based on their relative fair of $152,350, which was recorded as additional paid in capital.

The warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.

Below is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2022:

	Warrants	Weighted- Average Exercise Price
Outstanding at December 31, 2021	5,200,460	$	2.38
Granted	426,999		3.00
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2022	5,627,459	$	2.43
Exercisable at March 31, 2022	5,627,459	$	2.43

As of March 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 2.17 years and a total intrinsic value of $497,500.

F-23

1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(UNAUDITED)

NOTE 13 — LOSS PER SHARE

The computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to 1847 Holdings common shareholders for the three months ended March 31, 2022 consisted of the following:

Basic and Diluted Loss Per Share	March 31, 2022
Net loss per common share attributable to 1847 Holdings common shareholders’	$	(1,008,245	)
Weighted average common shares outstanding		4,915,655
Basic and diluted loss per share	$	(0.21	)

For the three months ended March 31, 2022, there were 20,871,528 potential common share equivalents from warrants, convertible debt, and series A and B convertible preferred shares were excluded from the diluted EPS calculations as their effect is anti-dilutive.

For the three months ended March 31, 2021, there were 4,450,460 potential common share equivalents from warrants, convertible debt, and series A convertible preferred shares were excluded from the diluted EPS calculations as their effect is anti-dilutive.

NOTE 14 — SUBSEQUENT EVENTS

On April 20, 2022, the Company entered into a securities purchase agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant to which the Company sold 28,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. 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 $3.00 per share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

F-24

1847 HOLDINGS LLC

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2021 AND 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of 1847 Holdings LLC:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of 1847 Holdings LLC (“the Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisitions — Refer to Note 10 to the Consolidated Financial Statements

Critical Audit Matter Description

During the year ended December 31, 2021, the Company completed two business acquisitions. On March 30, 2021, the Company acquired 100% of the outstanding capital stock of Wolo Mfg. Corp and Wolo Industrial Horn & Signal, Inc., for an aggregate purchase price of $8,344,056. On October 8, 2021, the Company acquired 100% of the outstanding capital stock of High Mountain Door & Trim, Inc. and Sierra Homes LLC, Inc. for an aggregate purchase price of $15,441,173. The Company accounted for these two acquisitions as business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed at fair value as of the transaction dates. The Company utilized a third-party valuation specialist to assist in determining the fair value of the consideration granted and identifiable intangible assets acquired in each acquisition. We identified the estimation of the fair value of the consideration transferred, assets acquired, and liabilities assumed in these acquisitions as a critical audit matter.

We identified the valuation of the consideration transferred, assets acquired, and liabilities assumed as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of certain of these assets. This required a high degree of auditor judgment and an increased extent of effort when performing

F-26

audit procedures to evaluate the reasonableness of valuation methodologies applied and the assumptions used such as forecasted sales growth rates, cash flows, attrition rates, market-based royalty rates, and estimated discount rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the following:

•        We evaluated management’s and the valuation specialist’s identification of assets acquired and liabilities assumed.

•        We obtained management’s purchase price allocation detailing fair values assigned to acquired tangible and intangible assets.

•        We obtained valuation report prepared by valuation specialist engaged by management to assist in the purchase price allocation, including determination of fair values assigned to acquired intangible assets, and examined valuation methods used and qualifications of specialist.

•        We examined the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation report, including historical and projected financial information.

•        We evaluated the accuracy and completeness of the financial statement presentation and disclosure of the acquisitions.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in the evaluations of the valuation methodologies deployed and the reasonableness of the significant assumptions used.

Going Concern

Critical Audit Matter Description

As described further in Note 2 to the consolidated financial statements, the Company has incurred losses since inception, has negative cash flows from operations, and has an accumulated deficit. Accordingly, the Company has determined that these factors raise substantial doubt about its ability to continue as a going concern. However, management believes, based on the Company’s operating plan, that current working capital and current and expected additional financing is sufficient to fund operations and satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date.

We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s future cash flows, available capital and the risk of bias in management’s judgments and assumptions in their determination.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the following:

•        We performed testing procedures such as analytical procedures to identify conditions and events that indicate there could be substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.

•        We reviewed and evaluated management’s plans for dealing with adverse effect of these conditions and events.

•        We inquired of Company management and reviewed company records to assess whether there are additional factors that contribute to the uncertainties disclosed.

•        We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern, and that such doubt was alleviated by management’s plans, was adequately disclosed.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2017.

Draper, UT
March 31, 2022

F-27

1847 HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS

	December 31, 2021			December 31, 2020
ASSETS
Current Assets
Cash	$	1,383,533		$	976,538
Restricted cash		—			403,811
Investments		276,429			—
Accounts receivable, net		3,378,996			525,625
Contract assets		88,466			70,230
Inventories, net		5,427,302			2,022,754
Prepaid expenses and other current assets		582,048			550,964
Discontinued operations – current assets		—			1,324,608
TOTAL CURRENT ASSETS		11,136,774			5,874,530
Property and equipment, net		1,695,311			398,503
Investments long-term		—			276,270
Operating lease right-of-use assets		3,192,604			357,208
Goodwill		19,452,270			5,989,817
Intangible assets, net		11,443,897			3,885,467
Other assets		85,691			375
Discontinued operations – long-term assets		—			2,457,770
TOTAL ASSETS	$	47,006,547		$	19,239,940
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	4,818,672		$	2,558,559
Contract liabilities		2,547,903			77,403
Customer deposits		3,465,259			3,370,957
Current portion of operating lease liability		613,696			66,803
Advances, related party		193,762			190,192
Lines of credit		—			301,081
Due to seller		—			33,630
Note payable – related party		—			56,900
Current portion of notes payable		793,174			429,183
Discontinued operations – current liabilities		—			999,122
TOTAL CURRENT LIABILITIES		12,432,466			8,083,830
Operating lease liability – long term, net of current portion		2,607,862			291,183
Notes payable, net of current portion		707,306			1,138,331
Vesting note payable – related party		1,001,183			498,979
Convertible promissory notes, net of discount		26,630,655			—
Deferred tax liability		2,070,000			—
Discontinued operations – long-term liabilities		—			5,981,467
TOTAL LIABILITIES	$	45,449,472		$	15,993,790
SHAREHOLDERS’ EQUITY
Allocation shares, 1,000 shares issued and outstanding		1,000			1,000
Series A convertible preferred shares, 1,818,182 and 2,632,278 outstanding as of December 31, 2021 and 2020, respectively		1,655,404			2,971,427
Distribution receivable		(2,000,000	)		(2,000,000	)
Common Shares, 500,000,000 shares authorized, 4,842,851 and 4,444,013 shares issued and outstanding as of December 31, 2021 and 2020, respectively		4,843			4,444
Additional paid-in capital		21,719,410			17,005,491
Accumulated deficit		(19,914,957	)		(13,856,973	)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ EQUITY		1,465,700			4,125,389
NON-CONTROLLING INTERESTS		91,375			(879,239	)
TOTAL SHAREHOLDERS’ EQUITY		1,557,075			3,246,150
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	47,006,547		$	19,239,940

The accompanying notes are an integral part of these consolidated financial statements

F-28

1847 HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2021			2020
REVENUES
Furniture and appliances	$	12,741,064		$	7,625,222
Construction		12,203,890			1,120,224
Automotive supplies		5,716,030			—
TOTAL REVENUE		30,660,984			8,745,446
OPERATING EXPENSES
Cost of sales		20,311,724			6,531,435
Personnel		3,247,441			734,867
Depreciation and amortization		908,982			176,612
General and administrative		7,296,736			2,652,429
TOTAL OPERATING EXPENSES		31,764,883			10,095,343
NET LOSS FROM OPERATIONS		(1,103,899	)		(1,349,897	)
OTHER INCOME (EXPENSE)
Gain on forgiveness of debt		360,302			—
Loss on write-down of vesting note payable – related party		(602,204	)		—
Loss on extinguishment of debt		(137,692	)		(286,350	)
Loss on redemption of preferred shares		(4,017,553	)		—
Gain on disposition of subsidiary		3,282,804			—
Gain on sale of property and equipment		10,885			—
Other income and (expense)		876			(18,196	)
Interest expense		(1,296,537	)		(249,626	)
TOTAL OTHER INCOME (EXPENSE)		(2,399,119	)		(554,172	)
NET LOSS BEFORE INCOME TAXES		(3,503,018	)		(1,904,069	)
INCOME TAX BENEFIT (EXPENSE)		(218,139	)		83,931
NET LOSS AFTER TAXES		(3,721,157	)		(1,820,138	)
NET LOSS FROM CONTINUING OPERATIONS	$	(3,721,157	)	$	(1,820,138	)
NET LOSS FROM DISCONTINUED OPERATIONS
Income (loss) from discontinued operations before income taxes		240,405			(12,875,463	)
Less provision for income taxes for discontinued operations		—			—
Net income (loss) from discontinued operations		240,405			(12,875,463	)
Less net income (loss) from discontinued operations attributable to noncontrolling interests		108,182			(5,036,832	)
Net income (loss) from discontinued operations attributable to 1847 Holdings common shareholders		132,223			(7,838,631	)
NET LOSS	$	(3,588,934	)	$	(9,658,769	)
LESS NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		(284,372	)		(50,120	)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(3,304,562	)	$	(9,608,649	)
PREFERRED SHARE ACCRUED DIVIDEND		(984,176	)		—
1847 GOEDEKER SPIN-OFF DIVIDEND		—			(283,257	)
DISTRIBUTION – ALLOCATION SHARES		—			(5,985,000	)
DEEMED DIVIDEND RELATED TO ISSUANCE OF PREFERRED SHARES		(1,527,086	)		(3,051,478	)
NET INCOME (LOSS) ATTRIBUTABLE TO 1847 HOLDINGS SHAREHOLDERS	$	(5,815,824	)	$	(18,928,384	)

F-29

1847 HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS — (Continued)

	Years Ended December 31,
	2021			2020
Net loss per common share from continuing operations: basic	$	(0.78	)	$	(0.49	)
Net income (loss) per common share from discontinued operations: basic	$	0.03		$	(2.12	)
Net loss per common share: basic	$	(0.70	)	$	(2.60	)
Net loss per common share from continuing operations: diluted	$	(0.78	)	$	(0.49	)
Net income (loss) per common share from discontinued operations: diluted	$	0.01		$	(2.12	)
Net loss per common share: diluted	$	(0.70	)	$	(2.60	)
Weighted-average common shares outstanding: basic		4,749,971			3,692,429
Weighted-average common shares outstanding: diluted		11,175,892			3,692,429

The accompanying notes are an integral part of these consolidated financial statements

F-30

1847 HOLDINGS LLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

	Allocation Shares		Preferred Shares					Goedeker Subscription Receivable			Common Shares					Additional Paid-In Capital			Accumulated Deficit			Non-Controlling Interest			Shareholders’ Equity (Deficit)
			Shares		Amount						Shares		Amount
BALANCE – January 1, 2020	$	1,000	—		$	—		$	—		3,165,625		$	3,165		$	442,014		$	(4,402,043	)	$	(42,930	)	$	(3,998,794	)
Common shares issued in connection with acquisition		—	—			—			—		415,000			415			1,037,085			—			—			1,037,500
Common shares issued for service		—	—			—			—		100,000			100			244,900			—			—			245,000
Common shares issued upon partial conversion of convertible note payable		—	—			—			—		150,000			150			374,850			—			—			375,000
Warrants issued in connection with convertible note payable		—	—			—			—		—			—			448,211			—			118,500			566,711
Fair value of stock options		—	—			—			—		—			—			191,386			—			—			191,386
Common shares issued in connection with Kyle’s acquisition		—	—			—			—		700,000			700			3,674,300			—			—			3,675,000
Issuance of warrants for services		—	—			—			—		—			—			87,550			—			—			87,550
Common shares issued upon warrant exercise		—	—			—			—		230,000			230			62,270			—			—			62,500
Common shares issued upon option exercise		—	—			—			—		77,500			78			149,922			—			—			150,000
Purchase of common shares from seller shares, cancellation of common shares held in treasury and common share dividend to non-controlling interest		—	—			—			—		(394,112	)		(394	)		(693,314	)		(57,442	)		—			(751,150	)
Issuance of preferred shares, net of fees		—	2,633,278			2,794,477			—		—			—			5,001,317			(2,874,478	)		—			4,921,316
Dividend on disposition of Goedeker		—	—			—			(2,000,000	)	—			—			5,985,000			3,262,592			(359,078	)		6,888,514
Accrued dividends payable		—	—			176,950			—		—			—			—			(176,950	)		—			—
Net loss		—	—			—			—		—			—			—			(9,608,652	)		(595,731	)		(10,204,383	)
BALANCE – December 31, 2020	$	1,000	2,633,278		$	2,971,427		$	(2,000,000	)	4,444,013		$	4,444		$	17,005,491		$	(13,856,973	)	$	(879,239	)	$	3,246,150
Issuance of Series A preferred shares, net of fees		—	1,818,182			1,527,086			—		—			—			3,000,000			(1,527,086	)		—			3,000,000
Debt discount on $0.01 Warrant Feature		—	—			—			—		—			—			402,781			—			—			402,781
Debt discount on $2.50 Warrant Feature		—	—			—			—		—			—			553,745			—			—			553,745
Debt discounts on convertible promissory notes		—	—			—			—		—			—			—			—			1,146,804			1,146,804
Accrued preferred shares dividends payable		—	—			(48,630	)		—		—			—			—			(984,176	)		—			(1,032,806	)
Accrued common share dividend		—	—			—			—		—			—			—			(242,160	)		—			(242,160	)
Issuance of common adjustment shares		—	—			—			—		398,838			399			757,393			—			—			757,792
Redemption of preferred shares		—	(2,633,278	)		(2,794,479	)		—		—			—			—			—			—			(2,794,479	)
Net loss		—	—			—			—		—			—			—			(3,304,562	)		(176,190	)		(3,480,752	)
BALANCE – December, 2021	$	1,000	1,818,182		$	1,655,404		$	(2,000,000	)	4,842,851		$	4,843		$	21,719,410		$	(19,914,957	)	$	91,375		$	1,557,075

The accompanying notes are an integral part of these consolidated financial statements

F-31

1847 HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2021			2020
OPERATING ACTIVITIES
Net income (loss)	$	(3,588,934	)	$	(9,658,769	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss) from discontinued operations		(132,223	)		7,838,631
Gain on disposition of subsidiary		(3,282,804	)		—
Depreciation and amortization of intangibles		908,982			176,612
Stock compensation		—			523,936
Loss on extinguishment of debt		—			286,350
Amortization of right of use asset		181,032			15,931
Change in debt discounts		382,565			—
Loss on redemption of preferred shares		4,017,553			—
Gain on forgiveness of debt – PPP loan		(360,302	)		—
Gain on sale of property and equipment		(10,885	)		—
Loss on write-down of contingent notes payable		602,204			—
Changes in operating assets and liabilities:
Accounts receivable		48,930			95,216
Inventory		389,110			(565,264	)
Prepaid expenses and other assets		182,366			(495,831	)
Accounts payable and accrued expenses		719,890			962,464
Impact on lease liability		(177,282	)		(15,931	)
Change on contract liabilities		(950,640	)		85,761
Deferred taxes		75,000			(84,000	)
Customer deposits		94,302			965,254
Due to related parties		3,570			7,140
Net cash provided by (used in) operating activities from continuing operations		(897,566	)		137,500
Net cash provided by (used in) operating activities from discontinued operations		(170,580	)		3,788,983
Net cash provided by (used in) operating activities		(1,068,146	)		3,926,483
INVESTING ACTIVITIES
Net cash acquired in (paid for) acquisitions		(15,857,295	)		1,409,936
Proceeds from sale of property and equipment		25,000			—
Proceeds from disposition of subsidiary		325,000
Investments in certificates of deposit		—			(276,270	)
Purchase of property and equipment		(177,475	)		(72,794	)
Net cash provided by (used in) investing activities from continuing operations		(15,684,770	)		1,060,872
Net cash provided by investing activities from discontinued operations		644,303			72,001
Net cash provided by (used in) investing activities		(15,040,467	)		1,132,873
FINANCING ACTIVITIES
Proceeds from convertible notes payable, net of fees and debt discounts		23,744,975			—
Proceeds of notes payables		3,550,000			21,968
Payment of vesting notes payable – related party		(100,000	)		—
Proceeds from (repayment on) lines of credit		(301,081	)		301,081
Repayment of grid note – related party		(56,900	)		(62,500	)
Payments to sellers		(977,686	)		(4,356,162	)

F-32

1847 HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

	Years Ended December 31,
	2021			2020
Payments on notes payable		(5,021,511	)		(856,225	)
Proceeds from issuance of preferred shares, net of costs		3,000,000			4,921,315
Proceeds from exercise of stock options and warrants		—			212,500
Redemption of preferred shares		(6,054,241	)		—
Dividends paid on preferred shares		(1,032,806	)		—
Financing fees		(165,230	)		—
Net cash provided by financing activities from continuing operations		16,585,520			181,977
Net cash provided by (used in) financing activities from discontinued operations		(208,693	)		4,449,634
Net cash provided by financing activities		16,376,827			4,631,611
NET CHANGE IN CASH AND RESTRICTED CASH – Continuing Operations		3,184			1,380,349
NET CHANGE IN CASH AND RESTRICTED CASH – Discontinued Operations		265,030			8,310,618
CASH AND RESTRICTED CASH AVAILABLE – Discontinued Operations		265,030			(8,310,618	)
CASH AND RESTRICTED CASH – Continuing Operations
Beginning of year		1,380,349			—
End of year	$	1,383,533		$	1,380,349

The accompanying notes are an integral part of these consolidated financial statements

F-33

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

1847 Holdings LLC (the “Company”) was formed under the laws of the State of Delaware on January 22, 2013. The Company is in the business of acquiring small businesses in a variety of different industries.

On March 27, 2020, the Company and the Company’s wholly owned subsidiary 1847 Asien Inc., a Delaware corporation (“1847 Asien”), entered into a stock purchase agreement with Asien’s Appliance, Inc., a California corporation (“Asien’s”), and Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992 (the “Asien’s Seller”), pursuant to which 1847 Asien acquired all of the issued and outstanding stock of Asien’s on May 28, 2020 (see Note 10). As a result of this transaction, the Company owns 95% of 1847 Asien, with the remaining 5% held by a third-party, and 1847 Asien owns 100% of Asien’s.

On August 27, 2020, the Company and the Company’s wholly owned subsidiary 1847 Cabinet Inc., a Delaware corporation (“1847 Cabinet”), entered into a stock purchase agreement with Kyle’s Custom Wood Shop, Inc., an Idaho corporation (“Kyle’s”), and Stephen Mallatt, Jr. and Rita Mallatt (the “Kyle’s Sellers”), pursuant to which 1847 Cabinet acquired all of the issued and outstanding stock of Kyle’s on September 30, 2020 (see Note 10). As a result of this transaction, the Company owns 92.5% of 1847 Cabinet, with the remaining 7.5% held by a third-party, and 1847 Cabinet owns 100% of Kyle’s.

On 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 10). 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 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 10). As a result of this transaction, 1847 Cabinet owns 92.5% of High Mountain and Innovative Cabinets, with the remaining 7.5% held by a third-party.

The Company previously owned two additional companies, 1847 Neese Inc. and 1847 Goedeker Inc.

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.

On January 10, 2019, the Company established 1847 Goedeker Inc. (“Goedeker”) as a wholly owned subsidiary in the State of Delaware in connection with the proposed acquisition of assets from Goedeker Television Co., a Missouri corporation (“Goedeker Television”). On March 20, 2019, the Company established 1847 Goedeker Holdco Inc. (“Holdco”) as a wholly owned subsidiary in the State of Delaware and subsequently transferred all of its shares in Goedeker to Holdco, such that Goedeker became a wholly owned subsidiary of Holdco. On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker, pursuant to which Goedeker acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business on April 5, 2019. As a result of this transaction, the Company owned 70% of Holdco, with the remaining 30% held by third parties, and Holdco owned 100% of Goedeker. On August 4, 2020, Holdco distributed all of its shares of Goedeker to its stockholders in accordance with their pro rata ownership in Holdco, after which time

F-34

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS (cont.)

Holdco was dissolved. Following this transaction, and the closing of Goedeker’s initial public offering on August 4, 2020 (the “Goedeker IPO”), the Company owned approximately 54.41% of Goedeker. On October 23, 2020, the Company distributed all of the shares of Goedeker that it held to its shareholders (the “Goedeker Spin-Off”). As a result of the Goedeker Spin-Off, Goedeker is no longer a subsidiary of the Company.

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, 1847 Asien, 1847 Cabinet, 1847 Wolo, Asien’s, Kyle’s, High Mountain, Innovative Cabinets, Wolo Mfg and Wolo H&S. All significant intercompany balances and transactions have been eliminated in consolidation.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and are presented in US dollars.

The results of Goedeker are included within discontinued operations for year ended December 31, 2020.

The results of 1847 Neese are included within discontinued operations for the years ended December 31, 2021 and 2020. The Company retrospectively updated the consolidated financial statements for the year ended December 31, 2020 to reflect this change.

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

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 stockholders. 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 services including sales, 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, extended warranties, 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.

F-35

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

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.

Impact of COVID-19

The impact of COVID-19 on the Company’s business has been considered in management’s estimates and assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides for economic assistance loans through the United States Small Business Administration (the “SBA”). On April 28, 2020, Asien’s received $357,500 in Paycheck Protection Program (“PPP”) loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the Small Business Administration (See Note 11).

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company’s prior financial statements and accompanying notes to conform to the presentation for the year ended December 31, 2021. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder’s equity.

Revenue Recognition and Cost of Revenue

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

F-36

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Retail and Appliances Segment

The Company collects 100% of the payment for special-order models including tax and 50% of the 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 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 5% of total revenue.

Customer deposits ‒ The Company records customer deposits when payments are received in advance of the delivery of the merchandise. The Company expects that substantially all of the customer deposits will be recognized within six months as the performance obligations are satisfied.

Construction Segment

The Company’s construction segment revenues are derived primarily through contracts with customers whereby the Company specializes in all aspects of products and services relating to finished carpentry, custom cabinetry, and countertops. The Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Since most contracts are bundled to include both material and installation services, the Company combines these items into one performance obligation as the overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. The Company does offer assurance-type warranties on certain of its installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For any contracts that are not complete at the reporting date, the Company recognizes revenue over time, because of the continuous transfer of control to the customer as work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. The Company utilizes the cost-to-cost measure of progress method as it believes this best depicts the transfer of control of assets to the customer, which occurs as costs are incurred.

F-37

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

When this method is used, the Company estimates the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, cash flow, and profitability from a particular contract may be adversely affected.

An insignificant portion of sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability and excluded from revenue on a net basis.

Contracts can be subject to modification to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

All contracts are billed either contractually or as work is performed. Billing on long-term contracts occurs primarily on a monthly basis throughout the contract period whereby the Company submits progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some contracts, the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered a significant financing component.

Cost of revenues earned include all direct material and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying the performance obligation.

Contract Assets and Contract Liabilities

The Company records a contract asset when it has satisfied its performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of the Company’s performance obligation. The difference between the beginning and ending balances of contract assets and liabilities primarily results from the timing of the Company’s performance and the customer’s payment. At times, the Company has a right to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included in contract assets or contract liabilities, as determined on a contract-by-contract basis.

Automotive Supplies Segment

The Company’s automotive supplies segment 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. Focused on the automotive and industrial after-market, the Company sells its products to big-box national retail chains, through specialty and industrial distributors, as well as online/mail order retailers and original equipment manufacturers.

The Company collects 100% of the payment for internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the agreed upon terms.

F-38

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Performance Obligations — The revenue that the Company recognizes arises from orders it receives from contracts with customers. The Company’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers and each 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 shipment of the order. 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 sales includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor to the Company.

Warranties vary and are typically 90 days to consumers and manufacturing defect warranty to are available to resellers. At times, depending on the product, the Company can also offer a warranty up to 12 months.

Receivables

Receivables consist of trade accounts receivable from customer, credit card transactions in the process of settlement, and vendor rebates receivable. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivables are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivable. Retainage receivables represent the amount retained by customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered at risk. The allowance for doubtful accounts amounted to $359,000 and $0 for the years ended December 31, 2021 and 2020, respectively. Uncollectible balances are expensed in the periods they are determined to be uncollectible.

Inventory

For Asien’s, inventory mainly consists of appliances that are acquired for resale and is valued at the average cost determined on a specific item basis. Inventory also consists of parts that are used in service and repairs and may or may not be charged to the customer depending on warranty and contractual relationship. Kyle’s typically orders inventory on a job-by-job basis and those jobs are put into production within hours of being received. The inventory in production is accounted for in the contract assets and liabilities and follows the percentage completion methodology. Inventories consisting of materials and supplies are stated at lower of costs or market. High Mountain and Innovative Cabinets’ inventory mainly consists of doors, door frames, baseboards, crown molding, cabinetry, countertops, custom cabinets, closet shelving, and other related products. The Company values inventory at each balance sheet date to ensure that it is carried at the lower of cost or net realizable value with cost determined based on the average cost basis. Wolo’s inventory consists of finished goods acquired for resale and is valued at the weighted-average cost determined on a

F-39

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

specific item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $387,848 and $12,824 at December 31, 2021 and 2020, respectively.

Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Trucks and Vehicles	3-6

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5-15
Marketing-Related	Straight-line basis	5

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating 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.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, certificates of deposit and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

F-40

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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 three-level hierarchy is as follows:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or inputs that are corroborated by market data.

Level 3 — Unobservable inputs that are not corroborated by market date.

The Company’s held to maturity securities are comprised of certificates of deposit.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 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.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the year ended December 31, 2021, potentially dilutive securities were included in diluted loss per share under the treasury method: 5,200,460 for outstanding warrants, 2,257,404 for principal and accrued interest of series A convertible preferred shares, and 10,131,076 for the principal and accrued interest of convertible notes. As the Company had a net loss for the year ended December 31, 2020, the following 2,632,278 potentially dilutive securities were excluded from diluted loss per share: 2,632,278 for outstanding warrants.

F-41

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Operating Leases

ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

Going Concern Assessment

Management assesses going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

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. For the year ended December 31, 2021, the Company incurred operating losses from continuing operations of $3,721,157 (before deducting losses attributable to non-controlling interests and excluding net income from discontinued operations), cash flows used in operations of $897,566 (excluding the cashflow from discontinued operations) and negative working capital of $1,295,692 (excluding the negative working capital from discontinued operations).

Management has prepared estimates of operations for fiscal year 2022 and believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K, which indicate improved operations and the Company’s ability to continue operations as a going concern.

The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted CARES Act provides for economic assistance loans through the SBA. On April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the

F-42

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.

The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.

Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K indicate improved operations and the Company’s ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

NOTE 3 — BUSINESS SEGMENTS

Summarized financial information concerning the Company’s reportable segments for the years ended December 31, 2021 and 2020 is presented below.

	Year Ended December 31, 2021
	Retail & Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenue
Furniture and appliances	$	12,741,064	$	—	$	—		$	—		$	12,741,064
Construction		—		12,203,890		—			—			12,203,890
Automotive supplies		—		—		5,716,030			—			5,716,030
Total Revenue		12,741,064		12,203,890		5,716,030			—			30,660,984
Cost of sales		9,773,371		6,966,064		3,572,289			—			20,311,724
Operating expenses		2,892,973		4,153,938		3,119,435			1,286,813			11,453,159
Income (loss) from operations	$	74,720	$	1,083,888	$	(975,694	)	$	(1,286,813	)	$	(1,103,899	)

F-43

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 3 — BUSINESS SEGMENTS (cont.)

	Year Ended December 31, 2020
	Retail & Appliances			Construction			Automotive Supplies		Corporate Services			Total
Revenue
Furniture and appliances	$	7,625,222		$	—		$	—	$	—		$	7,625,222
Construction		—			1,120,224			—		—			1,120,224
Automotive supplies		—			—			—		—			—
Total Revenue		7,625,222			1,120,224			—		—			8,745,446
Cost of sales		5,866,413			665,022			—		—			6,531,435
Operating expenses		1,986,775			681,040			—		896,092			3,563,908
Loss from operations	$	(227,967	)	$	(225,838	)	$	—	$	(896,092	)	$	(1,349,897	)

NOTE 4 — CASH EQUIVALENTS AND INVESTMENTS

	December 31, 2021		December 31, 2020
Cash and cash equivalents
Operating accounts	$	1,383,533	$	976,538
Restricted accounts		—		403,811
Subtotal	$	1,383,533	$	1,380,349
Held to Maturity Investments
Restricted accounts – certificates of deposit (4 – 24-month maturities, FDIC insured)	$	276,429	$	276,270
Subtotal	$	276,429	$	276,270
TOTAL	$	1,659,962	$	1,656,619

NOTE 5 — DISCONTINUED OPERATIONS

ASC 360-10-45-9 requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable, and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. For the Goedeker Spin-Off, these criteria were achieved on September 10, 2020, when the board approved the Goedeker Spin-Off and subsequently on October 23, 2020, when the Company completed the Goedeker Spin-Off. These criteria were achieved in March 2021 for the Neese Spin-Off.

The discontinued operations as of December 31, 2021 and for the year ended December 31, 2021 are comprised entirely of the business of Neese. The discontinued operations as of December 31, 2020 and for the year ended December 31, 2020 are comprised of the businesses of Neese and Goedeker.

For comparability purposes, certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying consolidated statements of operations, consolidated statements of cash flows, and the consolidated balance sheets.

In accordance with ASC 205-20-S99, Allocation of Interest to Discontinued Operations, the Company elected to not allocate consolidated interest expense to discontinued operations where the debt is not directly attributable to or related to discontinued operations.

F-44

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets as of December 31, 2021 and 2020:

	December 31, 2021		December 31, 2020
Current Assets – discontinued operations:
Cash	$	—	$	416,831
Accounts receivable, net		—		334,095
Inventories, net		—		305,080
Prepaid expenses and other current assets		—		268,602
Total current assets – discontinued operations		—		1,324,608
Noncurrent Assets – discontinued operations:
Property and equipment, net		—		1,925,844
Operating lease right of use assets		—		501,827
Goodwill		—		22,166
Intangible assets, net		—		7,933
Total noncurrent assets	$	—	$	2,457,770
Current liabilities – discontinued operations:
Accounts payable and accrued expenses	$	—	$	484,852
Current portion of operating lease liability		—		67,725
Notes payable – current portion		—		446,545
Total current liabilities – discontinued operations		—		999,122
Long term liabilities – discontinued operations:
Notes payable – long term, net of current portion		—		4,187,376
Accrued expenses – long term, related party		—		1,359,989
Financing lease liability, net of current portion		—		434,102
Total long term liabilities – discontinued operations	$	—	$	5,981,467

F-45

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2021 and 2020:

	Years Ended December 31,
	2021			2020
REVENUES
Services	$	612,862		$	3,379,653
Sales of parts and equipment		324,189			3,322,945
Furniture and appliances		—			42,709,714
TOTAL REVENUE		937,051			49,412,312
OPERATING EXPENSES
Cost of sales		298,050			38,488,245
Personnel costs		485,774			6,534,408
Depreciation and amortization		360,746			1,547,378
Fuel		112,746			378,115
General and administrative		290,872			8,555,731
TOTAL OPERATING EXPENSES		1,548,188			55,503,877
LOSS FROM OPERATIONS		(611,137	)		(6,091,564	)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt		(320	)		(792,721	)
Gain on forgiveness of debt		380,247			—
Loss on extinguishment of debt		—			(1,852,426	)
Gain on sale of assets		548,723			130,748
Loss on acquisition receivable		—			(809,000	)
Change in warrant liability		—			(2,127,656	)
Interest expense		(78,308	)		(985,840	)
Other income (expense)		1,200			3,599
TOTAL OTHER INCOME (EXPENSE)		851,542			(6,433,296	)
NET LOSS BEFORE INCOME TAXES		240,405			(12,524,860	)
INCOME TAX EXPENSE		—			350,603
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS		240,405			(12,875,463	)
LESS NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		108,182			(5,036,832	)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS	$	132,223		$	(7,838,631	)

F-46

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

The following information presents the major classes of line items constituting significant operating, investing and financing cash flow activities in the unaudited consolidated statements of cash flows relating to discontinued operations:

	Years Ended December 31,
	2021			2020
Cash flows from operating activities of discontinued operations:
Net Income (Loss)	$	240,405		$	(12,875,461	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities of discontinued operations:
Depreciation and amortization		360,746			1,547,378
Amortization of financing costs and warrant features		2,187			842,174
Stock compensation		—			281,194
Amortization of operating lease right-of-use assets		19,007			63,253
Gain on forgiveness of PPP loans		(380,247	)		—
Loss on extinguishment of debt		—			2,052,118
Amortization of original interest discount		—			100,511
Gain on sale of equipment		(548,723	)		(130,748	)
Change in fair value of warrant liability		—			2,127,656
Write-off of acquisition receivable		—			809,000
Changes in operating assets and liabilities:
Accounts receivable		10,698			(3,327,816	)
Inventory		(161,286	)		(2,125,032	)
Prepaid expenses and other assets		49,222			(1,144,323	)
Accounts payable and accrued expenses		118,980			368,128
Operating lease liability		(19,007	)		(63,253	)
Vendor deposits		—			(252,688	)
Deferred tax asset		—			635,503
Customer deposits		—			14,427,180
Accrued expense long-term		137,438			454,209
Net cash provided by (used in) operating activities from discontinued operations	$	(170,580	)	$	3,788,983
Cash flows from investing activities in discontinued operations:
Proceeds from sale of equipment	$	675,000		$	209,500
Purchase of equipment		(30,697	)		(137,499	)
Net cash provided by investing activities in discontinued operations	$	644,303		$	72,001
Cash flows from financing activities in discontinued operations:
Proceeds from initial public offering	$	—		$	8,602,166
Proceeds from note payable		380,385			1,612,297
Repayments of notes payable		(589,078	)		(3,474,557	)
Repayment of floor plan		—			(10,581	)
Net borrowings from lines of credit		—			(1,339,430	)
Financing fees		—			(219,110	)
Repayment of financing lease		—			(721,151	)
Net cash provided by (used in) financing activities in discontinued operations	$	(208,693	)	$	4,449,634

F-47

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

The following are the financial instruments of the discontinued operations:

Lines of Credit

Burnley Capital LLC

On April 5, 2019, Goedeker, as borrower, and Holdco entered into a loan and security agreement with Burnley Capital LLC (“Burnley”) for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker Television on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was $571,997.

On August 4, 2020, Goedeker used a portion of the proceeds from its initial public offering (the “Goedeker IPO”) to repay the revolving note in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350, interest of $42 and prepayment, legal, and other fees of $85,802.

Northpoint Commercial Finance LLC

On June 24, 2019, Goedeker entered into a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR plus 7.99%. As of December 31, 2019, the balance of the line of credit was $678,993. Goedeker terminated the loan and security agreement on May 18, 2020.

Home State Bank

On June 13, 2018, Neese entered into a term loan agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% and with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2020. Neese met this covenant for the year ended December 31, 2020. On July 30, 2020, Neese entered into a change in terms agreement with Home State Bank to amend the terms of the term loan. Pursuant to the change in terms agreement: (i) the maturity date was extended to July 30, 2022; (ii) the interest rate was changed to 5.50%; (iii) Neese agreed to pay accrued interest in the amount of $95,970; (iv) Neese agreed to make payments of $30,000 beginning on September 30, 2020 and continuing thereafter on a monthly basis until maturity, at which time a final interest payment is due; (v) Neese agreed to make a payment of $260,000 on December 30, 2020 and December 30, 2021; (vi) Neese agreed to make two new advances under the note in the amounts $51,068 and $517,529 to repay in full Neese’s capital lease transactions due to Utica Leaseco LLC described below; (vii) Neese agreed to pay a loan fee of $17,500; and (viii) Home State Bank agreed to make a loan advance to checking for $17,500. The balance of the note amounts to $3,225,321, comprised of principal of $3,239,176, net of unamortized debt discount of $13,855 as of December 31, 2020.

If Neese sells property, plant, and equipment securing the loan, it must remit the appraised value of the equipment to Home State Bank. During the nine months ended September 30, 2021 and 2020, $400,000 and $145,690, respectively, was remitted to Home State Bank pursuant to this requirement.

Notes Payable and Warrant Liability

Arvest Loan

On August 25, 2020, Goedeker entered into a promissory note and security agreement with Arvest Bank for a loan in the principal amount of $3,500,000. As of October 23, 2020, the outstanding balance of this loan is $3,340,602, comprised of principal of $3,446,126, net of unamortized loan costs of $103,524.

F-48

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

PPP Loan

On April 8, 2020, Goedeker received a $642,600 PPP loan from the SBA under the provisions of the CARES Act. The PPP loan had an 18-month term and bore interest at a rate of 1.0% per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The PPP provides that the loan could be partially or wholly forgiven if the funds were used for certain qualifying expenses as described in the CARES Act. The balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability. On November 2, 2020, Goedeker repaid the PPP loan.

Small Business Community Capital II, L.P.

On April 5, 2019, Goedeker, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan in the principal amount of $1,500,000, pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0% of the outstanding equity securities of Goedeker on a fully-diluted basis for an aggregate price equal to $100. As of December 31, 2019, the balance of the note was $999,201.

On August 4, 2020, Goedeker used a portion of the proceeds from the Goedeker IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999.             

Goedeker classified the warrant as a derivative liability on the balance sheet at June 30, 2020 of $2,250,000 based on the estimated value of the warrant in the Goedeker IPO. The increase in the value of the warrant from the estimated value of $122,344 at December 31, 2020 resulted in a charge of $2,127,656 during the period January 1, 2020 through October 23, 2020 (date of distribution). Immediately prior to the closing of the Goedeker IPO on August 4, 2020, SBCC converted the warrant into 250,000 shares of common stock.

10% Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the Neese Sellers. The note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018. The note is unsecured and contains customary events of default. The note has not been repaid, so the Company is in default under this note. Under terms of the term loan with Home State Bank described above, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. Accordingly, the loan is shown as a long-term liability as of December 31, 2020. Additionally, Home State Bank limits the payment of interest on this note to $40,000 annually. The Company continued to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

Notes Payable, Related Parties

A portion of the purchase price for the acquisition of Goedeker Television was paid by the issuance by Goedeker to Steve Goedeker, as representative of Goedeker Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. As of December 31, 2019, the balance of the note was $3,300,444.

F-49

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 5 — DISCONTINUED OPERATIONS (cont.)

Pursuant to a settlement agreement, the parties entered into an amendment and restatement of the note that became effective as of the closing of the Goedeker IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the Goedeker IPO, Goedeker agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, Goedeker used a portion of the proceeds from the Goedeker IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.

In August 2020, Goedeker refinanced this note payable with proceeds from a loan from Arvest Bank. In connection with the refinance, Goedeker recorded a $757,239 loss on extinguishment of debt consisting of a $250,000 forbearance fee, write-off of unamortized loan discount of $338,873, and write-off of unamortized debt costs of $168,366.

Convertible Promissory Note

On April 5, 2019, the Company, Holdco and Goedeker entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company, pursuant to which they issued to Leonite Capital LLC a secured convertible promissory note in the aggregate principal amount of $714,286 due April 5, 2020. See Note 12 for further details of the convertible promissory note.

Financing Lease

The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neese’s equipment with Utica Leaseco, LLC (“Utica”), pursuant to a master lease agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees (collectively, the “Lessee”), which was amended on June 14, 2017. Under the master lease agreement, as amended, Utica loaned an aggregate of $3,240,000 for certain of Neese’s equipment listed therein, which it leases to the Lessee. A portion of the proceeds from the term loan from Home State Bank were applied to reduce the balance of this lease to $475,000. The lease was payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000.

On October 31, 2017, the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule was 51 months and agreed monthly payments are $25,807.

On July 29, 2020, the Company paid $568,597 to repay this capital lease transaction with Utica in full.

NOTE 6 — RECEIVABLES

At December 31, 2021 and 2020, receivables consisted of the following:

	December 31, 2021			December 31, 2020
Credit card payments in process of settlement	$	116,187		$	158,924
Retainage		803,989			—
Trade receivables from customers		2,691,702			366,701
Vendor rebates receivable		126,118			—
Total receivables		3,737,996			525,625
Allowance for doubtful accounts		(359,000	)		—
Accounts receivable, net	$	3,378,996		$	525,625

F-50

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 7 — INVENTORIES

At December 31, 2021 and 2020, the inventory balances are composed of finished goods for sale, as well as materials, parts, and components used in construction.

	December 31, 2021			December 31, 2020
Construction	$	1,543,980		$	6,308
Appliances		2,206,336			2,029,270
Automotive		2,064,834			—
Subtotal		5,815,150			2,035,578
Allowance for inventory obsolescence		(387,848	)		(12,824	)
Inventories, net	$	5,427,302		$	2,022,754

NOTE 8 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2021 and 2020:

Classification	December 31, 2021			December 31, 2020
Buildings and leasehold improvements	$	135,804		$	42,601
Equipment and machinery		836,622			171,179
Office furniture and equipment		53,725			2,613
Transportation equipment		864,121			213,850
Total		1,890,272			430,243
Less: Accumulated depreciation		(194,961	)		(31,740	)
Property and equipment, net	$	1,695,311		$	398,503

Depreciation expense for the years ended December 31, 2021 and 2020 was $166,413 and $31,740, respectively.

NOTE 9 — INTANGIBLE ASSETS

The following provides a breakdown of identifiable intangible assets as of December 31, 2021 and 2020:

	December 31, 2021			December 31, 2020
Customer Relationships
Identifiable intangible assets	$	5,791,000		$	3,189,000
Accumulated amortization		(399,480	)		(63,419	)
Customer relationship identifiable intangible assets, net		5,391,520			3,125,581
Marketing Related
Identifiable intangible assets		5,917,000			841,000
Accumulated amortization		(418,404	)		(81,114	)
Marketing related identifiable intangible assets, net		5,498,596			759,886
Technology Related
Identifiable intangible assets		623,000			—
Accumulated amortization		(69,219	)		—
Technology related identifiable intangible assets, net		553,781			—
Total Identifiable intangible assets, net	$	11,443,897		$	3,885,467

F-51

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 9 — INTANGIBLE ASSETS (cont.)

In connection with the acquisitions of Asien’s, Kyle’s, Wolo, and High Mountain and Innovative Cabinets, the Company identified intangible assets of $1,009,000, $3,021,000, $1,848,000, and $6,453,000 respectively, representing trade names, customer relationships, and technology. These assets are being amortized on a straight-line basis over their weighted-average estimated useful life of 8.2 years and amortization expense amounted to $742,571 and $144,533 for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the estimated annual amortization expense for each of the next five fiscal years is as follows:

2022	$	1,458,780
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,443,897

NOTE 10 — ACQUISITIONS

Asien’s

On March 27, 2020, the Company and 1847 Asien entered into a stock purchase agreement with the Asien’s Seller, pursuant to which 1847 Asien agreed to acquire all of the issued and outstanding capital stock of Asien’s. The Company acquired Asien’s, which provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North Bay area of Sonoma County, California, to expand into the appliance industry.

On May 28, 2020, the Company, 1847 Asien, Asien’s and the Asien’s Seller entered into an amendment to the stock purchase agreement and closing of the acquisition of all of the issued and outstanding capital stock of Asien’s was completed (the “Asien’s Acquisition”).

The aggregate purchase price was $1,918,000 consisting of: (i) $233,000 in cash; (ii) the issuance of an amortizing promissory note in the principal amount of $200,000; (iii) the issuance of a demand promissory note in the principal amount of $655,000; and (iv) 415,000 common shares of the Company, having a mutually agreed upon value of $830,000 and a fair value of $1,037,500, which may be repurchased by 1847 Asien for a period of one year following the closing at a purchase price of $2.50 per share. The shares were repurchased by 1847 Asien on July 29, 2020 in exchange for a 6% amortizing promissory note (See Note 11).

The fair value of the purchase consideration issued to the Asien’s Seller was allocated to the net tangible assets acquired. The Company accounted for the Asien’s Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $1,182,925. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

F-52

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 10 — ACQUISITIONS (cont.)

The table below shows analysis for the Asien’s Acquisition:

Purchase Consideration at fair value:
Common shares	$	1,037,500
Notes payable		855,000
Cash paid to Seller (post-closing)		233,000
Amount of consideration	$	2,125,500
Assets acquired and liabilities assumed at fair value
Cash	$	1,501,285
Accounts receivable		235,746
Inventories		1,457,489
Other current assets		41,427
Property and equipment		157,052
Customer related intangibles		462,000
Marketing related intangibles		547,000
Accounts payable and accrued expenses		(280,752	)
Customer deposits		(2,405,703	)
Notes payable		(509,272	)
Other liabilities		(23,347	)
Net assets acquired	$	1,182,925
Total net assets acquired	$	1,182,925
Consideration paid		2,125,500
Goodwill	$	942,575

The estimated useful life remaining on the property and equipment acquired is 5 to 13 years.

Kyle’s

On August 27, 2020, the Company and 1847 Cabinet entered into a stock purchase agreement with Kyle’s and the Kyle’s Sellers, pursuant to which 1847 Cabinet agreed to acquire all of issued and outstanding capital stock of Kyle’s. The Company acquired Kyle’s, a leading custom cabinetry maker servicing contractors and homeowners in Boise, Idaho, to expand into contracting services.

On September 30, 2020, the Company, 1847 Cabinet, Kyle’s and the Kyle’s Sellers entered into addendum to the stock purchase and closing of the acquisition of all of the issued and outstanding capital stock of Kyle’s was completed (the “Kyle’s Acquisition”).

The aggregate purchase price was $6,839,792, consisting of (i) $4,389,792 in cash, (ii) an 8% contingent subordinated note in the aggregate principal amount of $1,050,000 and (iii) 700,000 common shares of the Company, having a mutually agreed upon value of $1,400,000 and a fair value of $3,675,000. The shares were issued on October 16, 2020, immediately following the record date for the Goedeker Spin-Off described above.

The fair value of the purchase consideration issued to the Kyle’s Sellers was allocated to the net tangible assets acquired. The Company accounted for the Kyle’s Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $3,516,530. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

F-53

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 10 — ACQUISITIONS (cont.)

The table below shows an analysis for the Kyle’s Acquisition:

Purchase consideration at fair value:
Common shares	$	3,675,000
Notes payable		498,979
Cash		4,389,792
Amount of consideration	$	8,563,771
Assets acquired and liabilities assumed at fair value
Cash	$	130,000
Accounts receivable		385,095
Costs in excess of billings		122,016
Other current assets		13,707
Property and equipment		200,737
Customer related intangibles		2,727,000
Marketing related intangibles		294,000
Accounts payable and accrued expenses		(263,597	)
Billings in excess of costs		(43,428	)
Other liabilities		(49,000	)
Net tangible assets acquired	$	3,516,530
Total net assets acquired	$	3,516,530
Consideration paid		8,563,771
Goodwill	$	5,047,241

The estimated useful life remaining on the property and equipment acquired is 3 to 7 years.

Wolo

On December 22, 2020, the Company 1847 Wolo entered into a stock purchase agreement with Wolo and the Wolo Sellers, pursuant to which 1847 Wolo agreed to acquire all of the issued and outstanding capital stock of Wolo.

On March 30, 2021, the Company, 1847 Wolo, Wolo and the Wolo Sellers entered into amendment No. 1 to the stock purchase agreement and closing of the acquisition of all of the issued and outstanding capital stock of Wolo was completed (the “Wolo Acquisition”).

The aggregate purchase price was $8,344,056, consisting of (i) $6,550,000 in cash, (ii) a 6% secured promissory note in the aggregate principal amount of $850,000 and (iii) cash paid to seller, net of working capital adjustment, of $944,056.

The fair value of the purchase consideration issued to the Wolo Sellers was allocated to the net tangible assets acquired. The Company accounted for the Wolo Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $6,606,403. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

F-54

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 10 — ACQUISITIONS (cont.)

The table below shows an analysis for the Wolo Acquisition:

Purchase consideration at fair value:
Notes payable	$	850,000
Cash		6,550,000
Net cash paid to Seller (post-closing)		944,056
Amount of consideration	$	8,344,056
Assets acquired and liabilities assumed at fair value
Cash	$	1,171,655
Accounts receivable		1,860,107
Inventory		1,944,929
Customer related intangibles		233,000
Marketing related intangibles		992,000
Technology related intangibles		623,000
Other current assets		218,154
Deferred tax liability		(325,000	)
Accounts payable and accrued expenses		(111,442	)
Net tangible assets acquired	$	6,606,403
Total net assets acquired	$	6,606,403
Consideration paid		8,344,056
Goodwill	$	1,737,653

High Mountain and Innovative Cabinets

On September 23, 2021, 1847 Cabinet entered into a securities purchase agreement with High Mountain, Innovative Cabinets and the H&I Sellers, which was amended on October 6, 2021, pursuant to which 1847 Cabinet agreed to acquire all of the issued and outstanding capital stock or other equity securities of High Mountain and Innovative Cabinets. On October 8, 2021, closing of the acquisition was completed (the “H&I Acquisition”).

The purchase price was $15,441,173 (subject to adjustment), consisting of (i) $10,687,500 in cash (subject to adjustment) and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the amount of $4,753,673 consisting of an aggregate principal amount of $5,880,345, net of debt discount of $1,126,672.

The purchase price is subject to a post-closing working capital adjustment provision. Under this provision, the H&I Sellers delivered to 1847 Cabinet at the closing an unaudited balance sheet of High Mountain and Innovative Cabinets and a calculation of estimated net working capital of High Mountain and Innovative Cabinets as of that date. On or before the 75th day following the closing, 1847 Cabinet must deliver to the H&I Sellers an unaudited balance sheet of High Mountain and Innovative Cabinets and its calculation of the final net working capital of High Mountain and Innovative Cabinets as of the closing date. If such final net working capital exceeds the estimated net working capital, 1847 Cabinet must, within seven days, pay to the H&I Sellers an amount of cash that is equal to such excess. If the estimated net working capital exceeds the final net working capital, the H&I Sellers must, within seven days, pay to 1847 Cabinet an amount in cash equal to such excess. As of the date of this report, the post-closing working capital adjustment has not been completed notwithstanding the fact that the date of this report is past the 75th day following closing. The Company and 1847 Cabinet have agreed with the Sellers to finalize the post-working capital adjustment.

The fair value of the purchase consideration issued to the H&I Sellers was allocated to the net tangible assets acquired. The Company accounted for the H&I Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $3,716,376. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

F-55

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 10 — ACQUISITIONS (cont.)

The Company is currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation for Wolo will be included in the Company’s financial statements in future periods.

The table below shows a preliminary analysis for the H&I Acquisition:

Purchase consideration at preliminary fair value:
Cash	$	10,687,500
Notes payable, net of debt discount		4,753,673
Amount of consideration	$	15,441,173
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	208,552
Accounts receivable		1,042,194
Inventory		1,848,729
Contract assets		367,177
Other current assets		80,771
Marketing intangible		1,610,000
Customer intangible		4,843,000
Property and equipment		610,882
Operating lease assets		831,951
Other assets		—
Accounts payable and accrued expenses		(1,207,424	)
Contract liabilities		(3,770,081	)
Deferred tax liabilities		(1,670,000	)
Lease liabilities		(856,377	)
Financing leases		(18,600	)
Loans payable		(204,399	)
Net tangible assets acquired	$	3,716,375
Total net assets acquired	$	3,716,375
Consideration paid		15,441,173
Preliminary goodwill	$	11,724,798

The estimated useful life remaining on the property and equipment acquired is 3 to 7 years.

Proforma

The following unaudited proforma results of operations are presented for information purposes only. The unaudited proforma results of operations are not intended to present actual results that would have been attained had the Asien’s Acquisition, the Kyle’s Acquisition, the Wolo Acquisition and the H&I Acquisition been completed as of January 1, 2020, nor to project potential operating results as of any future date or for any future periods. The revenue and net loss before non-controlling interest of Asien’s from May 29, 2020 through December 31, 2020 included in the consolidated income statement amounted to approximately $7,625,222 and $431,641, respectively. The revenue and net loss before non-controlling interest of Kyle’s from October 1, 2020 through December 31, 2020 included in the consolidated statement of operations amounted to approximately $1,120,224 and $380,500, respectively. The revenue and net loss before non-controlling interest of Wolo from April 1, 2021 through December 31, 2021 included in the consolidated income statement amounted to approximately $5,716,030 and $1,970,239, respectively. The revenue and net loss before non-controlling interest of High Mountain and Innovative Cabinets from October 9, 2021 through December 31, 2021 included in the consolidated income statement amounted to approximately $10,249,281 and $81,773, respectively. The unaudited proforma results of operations also removes the effect of Goedeker and Neese as if they had been disposed of on January 1, 2020.

F-56

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 10 — ACQUISITIONS (cont.)

	Years Ended December 31,
	2021			2020
Revenues, net	$	51,589,004		$	42,131,589
Net income (loss)	$	(4,445,617	)	$	1,733,005
Basic earnings (loss) per share	$	(0.94	)	$	0.36
Diluted earnings (loss) per share	$	(0.94	)	$	0.36
Basic Number of Shares (*)		4,749,971			4,807,429
Diluted Number of Shares (*)		4,749,971			4,807,429

____________

*        shares assuming as if issued as of January 1.

NOTE 11 — NOTES PAYABLE

Summary of Notes Payable

	December 31, 2021			December 31, 2020
Line of Credit	$	—		$	301,081
8% Subordinated Amortizing Promissory Notes		—			101,980
6% Subordinated Amortizing Promissory Notes		581,963			975,985
PPP loans		—			357,500
4.5% Unsecured Promissory Notes		—			41,675
Loans on vehicles		396,351			90,374
Financing leases		522,166			—
Subtotal		1,500,480			1,868,595
Line of Credit		—			(301,081	)
Current portion of notes payable		(793,174	)		(429,183	)
Long-term notes payable	$	707,306		$	1,138,331

Asien’s

Arvest Bank

On July 10, 2020, Asien’s entered into a promissory note and security agreement with Arvest Bank for a revolving loan for up to $400,000. The loan bore interest at 5.25% per annum, subject to change in accordance with the Variable Rate (as defined in the promissory note and security agreement), the calculation for which is the U.S. Prime Rate plus 2%. The remaining principal balance of the note at December 31, 2020 was $301,081 and it had accrued interest of $995. On October 8, 2021, the revolving loan was paid off and terminated for $301,240.

8% Subordinated Amortizing Promissory Note

A portion of the purchase price for acquisition of Asien’s on May 28, 2020 was paid by the issuance of an 8% subordinated amortizing promissory note in the principal amount of $200,000 by 1847 Asien to the Asien’s Seller. Interest on the outstanding principal amount were payable quarterly at the rate of eight percent (8%) per annum. The outstanding principal amount of the note amortized on a one-year straight-line basis in accordance with a specified amortization schedule, with all unpaid principal and accrued, but unpaid interest being fully due and payable on May 28, 2021. As of December 31, 2020, the remaining principal balance of the note was $101,980 and it had accrued interest of $1,095. The note and accrued interest were repaid in May 2021.

F-57

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 11 — NOTES PAYABLE (cont.)

6% Amortizing Promissory Note

On July 29, 2020, 1847 Asien entered into a securities purchase agreement with the Asien’s Seller, pursuant to which the Asien’s Seller sold to 415,000 of the Company’s common shares to 1847 Asien a purchase price of $2.50 per share. As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, 1847 Asien and the Asien’s Seller entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described below, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon. The note is unsecured and contains customary events of default. The remaining principal balance of the note at December 31, 2021 is $583,961 and it has accrued interest of $21,758.

Inventory Financing Agreement

On September 25, 2020, Asien’s entered into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”), pursuant to which Wells Fargo may extend credit to Asien’s from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative covenants and events of default for a loan of this type. The agreement is secured by all assets of Asien’s and is guaranteed by 1847 Asien and the Company. As of December 31, 2021, Asien’s has not borrowed any funds under this agreement.

4.5% Unsecured Promissory Note

On October 30, 2017, Asien’s entered into a stock repurchase agreement with Paul A. Gwilliam and Terri L. Gwilliam, co-trustees of the Gwilliam Family Trust, pursuant to which Asien’s issued an unsecured promissory note in the aggregate principal amount of $540,000 for a term of 5 years. The note bore interest at the rate of the 4.25% per annum. The remaining principal balance of the note at December 31, 2020 was $41,675. The note and accrued interest were repaid in July 2021.

Loans on Vehicles

Asien’s has entered into seven retail installment sale contracts pursuant to which Asien’s agreed to finance its delivery trucks at rates ranging from 3.74% to 8.72% with an aggregate remaining principal amount of $146,043 as of December 31, 2021.

Kyle’s

Intercompany Secured Promissory Note

In connection with the acquisition of Kyle’s, the Company provided 1847 Cabinet with the funds necessary to pay the cash portion of the purchase price and cover acquisition expenses. In connection therewith, on September 30, 2020, 1847 Cabinet issued a secured promissory note to the Company in the principal amount of $4,525,000, which was amended and restated on December 11, 2020 and again on October 8, 2021 to increase the principal amount to $15,955,325. The note bears interest at the rate of 16% per annum. Interest on the note is cumulative and any unpaid accrued interest will compound on each anniversary date of the note. Interest is due and payable in arrears to the Company on December 1, March 1, June 1 and October 1, commencing on December 1, 2021. In the event payment

F-58

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 11 — NOTES PAYABLE (cont.)

of principal or interest due under the note is not made when due, giving effect to any grace period which may be applicable, or in the event of any other default (as defined in the note), the outstanding principal balance shall from the date of default immediately bear interest at the rate of 5% above the then applicable interest rate for so long as such default continues. The Company may demand payment in full of the note at any time, even if 1847 Cabinet has complied with all of the terms of the note, and the note shall be due in full, without demand, upon the third party sale of all or substantially all the assets and business of 1847 Cabinet or the third party sale or other disposition of any capital stock of 1847 Cabinet. 1847 Cabinet may prepay the note at any time without penalty. If and to the extent any amounts are owing under the secured convertible promissory notes described below due to a default thereunder, in addition to payment obligations due under the note, 1847 Cabinet is required to immediately make payments to the Company so that the Company may make payments in compliance with the terms of the secured convertible promissory notes. The note contains customary covenants and events of default for loans of this type. The note is guaranteed by Kyle’s, High Mountain and Sierra Homes and is secured by a security interest in all of the assets of 1847 Cabinet, Kyle’s, High Mountain and Sierra Homes; provided that the rights of the Company to receive payments under the note are subordinated to the rights of the purchasers under secured convertible promissory notes described below (Note 12). The remaining principal balance of the note at December 31, 2021 is $6,549,073 and it has accrued interest of $35,416.

Loans on Vehicles

Kyle’s has entered into two retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of $64,255 as of December 31, 2021.

Financing Leases

Kyle’s has entered into two financing lease agreements for expansion equipment. The equipment was installed in December 2021. These agreements have terms of six years beginning at the time of installation.

On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, maturing on December 1, 2027. The balance payable was $276,896 as of December 31, 2021.

On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,375, maturing on December 1, 2027. The balance payable was $245,375 as of December 31, 2021.

Following is a summary of payments due on financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	99,075
2023		99,075
2024		99,075
2025		99,075
2026		99,075
Thereafter		99,075
Total payments		594,450
Less: amount representing interest		(72,178	)
Present value of minimum lease payments	$	522,272

As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 6 years.

F-59

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 11 — NOTES PAYABLE (cont.)

Wolo

6% Secured Promissory Note

A portion of the purchase price for the acquisition of Wolo on March 30, 2021 was paid by the issuance of a 6% secured promissory note in the principal amount of $850,000 by 1847 Wolo to the Wolo Sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent (6%) per annum. On October 8, 2021, the promissory note was repaid in full.

Credit Agreement and Notes

On March 30, 2021, 1847 Wolo and Wolo entered into a credit agreement with Sterling National Bank for revolving loans in the principal amount of $1,000,000 and a term loan in the principal amount of $3,550,000. On October 8, 2021, the revolving loan and the term loan were repaid in full.

High Mountain/Innovative Cabinets

Loans on Vehicles/Equipment

High Mountain and Innovative Cabinets have entered into seventeen retail installment sale contracts pursuant to which they agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.80% with an aggregate remaining principal amount of $186,054 as of December 31, 2021.

Financing Leases

On February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. The balance payable was $11,044 as of December 31, 2021.

On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. The balance payable was $5,757 as of December 31, 2021.

Following is a summary of payments due on financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	8,161
2023		8,161
2024		1,515
2025		—
2026		—
Thereafter		—
Total payments		17,837
Less: amount representing interest		(1,036	)
Present value of minimum lease payments	$	16,801

As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 2.10 years.

PPP Loans

On April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under provisions of the CARES Act. The PPP loans have two-year terms and bear interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the

F-60

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 11 — NOTES PAYABLE (cont.)

proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.

Following is a summary of payments due on notes payable and financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	820,400
2023		212,554
2024		179,868
2025		160,270
2026		118,647
Thereafter		206,701
Total payments	$	1,698,440

NOTE 12 — VESTING NOTE PAYABLE — RELATED PARTY

Vesting Promissory Note

A portion of the purchase price for the acquisition of Kyle’s on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to the Kyle’s Sellers in the principal amount of $1,050,000, which increased to a principal amount of up to $1,260,000 pursuant to the vested percentage calculation described below. Payment of the principal and accrued interest on the note is subject to vesting as described below. The note bears interest 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.

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.

F-61

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 13 — CONVERTIBLE PROMISSORY NOTES

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).

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 61st 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.

F-62

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 13 — CONVERTIBLE PROMISSORY NOTES (cont.)

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.

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.

F-63

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 13 — CONVERTIBLE PROMISSORY NOTES (cont.)

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 the outstanding balance of the note into 100,000 common shares.

On July 21, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares.

On August 4, 2020, Goedeker used a portion of the proceeds from the Goedeker IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.

On September 2, 2020, the Company entered into amendment to the warrant issued to Leonite on April 5, 2019. Pursuant to the amendment, the parties amended the warrant to allow for the conversion of the warrant into 180,000 common shares in exchange for Leonite’s surrender of the remaining 20,000 common shares underlying this warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September 2, 2020, Leonite exercised the first warrant in accordance with the foregoing amendment and the Company issued 180,000 common shares to Leonite. As a result of this exercise, both warrants were cancelled.

NOTE 14 — OPERATING LEASES

Kyle’s

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. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On June 9, 2021, Kyle’s entered into an additional industrial lease agreement with a third party. The lease commenced on January 1, 2022 and is for a term of 62 months, with an option for a renewal term of five years, and provides for a base rent of $3,336 for months 3-4 (with no payments for the first two months), with gradual increases to $7,508 for final year. In addition, Kyle’s is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants. The lease increased the operating lease right to use asset and corresponding operating lease liability by $361,158.

F-64

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 14 — OPERATING LEASES (cont.)

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	735,074
Accumulated amortization		(85,777	)
Net balance	$	649,297
Lease liability, current portion		113,105
Lease liability, long term		539,234
Total operating lease liabilities	$	652,339
Weighted Average Remaining Lease Term – operating leases		54 months
Weighted Average Discount Rate – operating leases		5.5	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	146,559
2023		169,839
2024		174,043
2025		146,885
2026		90,099
Thereafter		15,017
Total lease payments		742,442
Less imputed interest		(90,103	)
Maturities of lease liabilities	$	652,339

High Mountain

On December 1, 2017, High Mountain entered into a lease agreement with a third party. The lease commenced on January 1, 2018 and was for a period of 48 months, expiring on December 31, 2021. High Mountain is continuing to pay on a month-to-month basis until the new facility described below is ready. The base rent is $12,767 per month. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs. The lease agreement contains customary events of default, representations, warranties and covenants.

On October 29, 2021, High Mountain entered into a new lease agreement with a third party. The term of the lease will commence upon the completion of work, which is expected in March or April 2022, and is for a period of 61 months. The base rent is $29,400 for months 2-13 (with no payments for the first month), with gradual increases to $34,394 for months 50-61. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

F-65

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 14 — OPERATING LEASES (cont.)

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	2,055,995
Accumulated amortization		(337,812	)
Net balance	$	1,718,183
Lease liability, current portion		258,843
Lease liability, long term		1,459,339
Total operating lease liabilities	$	1,718,182
Weighted Average Remaining Lease Term – operating leases		61 Months
Weighted Average Discount Rate – operating leases		4.0	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	294,000
2023		364,560
2024		379,142
2025		394,308
2026		410,082
Thereafter		68,788
Total lease payments		1,910,880
Less imputed interest		(192,697	)
Maturities of lease liabilities	$	1,718,183

Innovative Cabinets

On January 20, 2020, Innovative Cabinets entered into a lease agreement with the third party. The term of the lease commenced on April 1, 2020 and is for a period of 36 months. The base rent is $2,936 for the first year, with gradual increases to $3,140 for the final year. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On December 7, 2020, Innovative Cabinets entered into a lease agreement with the third party. The term of the lease commenced on January 1, 2021 and is for a period of 61 months. The base rent is $15,600 for 2021, with gradual increases to $18,085 for 2026. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

F-66

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 14 — OPERATING LEASES (cont.)

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	1,232,993
Accumulated amortization		(454,609	)
Net balance	$	778,384
Lease liability, current portion		218,873
Lease liability, long term		584,833
Total operating lease liabilities	$	803,706
Weighted Average Remaining Lease Term – operating leases		42 Months
Weighted Average Discount Rate – operating leases		4.02	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	230,191
2023		208,020
2024		204,558
2025		210,695
2026		18,085
Total lease payments		871,549
Less imputed interest		(67,843	)
Maturities of lease liabilities	$	803,706

Wolo

On October 4, 1978, Wolo Mfg entered into a lease agreement with PKL Realty LLC (formerly P.K.L. Realty Corp). This lease agreement has been amended numerous times. Pursuant to the latest amendment entered into in July 2020, the lease expires on July 31, 2022 and provides for rent of $6,897 from August 8, 2021 to July 31, 2022. The lease agreement contains customary events of default representations, warranties and covenants.

Supplemental balance sheet information related to this lease is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	153,663
Accumulated amortization		(106,924	)
Net balance	$	46,739
Lease liability, current portion		47,328
Lease liability, long term		—
Total operating lease liabilities	$	47,328
Weighted Average Remaining Lease Term – operating leases		7 months
Weighted Average Discount Rate – operating leases		6.0	%

Future minimum lease payments under this operating lease as of December 31, 2021 were as follows:

2022	$	48,279
Total lease payments		48,279
Less imputed interest		(951	)
Maturities of lease liabilities	$	47,328

F-67

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 14 — OPERATING LEASES (cont.)

Asien’s

Asien’s has an office and showroom space that has been leased on a month-by-month basis for $11,665 per month.

Supplemental cash flows information related to leases was as follows:

	December 31, 2021		December 31, 2020
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$	985,122	$	21,000
Right-of-use asset obtained in exchange for lease obligation:
Operating lease	$	3,040,854	$	373,916

NOTE 15 — RELATED PARTIES

Management Services Agreement

On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the years December 31, 2021 and 2020.

Offsetting Management Services Agreements

1847 Neese entered into an offsetting management services agreement with the Manager on March 3, 2017, which is included in discontinued operations, Goedeker entered into an offsetting management services agreement with the Manager on April 5, 2019, which is included in discontinued operations, 1847 Asien entered into an offsetting management services agreement with the Manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with the Manager on August 21, 2020, which was amended and restated on October 8, 2021, and 1847 Wolo entered into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, Goedeker appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that (i) pro rated payments shall be made in the first quarter and the last quarter of the term, (ii) if the aggregate amount of management fees paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of the Company’s gross income with respect to such fiscal year, then the management fee to be paid by such subsidiaries for any remaining fiscal quarters in such fiscal year shall be reduced, on a pro rata basis determined by reference to the management fees to be paid to the Manager by all of the subsidiaries of the Company, until the aggregate amount of the management fee paid or to

F-68

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 15 — RELATED PARTIES (cont.)

be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal year, does not exceed 9.5% of the Company’s gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the Parent Management Fee with respect to such fiscal quarter, then the management fee to be paid by such subsidiaries for such fiscal quarter shall be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal quarter, does not exceed the Parent Management Fee calculated and payable with respect to such fiscal quarter.

Each of these subsidiaries shall also reimburse the Manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs and expenses, which are actually incurred by the Manager or its affiliates on behalf of these subsidiaries in connection with performing services under the offsetting management services agreements.

1847 Asien expensed management fees of $300,000 for the year ended December 31, 2021 and $178,022 for the period from May 29, 2020 to December 31, 2020.

1847 Cabinet expensed management fees of $345,556 for the year ended December 31, 2021 and $75,000 for the period from October 1, 2020 to December 31, 2020.

1847 Wolo expensed management fees of $235,833 for the year ended December 31, 2021. In conjunction with acquisition of Wolo, our manager also received a fee of $110,000.

On a consolidated basis, the Company expensed total management fees of $981,389 and $253,022 for the years ended December 31, 2021 and 2020, respectively.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of December 31, 2021 and 2020, a total of $118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of December 31, 2021 and 2020, the Manager has funded the Company $74,927 and $71,358 in related party advances, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

Grid Promissory Note

On January 3, 2018, the Company issued a grid promissory note to the Manager in the initial principal amount of $50,000. The note provided that the Company could request additional advances from the Manager up to an aggregate additional amount of $150,000. On December 7, 2020, parties amended and restated the note for a new principal amount of $56,900 and maturity date of December 7, 2021. Interest on the note accrued on the unpaid portion of the principal amount and the outstanding portion of all advances at a fixed rate of 8% per annum. As of December 31, 2020, the Manager had advanced $56,900 of the note and the Company had accrued interest of $25,159. On October 8, 2021, the loan was repaid in full and the 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.

F-69

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

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.

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

F-70

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 16 — SHAREHOLDERS’ EQUITY (DEFICIT) (cont.)

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 12th 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-71

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 16 — SHAREHOLDERS’ EQUITY (DEFICIT) (cont.)

•        On the first day of the 24th 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 36th 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 of 2,189,835 units, at a price of $1.90 per unit, for aggregate gross proceeds of $4,160,684. On October 26, 2020, the Company sold an additional 442,443 units for an aggregate purchase price of $840,640. 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. In accordance with ASC 470, if debt or stock is issued with detachable warrants and/or stock, the guidance in ASC 470 requires that the proceeds be allocated to the instruments based on their relative fair values. The Company applied this guidance and recorded a deemed dividend of $2,874,478 as a result of a beneficial conversion feature. As the Company does not have any retained earnings this deemed dividend was netting against additional paid-in capital and the net accounting effect was none.

F-72

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 16 — SHAREHOLDERS’ EQUITY (DEFICIT) (cont.)

On March 26, 2021, the Company 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. The Company ASC 740 and recorded a deemed dividend of $1,527,086 as a result of a beneficial conversion feature. As the Company does not have any retained earnings this deemed dividend was netting against additional paid-in capital and the net accounting effect was none.

In the year ended December 31, 2021, the Company accrued dividends attributable to the series A senior convertible preferred shares in the amount of $128,319 and paid $1,032,806 including prior year accrued dividends of $176,949.

On October 12, 2021, the Company redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645. As a result, there are 1,818,182 series A senior convertible preferred shares outstanding as of December 31, 2021.

Common Shares

The Company is authorized to issue 500,000,000 common shares as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, the Company had 4,842,851 and 4,444,013 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of the Company for a vote.

On May 4, 2020, the Company issued 100,000 common shares to Leonite upon conversion of $100,000 of the outstanding balance of the secured convertible promissory note resulting is a loss on conversion of debt of $175,000 (see Note 12).

On May 28, 2020, the Company issued 415,000 common shares, having a fair value of $1,037,500, to the Asien’s Seller in connection with the Asien’s Acquisition (see Note 10).

On June 4, 2020, the Company issued 100,000 common shares to a service provider for services provided to the Company. The fair market value of the services amounted to $245,000.

On March 26, 2021, the Company issued an aggregate of 398,838 common shares to the holders of the series A senior convertible preferred shares issued on September 30, 2020 and October 26, 2020. As noted above, the purchase price for the units issued to such holders was $1.90 per unit. As noted above, on March 26, 2021, the Company issued additional units at a purchase price of $1.65 per unit. In exchange for the consent of the holders of the Company’s outstanding series A senior convertible preferred shares to the issuance of these additional units at a lower purchase price than such holders paid for their shares, the Company issued 398,838 common shares to such holders.

Warrants

	Number of Common Share Warrants	Weighted average exercise price		Weighted average life (years)	Intrinsic value of Warrants
Outstanding, January 1, 2021	2,632,278	$	2.50	2.76	$	—
Granted	2,568,182		2.26	3.58		—
Exercised	—		—	—		—
Canceled	—		—	—		—
Outstanding, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500
Exercisable, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500

F-73

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 16 — SHAREHOLDERS’ EQUITY (DEFICIT) (cont.)

On March 26, 2021, the Company 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 $2.50 per common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 62.52-63.25%; (iii) weighted average risk-free interest rate of 0.16%; (iv) expected life of three years; (v) estimated fair value of the common shares of $2.60-$5.25 per share; and (vi) various probability assumptions related to redemption, calls and price resets. The ultimate amount allocated to the warrants was $1,472,914, which was recorded as additional paid in capital.

The warrants allow the holder to purchase one (1) common share at an exercise price of $2.50 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The warrants have a term of three years and are callable by the Company after one year if the 30-day average stock price is in excess of $5 and the trading volume in the Company’s shares exceed 100,000 shares a day over such period. The Company can also redeem the warrants during the term for $0.50 a warrant in the first year; $1.00 a warrant in the second year; and $1.50 a warrant in the third year.

On October 8, 2021, the Company issued to Leonite a five-year warrant for the purchase of 250,000 common shares with an exercise price of $0.01 per share and a five-year warrant for the purchase of 500,000 common shares with an exercise price of $2.50 per share. The exercise price is subject to standard adjustments, including upon any future equity offering with a lower exercise price. Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The warrants may be exercised on a cashless basis under certain circumstances and contain certain beneficial ownership limitations.

Options

	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Term in Years
Outstanding at January 1, 2020	—		$	—	—
Granted	90,000			2.50	5.0
Exercised	77,500			2.50	—
Forfeited	—			—	—
Cancelled	(12,500	)		2.50	—
Expired	—		$	—	—
Outstanding at December 31, 2020	—		$	—	—
Exercisable at December 31, 2020

On May 11, 2020, the Company granted options to directors Paul A. Froning and Robert D. Barry to purchase 60,000 and 30,000 common shares, respectively, each at an exercise price of $2.50 per share. The options vested immediately on the date of grant and terminate on May 11, 2025. On September 29, 2020, Mr. Barry exercised the options cashless and on September 30, 2020, Mr. Froning exercised the options for proceeds of $150,000.

F-74

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Future Financing Leases

Kyle’s has entered into three financing lease agreements for expansion equipment. The equipment has been installed and expected to be in service in the second quarter of 2022. These agreements have terms of six years beginning at the time of installation, no payment have been made on the lease agreement as of December 31, 2021 and the expected future minimum lease payments under the leases are $630,816.

Office Lease

An office space has been leased on a month-by-month basis.

NOTE 18 — INCOME TAXES

As of December 31, 2021 and 2020, the Company had net operating loss carry forwards of approximately $438,209 and $347,000, respectively, that may be available to reduce future years’ taxable income in varying amounts through 2041.

The provision for Federal income tax consists of the following:

The cumulative tax effect at the expected rate of (3.4)% and (4.8)% of significant items comprising the Company’s net deferred tax amount is as follows:

The components for the provision of income taxes include:

	December 31, 2021		December 31, 2020
Current Federal and State	$	143,000	$	—
Deferred Federal and State		75,300		83,900
Total (benefit) provision for income taxes	$	218,300	$	(83,900	)

A reconciliation of the statutory US Federal income tax rate to the Company’s effective income tax rate is as follows:

	December 31, 2021		December 31, 2020
Federal tax	21.0	%	21.0	%
State tax	1.7	%	4.1	%
Discontinued operations	0.0	%	(5.4	)%
Permanent items	(5.0	)%	(1.6	)%
Measurement Period Adjustment	(16.9	)%	0.0	%
Valuation Allowance	2.3	%	(22.6	)%
Other	(6.5	)%	(0.3	)%
Effective income tax rate	(3.4	)%	(4.8	)%

F-75

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 18 — INCOME TAXES (cont.)

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The Company has a net cumulative current deferred tax asset of $242,000 and a net cumulative long-term deferred tax liability of ($2,312,000). The major components of deferred tax assets and liabilities are as follows:

	December 31, 2021			December 31, 2020
Deferred tax assets
Inventory obsolescence	$	107,000		$	4,000
Sales return reserve		—			48,000
Business interest limitation		481,000			20,000
Lease liability		712,000			95,000
Other		135,000			55,000
Loss carryforward		153,000			94,000
Valuation Allowance		—			(132,000	)
Total deferred tax assets	$	1,588,000		$	184,000
Deferred tax liabilities
Fixed assets	$	(230,000	)	$	(89,000	)
Right of Use Assets		(706,000	)		(95,000	)
Intangibles		(2,722,000	)		—
Total deferred tax liabilities	$	(3,658,000	)	$	(184,000	)
Total net deferred income tax assets (liabilities)	$	(2,070,000	)	$	—

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2011 and 2020, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties were $0 and $0, respectively. The tax years ended December 31, 2016 through December 31, 2021 are considered to be open under statute and therefore may be subject to examination by the Internal Revenue Service and various state jurisdictions.

The Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2021 and 2020.

	As of December 31,
	2021			2020
Prepaid income taxes (accrued tax liability)	$	(175,000	)	$	21,000
Deferred tax asset (liability)	$	(2,070,000	)	$	—

	Years Ended December 31,
	2021		2020
Income tax (benefit)/expense	$	218,000	$	(84,000	)

F-76

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 19 — SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the years ended December 31, 2021 and 2020 were as follows:

	Years Ended December 31,
	2021		2020
Interest paid	$	176,204	$	415,451
Income tax paid	$	50,000	$	—
Business combinations:
Net assets in acquisition of H&I	$	3,716,375	$	—
Wolo business combination	$	6,606,403	$	—
Kyle’s business combination	$	—	$	3,516,530
Asien’s business combination	$	—	$	1,182,925
Financing:
Due to seller (net cash paid to seller after closing)	$	977,685	$	4,622,792
Notes payable sellers	$	6,730,345	$	—
Line of credit, net of debt discount	$	—	$	568,597
Finance purchases of property and equipment	$	688,978	$
Convertible Promissory Note	$	—	$	1,353,979
Common Shares	$	—	$	1,115
Accrued common share dividends	$	242,160	$	—
Deemed Dividend related to issuance of preferred shares	$	1,527,086	$	3,051,478
1847 Goedeker Spin-Off Dividend	$	—	$	283,257
Distribution – Allocation shares	$	—	$	5,985,500
Additional Paid in Capital – common shares and warrants issued	$	757,792	$	4,711,385
Operating lease, ROU assets and liabilities	$	2,184,477	$	373,916

NOTE 20 — SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2021 to the date these financial statements were issued, and has determined that, except as set forth below, it does not have any material subsequent events to disclose in these financial statements.

Unit Offering

On February 24, 2022, the Company entered into securities purchase agreements with several accredited investors, pursuant to which the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, to such investors for aggregate gross proceeds of $961,000. On March 24, 2022, the Company entered into securities purchase agreements with additional accredited investors, pursuant to which the Company sold an additional 106,666 units to such investors for aggregate gross proceeds of $320,000. Each unit consists of (i) one series B senior convertible preferred share and (ii) a three-year warrant to purchase one common share at an exercise price of $3.00, subject to adjustments.

Pursuant to the securities purchase agreements, the Company is required file a registration statement with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, covering the resale of all shares issuable upon conversion of the series B senior convertible preferred shares and exercise of the warrants with thirty (30) days after the closing and use its commercially reasonable efforts to have the registration statement declared effective by the SEC as soon as practicable, but in no event later than (i) ninety (90) days after the closing in the event that the SEC does not review the registration statement, or (ii) one hundred fifty (150) days after the closing in the event that the SEC reviews the registration statement (but in any event, no later than two (2) business days from the SEC indicating that it has no further comments on the registration statement).

F-77

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 20 — SUBSEQUENT EVENTS (cont.)

In addition to registration rights described above, the securities purchase agreements provide several other covenants in favor of the investors, including information rights for significant shareholders, most favored nations provisions, and other covenants customary for similar transactions. The securities purchase agreements also contain customary representations, warranties closing conditions and indemnities.

Series B Senior Convertible Preferred Shares

The terms of the series B senior convertible preferred shares are governed by a share designation, dated February 17, 2022 (the “Share Designation”). Pursuant to the Share Designation, the Company designated 583,334 of its preferred shares as series B senior convertible preferred shares. Following is a summary of the material terms of the series B senior convertible preferred shares:

•        Dividend Rights.    Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 VWAP for the common shares 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; 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 $2.70 or higher.

•        Liquidation Rights.    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 junior securities (as defined in the Share Designation), including the Company’s common shares and allocation shares, each holder of outstanding series B 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, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B 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, then such assets, or the proceeds thereof, shall be distributed among the holders of series B senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

•        Voting Rights.    The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the Share Designation or (ii) the Company’s creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

F-78

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 20 — SUBSEQUENT EVENTS (cont.)

•        Conversion Rights.    Each series B 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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 (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms of the series B 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 the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

•        On the first day of the 12th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.        

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). 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 B 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.

F-79

1847 HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

NOTE 20 — SUBSEQUENT EVENTS (cont.)

Warrants

Each warrant is exercisable within three years at an exercise price of $3.00 per common share (subject to adjustment, including a full ratchet antidilution adjustment), which may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable.

The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period.

The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.

The warrants also contain an ownership limitation, such that the Company shall not effect any exercise of any warrant, and the holder shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to issuance of common shares upon exercise such warrant, such holder, together with its affiliates, and any other persons acting as a group together with such holder or any of 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 issuable upon exercise of such warrant. Upon no fewer than 61 days’ prior notice to the Company, a holder may increase or decrease such beneficial ownership limitation provisions and any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.

Dividend

On January 14, 2022, the Company paid its first quarterly dividend in the amount of $0.05 per share to the holders of common shares as of December 31, 2021. The total dividend paid was $242,160

F-80

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)

AUDITED COMBINED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2020 AND 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Owners

High Mountain Door & Trim, Inc. and Sierra Homes LLC (dba Innovative Cabinets & Design)

Opinion on the Financial Statements

We have audited the accompanying combined balance sheets of High Mountain Door & Trim, Inc. and Sierra Homes LLC (collectively “the Company”), as of December 31, 2020 and 2019, the related combined statements of income and changes in owner’s equity, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the combined financial statements that was communicated or required to be communicated to the board of directors and that (i) relates to accounts or disclosures that are material to the combined financial statements, and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described further in Note 2 to the combined financial statements, revenues derived from contracts with customers are recognized as the performance obligations are satisfied over time. The Company uses estimates of project costs incurred and total costs for each contract to recognize revenue. Under the cost-to-cost approach, the determination of the progress toward completion requires management to prepare estimates of the costs to complete. In addition, the Company’s contracts may include variable consideration related to contract modifications through change orders or claims, and management must also estimate the variable consideration the Company expects to receive in order to estimate the total contract revenue. We identified revenue recognized over time to be a critical audit matter.

F-82

The principal considerations for our determination that revenue recognized over time is a critical audit matter is that auditing management’s estimate of the progress toward completion of its projects was complex and subjective. This is due to the considerable judgement required to evaluate management’s determination of the forecasted costs to complete its contracts as future results may vary significantly from past estimates due to changes in facts and circumstances. In addition, auditing the Company’s measurement of variable consideration is also complex and highly judgmental and can have a material effect on the amount of revenue recognized.

Our audit procedures related to revenue recognized over time included the following, among others:

•        We obtained an understanding and evaluated the Company’s processes and controls related to contract revenue recognition.

•        We evaluated the Company’s cost-to-cost estimates by evaluating the appropriate application of the cost-to-cost method, including the significant assumptions used to develop the estimated cost to complete, and the completeness and accuracy of the underlying data.

•        We evaluated the estimated variable consideration by evaluating the appropriate application of the most likely amount method and examining relevant supporting documentation.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2021.

Draper, UT

January 27, 2022

F-83

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
COMBINED BALANCE SHEETS

	December 31, 2020		December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	1,368,927	$	1,212,972
Accounts receivable, net		1,900,892		917,510
Contract assets		160,118		84,980
Inventories, net		1,272,397		676,704
Prepaid expenses and other current assets		168,829		106,943
Total Current Assets		4,871,163		2,999,109
Property and equipment, net		589,588		614,402
Operating lease right-of-use assets		224,398		383,655
Other assets		47,431		26,274
TOTAL ASSETS	$	5,732,580	$	4,023,440
LIABILITIES AND OWNERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	341,265	$	344,547
Contract liabilities		4,158,964		2,955,890
Current portion of notes payable		63,932		83,432
Current portion of finance lease liabilities		7,654		4,932
Current portion of operating lease liabilities		186,825		257,150
Total Current Liabilities		4,758,640		3,645,951
Notes payable, net of current portion		155,625		155,957
Finance lease liabilities, net of current portion		16,197		15,478
Operating lease liabilities, net of current portion		42,166		132,196
TOTAL LIABILITIES		4,972,628		3,949,582
Owners’ Equity		759,952		73,858
TOTAL LIABILITIES AND OWNERS’ EQUITY	$	5,732,580	$	4,023,440

The accompanying notes are an integral part of these combined financial statements.

F-84

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
COMBINED STATEMENTS OF INCOME AND CHANGES IN OWNERS’ EQUITY

	For the Years Ended December 31,
	2020			2019
Net sales	$	17,655,250		$	15,249,851
Cost of sales		12,184,092			11,380,264
Gross Profit		5,471,158			3,869,587
Operating Expenses:
General and administrative		964,366			481,457
Personnel		2,552,683			1,961,307
Occupancy		341,093			326,509
Depreciation and amortization		210,826			173,829
Total Operating Expenses		4,068,968			2,943,102
Income From Operations		1,402,190			926,485
Other Income (Expense)
Other income		220			883
Gain on forgiveness of PPP loans		1,191,424			—
Interest expense		(21,830	)		(12,908	)
Gain (loss) on disposal of property and equipment		44,090			(11,401	)
Total Other Income (Expense)		1,213,904			(23,426	)
Net Income	$	2,616,094		$	903,059
Owners’ Equity (Deficit) – Beginning	$	73,858		$	(497,201	)
Distribution paid		(1,930,000	)		(332,000	)
Owners’ Equity – Ending	$	759,952		$	73,858

The accompanying notes are an integral part of these combined financial statements.

F-85

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
COMBINED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,616,094		$	903,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		210,826			173,829
Amortization of operating lease right-of-use assets		246,228			245,291
Loss (gain) on disposal of property and equipment		(44,090	)		11,401
Gain on forgiveness of PPP loans		(1,191,424	)		—
Changes in current assets and liabilities:
Accounts receivable		(983,382	)		(412,432	)
Contract assets		(75,138	)		(84,980	)
Inventory		(595,693	)		242,843
Prepaid expenses and other assets		(83,043	)		(78,107	)
Accounts payable and accrued expenses		3,690			33,516
Contract liabilities		1,203,074			326,310
Operating lease liabilities		(247,326	)		(239,600	)
Net cash provided by operating activities		1,059,816			1,121,130
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(75,468	)		(149,748	)
Net cash used in investing activities		(75,468	)		(149,748	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		1,184,452			—
Repayments of notes payable		(77,046	)		(131,366	)
Repayments of financing lease liabilities		(5,799	)		(3,927	)
Distributions paid		1,930,000	)		(332,000	)
Net cash used in financing activities		(828,393	)		(467,293	)
NET CHANGE TO CASH AND CASH EQUIVALENTS		155,955			504,089
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		1,212,972			708,883
CASH AND CASH EQUIVALENTS, END OF YEAR	$	1,368,927		$	1,212,972
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	14,858		$	12,908
Cash paid for income taxes	$	—		$	—
Non-cash investing and financing activities:
Operating lease right-of-use asset and liability	$	—		$	628,946
Operating lease right-of-use asset and liability remeasurement	$	86,971		$	—
Financed purchases of property and equipment	$	80,874		$	163,671

The accompanying notes are an integral part of these combined financial statements.

F-86

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

High Mountain Door & Trim Inc. (“HMD&T”) was formed under the laws of the State of Nevada on April 4, 2014. Sierra Homes, LLC, dba Innovative Cabinets & Design (“IC&D”) was formed under the laws of the State of Nevada on June 17, 2008. The entities collectively are referred to throughout as “we”, “us”, “our” or “the Company.”

HMD&T is headquartered in Reno, NV, and specializes in all aspects of finished carpentry products and services, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. Finished carpentry includes all the finishing required for single-family and multi-family residential dwellings; these include doors, door frames, baseboards, crown molding, cabinetry, bathroom sinks and cabinets, hardware, bookcases, built-in closets, fireplace mantles, millwork, and window installations.

IC&D is headquartered in Reno, NV, and specializes in custom cabinetry and countertops working primarily with single-family homeowners, builders of multi-family homes, as well as commercial clients. Custom cabinetry and countertops include custom cabinet and countertop design and installation work in remodeling kitchens, bathrooms, home offices, etc.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The combined 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. All intercompany transactions have been eliminated. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. At December 31, 2020 and 2019, the Company had $1,021,291 and $733,126, respectively, in its domestic accounts in excess of Federal Deposit Insurance Corporation (“FDIC”) insured limits. No losses have been incurred by the Company as a result of such excesses of FDIC limits.

Use of Estimates

The preparation of the combined 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 combined financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. It is reasonably possible that changes may occur in the near term that would affect management’s estimates with respect to the cost-to-cost measure of progress method, allowance for doubtful accounts, and inventory reserve. Revisions in estimated revenue from contracts are made in the year in which circumstances requiring the revision become probable.

Revenue and Cost Recognition

The Company records revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606. This Accounting Standards Update (“ASU”) is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments.

F-87

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Our revenues are derived primarily through contracts with customers whereby we specialize in all aspects of products and services relating to finished carpentry, custom cabinetry, and countertops. We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Most of our contracts are bundled to include both material and installation services, we combine these items into one performance obligation as the overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. We do offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For any of our contracts that are not complete at the reporting date, we recognize revenue over time, because of the continuous transfer of control to the customer as work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. We utilize the cost-to-cost measure of progress method as we believe this best depicts the transfer of control of assets to the customer, which occurs as costs are incurred. When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion, can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, cash flow, and profitability from a particular contract may be adversely affected.

An insignificant portion of our sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability and excluded from revenue on a net basis.

Our contracts can be subject to modification to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

All contracts are billed either contractually or as work is performed. Billing on our long-term contracts occurs primarily on a monthly basis throughout the contract period whereby we submit progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some of our contracts the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered a significant financing component.

Cost of revenues earned include all direct material and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying the performance obligation.

F-88

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Contract Assets and Contract Liabilities

We record a contract asset when we have satisfied our performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of our performance obligation. The difference between the beginning and ending balances of our contract assets and liabilities primarily results from the timing of our performance and the customer’s payment. At times, we have a right to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included in contract assets or contract liabilities, as determined on a contract-by-contract basis.

As of December 31, 2020, the Company had $274,941 in retainage, of which $114,823 was netted against contract liabilities. As of December 31, 2019, the Company had $169,521 in retainage, of which $84,541 was netted against contract liabilities.

Accounts Receivable

Accounts receivable include billed and unbilled amounts for services provided to customers for which we have an unconditional right to payment. Billed and unbilled amounts for which payment is contingent on anything other than the passage of time are included in contract assets and contract liabilities on a contract-by-contract basis.

The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. The Company historically collects substantially all its contract receivables from customers and bad debt expense has been historically immaterial to the combined financial statements. Uncollectible balances are expensed in the period it is determined to be uncollectible. The Company had no significant concentrations of receivables balances as of December 31, 2020 and 2019.

Inventories

Inventory mainly consists of doors, door frames, baseboards, crown molding, cabinetry, countertops, custom cabinets, closet shelving, and other related products. We value inventory at each balance sheet date to ensure that it is carried at the lower of cost or net realizable value with cost determined based on the average cost basis. A reserve for slow-moving and potentially obsolete inventories is recorded as of each balance sheet date and total inventories are presented net of that reserve. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $76,300 at December 31, 2020 and December 31, 2019, respectively.

Property and Equipment

Property and equipment is stated at the historical cost and depreciated on a straight-line method over the estimated useful life of the asset. Expected useful lives of property and equipment vary but generally are the shorter of lease life or five years for leasehold improvements and five years for vehicles, equipment, and office furniture.

Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the fair value. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the long-lived assets as determined by projected discounted net future cashflows.

F-89

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Leases

The Company recognizes right-of-use (“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. As most of 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 determination of the IBR requires judgment and is primarily based on publicly available information for companies within the same industry and with similar credit profiles. The Company adjusts the rate for the impact of collateralization, the lease term and other specific terms included in each lease arrangement. The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease arrangement.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term and equal amounts of rent expense is 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.

Our facilities’ operating leases have lease and non-lease fixed cost components, which we account for as one single lease component in calculating the present value of minimum lease payments. Variable lease and non-lease cost components are expensed as incurred.

We do not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less. We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term.

Completed Acquisition

On September 23, 2021, 1847 Cabinet Inc. (“1847 Cabinet”), a wholly owned subsidiary of 1847 Holdings LLC (“1847 Holdings”), entered into a securities purchase agreement with the Company, and Steven J. Parkey and Jose D. Garcia-Rendon (together, the “Sellers”), pursuant to which 1847 Cabinet agreed to acquire all of the issued and outstanding capital stock or other equity securities of the Company from the Sellers (the “Acquisition”).

On October 6, 2021, 1847 Cabinet, the Company and the Sellers entered into amendment No. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement. On October 8, 2021, closing of the Acquisition was completed.

Pursuant to the terms of the securities purchase agreement, as amended (the “Purchase Agreement”), 1847 Cabinet acquired all of the issued and outstanding capital stock or other equity securities of the Company from the Sellers for an aggregate purchase price of $16,567,845, after certain adjustments made at closing and subject to additional post-closing adjustments as described below. The purchase price consists of (i) $10,687,500 in cash and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345.

The purchase price is subject to a post-closing working capital adjustment provision. On or before the 75th day following the closing, 1847 Cabinet must deliver to the Sellers its calculation of the final net working capital of the Company as of the closing date. If such final net working capital exceeds the estimated net working capital, 1847 Cabinet must, within seven days, pay to the Sellers an amount of cash that is equal to such excess. If the estimated net working capital exceeds the final net working capital, the Sellers must, within seven days, pay to 1847 Cabinet an amount in cash equal to such excess. As of the date of this report, the post-closing working capital adjustment has not been completed notwithstanding the fact that the date of this report is past the 75th day following closing. The Company and 1847 Cabinet have agreed with the Sellers to finalize the post-working capital adjustment promptly following the date of this report.

F-90

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

As noted above, a portion of the purchase price for the Acquisition 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 Sellers (the “Seller Notes”). The Seller 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 Seller Notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the Seller Notes in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the Seller 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 Seller 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 Seller Notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. The holders may also exchange the Seller Notes or any portion thereof for securities of the Company pursuant to the exchange agreement described below.

Pursuant to the terms of the Seller Notes, 1847 Cabinet must provide at least thirty (30) days prior notice prior to the consummation of a corporate transaction (as defined in the Seller Notes), which generally includes (i) the sale of all or substantially all of the assets of 1847 Cabinet and the Company, (ii) the merger, consolidation or any other reorganization of any of these companies, other than a reorganization where the holders of the voting securities of such companies prior to such reorganization continue to hold a majority of the outstanding voting securities after such reorganization; or (iii) any transfer (whether by sale, merger, consolidation or otherwise) of more that fifty percent (50%) of the outstanding voting securities of any of these companies. In the event of such corporate transaction, the Sellers may exercise their right to convert a portion of the outstanding principal balance and accrued but unpaid interest into 1847 Cabinet’s common stock, exercise their right to exchange all or any portion of the outstanding principal balance and accrued but unpaid interest pursuant to the exchange agreement, and/or accelerate the maturity date such that the outstanding principal balance together with all accrued but unpaid interest and all other amounts payable under the Seller Notes (less any amounts to be converted or exchanged, if applicable) shall become due and payable in full upon the consummation of the corporate transaction.

The Seller Notes contain customary events of default, including in the event of a default under the Senior Notes described below. The rights of the holders to receive payments under the Seller Notes are subordinated to the rights of the Purchasers under Senior Notes described below.

On October 8, 2021, the Company entered into an exchange agreement with the Sellers (the “Exchange Agreement”), pursuant to which the Company granted the Sellers and their permitted assigns the right, but not the obligation, to exchange all of the principal amount and accrued but unpaid interest under the Seller Notes as may be the outstanding from time to time 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 common shares on the primary national securities exchange or over the counter market on which the 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).

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

F-91

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Cash, restricted cash, receivables, inventory, and prepaid expenses approximate fair value. The fair value hierarchy is defined in the following three categories:

Level 1:    Quoted market prices in active markets for identical assets or liabilities.

Level 2:    Observable market-based inputs or inputs that are corroborated by market data.

Level 3:    Unobservable inputs that are not corroborated by market data.

Income Taxes

All combined entities have elected to be taxed as an “S Corporation” under the provisions of the Internal Revenue Code and comparable state income tax law. As an S Corporation, the Company is generally not subject to corporate income taxes and the Company’s net income or loss is reported on the individual tax return of the stockholder of the Company. Therefore, no provision or liability for income taxes is reflected in the combined financial statements.

Management has evaluated its tax positions and has concluded that the Company had taken no uncertain tax positions that could require adjustment or disclosure in the combined financial statements to comply with provisions set forth in ASC 740, Income Taxes.

Impact of COVID-19

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The extent of the COVID-19 pandemic’s continued effect on our operational and financial performance and those of third parties on which the Company relies will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential impacts on its business and financing. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. ASU 2014-09 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The Company’s adoption of this ASU resulted in no material changes to the Company’s results of operations or balance sheet.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which made changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for private companies for years beginning after December 15, 2019. The Company’s adoption of this ASU resulted in the recognition of an ROU asset and liability in the amount of $628,946 and no material changes to the Company’s results of operations.

F-92

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The Company’s adoption of this ASU resulted in no material changes to the Company’s results of operations or balance sheet.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s financial position, results of operations, or cash flows.

The Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company’s combined financial statements.

NOTE 3 — REVENUE RECOGNITION

The following table presents the Company’s revenues disaggregated by type of service of such revenue recognized during the years ended December 31, 2020 and 2019:

	December 31, 2020		December 31, 2019
Finished carpentry	$	11,547,948	$	10,455,483
Custom cabinets and countertops		6,107,302		4,794,368
Net revenues	$	17,655,250	$	15,249,851

The following outstanding contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows at December 31, 2020 and 2019:

	December 31, 2020		December 31, 2019
Contract assets	$	160,118	$	84,980
Contract liabilities	$	4,158,964	$	2,955,890

The difference between contract assets and contract liabilities as of December 31, 2020 compared to December 31, 2019 is primarily the result of timing differences between our performance of obligations under contracts and customer payments. We did not recognize any impairment losses on our receivables and contract assets during the years ended December 31, 2020 and 2019.

As of December 31, 2020, the Company had approximately $22.2 million of estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied).

F-93

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 4 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2020 and 2019:

	December 31, 2020			December 31, 2019
Leasehold improvements	$	26,941		$	11,225
Transportation equipment		785,982			725,723
Machinery and equipment		241,304			240,043
Office furniture and equipment		118,288			89,350
Total property and equipment		1,172,515			1,066,341
Less: accumulated depreciation		(582,927	)		(451,939	)
Property and equipment, net	$	589,588		$	614,402

Depreciation expense for the years ended December 31, 2020 and 2019 was $210,826 and $173,829, respectively.

NOTE 5 — LEASES

Financing Leases

On February 14, 2019, the Company entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. As of December 31, 2020 and 2019, the balance payable was $15,869 and $20,410, respectively.

On June 2, 2020, the Company entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. As of December 31, 2020 and 2019, the balance payable was $7,982 and $0, respectively.

Following is a summary of payments due on financing leases for the succeeding five years:

Year Ending December 31,	Amount
2021	$	8,161
2022		8,161
2023		8,161
2024		1,515
2025		—
Thereafter		—
Total payments		25,998
Less: amount representing interest		(2,147	)
Present value of minimum lease payments	$	23,851

As of December 31, 2020 and 2019, the weighted-average remaining lease term for all finance leases is 3.10 years and 4.10 years, respectively.

Operating Leases

The Company has three facility leases, including a warehouse, showroom, and office facilities under long-term leases.

Commencing January 20, 2020, the Company amended their design center lease by extending the lease for an additional 3 years and provides a base rent of $2,936 for the first 12 months, which will increase by 3 percent every 12 months. In addition, the Company is responsible for all taxes, insurance, and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants. As a result of the lease amendment, the Company remeasured the lease and recognized an additional $86,971 lease liability and corresponding ROU asset.

F-94

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 5 — LEASES (cont.)

As of December 31, 2020 and 2019, the weighted-average remaining lease term for all operating leases is 1.3 years and 1.7 years, respectively.

Because the Company generally does not have access to the rate implicit in operating leases, we utilize our incremental borrowing rate as the discount rate. The weighted average discount rate associated with operating leases as of December 31, 2020 and 2019 is 6.09 percent and 6.01 percent, respectively.

The Company recognizes operating lease expense on a straight-line basis over the lease term. Rental expense under the operating lease for the years ended December 31, 2020 and 2019 were $273,180 and $276,951, respectively.

Supplemental balance sheet information related to lease at December 31, 2020 was as follows:

Operating lease right-of-use asset	$	224,398
Lease liability, current portion		186,825
Lease liability, long-term		42,166
Total operating lease liability		228,991
Weighted-average remaining lease term (months)		16
Weighted average discount rate	$	6.01	%

Future minimum lease payments under operating leases as of December 31, 2020 were as follows:

Year Ending December 31,	Amount
2021	$	192,138
2022		37,375
2023		9,420
2024		—
2025		—
Thereafter		—
Total	$	238,933
Less imputed interest		(9,942	)
Total lease liability	$	228,991

NOTE 6 — NOTES PAYABLE

The Company has financed purchases of transportation vehicles with notes payable which are secured by the vehicles purchased.

From April 8, 2020 to April 13, 2020, the Company received a total of $1,184,452 in Paycheck Protection Program (“PPP”) loans from the Small Business Administration (“SBA”) under provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The PPP loans have two-year terms and bear interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On November 13, 2020, the Company received notice from Heritage Bank of Nevada that its loans had been forgiven in its entirety by the SBA.

F-95

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 6 — NOTES PAYABLE (cont.)

Notes payable consist of the following at December 31, 2020 and 2019:

Lender	Origination Date	Maturity Date	Interest Rate		December 31, 2020			December 31, 2019
Isuzu Finance of America	03/23/15	04/01/20	6.30	%	$	—		$	2,337
Reno Buick GMC Cadillac	09/06/15	09/06/21	3.50	%		—			16,766
Reno Buick GMC Cadillac	09/06/15	09/06/21	3.50	%		—			15,219
Reno Buick GMC Cadillac	12/09/16	12/23/22	4.70	%		13,088			19,180
Future Ford Lincoln	07/31/18	08/14/23	6.09	%		13,735			18,329
Future Ford Lincoln	07/31/18	08/14/23	6.09	%		8,245			11,004
Future Ford Lincoln	07/31/18	08/14/23	6.09	%		8,245			11,004
Future Ford Lincoln	07/31/18	08/14/23	6.09	%		13,735			18,329
US Bank	04/10/19	04/01/24	6.80	%		47,544			59,834
Future Ford Lincoln	06/13/19	06/28/23	6.34	%		11,158			15,140
Future Ford Lincoln	06/13/19	06/28/23	6.34	%		14,544			19,735
Future Ford Lincoln	12/27/19	01/10/24	5.24	%		10,832			13,723
Future Ford Lincoln	12/27/19	01/10/24	5.24	%		14,831			18,789
Reno Buick GMC Cadillac	02/26/20	03/11/26	3.99	%		31,800			—
Reno Buick GMC Cadillac	02/26/20	03/11/26	3.99	%		31,800			—
Total notes payable					$	219,557		$	239,389
Less: current portion						(63,932	)		(155,957	)
Notes payable, net of current portion					$	155,625		$	83,432

Following is a summary of notes payable payments due for the succeeding five years:

Year Ending December 31,	Amount
2021	$	63,932
2022		67,707
2023		53,001
2024		18,531
2025		13,044
Thereafter		3,342
Total	$	219,557

NOTE 7 — SUPPLIER CONCENTRATION

Significant customers and suppliers are those that account for greater than ten percent of the Company’s revenues and purchases.

In 2020 and 2019, the Company purchased a substantial portion of finished goods from four third-party vendors, which compromised 54.2% percent and 48.5% percent of the Company’s purchases, respectively. The Company believes there are numerous other suppliers that could be substituted should any of the suppliers become unavailable or non-competitive.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

There are no legal proceedings which the Company believes will have a material adverse effect on its financial position.

F-96

HIGH MOUNTAIN DOOR & TRIM INC. AND SIERRA HOMES, LLC
(D/B/A INNOVATIVE CABINETS & DESIGN)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2020 and 2019

NOTE 9 — SUBSEQUENT EVENTS

On December 7, 2020, the Company entered into a new warehouse and office lease, which commenced on January 1, 2021. The lease has a 5-year term and provides a base rent of $15,600 for the first 12 months, which will increase by 3 percent every 12 months. In addition, the Company is responsible for the proportional share taxes, insurance, and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

From February through May 2021, the Company financed purchases of five transportation vehicles through the issuance of notes payable for $97,528, which are secured by the vehicles purchased. The notes mature in five years and have an interest rate of 3.74%.

On March 24, 2021, the Company received $362,815 from a second PPP loan from the SBA under provisions of the CARES Act. The PPP loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the PPP loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On October 6, 2021, the Company received notice from Heritage Bank of Nevada that its loan had been forgiven in its entirety by the SBA.

On October 29, 2021, the Company entered into a new warehouse and office lease with an estimated commencement date of February 1, 2022. The lease has a 5-year term and provides a base rent of $29,400 for 12 months, which will increase by 4 percent every 12 months. In addition, the Company is responsible for the proportional share of taxes, insurance, and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On October 6, 2021, 1847 Cabinet, the Company and the Sellers entered into amendment No. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement. On October 8, 2021, closing of the Acquisition was completed. Pursuant to the terms of the securities purchase agreement, as amended, 1847 Cabinet acquired all of the issued and outstanding capital stock or other equity securities of the Company from the Sellers for an aggregate purchase price of $16,567,845, after certain adjustments made at closing and subject to additional post-closing adjustments. The purchase price consists of (i) $10,687,500 in cash and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345 as described further in Note 2.

Subsequent to December 31, 2020, the Company paid $4,007,863 in owner distributions.

F-97

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.

AUDITED COMBINED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2020 AND 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders

Wolo Mfg. Corp. and Wolo Industrial Horn & Sign, Inc.

Opinion on the Financial Statements

We have audited the accompanying combined balance sheets of Wolo Mfg. Corp. and Wolo Industrial Horn & Sign, Inc. (collectively “the Company”) as of December 31, 2020 and 2019, the related combined statements of income and changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2021.

Draper, UT

July 29, 2021

F-99

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
COMBINED BALANCE SHEETS

	December 31, 2020		December 31, 2019
Assets
Current assets:
Cash	$	574,983	$	1,091,346
Accounts receivable		1,514,262		1,459,522
Inventory, net		2,526,193		2,667,427
Prepaid expenses and other current assets		62,234		124,738
Total current assets		4,677,672		5,343,033
Long-term assets:
Property and equipment, net		10,407		16,052
Operating lease right-of-use asset		123,561		45,048
Security deposits		6,482		6,482
Total long-term assets		140,450		67,582
Total assets	$	4,818,122	$	5,410,615
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	125,241	$	143,879
Income taxes payable		85,580		89
Current portion of operating lease liability		76,233		45,048
Current portion of SBA note payable		105,018		—
Total current liabilities		392,072		189,016
Long-term liabilities
SBA note payable – net of current portion		67,332		—
Operating lease liability – net of current portion		47,328		—
Total long-term liabilities		114,660		—
Total liabilities		506,732		189,016
Stockholders’ Equity
Stockholders’ equity		4,311,390		5,221,599
Total liabilities and stockholders’ equity	$	4,818,122	$	5,410,615

The accompanying notes are an integral part of these combined financial statements.

F-100

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
COMBINED STATEMENTS OF INCOME AND CHANGES IN STOCKHOLDERS’ EQUITY

	For the Years Ended December 31,
	2020			2019
Revenues	$	7,444,776		$	7,640,304
Cost of Goods Sold		4,095,389			4,399,717
Gross Profit		3,349,387			3,240,587
Operating expenses:
Personnel		584,852			752,149
General and administrative		1,736,058			1,868,530
Depreciation and amortization		5,949			6,031
Total operating expenses		2,326,859			2,626,710
Income from operations		1,022,528			613,877
Other Income and Expense
Settlement income		—			80,794
Interest income		10			39
Interest expense		(1,140	)		(635	)
Gain on forgiveness of debt		10,000			—
Other income		14			212
Total other income/(expenses)		8,884			80,410
Net income before income taxes		1,031,412			694,287
Income tax expense		(216,621	)		(145,376	)
Net Income	$	814,791		$	548,911
Stockholders’ Equity, Beginning		5,221,599			5,172,688
Distribution to stockholders		(1,725,000	)		(500,000	)
Stockholders’ Equity, Ending	$	4,311,390		$	5,221,599

The accompanying notes are an integral part of these combined financial statements.

F-101

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
COMBINED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2020			2019
Cash flows from operating activities:
Net Income	$	814,791		$	548,911
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,645			5,971
Amortization of right-of-use assets		75,150			75,176
Changes in current assets and liabilities:
Accounts receivable		(54,740	)		172,710
Prepaid expenses and other current assets		62,504			214,746
Inventory		141,234			(50,922	)
Accounts payable and accrued expenses		66,853			(6,141	)
Operating lease liability		(75,150	)		(75,176	)
Deposits		—			(38	)
Net cash provided by operating activities		1,036,287			885,237
Cash flows from investing activities:
Purchases of property and equipment		—			(5,939	)
Net cash used-in investing activities		—			(5,939	)
Cash flows from financing activities:
Net proceeds from related party notes payable		—			(75,000	)
Proceeds from PPP loan		172,350			—
Distribution to stockholders		(1,725,000	)		(500,000	)
Net cash used-in financing activities		(1,552,650	)		(575,000	)
Net change to cash and cash equivalents		(516,363	)		304,298
Cash at beginning of period		1,091,346			787,048
Cash at end of period	$	574,983		$	1,091,346
Supplemental Cash Flow disclosures:
Cash paid for interest	$	—		$	—
Cash paid for taxes	$	216,621		$	145,376
Non Cash Investing and Financing Activities:
Change in right-of-use asset/liability due to lease amendments	$	153,863		$	76,275

The accompanying notes are an integral part of these combined financial statements.

F-102

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

Wolo Mfg. Corp. was formed under the laws of the State of New York on August 6, 1965. Wolo Industrial Horn & Signal, Inc. was formed under the laws of the State of New York on January 27, 1999. The entities collectively do business as Wolo and are referred to throughout as “Wolo” or “the Company.”

Founded in 1965, Wolo was a one-person operation with an idea and commitment to manufacture a single patented hood lock. Today, Wolo is a second — generation family owned and operated business with the same mission, to provide the very best quality products and customer service. Wolo provides innovative products to protect and keep people safe. Wolo is the leader in horn design and technology (electric, air, truck, marine, motorcycle and industrial equipment). Wolo also offers vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The 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. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Cash

At December 31, 2020 and December 31, 2019, the Company had $139,732 and $457,877, respectively, in its domestic accounts in excess of Federal Deposit Insurance Corporation insured limits.

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.

Revenue Recognition and Cost of Revenue

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

Wolo collects 100% of the payment for internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the agreed upon terms.

Performance Obligations — The revenue that Wolo recognizes arises from orders it receives from contracts with customers. Wolo’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers and each 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, Wolo’s products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment of the order. Once this occurs, Wolo has satisfied its performance obligation and Wolo recognizes revenue.

F-103

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Transaction Price — Wolo agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In Wolo’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 Wolo collects concurrently with revenue-producing activities are excluded from revenue.

Cost of sales includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor to the company.

Warranties vary and are typically 90 days to consumers and manufacturing defect warranty to are available to resellers. At times, depending on the product, the company can also offer a warranty up to 12 months.

The majority of Wolo’s sales are to business to business (“B2B”) clients, with three exceeding 10% of revenue in 2020. The Company had sales to Zhongshan Yonglong Car Accessories and E-Own Corp in 2020 each making up 21% of total revenue and Echo Industrial making up 18% of total revenue in 2019.

Disaggregated Revenue — Wolo disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Wolo’s revenue by sales type is as follows:

	For the Years Ended December 31,
	2020		2019
B2B – Resellers/other	$	7,446,776	$	7,640,304
Total revenue	$	7,444,776	$	7,640,304

Receivables

Receivables consists of customer’s balance payments for which the Company extends credit to certain customers, primarily B2B sales, based on prior business relationship and credit worthiness. Based on the Company’s assessment of the credit history with its customers, it has concluded that there should be no allowance for uncollectible accounts.

The Company historically collects substantially all its trade receivables from customers. Uncollectible balances are expensed in the period it is determined to be uncollectible.

The Company factors accounts receivable from two of its customers. The factor bears all of the risk of the collectability of these two accounts.

Inventory

Inventory consists of finished goods acquired for resale and is valued at the weighted-average cost determined on a specific item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on estimate of its ability to sell the item as well as general market conditions. The Company typically has In-Transit inventory that ships internationally through its network of carriers. The In-Transit shipping terms are primarily FOB shipping point terms at the international port and risk of loss passes at that point in transit. Based on these evaluations, the Company estimated an obsolescence allowance of $148,000 at December 31, 2020 and 2019.

Product Warranties

The Company offers assurance-type warranties from 90 days to 1 year on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims and costs incurred to satisfy those claims. The Company estimates, based upon a review of historical warranty claim experience, the costs that may

F-104

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

be incurred under our warranties and record a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance-type warranties and has determined that the estimated outstanding warranty obligation on December 31, 2020 and 2019 are immaterial to the Company’s financial statements.

Property and Equipment

Property and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as incurred.

Depreciation is computed using the straight-line method over estimated useful lives as follows:

	Useful Lives (Years)
Furniture and fixtures	7
Machinery and equipment	5 – 7

Long-lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating 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.

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 categories:

Level 1:    Quoted market prices in active markets for identical assets or liabilities.

Level 2:    Observable market-based inputs or inputs that are corroborated by market data.

Level 3:    Unobservable inputs that are not corroborated by market data.

The cash and cash equivalents held by the Company are included in Level 1 in the fair value hierarchy. The carrying value of accounts receivable, accounts payable, and accrued liabilities approximate their fair value because of the short-term nature of these instruments.

Income Taxes

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss, credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing

F-105

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

authorities, based on the technical merits of the position. There are no uncertain tax positions as of December 31, 2020 and December 31, 2019. The Company’s accounting policy is to include penalties and interest related to income taxes in selling, general and administrative expenses.

The Company is subject to Corporate Federal and State income taxes. The Company paid income taxes of $216,621 and $145,376 for 2020 and 2019, respectively.

Recent Accounting Pronouncements

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU as of January 1, 2018 resulted in no change to the Company’s results of operations or balance sheet.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which made changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for private companies for years beginning after December 15, 2019. We are in the process of evaluating the impact of the new standard on our consolidated financial statements.

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of Operations.

NOTE 3 — RECEIVABLES

At December 31, 2020 and 2019, receivables consisted of the following:

	December 31, 2020		December 31, 2019
Trade receivables from customers	$	1,513,432	$	1,456,462
Employee receivables		—		2,230
Total receivables	$	1,513,432	$	1,458,692

Accounts Receivable Factoring

As a part of its working capital management, the Company sells certain receivables through a single third-party financial institution (the “Factor”). The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company. The factoring facility, which was initiated in August 2014, allows the Company to a factor specific vendor accounts receivables, accelerating access to cash and reducing credit risk. The factoring facility and margin rate is reviewed from time to time and the margin rates ranged from 1.375% to 1.625%.

Costs incurred on the sale of receivables are recorded in other expense, net in the combined statements of income. The sale of receivables under this contract is considered an off-balance sheet arrangement to the Company and is accounted for as a true sale and is excluded from accounts receivable in the combined balance sheet.

F-106

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 4 — INVENTORY

Inventory consists of the following at December 31, 2020 and, 2019:

Classification	December 31, 2020			December 31, 2019
Finished Goods	$	1,481,155		$	1,725,530
Components		761,498			595,066
In-Transit		431,540			494,831
Total		2,674,193			2,815,427
Less: Inventory reserve for excess and slow mowing inventory		(148,000	)		(148,000	)
Inventory, net	$	2,526,193		$	2,667,427

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2020 and, 2019:

Classification	December 31, 2020			December 31, 2019
Furniture and fixtures	$	1,710		$	1,710
Equipment		34,704			34,704
Total		36,414			36,414
Less: Accumulated depreciation		(26,007	)		(20,362	)
Property and equipment, net	$	10,407		$	16,052

Depreciation expense for the years ended December 31, 2020 and 2019 was $5,571 and $6,032, respectively.

NOTE 6 — RELATED PARTY TRANSACTIONS

On December 14, 2018, the Company obtained a $75,000 loan from the owner of the Company. The note was a verbal agreement, and no interest was accrued on the note. Additionally, the note was due on demand.

On April 6, 2019, the Company made a cash payment of $75,000 on the related party note.

NOTE 7 — SBA NOTE PAYABLE

On May 1, 2020, the Company received $172,350 in Paycheck Protection Program (“PPP”) loans from the Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The PPP loans have two-year terms and bear interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loans may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loans contain events of default and other provisions customary for loans of this type. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On March 26, 2021, the Company received notice from Chase Bank that its loan had been forgiven in its entirety by the SBA. The Company has classified $105,018 of the PPP loans as current liabilities and $67,332 as long-term liabilities pending SBA clarification of the final loan terms.

The other income of $10,000 was Economic Injury Disaster Loan (“EIDL”) program advance provided by SBA, in conjunction with the PPP loans, which is designed to provide emergency economic relief to business that were impacted by COVID-10 pandemic. The advance will not have to be repaid. Wolo received the advance but was not approved for the EIDL loan.

F-107

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 8 — STOCKHOLDERS’ EQUITY

During the years ended December 31, 2020 and 2019, net cash of $1,725,000 and $500,000, respectively, was distributed to stockholders.

During the years ended December 31, 2020 and 2019, both Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. had 200 shares of common stock authorized and 100 shares of common stock issued and outstanding. The shares of common stock do not have a stated par value. There were no shares issued by either Company during the periods under review.

NOTE 9 — SUPPLIER CONCENTRATION

Significant suppliers are those that account for greater than 10% of the Company’s purchases.

In 2020 and 2019, the Company purchased a substantial portion of finished goods from four third-party vendors which comprised of 56% and 52% of the Company’s purchases, respectively. The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its combined financial results.

NOTE 11 — SETTLEMENT INCOME

On August 16, 2017, the Apollo Fire Detectors Limited (“Apollo”) filed a petition with the United States Patent and Trademark office to invalidate a trademark held by the Company. Both parties agreed to a settlement agreement on September 17, 2019 in order to end the drawn-out legal process. As part of the settlement agreement, the Company granted coexistence to Apollo, effectively granting Apollo permission to legally use the trademark in their normal course of business. In return for being granted coexistence, Apollo agreed to pay the Company $19,800 within five business days of the settlement agreement.

On November 30, 2017, the Company filed a lawsuit against The Aftak Corporation d/b/a Vixen Horns for copyright infringement, trademark infringement, false advertising, unfair completion and related claims in connection with certain goods and their associated packaging, instructions sheets, and advertisements. On July 9, 2019, both parties signed a settlement agreement, effectively dropping the lawsuit. As part of the settlement agreement, Vixen Horns agreed to pay the Company $60,000 within five business days of the settlement agreement.

The Company’s settlement income for the year ended December 31, 2019 was $80,794. There were no settlements in the year ended December 31, 2020.

NOTE 12 — PROVISION FOR INCOME TAXES

During the years ended December 31, 2020 and 2019, the Company recognized no interest or penalties related to income taxes. Accordingly, the Company had neither accruals for interest and penalties at December 31, 2020 or December 31, 2019. If the Company were to incur such charges, it would elect to recognize interest related to underpayment of income taxes as interest expense and recognize any penalties as operating expenses.

The Company is current on its Federal and New York State income tax filings. Tax years that remain open for examination are 2017 through 2019.

F-108

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 12 — PROVISION FOR INCOME TAXES (cont.)

The table below outlines the components of income tax expense:

	For the Years Ended December 31,
	2020		2019
Federal	$	216,621	$	145,376
State		—		—
Total provision for income taxes	$	216,621	$	145,376

The table below reconciles our effective tax rate to the statutory tax rate:

	For the Years Ended December 31,
	2020		2019
Federal statutory tax rate	21.0	%	21.0	%
State statutory tax rate, net federal effect	—		—
Total provision for income taxes	27.0	%	27.0	%

The Company has no material deferred income taxes assets or liabilities.             

NOTE 13 — OPERATING LEASES

In February 2016, the FASB issued ASU No. 2016-02, Leases, which was subsequently amended by ASU No. 2018-01, ASU No. 2018-10 and ASU No. 2018-11, collectively ASC 842. Under this standard, which applies to both lessors and lessees, lessees will be required to recognize all leases (except for short-term leases) as a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and as a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statements of operations.

The Company adopted ASC 842 on January 1, 2019, using the additional (optional) approach, with certain available practical expedients. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for any of our leases. After giving effect to the adoption of practical expedients, no right-of-use asset or lease liability was required to be recorded on the date of adoption. The Company continues to account for leases in the prior period consolidated financial statements under ASC 840. The Company has presented additional qualitative and quantitative disclosures regarding the Company’s lease obligations as required upon implementation of ASC 842 and has identified and implemented changes to its business processes and internal controls relating to implementation of the new standard. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

On October 4, 1978, Wolo Mfg. Corp. entered into a lease agreement with PKL Realty LLC (formerly P.K.L. Realty Corp). This lease agreement has been amended numerous times. Pursuant to the latest amendment entered into in July 2020, the lease expires on July 31, 2022. The lease agreement contains customary events of default representations, warranties and covenants.

F-109

WOLO MFG. CORP. AND WOLO INDUSTRIAL HORN & SIGNAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019

NOTE 13 — OPERATING LEASES (cont.)

	December 31, 2020
Operating lease right-of-use lease asset	$	153,663
Accumulated amortization		(30,102	)
Net balance	$	123,561
Operating lease liability, current portion		76,233
Operating lease liability, long term		47,328
Total operating lease liabilities	$	123,561
Weighted Average Remaining Lease Term – operating leases		19 months
Weighted Average Discount Rate – operating leases		6.0	%

Future minimum lease payments under this operating lease as of December 31, 2020 were as follows:

2021	$	81,755
2022		48,111
Total lease payments		129,866
Less imputed interest		(6,305	)
Maturities of lease liabilities	$	123,561

NOTE 14 — SUBSEQUENT EVENTS

Management has reviewed subsequent events through July 23, 2021, which is the date these financial statements were available to be issued and has concluded that, other than the following, no additional disclosures are required.

Amendment to the Stock Purchase Agreement and Closing

On December 22, 2020, Wolo entered into a Stock Purchase Agreement (the “Purchase Agreement”) with 1847 Wolo Inc. (“1847 Wolo”), a subsidiary of 1847 Holdings LLC (the “Company”), and the sellers named therein (together, the “Sellers”), pursuant to which 1847 Wolo agreed to acquire all of the issued and outstanding capital stock of the Company (the “Acquisition”).

On March 30, 2021, the parties entered into Amendment No. 1 to the Purchase Agreement (the “Amendment”) to amend certain terms of the Purchase Agreement. Following entry into the Amendment, closing of the Acquisition was completed on the same day.

Pursuant to the terms of the Purchase Agreement, as amended by the Amendment, 1847 Wolo agreed to acquire all of the issued and outstanding capital stock of Wolo for an aggregate purchase price of $7,400,000, subject to adjustment as described below. The purchase price consists of (i) $6,550,000 in cash and (ii) a secured promissory note in the principal amount of $850,000.

The purchase price is subject to a post-closing working capital adjustment provision. Under this provision, the Sellers delivered to Wolo at the closing of the Acquisition an unaudited balance sheet of Wolo as of that date (the “Preliminary Balance Sheet”). On or before the 75th day following the closing of the Acquisition, Wolo shall deliver to the Sellers an audited balance sheet as of the closing date (the “Final Balance Sheet”). If the net working capital reflected on the Final Balance Sheet (the “Final Working Capital”) exceeds the net working capital reflected on the Preliminary Balance Sheet (the “Preliminary Working Capital”), Wolo shall, within seven days, pay to the Sellers an amount of cash that is equal to such excess. If the Preliminary Working Capital exceeds the Final Working Capital, the Sellers shall, within seven days, pay to Wolo an amount in cash equal to such excess.

F-110

1,442,308

Common Shares

1847 HOLDINGS LLC

______________________

PROSPECTUS

______________________

Craft Capital Management LLC R.F. Lafferty & Co., Inc.

            , 2022

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common shares being registered. All amounts, other than the SEC registration fee, NYSE American listing fee and FINRA filing fee, are estimates. We will pay all these expenses.

	Amount
SEC registration fee	$	999.80
NYSE American listing fee		75,000.00
FINRA filing fee		4,165.63
Accounting fees and expenses		7,500.00
Legal fees and expenses		182,500.00
Transfer agent fees and expenses		5,000.00
Printing and related fees and expenses		5,000.00
Miscellaneous fees and expenses	$	5,834.57
Total	$	286,000.00

Item 14. Indemnification of Directors and Officers

Certain provisions of our operating agreement are intended to be consistent with Section 145 of the General Corporation Law of the State of Delaware, which provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceedings to which he is, or is threatened to be made, a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceedings, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances.

Our operating agreement includes a provision that eliminates the personal liability of its directors for monetary damages for breach of fiduciary duty as a director, except for liability:

•        for any breach of the director’s duty of loyalty to the company or its members;

•        for acts or omissions not in good faith or a knowing violation of law;

•        regarding unlawful distributions and interest purchases analogous to Section 174 of the General Corporation Law of the State of Delaware; or

•        for any transaction from which the director derived an improper benefit.

Our operating agreement provides that:

•        we must indemnify our directors and officers to the equivalent extent permitted by General Corporation Law of the State of Delaware;

•        we may indemnify our other employees and agents to the same extent that we indemnify our officers and directors, unless otherwise determined by our board of directors; and

•        we must advance expenses, as incurred, to our directors and executive officers in connection with a legal proceeding to the extent permitted by Delaware law and may advance expenses as incurred to our other employees and agents, unless otherwise determined by our board of directors.

II-1

The indemnification provisions contained in our operating agreement are not exclusive of any other rights to which a person may be entitled by law, agreement, vote of members or disinterested directors or otherwise.

In addition, we have entered into indemnification agreements with each of our executive officers and directors, pursuant to which we have agreed to indemnify them to the fullest extent permitted by law. Under the indemnification agreements, we have agreed to advance all expenses incurred by or on behalf of the independent directors in connection with any proceeding within thirty (30) days after the receipt by us of a statement requesting such advance, whether prior to or after final disposition of such proceeding.

We are also in the process of obtaining insurance on behalf of our directors and executive officers and certain other persons insuring them against any liability asserted against them in their respective capacities or arising out of such status.

The underwriting agreement, filed as Exhibit 1.1 to this registration statement, will provide for indemnification, under certain circumstances, by the underwriter of us and our officers and directors for certain liabilities arising under the Securities Act or otherwise.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 15. Recent Sales of Unregistered Securities

During the past three years, we issued the following securities, which were not registered under the Securities Act.

On April 5, 2019, our company, 1847 Holdco and 1847 Goedeker entered into a securities purchase agreement with Leonite Capital LLC, or Leonite, pursuant to which they issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286, which was convertible into our common shares. As additional consideration for the purchase of the note, (i) our company issued to Leonite 25,000 common shares (post-split), (ii) our company issued to Leonite a five-year warrant to purchase 50,000 common shares (post-split) at an exercise price of $5.00 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis, and (iii) 1847 Goedeker issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in 1847 Goedeker.

On May 11, 2020, in connection with an amendment to the secured convertible promissory note, we issued to Leonite another five-year warrant to purchase 50,000 common shares (post-split) at an exercise price of $5.00 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis.

On May 4, 2020, Leonite converted $100,000 of the outstanding balance of the secured convertible promissory note into 25,000 common shares (post-split). On July 24, 2020, Leonite converted $50,000 of the outstanding balance of the secured convertible promissory note into 12,500 common shares (post-split). On August 4, 2020, 1847 Goedeker used a portion of the proceeds from its initial public offering to repay the secured convertible promissory note in full. Therefore, no shares remain available for issuance under the secured convertible promissory note.

On September 2, 2020, we entered into amendment to the first warrant issued to Leonite, pursuant to which the parties amended the warrant to allow for the conversion of the warrant into 45,000 common shares (post-split) in exchange for Leonite’s surrender of the remaining 5,000 common shares (post-split) underlying the first warrant, as well as all 50,000 common shares (post-split) underlying the second warrant. On September 2, 2020, Leonite exercised the first warrant in accordance with the foregoing amendment and we issued 45,000 common shares (post-split) to Leonite. As a result of this exercise, both warrants were cancelled.

On May 28, 2020, in connection with the acquisition of Asien’s, we issued 103,750 common shares (post-split) to the Asien’s Seller, which were subject to repurchase by 1847 Asien for a period of one year following the closing at a purchase price of $10.00 per share (post-split). These shares were repurchased by 1847 Asien on July 29, 2020. On August 28, 2020, 1847 Asien distributed these 103,750 shares (post-split) to its stockholders, pro rata in accordance with their holdings. Our company, as the holder of 95% of the outstanding common stock of 1847 Asien, received 98,528 shares (post-split) in connection with this distribution, which were then returned to our treasury and cancelled.

On June 4, 2020, we issued 25,000 common shares (post-split) to a service provider as partial compensation for consulting services provided by it.

II-2

On September 2, 2020, we issued a total of 12,500 common shares (post-split) to representatives of Craft Capital Management LLC in consideration for services provided by them.

On September 30, 2020, we sold an aggregate of 2,189,835 units, at a price of $1.90 per unit, for aggregate gross proceeds of $4,160,684. Each unit consisted 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 $5.20 per common share (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. On October 26, 2020, we sold an additional 442,443 units for aggregate gross proceeds of $840,640.

On October 16, 2020, we issued 175,000 common shares (post-split) to Stephen Mallatt, Jr. and Rita Mallatt, the sellers of Kyle’s.

On March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for an aggregate purchase price of $3,000,000. These units have the same terms as those previously sold on September 30, 2020 and October 26, 2020.

On March 26, 2021, we also issued an aggregate of 99,710 common shares (post-split) to the holders of the series A senior convertible preferred shares issued on September 30, 2020 and October 26, 2020. As noted above, the purchase price for the units issued to such holders was $1.90 per unit and the purchase price for the units issued on March 26, 2021 was $1.65 per unit. In exchange for the consent of the holders of the outstanding series A senior convertible preferred shares to the issuance of these additional units at a lower purchase price than such holders paid for their shares, we issued 99,710 common shares (post-split) to such holders.

On October 8, 2021, we issued to two institutional investors, including Leonite, secured convertible promissory notes in the aggregate principal amount of $24,860,000. 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. 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 our common shares at a conversion price equal to $5.20 (post-split) (subject to standard adjustments, including a full ratchet antidilution adjustment). Notwithstanding the foregoing, the notes contain a beneficial ownership limitation, which provides that we 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 us, 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 61st day after such notice is delivered to us.

October 8, 2021, we issued to Leonite a five-year warrant for the purchase of 62,500 common shares (post-split) with an exercise price of $0.04 per share (post-split) and a five-year warrant for the purchase of 240,385 common shares (post-split) with an exercise price of $5.20 per share (post-split). The exercise price is subject to standard adjustments, including a full ratchet antidilution adjustment, and the warrants may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable. The warrants contains an ownership limitation, such that we shall not effect any exercise of any warrant, and the holder shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to issuance of common shares upon exercise such warrant, such 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 issuable upon exercise of such warrant. Upon no fewer than 61 days’ prior notice to us, a holder may increase or decrease such beneficial ownership limitation provisions (up to a maximum of 9.99%) and any such increase or decrease will not be effective until the 61st day after such notice is delivered to us.

On February 24, 2022, we sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $960,999. On March 24, 2022, we sold an additional 106,666 units for aggregate gross proceeds of $319,990. On April 20, 2022, we sold an additional 28,333 units for aggregate gross proceeds of $85,000. On May 12, 2022, we sold an additional 16,667 units for aggregate gross proceeds of $50,000. On May 19, 2022, we sold an additional 9,567 units for aggregate gross proceeds of $28,700. Each unit consisted 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 $5.20 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

II-3

On July 8, 2022, we entered into a securities purchase agreement with Mast Hill, pursuant to which we issued to Mast Hill a promissory note in the principal amount of $600,000, which includes an original issue discount in the amount of $60,000, and a five-year warrant for the purchase of 100,000 common shares (post-split) at an exercise price of $6.00 per share (post-split) (subject to adjustment), which may be exercised on a cashless basis if the market price of our common shares is greater than the exercise price, for a total purchase price of $540,000. The note bears interest at a rate of 12% per annum and matures on July 8, 2023; provided that any principal amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16% per annum or the maximum amount permitted by law from the due date thereof until the same is paid. The note is convertible into common shares at the option of the holder at any time on or following the date that an event of default (as defined in the note) occurs under the note at a conversion price of $5.20 (post-split) (subject to adjustment). The conversion price of the note and the exercise price of the warrant are subject to standard adjustments, including a price-based adjustment in the event that we issue any common shares or other securities convertible into or exercisable for common shares at an effective price per share that is lower than the conversion or exercise price, subject to certain exceptions. In addition, the note and the warrant contain an ownership limitation, such that we shall not effect any conversion or exercise, and the holder shall not have the right to convert or exercise, or any portion of the note or the warrant to the extent that after giving effect to the issuance of common shares upon conversion or exercise, the holder, together with its affiliates and any other persons acting as a group together with the holder or any of 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 conversion or exercise.

The issuance of these securities was made in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(a)(2) of the Securities Act.

Item 16. Exhibits.

(a) Exhibits.

Exhibit No.	Description
1.1	Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to Amendment No. 7 to Registration Statement on Form S-1/A filed on June 27, 2022)
3.1	Certificate of Formation of 1847 Holdings LLC (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed on February 7, 2014)
3.2	Second Amended and Restated Operating Agreement of 1847 Holdings LLC, dated January 19, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 22, 2018)
3.3	Amendment No. 1 to Second Amended and Restated Operating Agreement (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 11, 2021)
4.1	Form of Representative’s Warrant (included in Exhibit 1.1)
4.2	Amended and Restated Share Designation of Series A Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 1, 2021)
4.3	Amendment No. 1 to Amended and Restated Share Designation of Series A Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 5, 2021)
4.4	Share Designation of Series B Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on March 2, 2022)
4.5	Form of Common Share Purchase Warrant relating to 2020 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 7, 2020)
4.6	Form of Common Share Purchase Warrant relating to 2021 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on April 1, 2021)
4.7	Form of Common Share Purchase Warrant relating to 2022 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 2, 2022)
4.8	Warrant for Common Shares issued by 1847 Holdings LLC to Leonite Capital LLC on October 8, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on October 13, 2021)
4.9	Warrant for Common Shares issued by 1847 Holdings LLC to Leonite Capital LLC on October 8, 2021 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 13, 2021)
4.10	Common Share Purchase Warrant issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on July 8, 2022 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on July 12, 2022)
5.1*	Opinion of Bevilacqua PLLC as to the legality of the common shares

II-4

Exhibit No.	Description
10.1	Management Services Agreement, dated April 15, 2013, between 1847 Holdings LLC and 1847 Partners LLC (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1/A filed on March 14, 2014)
10.2	Amendment No. 1 to Management Services Agreement, dated September 15, 2013, between 1847 Holdings LLC and 1847 Partners LLC (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on February 7, 2014)
10.3	Management Services Agreement, dated May 28, 2020, between 1847 Asien Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed June 3, 2020)
10.4	Amended and Restated Management Services Agreement, dated October 8, 2021, between 1847 Cabinet Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on October 13, 2021)
10.5	Management Services Agreement, dated March 30, 2021, by and between 1847 Wolo Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on April 5, 2021)
10.6	6% Amortizing Promissory Note issued by 1847 Asien Inc. to Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992, on July 29, 2020 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed August 4, 2020)
10.7	Amendment No. 1 to Securities Purchase Agreement and 6% Amortizing Promissory Note, dated October 8, 2021, between 1847 Asien Inc. and Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as Trustees of the Wilhelmsen Family Trust, U/D/T dated May 1, 1992 (incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K filed on October 13, 2021)
10.8	8% Vesting Promissory Note, dated September 30, 2020, issued by 1847 Cabinet Inc. to Stephen Mallatt, Jr. and Rita Mallatt (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 7, 2020)
10.9	Conversion Agreement, dated July 26, 2022, among 1847 Holdings LLC, 1847 Cabinet Inc., Stephen Mallatt, Jr. and Rita Mallatt (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 27, 2022)
10.10	Second Amended and Restated Secured Promissory Note issued by 1847 Holdings LLC to 1847 Cabinet Inc. on October 8, 2021 (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on October 13, 2021)
10.11	6% Subordinated Convertible Promissory Note issued by 1847 Cabinet Inc. to Steven J. Parkey on October 8, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 13, 2021)
10.12	Conversion Agreement, dated July 26, 2022, among 1847 Holdings LLC, 1847 Cabinet Inc. and Steven J. Parkey (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on July 27, 2022)
10.13	6% Subordinated Convertible Promissory Note issued by 1847 Cabinet Inc. to Jose D. Garcia-Rendon on October 8, 2021 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on October 13, 2021)
10.14	Conversion Agreement, dated July 26, 2022, among 1847 Holdings LLC, 1847 Cabinet Inc. and Jose D. Garcia-Rendon (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on July 27, 2022)
10.15	Exchange Agreement, dated October 8, 2021, among 1847 Holdings LLC, Steven J. Parkey and Jose D. Garcia-Rendon (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on October 13, 2021)
10.16	Note Purchase Agreement, dated October 8, 2021, among 1847 Holdings LLC, 1847 Asien Inc., 1847 Wolo Inc., 1847 Cabinet Inc., Asien’s Appliance, Inc., Wolo Mfg. Corp., Wolo Industrial Horn & Signal, Inc., Kyle’s Custom Wood Shop, Inc., High Mountain Door & Trim Inc., Sierra Homes, LLC, SILAC Insurance Company and Leonite Capital, LLC (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on October 13, 2021)
10.17	Secured Convertible Promissory Note issued by 1847 Holdings LLC to SILAC Insurance Company on October 8, 2021 (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on October 13, 2021)
10.18	Secured Convertible Promissory Note issued by 1847 Holdings LLC to SILAC Insurance Company on October 8, 2021 (incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on October 13, 2021)

II-5

Exhibit No.	Description
10.19	Secured Convertible Promissory Note issued by 1847 Holdings LLC to Leonite Capital LLC on October 8, 2021 (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on October 13, 2021)
10.20	Guaranty Agreement, dated October 8, 2021, among 1847 Asien Inc., 1847 Wolo Inc., 1847 Cabinet Inc., Asien’s Appliance, Inc., Wolo Mfg. Corp., Wolo Industrial Horn & Signal, Inc., Kyle’s Custom Wood Shop, Inc., High Mountain Door & Trim Inc., Sierra Homes, LLC and Leonite Capital LLC (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on October 13, 2021)
10.21	Security Agreement, dated October 8, 2021, among 1847 Holdings LLC, 1847 Asien Inc., 1847 Wolo Inc., 1847 Cabinet Inc., Asien’s Appliance, Inc., Wolo Mfg. Corp., Wolo Industrial Horn & Signal, Inc., Kyle’s Custom Wood Shop, Inc., High Mountain Door & Trim Inc., Sierra Homes, LLC and Leonite Capital, LLC (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on October 13, 2021)
10.22	Intellectual Property Security Agreement, dated October 8, 2021, among Wolo Mfg. Corp., Wolo Industrial Horn & Signal, Inc. and Leonite Capital, LLC (incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K filed on October 13, 2021)
10.23	Securities Purchase Agreement, dated July 8, 2022, between 1847 Holdings LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 12, 2022)
10.24	Promissory Note issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on July 8, 2022 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 12, 2022)
10.25	Conversion Agreement, dated July 26, 2022, between 1847 Holdings LLC and Bevilacqua PLLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on July 27, 2022)
10.26	Residential Lease Agreement, dated August 5, 2020, between Redwood Gospel Missions and Asien’s Appliance, Inc. (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.27	Industrial Lease, dated September 1, 2020, between Kyle’s Custom Wood Shop, Inc. and Stephen Mallatt, Jr. and Rita Mallatt (incorporated by reference to Exhibit 10.47 to the Annual Report on Form 10-K filed on April 15, 2021)
10.28	Standard Lease Agreement, dated June 9, 2021, between Emerald Town, LLC and Kyle’s Custom Wood Shop, Inc. (incorporated by reference to Exhibit 10.22 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.29	Lease, dated December 1, 2017, between Sage Partnership and High Mountain Door & Trim Inc. (incorporated by reference to Exhibit 10.23 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.30	Lease, dated October 29, 2021, between WL-MCK SRI Owner LLC and High Mountain Door & Trim Inc. (incorporated by reference to Exhibit 10.24 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.31	Lease, dated January 20, 2020, between Simon Levi Company, Ltd. and Sierra Homes, LLC (incorporated by reference to Exhibit 10.25 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.32	Lease, dated December 7, 2020, between SW Commerce Reno, LLC and Sierra Homes, LLC (incorporated by reference to Exhibit 10.26 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.33	Agreement of Lease, dated October 4, 1978, between PKI Reality LLC and Wolo Mfg. Corp., as amended (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.34†	Separation Agreement and Release, dated September 5, 2021, between Jay Amond and 1847 Holdings LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 10, 2021)
10.35†	Employment Offer Letter, dated September 7, 2021, between Vernice L. Howard and 1847 Holdings LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on September 10, 2021)
10.36†	Letter Agreement Regarding the Assignment, Assumption and Amendment of Employment Agreement, dated March 23, 2022, among 1847 Holdings LLC, 1847 HQ Inc. and Vernice L. Howard (incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K filed on March 31, 2022)

II-6

Exhibit No.	Description
10.37†	Employment Offer Letter, dated January 10, 2022, between 1847 Holdings LLC and Eric VanDam (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 14, 2022)
10.38†	Letter Agreement Regarding the Assignment, Assumption and Amendment of Employment Agreement, dated March 30, 2022, among 1847 Holdings LLC, 1847 HQ Inc. and Eric VanDam (incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K filed on March 31, 2022)
10.39	Form of Independent Director Agreement between 1847 Holdings LLC and each independent director (incorporated by reference to Exhibit 10.31 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
10.40	Form of Indemnification Agreement between 1847 Holdings LLC and each independent director (incorporated by reference to Exhibit 10.32 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
21.1	List of Subsidiaries (incorporated by reference to Exhibit 21.1 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
23.1*	Consent of Sadler, Gibb & Associates, LLC for 1847 Holdings LLC
23.2*	Consent of Sadler, Gibb & Associates, LLC for Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc.
23.3*	Consent of Sadler, Gibb & Associates, LLC for High Mountain Door & Trim Inc. and Sierra Homes, LLC
23.4*	Consent of Bevilacqua PLLC (included in Exhibit 5.1)
24.1	Power of Attorney (included on the signature page of this registration statement)
99.1	Consent of Clark R. Crosnoe (Director Nominee) (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-1 filed on August 23, 2021)
99.2	Consent of Glyn C. Milburn (Director Nominee) (incorporated by reference to Exhibit 99.2 to Registration Statement on Form S-1 filed on August 23, 2021)
99.3	Consent of Tracy S. Harris (Director Nominee) (incorporated by reference to Exhibit 99.3 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
99.4	Consent of Lawrence X. Taylor (Director Nominee) (incorporated by reference to Exhibit 99.4 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 31, 2022)
101.INS	XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
107*	Exhibit Filing Fees

____________

*        Filed herewith

†        Executive compensation plan or arrangement

(b) Financial Statement Schedules.

All financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or in the notes thereto.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-7

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1)    For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2)    For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-8

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on July 27, 2022.

1847 HOLDINGS LLC
By:	/s/ Ellery W. Roberts
	Ellery W. Roberts
	Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Ellery W. Roberts	Chairman and Chief Executive Officer	July 27, 2022
Ellery W. Roberts	(principal executive officer)
/s/ Vernice L. Howard	Chief Financial Officer	July 27, 2022
Vernice L. Howard	(principal financial and accounting officer)
*	Director	July 27, 2022
Robert D. Barry
*	Director	July 27, 2022
Paul A. Froning

*	By:	/s/ Ellery W. Roberts
		Ellery W. Roberts
		Attorney-In-Fact

II-9

EX-5.1

Exhibit 5.1

 

E: lou@bevilacquapllc.com

T: 202.869.0888

W: bevilacquapllc.com

July 27, 2022

1847 Holdings LLC

590 Madison Avenue, 21st Floor

New York, NY 10022

Re: Securities Being Registered Under Registration Statement on Form S-1 (File No. 333-259011)

Ladies and Gentlemen:

We have represented 1847 Holdings LLC, a Delaware limited liability company (the “Company”), in connection with the Registration Statement on Form S-1, as amended (File No. 333-259011) (the “Registration Statement”), of the Company, filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Act”), and the rules and regulations thereunder. You have asked us to furnish our opinion as to the legality of the securities being registered under the Registration Statement. The Registration Statement covers (i) the offering of up to $8,625,000 of common shares of the Company (the “Shares”) that may be offered for sale by the Company (including $1,125,000 of Shares that may be issued upon exercise of the underwriters’ over-allotment option), (ii) the representative’s warrants that will be issued by the Company to the representative of the underwriters of the offering (the “Representative’s Warrants”) and (iii) common shares that may be issued upon exercise of the Representative’s Warrants (the “Representative’s Warrant Shares”).

In connection with the furnishing of this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents:

(a) the Registration Statement;

(b) the form of the Underwriting Agreement (the “Underwriting Agreement”) included as Exhibit 1.1 to the Registration Statement;

(c) the form of Representative’s Warrant included as Exhibit 4.1 to the Registration Statement;

(d) the Certificate of Formation of the Company included as Exhibit 3.1 to the Registration Statement;

(e) the Second Amended and Restated Operating Agreement of the Company included as Exhibit 3.2 to the Registration Statement; and

(f) Amendment No. 1 to the Second Amended and Restated Operating Agreement of the Company included as Exhibit 3.3 to the Registration Statement.

We also have examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates, and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein.

In rendering the opinion expressed herein, we have, without independent inquiry or investigation, assumed (i) the legal capacity of all natural persons executing documents, (ii) the genuineness of all signatures, (iii) the authenticity, accuracy and completeness of all documents submitted to us as originals and the conformity to authentic original documents submitted to us as certified, conformed or reproduced copies. We have relied upon the accuracy and completeness of the information, factual matters, representations, and warranties contained in such documents. We have also assumed that the persons identified as officers of the Company are actually serving in such capacity and that the Registration Statement will be declared effective. In our examination of documents, we have assumed that the parties thereto (other than the Company) had the power, corporate or other, to enter into and perform all obligations thereunder and the due authorization of all parties other than the Company by all requisite action, corporate or other, the execution and delivery by all parties other than the Company of the documents, and the validity and binding effect thereof on such parties other than the Company.

 

1050 Connecticut Ave., NW, Suite 500

Washington, DC 20036

PG. 2   July 27, 2022  

Based upon our examination mentioned above, subject to the assumptions stated and relying on statements of fact contained in the documents that we have examined, we are of the opinion that:

1. the Shares have been duly authorized by all necessary corporate action of the Company and, when issued, delivered and paid for as contemplated in the Registration Statement and in accordance with the terms of the Underwriting Agreement, the Shares will be validly issued, fully paid and non-assessable;

2. when the Representative’s Warrants are duly executed in accordance with their terms and issued and delivered, as contemplated by the Registration Statement and the Underwriting Agreement, such Representative’s Warrants will constitute the valid and legally binding obligations of the Company, enforceable in accordance with their terms, except: (a) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law); (b) as enforceability of any indemnification or contribution provision may be limited under the Federal and state securities laws, and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; and

3. the Representative’s Warrant Shares, when issued and delivered by the Company upon exercise of the Representative’s Warrants against payment therefor as set forth in the Registration Statement, the Underwriting Agreement and the Representative’s Warrants, will be duly authorized and validly issued, fully paid and non-assessable.

Notwithstanding anything in this letter which might be construed to the contrary, our opinion expressed herein is limited to the laws of the State of New York and the Delaware Limited Liability Company Act. We express no opinion with respect to the applicability to, or the effect on, the subject transaction of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies. The opinion expressed herein is based upon the law of the State of New York and the Delaware Limited Liability Company Act in effect on the date hereof and as of the effective date of the Registration Statement, and we assume no obligation to revise or supplement this opinion after the effective date of the Registration Statement should such law be changed by legislative action, judicial decision, or otherwise. Except as expressly set forth in our opinion above: (i) we express no opinion as to whether the laws of any other jurisdiction are applicable to the subject matter hereof and (ii) we express no opinion as to compliance with any other Federal or state law, rule or regulation relating to securities, or to the sale or issuance thereof.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm appearing under the caption “Legal Matters” in the prospectus that forms a part of the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations promulgated thereunder.

Very truly yours,

/s/ BEVILACQUA PLLC

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

1847 Holdings LLC

As independent registered public accountants, we hereby consent to the use of our report dated March 31, 2022, with respect to the consolidated financial statements of 1847 Holdings LLC as of and for the years ended December 31, 2021 and 2020 in this Registration Statement on Form S-1 Amendment No. 9. We also consent to the reference of our firm under the caption “Experts” in this registration statement.

/s/ Sadler, Gibb & Associates, LLC

Draper, UT

July 27, 2022

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

1847 Holdings LLC

As independent registered public accountants, we hereby consent to the use of our report dated July 29, 2021, with respect to the combined financial statements of Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. for the years ended December 31, 2020 and 2019, in 1847 Holdings LLC’s Form S-1 Amendment No. 9. We also consent to the reference of our firm under the caption “experts” in the registration statement.

/s/ Sadler, Gibb & Associates, LLC

Draper, UT

July 27, 2022

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

1847 Holdings LLC

As independent registered public accountants, we hereby consent to the use of our report dated January 27, 2022, with respect to the combined financial statements of High Mountain Door & Trim, Inc. and Sierra Homes LLC in its Form S-1 Amendment No. 9. We also consent to the reference of our firm under the caption “experts” in the registration statement.

/s/ Sadler, Gibb & Associates, LLC

Draper, UT

July 27, 2022

EX-FILING FEES

Exhibit 107

Calculation of Filing Fee Tables

Form S-1

(Form Type)

 1847 HOLDINGS LLC

(Exact Name of Registrant as Specified in its Charter)

Table 1: Newly Registered and Carry Forward Securities

	Security Type	Security Class Title	Fee Calculation or Carry Forward Rule	Maximum Aggregate Offering Price(1)		Fee Rate		Amount of Registration Fee
Fees Previously Paid	Equity	Common Shares(2)	Rule 457(o)	$	8,625,000.00		0.0001091	$	940.99
Fees Previously Paid	Equity	Representative’s Warrants(3)(4)	Rule 457(g)		-				-
Fees Previously Paid	Equity	Common Shares underlying Representative’s Warrants(3)	Rule 457(o)	$	539,062.50		0.0001091	$	58.81
	Total Offering Amounts			$	9,164,062.50			$	999.80
	Total Fees Previously Paid							$	999.80
	Total Fee Offsets							$	0.00
	Net Fee Due							$	0.00

(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2) Includes common shares that may be purchased by the underwriters pursuant to their over-allotment option.

(3) We have agreed to issue to the representative of the underwriters or its designees warrants to purchase the number of common shares equal to five percent (5%) of the number of common shares to be issued and sold in this offering. The warrants are exercisable for a price per share equal to 125% of the public offering price.

(4) No fee required pursuant to Rule 457(g).

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2022
Document Information Line Items
Entity Registrant Name	1847 HOLDINGS LLC
Document Type	S-1/A
Amendment Flag	true
Amendment Description	Amendment No. 9
Entity Central Index Key	0001599407
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Incorporation, State or Country Code	DE

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash and cash equivalents	$ 1,638,924	$ 1,383,533
Investments	276,691	276,429
Receivables, net	3,918,814	3,378,996
Contract assets	69,735	88,466
Inventories, net	5,805,494	5,427,302
Prepaid expenses and other current assets	270,537	582,048
Total Current Assets	11,980,195	11,136,774
Property and equipment, net	1,920,967	1,695,311
Operating lease right-of-use assets	3,094,573	3,192,604
Goodwill	19,452,270	19,452,270
Intangible assets, net	11,079,205	11,443,897
Other long-term assets	85,691	85,691
TOTAL ASSETS	47,612,901	47,006,547
Accounts payable and accrued expenses	5,911,576	4,818,672
Contract liabilities	1,696,449	2,547,903
Customer deposits	3,677,543	3,465,259
Due to related parties	193,762	193,762
Current portion of operating lease liabilities	595,039	613,696
Current portion of finance lease liabilities	143,865	100,652
Current portion of notes payable, net	686,285	692,522
Total Current Liabilities	12,904,519	12,432,466
Operating lease liabilities, net of current portion	2,542,790	2,607,862
Finance lease liabilities, net of current portion	698,409	455,905
Notes payable, net of current portion	222,399	251,401
Convertible notes payable, net of current portion	26,880,029	26,630,655
Contingent note payable, net of current portion	1,001,183	1,001,183
Deferred tax liability, net	1,981,000	2,070,000
TOTAL LIABILITIES	46,230,329	45,449,472
Mezzanine Equity
Series A senior convertible preferred shares, 4,450,460 shares designated; 1,684,849 and 1,818,182 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	1,415,100	1,655,404
Series B senior convertible preferred shares, 583,334 shares designated; 426,999 and zero shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	1,113,650
TOTAL MEZZANINE EQUITY	2,528,750	1,655,404
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021	1,000	1,000
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,995,232 and 4,842,851 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	4,995	4,843
Distribution receivable	(2,000,000)	(2,000,000)
Additional paid-in capital	21,983,594	21,719,410
Accumulated deficit	(22,012,401)	(20,754,394)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT	(2,022,812)	(1,029,141)
NON-CONTROLLING INTERESTS	876,634	930,812
TOTAL SHAREHOLDERS’ DEFICIT	(1,146,178)	(98,329)	$ 274,723
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT	$ 47,612,901	47,006,547
Previously Reported [Member]
Cash and cash equivalents		1,383,533	976,538
Restricted cash			403,811
Investments		276,429
Discontinued operations – current assets			1,324,608
Receivables, net		3,378,996	525,625
Contract assets		88,466	70,230
Inventories, net		5,427,302	2,022,754
Prepaid expenses and other current assets		582,048	550,964
Total Current Assets		11,136,774	5,874,530
Investments long-term			276,270
Discontinued operations – long-term assets			2,457,770
Property and equipment, net		1,695,311	398,503
Operating lease right-of-use assets		3,192,604	357,208
Goodwill		19,452,270	5,989,817
Intangible assets, net		11,443,897	3,885,467
Other long-term assets		85,691	375
TOTAL ASSETS		47,006,547	19,239,940
Accounts payable and accrued expenses		4,818,672	2,558,559
Advances, related party		193,762	190,192
Contract liabilities		2,547,903	77,403
Lines of credit			301,081
Customer deposits		3,465,259	3,370,957
Due to seller			33,630
Note payable – related party			56,900
Current portion of operating lease liabilities		613,696	66,803
Discontinued operations – current liabilities			999,122
Current portion of notes payable, net		793,174	429,183
Total Current Liabilities		12,432,466	8,083,830
Vesting note payable – related party		1,001,183	498,979
Discontinued operations – long-term liabilities			5,981,467
Operating lease liabilities, net of current portion		2,607,862	291,183
Notes payable, net of current portion		707,306	1,138,331
Convertible notes payable, net of current portion		26,630,655
Deferred tax liability, net		2,070,000
TOTAL LIABILITIES		45,449,472	15,993,790
Mezzanine Equity
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021		1,000	1,000
Series A convertible preferred shares, 1,818,182 and 2,632,278 outstanding as of December 31, 2021 and 2020, respectively		1,655,404	2,971,427
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,995,232 and 4,842,851 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		4,843	4,444
Distribution receivable		(2,000,000)	(2,000,000)
Additional paid-in capital		21,719,410	17,005,491
Accumulated deficit		(19,914,957)	(13,856,973)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT		1,465,700	4,125,389
NON-CONTROLLING INTERESTS		91,375	(879,239)
TOTAL SHAREHOLDERS’ DEFICIT		1,557,075	3,246,150
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT		$ 47,006,547	$ 19,239,940

XML

Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Allocation shares, shares authorized	1,000	1,000
Allocation shares, shares issued	1,000	1,000
Allocation shares, shares outstanding	1,000	1,000
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000	500,000,000
Common stock, shares issued	4,995,232	4,842,851
Common stock, shares outstanding	4,995,232	4,842,851
Previously Reported [Member]
Allocation shares, shares issued		1,000	1,000
Allocation shares, shares outstanding		1,000	1,000
Common stock, shares authorized		500,000,000	500,000,000
Common stock, shares issued		4,842,851	4,444,013
Common stock, shares outstanding		4,842,851	4,444,013
Series A Convertible Preferred Shares
Convertible preferred shares, designated	4,450,460	4,450,460
Convertible preferred shares issued	1,684,849	1,818,182
Convertible preferred shares outstanding	1,684,849	1,818,182
Series A Convertible Preferred Shares | Previously Reported [Member]
Convertible preferred shares outstanding		1,818,182	2,632,278
Series B Senior Convertible Preferred Shares
Convertible preferred shares, designated	583,334	583,334
Convertible preferred shares issued	426,999	0
Convertible preferred shares outstanding	426,999	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Income Statement [Abstract]
Revenues	$ 12,073,878	$ 4,780,275	$ 30,660,984	$ 8,745,446
Operating Expenses
Cost of sales	7,749,130	3,260,682	20,311,724	6,531,435
Personnel	1,577,700	484,672	3,247,441	734,867
Depreciation and amortization	511,371	122,106	908,982	176,612
General and administrative	2,166,207	1,324,196	7,296,736	2,652,429
Total Operating Expenses	12,004,408	5,191,656	31,764,883	10,095,343
INCOME (LOSS) FROM OPERATIONS	69,470	(411,381)	(1,103,899)	(1,349,897)
Other Income (Expenses)
Other income	318
Interest expense	(906,743)	(45,121)	(1,296,537)	(249,626)
Gain on forgiveness of debt		360,302	360,302
Loss on write-down of vesting note payable – related party			(602,204)
Loss on extinguishment of debt			(137,692)	(286,350)
Loss on redemption of preferred shares			(4,017,553)
Gain on disposition of subsidiary			3,282,804
Gain on disposal of property and equipment	32,747		10,885
Other income and (expense)			876	(18,196)
Loss on adjustment shares		(757,792)
Total Other Income (Expenses)	(873,678)	(442,611)	(2,399,119)	(554,172)
NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(804,208)	(853,992)	(3,503,018)	(1,904,069)
INCOME TAX BENEFIT (EXPENSE)			(218,139)	83,931
NET LOSS AFTER TAXES			(3,721,157)	(1,820,138)
INCOME TAX EXPENSE ON CONTINUING OPERATIONS	(123,000)
NET LOSS FROM CONTINUING OPERATIONS	(927,208)	(853,992)	(3,721,157)	(1,820,138)
NET LOSS FROM DISCONTINUED OPERATIONS
Income (loss) from discontinued operations before income taxes			240,405	(12,875,463)
Less provision for income taxes for discontinued operations
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS		178,510	240,405	(12,875,463)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		80,329	108,182	(5,036,832)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS		98,181	132,223	(7,838,631)
NET LOSS	(927,208)	(755,811)	(3,588,934)	(9,658,769)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	(54,178)	(25,370)	(284,372)	(50,120)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS			(3,304,562)	(9,608,649)
PREFERRED SHARE ACCRUED DIVIDEND			(984,176)
1847 GOEDEKER SPIN-OFF DIVIDEND				(283,257)
DISTRIBUTION – ALLOCATION SHARES				(5,985,000)
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS	(873,030)	(730,441)
PREFERRED SHARE DIVIDENDS	(135,215)	(188,709)
DEEMED DIVIDEND RELATED TO ISSUANCE OF PREFERRED SHARES		(1,527,086)	(1,527,086)	(3,051,478)
NET INCOME (LOSS) ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS	$ (1,008,245)	$ (2,446,236)	$ (5,815,824)	$ (18,928,384)
NET LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS – BASIC AND DILUTED (in Dollars per share)	$ (0.21)	$ (0.19)	$ (0.78)	$ (0.49)
EARNINGS PER COMMON SHARE FROM DISCONTINUED OPERATIONS – BASIC AND DILUTED (in Dollars per share)		0.02	0.03	(2.12)
NET LOSS PER COMMON SHARE – BASIC AND DILUTED (in Dollars per share)	$ (0.21)	$ (0.55)	(0.7)	(2.6)
Net loss per common share from continuing operations: diluted (in Dollars per share)			(0.78)	(0.49)
Net income (loss) per common share from discontinued operations: diluted (in Dollars per share)			0.01	(2.12)
Net loss per common share: diluted (in Dollars per share)			$ (0.7)	$ (2.6)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED (in Shares)	4,915,655	4,466,171	4,749,971	3,692,429
Weighted-average common shares outstanding: diluted (in Shares)			11,175,892	3,692,429
REVENUES
Furniture and appliances			$ 12,741,064	$ 7,625,222
Construction			12,203,890	1,120,224
Automotive supplies			$ 5,716,030

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Condensed Consolidated Statements of Mezzanine Equity and Shareholders’ Deficit (Unaudited) - USD ($)	Series A Senior Convertible Preferred Shares	Series B Senior Convertible Preferred Shares	Preferred Shares	Allocation Shares	Common Shares	Distribution Receivable	Additional Paid-In Capital	Accumulated Deficit	Non-Controlling Interest	Goedeker Subscription Receivable	Total
Balance at Dec. 31, 2019				$ 1,000	$ 3,165		$ 442,014	$ (4,402,043)	$ (42,930)		$ (3,998,794)
Balance (in Shares) at Dec. 31, 2019					3,165,625
Common shares issued in connection with acquisition					$ 415		1,037,085				1,037,500
Common shares issued in connection with acquisition (in Shares)					415,000
Common shares issued for service					$ 100		244,900				245,000
Common shares issued for service (in Shares)					100,000
Common shares issued upon partial conversion of convertible note payable					$ 150		374,850				375,000
Common shares issued upon partial conversion of convertible note payable (in Shares)					150,000
Warrants issued in connection with convertible note payable							448,211		118,500		566,711
Fair value of stock options							191,386				191,386
Common shares issued in connection with Kyle’s acquisition					$ 700		3,674,300				3,675,000
Common shares issued in connection with Kyle’s acquisition (in Shares)					700,000
Issuance of warrants for services							87,550				87,550
Common shares issued upon warrant exercise					$ 230		62,270				62,500
Common shares issued upon warrant exercise (in Shares)					230,000
Common shares issued upon option exercise					$ 78		149,922				150,000
Common shares issued upon option exercise (in Shares)					77,500
Purchase of common shares from seller shares, cancellation of common shares held in treasury and common share dividend to non-controlling interest					$ (394)		(693,314)	(57,442)			(751,150)
Purchase of common shares from seller shares, cancellation of common shares held in treasury and common share dividend to non-controlling interest (in Shares)					(394,112)
Issuance of preferred shares, net of fees			$ 2,794,477				5,001,317	(2,874,478)			4,921,316
Issuance of preferred shares, net of fees (in Shares)			2,633,278
Dividend on disposition of Goedeker							5,985,000	3,262,592	(359,078)	(2,000,000)	6,888,514
Accrued preferred shares dividends payable			176,950					(176,950)
Net loss								(9,608,652)	(595,731)		(10,204,383)
Balance at Dec. 31, 2020			$ 2,971,427	1,000	$ 4,444		17,005,491	(13,856,973)	(879,239)	(2,000,000)	3,246,150
Balance (in Shares) at Dec. 31, 2020			2,633,278		4,444,013
Balance at Dec. 31, 2020	$ 2,971,427			1,000	$ 4,444	$ (2,000,000)	17,005,491	(13,856,973)	(879,239)		274,723
Balance (in Shares) at Dec. 31, 2020	2,633,278				4,444,013
Issuance of series A senior convertible preferred shares and warrants	$ 1,527,086						3,000,000	(1,527,086)			1,472,914
Issuance of series A senior convertible preferred shares and warrants (in Shares)	1,818,182
Issuance of common adjustment shares					$ 399		757,393				757,792
Issuance of common adjustment shares (in Shares)					398,838
Dividends – series A senior convertible preferred shares	11,759							(188,709)			(188,709)
Net loss								(730,441)	54,959		(675,482)
Balance at Mar. 31, 2021	$ 4,510,272			1,000	$ 4,843	(2,000,000)	20,762,884	(16,303,209)	(824,280)		1,641,238
Balance (in Shares) at Mar. 31, 2021	4,451,460				4,842,851
Balance at Dec. 31, 2020	$ 2,971,427			1,000	$ 4,444	(2,000,000)	17,005,491	(13,856,973)	(879,239)		274,723
Balance (in Shares) at Dec. 31, 2020	2,633,278				4,444,013
Balance at Dec. 31, 2020			$ 2,971,427	1,000	$ 4,444		17,005,491	(13,856,973)	(879,239)	(2,000,000)	3,246,150
Balance (in Shares) at Dec. 31, 2020			2,633,278		4,444,013
Issuance of common adjustment shares					$ 399		757,393				757,792
Issuance of common adjustment shares (in Shares)					398,838
Issuance of preferred shares, net of fees			$ 1,527,086				3,000,000	(1,527,086)			3,000,000
Issuance of preferred shares, net of fees (in Shares)			1,818,182
Debt discount on $0.01 Warrant Feature							402,781				402,781
Debt discount on $2.50 Warrant Feature							553,745				553,745
Debt discounts on convertible promissory notes									1,146,804		1,146,804
Accrued common share dividend								(242,160)			(242,160)
Redemption of preferred shares			$ (2,794,479)								(2,794,479)
Redemption of preferred shares (in Shares)			(2,633,278)
Accrued preferred shares dividends payable			$ (48,630)					(984,176)			(1,032,806)
Net loss								(3,304,562)	(176,190)		(3,480,752)
Balance at Dec. 31, 2021			$ 1,655,404	1,000	$ 4,843		21,719,410	(19,914,957)	91,375	$ (2,000,000)	1,557,075
Balance (in Shares) at Dec. 31, 2021			1,818,182		4,842,851
Balance at Dec. 31, 2021	$ 1,655,404			1,000	$ 4,843	(2,000,000)	21,719,410	(20,754,394)	930,812		(98,329)
Balance (in Shares) at Dec. 31, 2021	1,818,182				4,842,851
Issuance of common shares upon conversion of series A preferred shares	$ (111,986)				$ 152		111,834				111,986
Issuance of common shares upon conversion of series A preferred shares (in Shares)	(133,333)				152,381
Issuance of series B convertible preferred shares and warrants		$ 1,113,650					152,350				152,350
Issuance of series B convertible preferred shares and warrants (in Shares)		426,999
Dividends – common shares								(249,762)			(249,762)
Dividends – series A senior convertible preferred shares	(128,318)							(121,455)			(121,455)
Dividends – series B senior convertible preferred shares								(13,760)			(13,760)
Net loss								(873,030)	(54,178)		(927,208)
Balance at Mar. 31, 2022	$ 1,415,100	$ 1,113,650		$ 1,000	$ 4,995	$ (2,000,000)	$ 21,983,594	$ (22,012,401)	$ 876,634		$ (1,146,178)
Balance (in Shares) at Mar. 31, 2022	1,684,849	426,999			4,995,232

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Condensed Consolidated Statements of Mezzanine Equity and Shareholders’ Deficit (Unaudited) (Parentheticals)	12 Months Ended
	Dec. 31, 2021 $ / shares
Statement of Stockholders' Equity [Abstract]
Debt discount on warrant feature	$ 0.01
Debt discount on Warrant Feature	$ 2.5

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (927,208)	$ (755,811)	$ (3,588,934)	$ (9,658,769)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Income from discontinued operations		(98,181)	(132,223)	7,838,631
Gain on forgiveness of debt		(360,302)	(360,302)
Gain on disposal of property and equipment	(32,747)		(10,885)
Loss on redemption of series A senior convertible preferred shares		757,792
Deferred tax asset (liability)	(89,000)
Depreciation and amortization	511,371	122,106	908,982	176,612
Amortization of debt discounts	249,374
Amortization of right-of-use assets	98,031	16,928
Changes in operating assets and liabilities:
Receivables	(539,818)	(124,065)
Contract assets	18,731
Inventories	(378,192)	(115,545)
Prepaid expenses and other current assets	311,511	(62,071)
Accounts payable and accrued expenses	964,586	65,969	719,890	962,464
Contract liabilities	(851,454)	(122,247)	(950,640)	85,761
Customer deposits	212,284	328,580	94,302	965,254
Due to related parties		1,785	3,570	7,140
Operating lease liabilities	(83,729)	(15,657)
Net cash used in operating activities from continuing operations	(536,260)	(360,719)	(897,566)	137,500
Net cash used in operating activities from discontinued operations		(123,086)	(170,580)	3,788,983
Net cash used in operating activities	(536,260)	(483,805)	(1,068,146)	3,926,483
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash acquired in acquisitions		1,094,524	(15,857,295)	1,409,936
Purchases of property and equipment	(66,291)	(148,820)	(177,475)	(72,794)
Proceeds from disposal of property and equipment	35,498
Investments in certificates of deposit	(262)			(276,270)
Net cash (used in) provided by investing activities from continuing operations	(31,055)	945,704	(15,684,770)	1,060,872
Net cash provided by investing activities from discontinued operations		534,343	644,303	72,001
Net cash (used in) provided by investing activities	(31,055)	1,480,047	(15,040,467)	1,132,873
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable, net of fees and debt discounts			23,744,975
Proceeds from notes payable		123,405	3,550,000	21,968
Payment of vesting notes payable – related party			(100,000)
Net proceeds from issuance of series A senior convertible preferred shares		3,000,000
Net proceeds from issuance of series B senior convertible preferred shares	1,266,000
Proceeds from line of credit		569,395	(301,081)	301,081
Repayment of grid note – related party			(56,900)	(62,500)
Repayments of notes payable and finance lease liabilities	(58,317)	(143,432)
Repayments to sellers		(3,033,630)	(977,686)	(4,356,162)
Cash paid for financing costs		(165,229)	(165,230)
Dividends on series A senior convertible preferred shares	(121,455)	(176,950)
Dividends on series B senior convertible preferred shares	(13,760)
Dividends on common shares	(249,762)
Net cash provided by financing activities from continuing operations	822,706	173,559	16,585,520	181,977
Net cash used in financing activities from discontinued operations		(119,197)	(208,693)	4,449,634
Net cash provided by financing activities	822,706	54,362	16,376,827	4,631,611
Payments on notes payable			(5,021,511)	(856,225)
Proceeds from issuance of preferred shares, net of costs			3,000,000	4,921,315
Proceeds from exercise of stock options and warrants				212,500
Redemption of preferred shares			(6,054,241)
Dividends paid on preferred shares			(1,032,806)
NET CHANGE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS	255,391	758,544	3,184	1,380,349
NET CHANGE IN CASH AND CASH EQUIVALENT FROM DISCONTINUED OPERATIONS		292,060	265,030	8,310,618
CASH AND CASH EQUIVALENTS AVAILABLE FROM DISCONTINUED OPERATIONS		(292,060)	265,030	(8,310,618)
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS
Beginning of the period	1,383,533	1,380,349	1,380,349
End of the period	1,638,924	2,138,893	1,383,533	1,380,349
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	484,360
Cash paid for income taxes
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common shares upon conversion of series A preferred shares	111,986
Financed purchases of property and equipment	$ 316,798
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on disposition of subsidiary			(3,282,804)
Stock compensation				523,936
Loss on extinguishment of debt				286,350
Amortization of right of use asset			181,032	15,931
Change in debt discounts			382,565
Loss on redemption of preferred shares			4,017,553
Loss on write-down of contingent notes payable			602,204
Changes in operating assets and liabilities:
Accounts receivable			48,930	95,216
Inventory			389,110	(565,264)
Prepaid expenses and other assets			182,366	(495,831)
Impact on lease liability			(177,282)	(15,931)
Deferred taxes			75,000	(84,000)
INVESTING ACTIVITIES
Proceeds from sale of property and equipment			25,000
Proceeds from disposition of subsidiary			$ 325,000

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Basis of Presentation

3 Months Ended

Mar. 31, 2022

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of 1847 Holdings LLC (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Reclassifications

Certain reclassifications within property and equipment, notes payable, and preferred shares 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.

Sequencing

Under ASC 815-40-35 (“ASC 815”), the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest maturity date of potentially dilutive instruments first, with the earliest maturity date of grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities to the Company’s employees and directors, or to compensate grantees in a share-based payment arrangement, are not subject to the sequencing policy.

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Recent Accounting Pronoucements

3 Months Ended

Mar. 31, 2022

Accounting Standards Update and Change in Accounting Principle [Abstract]

RECENT ACCOUNTING PRONOUCEMENTS

NOTE 2 — RECENT ACCOUNTING PRONOUCEMENTS

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06 Accounting for Convertible Instruments and Contracts In An Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. Entities may adopt the ASU 2020-06 using either a full or modified retrospective approach, and it is effective for interim and annual reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2020. The Company adopted this guidance on January 1, 2022.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company adopted this guidance on January 1, 2022. The adoption of this standard does not have a material impact on our condensed consolidated financial statements.

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Liquidity and Going Concern Assessment

3 Months Ended

Mar. 31, 2022

Liquidity and Going Concern Assessment [Abstract]

LIQUIDITY AND GOING CONCERN ASSESSMENT

NOTE 3 — LIQUIDITY AND GOING CONCERN ASSESSMENT

Management assesses liquidity and going concern uncertainty in the Company’s condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

As of March 31, 2022, we had cash and cash equivalents of $1,638,924. For the three months ended March 31, 2022, the Company incurred operating income of $69,470 (before deducting losses attributable to non-controlling interests), cash flows used in operations of $536,260, and negative working capital of $924,324. 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.

Management has prepared estimates of operations for fiscal year 2022 and 2023 believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of these condensed consolidated financial statements, which indicate improved operations and the Company’s ability to continue operations as a going concern. The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of these condensed consolidated financial statements. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

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Disaggregation of Revenues and Segment Reporting

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

DISAGGREGATION OF REVENUES AND SEGMENT REPORTING

NOTE 4 — DISAGGREGATION OF REVENUES AND SEGMENT REPORTING

The Company has three reportable segments:

The Retail and Appliances Segment 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 provides finished carpentry products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace mantles, windows, and custom design and build of cabinetry and countertops).

The Automotive Supplies Segment provides 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.

The Company’s revenues for the three months ended March 31, 2022 and 2021 are disaggregated as follows:

	Three Months Ended March 31, 2022
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,204,625	$	—	$	—	$	2,204,625
Appliance accessories, parts, and other		316,159		—		—		316,159
Automotive horns		—		—		1,199,856		1,199,856
Automotive lighting		—		—		442,135		442,135
Custom cabinets and countertops		—		4,167,801		—		4,167,801
Finished carpentry		—		3,743,302		—		3,743,302
Total Revenues	$	2,520,784	$	7,911,103	$	1,641,991	$	12,073,878

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,899,361	$	—	$	—	$	2,899,361
Appliance accessories, parts, and other		365,005		—		—		365,005
Automotive horns		—		—		—		—
Automotive lighting		—		—		—		—
Custom cabinets and countertops		—		1,515,909		—		1,515,909
Finished carpentry		—		—		—		—
Total Revenues	$	3,264,366	$	1,515,909	$	—	$	4,780,275

Segment information for the three months ended March 31, 2022 and 2021 is as follows:

	Three Months Ended March 31, 2022
	Retail and Appliances			Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	2,520,784		$	7,911,103	$	1,641,991		$	—		$	12,073,878
Operating expenses										—
Cost of sales		1,871,450			4,879,591		998,089			—			7,749,130
Personnel		230,388			1,134,210		300,328			(87,226	)		1,577,700
Depreciation and amortization		79,797			379,704		51,870			—			511,371
General and administrative		449,494			1,116,558		386,781			213,374			2,166,207
Total Operating Expenses		2,631,129			7,510,063		1,737,068			126,148			12,004,408
Income (Loss) from Operations	$	(110,345	)	$	401,040	$	(95,077	)	$	(126,148	)	$	69,470

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	3,264,366	$	1,515,909	$	—		$	—		$	4,780,275
Operating expenses						—			—
Cost of sales		2,506,652		754,030		—			—			3,260,682
Personnel		253,083		231,589		—			—			484,672
Depreciation and amortization		44,675		77,431		—			—			122,106
General and administrative		434,587		215,311		598,295			76,003			1,324,196
Total Operating Expenses		3,238,997		1,278,361		598,295			76,003			5,191,656
Income (Loss) from Operations	$	25,369	$	237,548	$	(598,295	)	$	(76,003	)	$	(411,381	)

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Property and Equipment

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Equipment and machinery	$	1,127,897		$	808,592
Office furniture and equipment		107,903			105,203
Transportation equipment		901,426			864,121
Leasehold improvements		123,651			112,356
Total property and equipment		2,260,877			1,890,272
Less: Accumulated depreciation		(339,910	)		(194,961	)
Property and equipment, net	$	1,920,967		$	1,695,311

Depreciation expense for the three months ended March 31, 2022 and 2021 was $146,679 and $24,309, respectively.

NOTE 8 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2021 and 2020:

Classification	December 31, 2021			December 31, 2020
Buildings and leasehold improvements	$	135,804		$	42,601
Equipment and machinery		836,622			171,179
Office furniture and equipment		53,725			2,613
Transportation equipment		864,121			213,850
Total		1,890,272			430,243
Less: Accumulated depreciation		(194,961	)		(31,740	)
Property and equipment, net	$	1,695,311		$	398,503

Depreciation expense for the years ended December 31, 2021 and 2020 was $166,413 and $31,740, respectively.

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Intangible Assets

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 6 — INTANGIBLE ASSETS

Intangible assets at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Customer relationships	$	5,791,000		$	5,791,000
Marketing related		5,917,000			5,917,000
Technology related		623,000			623,000
Total intangible assets		12,331,000			12,331,000
Less: accumulated amortization		(1,251,795	)		(887,103	)
Intangible assets, net	$	11,079,205		$	11,443,897

Amortization expense for the three months ended March 31, 2022 and 2021 was $364,692 and $97,797, respectively.

Estimated amortization expense for intangible assets for the next five years consists of the following as of March 31, 2022:

Year Ending December 31,	Amount
2022 – remaining	$	1,094,088
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,079,205

NOTE 9 — INTANGIBLE ASSETS

The following provides a breakdown of identifiable intangible assets as of December 31, 2021 and 2020:

	December 31, 2021			December 31, 2020
Customer Relationships
Identifiable intangible assets	$	5,791,000		$	3,189,000
Accumulated amortization		(399,480	)		(63,419	)
Customer relationship identifiable intangible assets, net		5,391,520			3,125,581
Marketing Related
Identifiable intangible assets		5,917,000			841,000
Accumulated amortization		(418,404	)		(81,114	)
Marketing related identifiable intangible assets, net		5,498,596			759,886
Technology Related
Identifiable intangible assets		623,000			—
Accumulated amortization		(69,219	)		—
Technology related identifiable intangible assets, net		553,781			—
Total Identifiable intangible assets, net	$	11,443,897		$	3,885,467

In connection with the acquisitions of Asien’s, Kyle’s, Wolo, and High Mountain and Innovative Cabinets, the Company identified intangible assets of $1,009,000, $3,021,000, $1,848,000, and $6,453,000 respectively, representing trade names, customer relationships, and technology. These assets are being amortized on a straight-line basis over their weighted-average estimated useful life of 8.2 years and amortization expense amounted to $742,571 and $144,533 for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the estimated annual amortization expense for each of the next five fiscal years is as follows:

2022	$	1,458,780
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,443,897

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Selected Account Information

3 Months Ended

Mar. 31, 2022

Quarterly Financial Information Disclosure [Abstract]

SELECTED ACCOUNT INFORMATION

NOTE 7 — SELECTED ACCOUNT INFORMATION

Receivables at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Trade accounts receivable	$	3,235,644		$	2,691,702
Vendor rebates receivable		12,194			126,118
Credit card payments in process of settlement		—			116,187
Retainage		1,029,976			803,989
Total receivables		4,277,814			3,737,996
Allowance for doubtful accounts		(359,000	)		(359,000	)
Accounts receivable, net	$	3,918,814		$	3,378,996

Inventories at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
Appliances	$	2,554,539		$	2,206,336
Automotive		1,824,260			2,064,834
Construction		1,814,543			1,543,980
Total inventories		6,193,342			5,815,150
Less reserve for obsolescence		(387,848	)		(387,848	)
Total inventories, net	$	5,805,494		$	5,427,302

Inventory balances are composed of finished goods. Raw materials and work in process inventory are immaterial to the condensed consolidated financial statements.

Accounts payable and accrued expenses at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022		December 31, 2021
Trade accounts payable	$	3,810,165	$	3,117,825
Credit cards payable		80,536		52,300
Accrued payroll liabilities		397,717		263,590
Accrued interest		853,402		711,258
Accrued dividends		384,977		242,160
Other accrued liabilities		384,779		431,539
Total accounts payable and accrued expenses	$	5,911,576	$	4,818,672

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Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

LEASES

NOTE 8 — LEASES

Operating Leases

The following was included in our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021:

	March 31, 2022			December 31, 2021
Operating lease right-of-use assets	$	3,094,573		$	3,192,604
Lease liabilities, current portion		595,039			613,696
Lease liabilities, long-term		2,542,790			2,607,862
Total operating lease liabilities	$	3,137,829		$	3,221,558
Weighted-average remaining lease term (months)		54			59
Weighted average discount rate		4.29	%		4.29	%

Operating lease expense was expense was $235,438 and $85,924 for the three months ended March 31, 2022 and March 31, 2021, respectively.

As of March 31, 2022, maturities of operating lease liabilities were as follows:

Year Ending December 31,	Amount
2022 – remaining	$	524,519
2023		738,690
2024		753,868
2025		747,860
2026		495,994
Thereafter		212,580
Total		3,473,511
Less: imputed interest		(335,682	)
Total operating lease liabilities	$	3,137,829

Finance Leases

During the period ending March 31, 2022, the Company entered in an equipment financing lease to purchase machinery and equipment totaling $316,798, maturing in January 2028.

As of March 31, 2022, maturities of finance lease liabilities were as follows:

Year Ending December 31,	Amount
2022 – remaining	$	137,882
2023		184,711
2024		168,254
2025		161,487
2026		161,487
Thereafter		166,688
Total payments		980,509
Less: amount representing interest		(138,235	)
Present value of minimum finance lease payments	$	842,274

As of March 31, 2022, the weighted-average remaining lease term for all finance leases is 5.50 years.

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Acquisitions

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Business Combinations [Abstract]

ACQUISITIONS

NOTE 9 — ACQUISITIONS

On March 30, 2021, the Company acquired 100% of the outstanding capital stock of Wolo Mfg. Corp and Wolo Industrial Horn & Signal, Inc. (“Wolo”) for an aggregate purchase price of $8,344,056.

Wolo contributed revenue of $1,661,754 and net loss from continuing operations of $325,417, which are included in our condensed consolidated statements of operations for the three months ended March 31, 2022.

On October 8, 2021, the Company acquired 100% of the outstanding capital stock of High Mountain Door & Trim, Inc. (“High Mountain”) and Sierra Homes, LLC (“Sierra Homes”) for an aggregate purchase price of $15,441,173.

High Mountain and Sierra Homes contributed revenue of $6,249,349 and net loss from continuing operations of $271,647, which are included in our condensed consolidated statements of operations for the three months ended March 31, 2022.

Pro Forma Information

The following unaudited pro forma results presented below include the effects of the Wolo, High Mountain and Sierra Homes acquisitions as if they had been consummated as of January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the acquisitions.

	March 31, 2022			March 31, 2021
Revenues	$	12,073,878		$	13,373,918
Net income (loss)		(927,208	)		317,547
Net loss attributable to 1847 Holdings common shareholders’		(1,008,245	)		(1,398,248	)
Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted	$	(0.21	)	$	(0.29	)

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

NOTE 10 — ACQUISITIONS

Asien’s

On March 27, 2020, the Company and 1847 Asien entered into a stock purchase agreement with the Asien’s Seller, pursuant to which 1847 Asien agreed to acquire all of the issued and outstanding capital stock of Asien’s. The Company acquired Asien’s, which provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North Bay area of Sonoma County, California, to expand into the appliance industry.

On May 28, 2020, the Company, 1847 Asien, Asien’s and the Asien’s Seller entered into an amendment to the stock purchase agreement and closing of the acquisition of all of the issued and outstanding capital stock of Asien’s was completed (the “Asien’s Acquisition”).

The aggregate purchase price was $1,918,000 consisting of: (i) $233,000 in cash; (ii) the issuance of an amortizing promissory note in the principal amount of $200,000; (iii) the issuance of a demand promissory note in the principal amount of $655,000; and (iv) 415,000 common shares of the Company, having a mutually agreed upon value of $830,000 and a fair value of $1,037,500, which may be repurchased by 1847 Asien for a period of one year following the closing at a purchase price of $2.50 per share. The shares were repurchased by 1847 Asien on July 29, 2020 in exchange for a 6% amortizing promissory note (See Note 11).

The fair value of the purchase consideration issued to the Asien’s Seller was allocated to the net tangible assets acquired. The Company accounted for the Asien’s Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $1,182,925. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The table below shows analysis for the Asien’s Acquisition:

Purchase Consideration at fair value:
Common shares	$	1,037,500
Notes payable		855,000
Cash paid to Seller (post-closing)		233,000
Amount of consideration	$	2,125,500
Assets acquired and liabilities assumed at fair value
Cash	$	1,501,285
Accounts receivable		235,746
Inventories		1,457,489
Other current assets		41,427
Property and equipment		157,052
Customer related intangibles		462,000
Marketing related intangibles		547,000
Accounts payable and accrued expenses		(280,752	)
Customer deposits		(2,405,703	)
Notes payable		(509,272	)
Other liabilities		(23,347	)
Net assets acquired	$	1,182,925
Total net assets acquired	$	1,182,925
Consideration paid		2,125,500
Goodwill	$	942,575

The estimated useful life remaining on the property and equipment acquired is 5 to 13 years.

Kyle’s

On August 27, 2020, the Company and 1847 Cabinet entered into a stock purchase agreement with Kyle’s and the Kyle’s Sellers, pursuant to which 1847 Cabinet agreed to acquire all of issued and outstanding capital stock of Kyle’s. The Company acquired Kyle’s, a leading custom cabinetry maker servicing contractors and homeowners in Boise, Idaho, to expand into contracting services.

On September 30, 2020, the Company, 1847 Cabinet, Kyle’s and the Kyle’s Sellers entered into addendum to the stock purchase and closing of the acquisition of all of the issued and outstanding capital stock of Kyle’s was completed (the “Kyle’s Acquisition”).

The aggregate purchase price was $6,839,792, consisting of (i) $4,389,792 in cash, (ii) an 8% contingent subordinated note in the aggregate principal amount of $1,050,000 and (iii) 700,000 common shares of the Company, having a mutually agreed upon value of $1,400,000 and a fair value of $3,675,000. The shares were issued on October 16, 2020, immediately following the record date for the Goedeker Spin-Off described above.

The fair value of the purchase consideration issued to the Kyle’s Sellers was allocated to the net tangible assets acquired. The Company accounted for the Kyle’s Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $3,516,530. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The table below shows an analysis for the Kyle’s Acquisition:

Purchase consideration at fair value:
Common shares	$	3,675,000
Notes payable		498,979
Cash		4,389,792
Amount of consideration	$	8,563,771
Assets acquired and liabilities assumed at fair value
Cash	$	130,000
Accounts receivable		385,095
Costs in excess of billings		122,016
Other current assets		13,707
Property and equipment		200,737
Customer related intangibles		2,727,000
Marketing related intangibles		294,000
Accounts payable and accrued expenses		(263,597	)
Billings in excess of costs		(43,428	)
Other liabilities		(49,000	)
Net tangible assets acquired	$	3,516,530
Total net assets acquired	$	3,516,530
Consideration paid		8,563,771
Goodwill	$	5,047,241

The estimated useful life remaining on the property and equipment acquired is 3 to 7 years.

Wolo

On December 22, 2020, the Company 1847 Wolo entered into a stock purchase agreement with Wolo and the Wolo Sellers, pursuant to which 1847 Wolo agreed to acquire all of the issued and outstanding capital stock of Wolo.

On March 30, 2021, the Company, 1847 Wolo, Wolo and the Wolo Sellers entered into amendment No. 1 to the stock purchase agreement and closing of the acquisition of all of the issued and outstanding capital stock of Wolo was completed (the “Wolo Acquisition”).

The aggregate purchase price was $8,344,056, consisting of (i) $6,550,000 in cash, (ii) a 6% secured promissory note in the aggregate principal amount of $850,000 and (iii) cash paid to seller, net of working capital adjustment, of $944,056.

The fair value of the purchase consideration issued to the Wolo Sellers was allocated to the net tangible assets acquired. The Company accounted for the Wolo Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $6,606,403. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The table below shows an analysis for the Wolo Acquisition:

Purchase consideration at fair value:
Notes payable	$	850,000
Cash		6,550,000
Net cash paid to Seller (post-closing)		944,056
Amount of consideration	$	8,344,056
Assets acquired and liabilities assumed at fair value
Cash	$	1,171,655
Accounts receivable		1,860,107
Inventory		1,944,929
Customer related intangibles		233,000
Marketing related intangibles		992,000
Technology related intangibles		623,000
Other current assets		218,154
Deferred tax liability		(325,000	)
Accounts payable and accrued expenses		(111,442	)
Net tangible assets acquired	$	6,606,403
Total net assets acquired	$	6,606,403
Consideration paid		8,344,056
Goodwill	$	1,737,653

High Mountain and Innovative Cabinets

On September 23, 2021, 1847 Cabinet entered into a securities purchase agreement with High Mountain, Innovative Cabinets and the H&I Sellers, which was amended on October 6, 2021, pursuant to which 1847 Cabinet agreed to acquire all of the issued and outstanding capital stock or other equity securities of High Mountain and Innovative Cabinets. On October 8, 2021, closing of the acquisition was completed (the “H&I Acquisition”).

The purchase price was $15,441,173 (subject to adjustment), consisting of (i) $10,687,500 in cash (subject to adjustment) and (ii) the issuance by 1847 Cabinet of 6% subordinated convertible promissory notes in the amount of $4,753,673 consisting of an aggregate principal amount of $5,880,345, net of debt discount of $1,126,672.

The purchase price is subject to a post-closing working capital adjustment provision. Under this provision, the H&I Sellers delivered to 1847 Cabinet at the closing an unaudited balance sheet of High Mountain and Innovative Cabinets and a calculation of estimated net working capital of High Mountain and Innovative Cabinets as of that date. On or before the 75th day following the closing, 1847 Cabinet must deliver to the H&I Sellers an unaudited balance sheet of High Mountain and Innovative Cabinets and its calculation of the final net working capital of High Mountain and Innovative Cabinets as of the closing date. If such final net working capital exceeds the estimated net working capital, 1847 Cabinet must, within seven days, pay to the H&I Sellers an amount of cash that is equal to such excess. If the estimated net working capital exceeds the final net working capital, the H&I Sellers must, within seven days, pay to 1847 Cabinet an amount in cash equal to such excess. As of the date of this report, the post-closing working capital adjustment has not been completed notwithstanding the fact that the date of this report is past the 75th day following closing. The Company and 1847 Cabinet have agreed with the Sellers to finalize the post-working capital adjustment.

The fair value of the purchase consideration issued to the H&I Sellers was allocated to the net tangible assets acquired. The Company accounted for the H&I Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $3,716,376. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The Company is currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation for Wolo will be included in the Company’s financial statements in future periods.

The table below shows a preliminary analysis for the H&I Acquisition:

Purchase consideration at preliminary fair value:
Cash	$	10,687,500
Notes payable, net of debt discount		4,753,673
Amount of consideration	$	15,441,173
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	208,552
Accounts receivable		1,042,194
Inventory		1,848,729
Contract assets		367,177
Other current assets		80,771
Marketing intangible		1,610,000
Customer intangible		4,843,000
Property and equipment		610,882
Operating lease assets		831,951
Other assets		—
Accounts payable and accrued expenses		(1,207,424	)
Contract liabilities		(3,770,081	)
Deferred tax liabilities		(1,670,000	)
Lease liabilities		(856,377	)
Financing leases		(18,600	)
Loans payable		(204,399	)
Net tangible assets acquired	$	3,716,375
Total net assets acquired	$	3,716,375
Consideration paid		15,441,173
Preliminary goodwill	$	11,724,798

The estimated useful life remaining on the property and equipment acquired is 3 to 7 years.

Proforma

The following unaudited proforma results of operations are presented for information purposes only. The unaudited proforma results of operations are not intended to present actual results that would have been attained had the Asien’s Acquisition, the Kyle’s Acquisition, the Wolo Acquisition and the H&I Acquisition been completed as of January 1, 2020, nor to project potential operating results as of any future date or for any future periods. The revenue and net loss before non-controlling interest of Asien’s from May 29, 2020 through December 31, 2020 included in the consolidated income statement amounted to approximately $7,625,222 and $431,641, respectively. The revenue and net loss before non-controlling interest of Kyle’s from October 1, 2020 through December 31, 2020 included in the consolidated statement of operations amounted to approximately $1,120,224 and $380,500, respectively. The revenue and net loss before non-controlling interest of Wolo from April 1, 2021 through December 31, 2021 included in the consolidated income statement amounted to approximately $5,716,030 and $1,970,239, respectively. The revenue and net loss before non-controlling interest of High Mountain and Innovative Cabinets from October 9, 2021 through December 31, 2021 included in the consolidated income statement amounted to approximately $10,249,281 and $81,773, respectively. The unaudited proforma results of operations also removes the effect of Goedeker and Neese as if they had been disposed of on January 1, 2020.

	Years Ended December 31,
	2021			2020
Revenues, net	$	51,589,004		$	42,131,589
Net income (loss)	$	(4,445,617	)	$	1,733,005
Basic earnings (loss) per share	$	(0.94	)	$	0.36
Diluted earnings (loss) per share	$	(0.94	)	$	0.36
Basic Number of Shares (*)		4,749,971			4,807,429
Diluted Number of Shares (*)		4,749,971			4,807,429

*        shares assuming as if issued as of January 1.

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Related Parties

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Related Party Transactions [Abstract]

RELATED PARTIES

NOTE 10 — RELATED PARTIES

Management Services Agreement

On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the three months ended March 31, 2022 and 2021.

Offsetting Management Services Agreements

The Company’s subsidiary 1847 Asien Inc. (“1847 Asien”) entered into an offsetting management services agreement with the Manager on May 28, 2020, the Company’s subsidiary 1847 Cabinet Inc. (“1847 Cabinet”) entered into an offsetting management services agreement with the Manager on August 21, 2020 (which was amended and restated on October 8, 2021) and the Company’s subsidiary 1847 Wolo Inc. (“1847 Wolo”) entered into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the Parent Management Fee in any fiscal quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to the Manager under other offsetting management services agreements.

1847 Asien expensed management fees of $75,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Cabinet expensed management fees of $125,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Wolo expensed management fees of $75,000 and $0 for the three months ended March 31, 2022 and 2021, respectively.

On a consolidated basis, the Company expensed total management fees of $275,000 and $260,000 for the three months ended March 31, 2022 and 2021, respectively.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of March 31, 2022 and December 31, 2021, a total of $118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of March 31, 2022 and December 31, 2021, the Manager has funded the Company $74,928 and $74,928 in related party advances, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

Building Lease

On September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, who are officers of Kyle’s and principal shareholders of the Company. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term.

The total rent expense under this related party leases was $21,776 for the three months ended March 31, 2022.

NOTE 15 — RELATED PARTIES

Management Services Agreement

On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the years December 31, 2021 and 2020.

Offsetting Management Services Agreements

1847 Neese entered into an offsetting management services agreement with the Manager on March 3, 2017, which is included in discontinued operations, Goedeker entered into an offsetting management services agreement with the Manager on April 5, 2019, which is included in discontinued operations, 1847 Asien entered into an offsetting management services agreement with the Manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with the Manager on August 21, 2020, which was amended and restated on October 8, 2021, and 1847 Wolo entered into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, Goedeker appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that (i) pro rated payments shall be made in the first quarter and the last quarter of the term, (ii) if the aggregate amount of management fees paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of the Company’s gross income with respect to such fiscal year, then the management fee to be paid by such subsidiaries for any remaining fiscal quarters in such fiscal year shall be reduced, on a pro rata basis determined by reference to the management fees to be paid to the Manager by all of the subsidiaries of the Company, until the aggregate amount of the management fee paid or to

be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal year, does not exceed 9.5% of the Company’s gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the Parent Management Fee with respect to such fiscal quarter, then the management fee to be paid by such subsidiaries for such fiscal quarter shall be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal quarter, does not exceed the Parent Management Fee calculated and payable with respect to such fiscal quarter.

Each of these subsidiaries shall also reimburse the Manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs and expenses, which are actually incurred by the Manager or its affiliates on behalf of these subsidiaries in connection with performing services under the offsetting management services agreements.

1847 Asien expensed management fees of $300,000 for the year ended December 31, 2021 and $178,022 for the period from May 29, 2020 to December 31, 2020.

1847 Cabinet expensed management fees of $345,556 for the year ended December 31, 2021 and $75,000 for the period from October 1, 2020 to December 31, 2020.

1847 Wolo expensed management fees of $235,833 for the year ended December 31, 2021. In conjunction with acquisition of Wolo, our manager also received a fee of $110,000.

On a consolidated basis, the Company expensed total management fees of $981,389 and $253,022 for the years ended December 31, 2021 and 2020, respectively.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of December 31, 2021 and 2020, a total of $118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of December 31, 2021 and 2020, the Manager has funded the Company $74,927 and $71,358 in related party advances, respectively. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

Grid Promissory Note

On January 3, 2018, the Company issued a grid promissory note to the Manager in the initial principal amount of $50,000. The note provided that the Company could request additional advances from the Manager up to an aggregate additional amount of $150,000. On December 7, 2020, parties amended and restated the note for a new principal amount of $56,900 and maturity date of December 7, 2021. Interest on the note accrued on the unpaid portion of the principal amount and the outstanding portion of all advances at a fixed rate of 8% per annum. As of December 31, 2020, the Manager had advanced $56,900 of the note and the Company had accrued interest of $25,159. On October 8, 2021, the loan was repaid in full and the 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.

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Mezzanine Equity

3 Months Ended

Mar. 31, 2022

Mezzanine Equity [Abstract]

MEZZANINE EQUITY

NOTE 11 — MEZZANINE EQUITY

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.

Ranking.    The series A senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series A senior convertible preferred shares; (ii) on parity with the series B senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series A senior convertible preferred shares.

Dividend Rights.    Holders of series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($2.00 per share, subject to adjustment). 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 for the common shares on the Company’s principal trading market (the “VWAP”) 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 Rule 144 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.

Liquidation Rights.    Subject to the rights of 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, including the common shares and allocation shares, 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, the assets, 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, 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 Capital LLC so long as it 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 creation or issuance by the Company or by its subsidiaries Kyle’s Custom Wood Shop, Inc. (“Kyle’s”) and Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (together, “Wolo”) 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 will be used 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 ($2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $1.75 per share (subject to adjustment); 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. 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 Rights.    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. On October 12, 2021, the Company redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645.

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 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 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 such 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 initial 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.

As of March 31, 2022 and December 31, 2021, the Company had 1,684,849 and 1,818,182 series A senior convertible preferred shares issued and outstanding, respectively.

During the three months ended March 31, 2022, the Company accrued dividends attributable to the series A senior convertible preferred shares in the amount of $121,455 and paid prior period accrued dividends of $128,318.

On February 16, 2022, 133,333 shares of series A senior convertible preferred shares were converted into 152,381 common shares.

Series B Senior Convertible Preferred Shares

On February 17, 2022, the Company executed a share designation to designate 583,334 of its shares as series B senior convertible preferred shares. Following is a description of the rights of the series B senior convertible preferred shares.

Ranking.    The series B senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series B senior convertible preferred shares; (ii) on parity with the series A senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series B senior convertible preferred shares.

Dividend Rights.    Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 VWAP 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; 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 $2.70 or higher.

Liquidation Rights.    Subject to the rights of 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 B senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, including the common shares and allocation shares, each holder of outstanding series B 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, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B 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, then such assets, or the proceeds thereof, shall be distributed among the holders of series B senior convertible preferred

shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

Voting Rights.    The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the share designation or (ii) the Company’s creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

Conversion Rights.    Each series B 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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 Rights.    The Company may redeem in whole (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms of the series B 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 the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

•        On the first day of the 12th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). 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 B 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.

On February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of approximately $320,000. The Company had issuance costs relating to the offering of approximately $15,000, resulting in net proceeds of $1,266,000. 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 $3.00 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. The embedded conversion options of the series B senior convertible preferred shares and warrants were clearly and closely related to the equity host and did not require bifurcation. The $1,266,000 of net proceeds were allocated on a relative fair value basis of $1,113,650 to the series B preferred shares and $152,350 to the warrants. The series B preferred shares fair value was derived using an Option Pricing Method and the warrants fair value was derived using a Monte Carlo Simulation Model.

As of March 31, 2022 and December 31, 2021, the Company had 426,999 and 0 series B senior convertible preferred shares issued and outstanding, respectively.

During the three months ended March 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares in the amount of $13,760.

Mezzanine Equity Classification

We applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”), in order to determine the appropriate classification for both the series A senior convertible preferred shares and the series B senior convertible preferred shares.

ASC 480 requires equity instruments to be evaluated on an ongoing basis for mezzanine equity (temporary equity) vs permanent equity classification. As a result of the maximum number of common shares that may be issuable (upon conversion of the preferred securities) exceeded the number of authorized but unissued common shares available, temporary equity classification is required. As of March 31, 2022 and December 31, 2021, there were 1,684,849 and 1,818,182 series A senior convertible preferred shares presented in mezzanine equity, respectively. As of March 31, 2022 and December 31, 2021, there were 426,999 and 0 series B senior convertible preferred shares presented in mezzanine equity, respectively.

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Shareholders’ Deficit

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' DEFICIT

NOTE 12 — SHAREHOLDERS’ DEFICIT

Common Shares

As of March 31, 2022, the Company was authorized to issue 500,000,000 common shares. As of March 31, 2022 and December 31, 2021, the Company had 4,995,232 and 4,842,851 common shares issued and outstanding, respectively.

On February 16, 2022, the Company issued 152,851 common shares upon the conversion of 133,333 series A senior convertible preferred shares.

On March 23, 2022, the Company declared a common share dividend of $0.05 per share, or $249,762, to shareholders of record as of March 31, 2022. This dividend was paid on April 15, 2022.

Warrants

On February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of $320,000. 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 $3.00 per common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free interest rate of 0.31%; (iv) expected life of three years; (v) estimated fair value of the common shares of $1.94 per share; and (vi) various probability assumptions related to redemption, calls and price resets. The fair value of the warrants was $379,533 or $0.89 per warrant, resulting in the amount allocated to the warrants, based on their relative fair of $152,350, which was recorded as additional paid in capital.

The warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.

Below is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2022:

	Warrants	Weighted- Average Exercise Price
Outstanding at December 31, 2021	5,200,460	$	2.38
Granted	426,999		3.00
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2022	5,627,459	$	2.43
Exercisable at March 31, 2022	5,627,459	$	2.43

As of March 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 2.17 years and a total intrinsic value of $497,500.

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.

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 12th 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.

•        On the first day of the 24th 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 36th 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 of 2,189,835 units, at a price of $1.90 per unit, for aggregate gross proceeds of $4,160,684. On October 26, 2020, the Company sold an additional 442,443 units for an aggregate purchase price of $840,640. 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. In accordance with ASC 470, if debt or stock is issued with detachable warrants and/or stock, the guidance in ASC 470 requires that the proceeds be allocated to the instruments based on their relative fair values. The Company applied this guidance and recorded a deemed dividend of $2,874,478 as a result of a beneficial conversion feature. As the Company does not have any retained earnings this deemed dividend was netting against additional paid-in capital and the net accounting effect was none.

On March 26, 2021, the Company 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances. The Company ASC 740 and recorded a deemed dividend of $1,527,086 as a result of a beneficial conversion feature. As the Company does not have any retained earnings this deemed dividend was netting against additional paid-in capital and the net accounting effect was none.

In the year ended December 31, 2021, the Company accrued dividends attributable to the series A senior convertible preferred shares in the amount of $128,319 and paid $1,032,806 including prior year accrued dividends of $176,949.

On October 12, 2021, the Company redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645. As a result, there are 1,818,182 series A senior convertible preferred shares outstanding as of December 31, 2021.

Common Shares

The Company is authorized to issue 500,000,000 common shares as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, the Company had 4,842,851 and 4,444,013 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of the Company for a vote.

On May 4, 2020, the Company issued 100,000 common shares to Leonite upon conversion of $100,000 of the outstanding balance of the secured convertible promissory note resulting is a loss on conversion of debt of $175,000 (see Note 12).

On May 28, 2020, the Company issued 415,000 common shares, having a fair value of $1,037,500, to the Asien’s Seller in connection with the Asien’s Acquisition (see Note 10).

On June 4, 2020, the Company issued 100,000 common shares to a service provider for services provided to the Company. The fair market value of the services amounted to $245,000.

On March 26, 2021, the Company issued an aggregate of 398,838 common shares to the holders of the series A senior convertible preferred shares issued on September 30, 2020 and October 26, 2020. As noted above, the purchase price for the units issued to such holders was $1.90 per unit. As noted above, on March 26, 2021, the Company issued additional units at a purchase price of $1.65 per unit. In exchange for the consent of the holders of the Company’s outstanding series A senior convertible preferred shares to the issuance of these additional units at a lower purchase price than such holders paid for their shares, the Company issued 398,838 common shares to such holders.

Warrants

	Number of Common Share Warrants	Weighted average exercise price		Weighted average life (years)	Intrinsic value of Warrants
Outstanding, January 1, 2021	2,632,278	$	2.50	2.76	$	—
Granted	2,568,182		2.26	3.58		—
Exercised	—		—	—		—
Canceled	—		—	—		—
Outstanding, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500
Exercisable, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500

On March 26, 2021, the Company 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 $2.50 per common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 62.52-63.25%; (iii) weighted average risk-free interest rate of 0.16%; (iv) expected life of three years; (v) estimated fair value of the common shares of $2.60-$5.25 per share; and (vi) various probability assumptions related to redemption, calls and price resets. The ultimate amount allocated to the warrants was $1,472,914, which was recorded as additional paid in capital.

The warrants allow the holder to purchase one (1) common share at an exercise price of $2.50 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The warrants have a term of three years and are callable by the Company after one year if the 30-day average stock price is in excess of $5 and the trading volume in the Company’s shares exceed 100,000 shares a day over such period. The Company can also redeem the warrants during the term for $0.50 a warrant in the first year; $1.00 a warrant in the second year; and $1.50 a warrant in the third year.

On October 8, 2021, the Company issued to Leonite a five-year warrant for the purchase of 250,000 common shares with an exercise price of $0.01 per share and a five-year warrant for the purchase of 500,000 common shares with an exercise price of $2.50 per share. The exercise price is subject to standard adjustments, including upon any future equity offering with a lower exercise price. Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The warrants may be exercised on a cashless basis under certain circumstances and contain certain beneficial ownership limitations.

Options

	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Term in Years
Outstanding at January 1, 2020	—		$	—	—
Granted	90,000			2.50	5.0
Exercised	77,500			2.50	—
Forfeited	—			—	—
Cancelled	(12,500	)		2.50	—
Expired	—		$	—	—
Outstanding at December 31, 2020	—		$	—	—
Exercisable at December 31, 2020

On May 11, 2020, the Company granted options to directors Paul A. Froning and Robert D. Barry to purchase 60,000 and 30,000 common shares, respectively, each at an exercise price of $2.50 per share. The options vested immediately on the date of grant and terminate on May 11, 2025. On September 29, 2020, Mr. Barry exercised the options cashless and on September 30, 2020, Mr. Froning exercised the options for proceeds of $150,000.

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Loss Per Share

3 Months Ended

Mar. 31, 2022

Loss Per Share [Abstract]

LOSS PER SHARE

NOTE 13 — LOSS PER SHARE

The computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to 1847 Holdings common shareholders for the three months ended March 31, 2022 consisted of the following:

Basic and Diluted Loss Per Share	March 31, 2022
Net loss per common share attributable to 1847 Holdings common shareholders’	$	(1,008,245	)
Weighted average common shares outstanding		4,915,655
Basic and diluted loss per share	$	(0.21	)

For the three months ended March 31, 2022, there were 20,871,528 potential common share equivalents from warrants, convertible debt, and series A and B convertible preferred shares were excluded from the diluted EPS calculations as their effect is anti-dilutive.

For the three months ended March 31, 2021, there were 4,450,460 potential common share equivalents from warrants, convertible debt, and series A convertible preferred shares were excluded from the diluted EPS calculations as their effect is anti-dilutive.

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Subsequent Events

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 14 — SUBSEQUENT EVENTS

On April 20, 2022, the Company entered into a securities purchase agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant to which the Company sold 28,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. 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 $3.00 per share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

NOTE 20 — SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2021 to the date these financial statements were issued, and has determined that, except as set forth below, it does not have any material subsequent events to disclose in these financial statements.

Unit Offering

On February 24, 2022, the Company entered into securities purchase agreements with several accredited investors, pursuant to which the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, to such investors for aggregate gross proceeds of $961,000. On March 24, 2022, the Company entered into securities purchase agreements with additional accredited investors, pursuant to which the Company sold an additional 106,666 units to such investors for aggregate gross proceeds of $320,000. Each unit consists of (i) one series B senior convertible preferred share and (ii) a three-year warrant to purchase one common share at an exercise price of $3.00, subject to adjustments.

Pursuant to the securities purchase agreements, the Company is required file a registration statement with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, covering the resale of all shares issuable upon conversion of the series B senior convertible preferred shares and exercise of the warrants with thirty (30) days after the closing and use its commercially reasonable efforts to have the registration statement declared effective by the SEC as soon as practicable, but in no event later than (i) ninety (90) days after the closing in the event that the SEC does not review the registration statement, or (ii) one hundred fifty (150) days after the closing in the event that the SEC reviews the registration statement (but in any event, no later than two (2) business days from the SEC indicating that it has no further comments on the registration statement).

In addition to registration rights described above, the securities purchase agreements provide several other covenants in favor of the investors, including information rights for significant shareholders, most favored nations provisions, and other covenants customary for similar transactions. The securities purchase agreements also contain customary representations, warranties closing conditions and indemnities.

Series B Senior Convertible Preferred Shares

The terms of the series B senior convertible preferred shares are governed by a share designation, dated February 17, 2022 (the “Share Designation”). Pursuant to the Share Designation, the Company designated 583,334 of its preferred shares as series B senior convertible preferred shares. Following is a summary of the material terms of the series B senior convertible preferred shares:

•        Dividend Rights.    Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 VWAP for the common shares 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; 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 $2.70 or higher.

•        Liquidation Rights.    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 junior securities (as defined in the Share Designation), including the Company’s common shares and allocation shares, each holder of outstanding series B 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, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B 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, then such assets, or the proceeds thereof, shall be distributed among the holders of series B senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

•        Voting Rights.    The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the Share Designation or (ii) the Company’s creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

•        Conversion Rights.    Each series B 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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 (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms of the series B 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 the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

•        On the first day of the 12th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.        

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). 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 B 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.

Warrants

Each warrant is exercisable within three years at an exercise price of $3.00 per common share (subject to adjustment, including a full ratchet antidilution adjustment), which may be exercised on a cashless basis if the underlying warrant shares are not then registered or otherwise freely tradeable.

The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period.

The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.

The warrants also contain an ownership limitation, such that the Company shall not effect any exercise of any warrant, and the holder shall not have the right to exercise any portion of such warrant, to the extent that after giving effect to issuance of common shares upon exercise such warrant, such holder, together with its affiliates, and any other persons acting as a group together with such holder or any of 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 issuable upon exercise of such warrant. Upon no fewer than 61 days’ prior notice to the Company, a holder may increase or decrease such beneficial ownership limitation provisions and any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.

Dividend

On January 14, 2022, the Company paid its first quarterly dividend in the amount of $0.05 per share to the holders of common shares as of December 31, 2021. The total dividend paid was $242,160

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Organization and Nature of Business

12 Months Ended

Dec. 31, 2021

Organization and Nature of Business [Abstarct]

ORGANIZATION AND NATURE OF BUSINESS

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

1847 Holdings LLC (the “Company”) was formed under the laws of the State of Delaware on January 22, 2013. The Company is in the business of acquiring small businesses in a variety of different industries.

On March 27, 2020, the Company and the Company’s wholly owned subsidiary 1847 Asien Inc., a Delaware corporation (“1847 Asien”), entered into a stock purchase agreement with Asien’s Appliance, Inc., a California corporation (“Asien’s”), and Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992 (the “Asien’s Seller”), pursuant to which 1847 Asien acquired all of the issued and outstanding stock of Asien’s on May 28, 2020 (see Note 10). As a result of this transaction, the Company owns 95% of 1847 Asien, with the remaining 5% held by a third-party, and 1847 Asien owns 100% of Asien’s.

On August 27, 2020, the Company and the Company’s wholly owned subsidiary 1847 Cabinet Inc., a Delaware corporation (“1847 Cabinet”), entered into a stock purchase agreement with Kyle’s Custom Wood Shop, Inc., an Idaho corporation (“Kyle’s”), and Stephen Mallatt, Jr. and Rita Mallatt (the “Kyle’s Sellers”), pursuant to which 1847 Cabinet acquired all of the issued and outstanding stock of Kyle’s on September 30, 2020 (see Note 10). As a result of this transaction, the Company owns 92.5% of 1847 Cabinet, with the remaining 7.5% held by a third-party, and 1847 Cabinet owns 100% of Kyle’s.

On 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 10). 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 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 10). As a result of this transaction, 1847 Cabinet owns 92.5% of High Mountain and Innovative Cabinets, with the remaining 7.5% held by a third-party.

The Company previously owned two additional companies, 1847 Neese Inc. and 1847 Goedeker Inc.

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.

On January 10, 2019, the Company established 1847 Goedeker Inc. (“Goedeker”) as a wholly owned subsidiary in the State of Delaware in connection with the proposed acquisition of assets from Goedeker Television Co., a Missouri corporation (“Goedeker Television”). On March 20, 2019, the Company established 1847 Goedeker Holdco Inc. (“Holdco”) as a wholly owned subsidiary in the State of Delaware and subsequently transferred all of its shares in Goedeker to Holdco, such that Goedeker became a wholly owned subsidiary of Holdco. On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker, pursuant to which Goedeker acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business on April 5, 2019. As a result of this transaction, the Company owned 70% of Holdco, with the remaining 30% held by third parties, and Holdco owned 100% of Goedeker. On August 4, 2020, Holdco distributed all of its shares of Goedeker to its stockholders in accordance with their pro rata ownership in Holdco, after which time

Holdco was dissolved. Following this transaction, and the closing of Goedeker’s initial public offering on August 4, 2020 (the “Goedeker IPO”), the Company owned approximately 54.41% of Goedeker. On October 23, 2020, the Company distributed all of the shares of Goedeker that it held to its shareholders (the “Goedeker Spin-Off”). As a result of the Goedeker Spin-Off, Goedeker is no longer a subsidiary of the Company.

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, 1847 Asien, 1847 Cabinet, 1847 Wolo, Asien’s, Kyle’s, High Mountain, Innovative Cabinets, Wolo Mfg and Wolo H&S. All significant intercompany balances and transactions have been eliminated in consolidation.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Basis of Presentation [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and are presented in US dollars.

The results of Goedeker are included within discontinued operations for year ended December 31, 2020.

The results of 1847 Neese are included within discontinued operations for the years ended December 31, 2021 and 2020. The Company retrospectively updated the consolidated financial statements for the year ended December 31, 2020 to reflect this change.

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

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 stockholders. 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 services including sales, 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, extended warranties, 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

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

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.

Impact of COVID-19

The impact of COVID-19 on the Company’s business has been considered in management’s estimates and assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides for economic assistance loans through the United States Small Business Administration (the “SBA”). On April 28, 2020, Asien’s received $357,500 in Paycheck Protection Program (“PPP”) loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the Small Business Administration (See Note 11).

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company’s prior financial statements and accompanying notes to conform to the presentation for the year ended December 31, 2021. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder’s equity.

Revenue Recognition and Cost of Revenue

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

Retail and Appliances Segment

The Company collects 100% of the payment for special-order models including tax and 50% of the 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 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 5% of total revenue.

Customer deposits ‒ The Company records customer deposits when payments are received in advance of the delivery of the merchandise. The Company expects that substantially all of the customer deposits will be recognized within six months as the performance obligations are satisfied.

Construction Segment

The Company’s construction segment revenues are derived primarily through contracts with customers whereby the Company specializes in all aspects of products and services relating to finished carpentry, custom cabinetry, and countertops. The Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Since most contracts are bundled to include both material and installation services, the Company combines these items into one performance obligation as the overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. The Company does offer assurance-type warranties on certain of its installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For any contracts that are not complete at the reporting date, the Company recognizes revenue over time, because of the continuous transfer of control to the customer as work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. The Company utilizes the cost-to-cost measure of progress method as it believes this best depicts the transfer of control of assets to the customer, which occurs as costs are incurred.

When this method is used, the Company estimates the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, cash flow, and profitability from a particular contract may be adversely affected.

An insignificant portion of sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability and excluded from revenue on a net basis.

Contracts can be subject to modification to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

All contracts are billed either contractually or as work is performed. Billing on long-term contracts occurs primarily on a monthly basis throughout the contract period whereby the Company submits progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some contracts, the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered a significant financing component.

Cost of revenues earned include all direct material and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying the performance obligation.

Contract Assets and Contract Liabilities

The Company records a contract asset when it has satisfied its performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of the Company’s performance obligation. The difference between the beginning and ending balances of contract assets and liabilities primarily results from the timing of the Company’s performance and the customer’s payment. At times, the Company has a right to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included in contract assets or contract liabilities, as determined on a contract-by-contract basis.

Automotive Supplies Segment

The Company’s automotive supplies segment 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. Focused on the automotive and industrial after-market, the Company sells its products to big-box national retail chains, through specialty and industrial distributors, as well as online/mail order retailers and original equipment manufacturers.

The Company collects 100% of the payment for internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the agreed upon terms.

Performance Obligations — The revenue that the Company recognizes arises from orders it receives from contracts with customers. The Company’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers and each 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 shipment of the order. 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 sales includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor to the Company.

Warranties vary and are typically 90 days to consumers and manufacturing defect warranty to are available to resellers. At times, depending on the product, the Company can also offer a warranty up to 12 months.

Receivables

Receivables consist of trade accounts receivable from customer, credit card transactions in the process of settlement, and vendor rebates receivable. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivables are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivable. Retainage receivables represent the amount retained by customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered at risk. The allowance for doubtful accounts amounted to $359,000 and $0 for the years ended December 31, 2021 and 2020, respectively. Uncollectible balances are expensed in the periods they are determined to be uncollectible.

Inventory

For Asien’s, inventory mainly consists of appliances that are acquired for resale and is valued at the average cost determined on a specific item basis. Inventory also consists of parts that are used in service and repairs and may or may not be charged to the customer depending on warranty and contractual relationship. Kyle’s typically orders inventory on a job-by-job basis and those jobs are put into production within hours of being received. The inventory in production is accounted for in the contract assets and liabilities and follows the percentage completion methodology. Inventories consisting of materials and supplies are stated at lower of costs or market. High Mountain and Innovative Cabinets’ inventory mainly consists of doors, door frames, baseboards, crown molding, cabinetry, countertops, custom cabinets, closet shelving, and other related products. The Company values inventory at each balance sheet date to ensure that it is carried at the lower of cost or net realizable value with cost determined based on the average cost basis. Wolo’s inventory consists of finished goods acquired for resale and is valued at the weighted-average cost determined on a

specific item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $387,848 and $12,824 at December 31, 2021 and 2020, respectively.

Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Trucks and Vehicles	3-6

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5-15
Marketing-Related	Straight-line basis	5

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating 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.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, certificates of deposit and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

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 three-level hierarchy is as follows:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or inputs that are corroborated by market data.

Level 3 — Unobservable inputs that are not corroborated by market date.

The Company’s held to maturity securities are comprised of certificates of deposit.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 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.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the year ended December 31, 2021, potentially dilutive securities were included in diluted loss per share under the treasury method: 5,200,460 for outstanding warrants, 2,257,404 for principal and accrued interest of series A convertible preferred shares, and 10,131,076 for the principal and accrued interest of convertible notes. As the Company had a net loss for the year ended December 31, 2020, the following 2,632,278 potentially dilutive securities were excluded from diluted loss per share: 2,632,278 for outstanding warrants.

Operating Leases

ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

Going Concern Assessment

Management assesses going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

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. For the year ended December 31, 2021, the Company incurred operating losses from continuing operations of $3,721,157 (before deducting losses attributable to non-controlling interests and excluding net income from discontinued operations), cash flows used in operations of $897,566 (excluding the cashflow from discontinued operations) and negative working capital of $1,295,692 (excluding the negative working capital from discontinued operations).

Management has prepared estimates of operations for fiscal year 2022 and believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K, which indicate improved operations and the Company’s ability to continue operations as a going concern.

The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted CARES Act provides for economic assistance loans through the SBA. On April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the

proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.

The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.

Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K indicate improved operations and the Company’s ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

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Business Segments

12 Months Ended

Dec. 31, 2021

Business Segments [Abstract]

BUSINESS SEGMENTS

NOTE 3 — BUSINESS SEGMENTS

Summarized financial information concerning the Company’s reportable segments for the years ended December 31, 2021 and 2020 is presented below.

	Year Ended December 31, 2021
	Retail & Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenue
Furniture and appliances	$	12,741,064	$	—	$	—		$	—		$	12,741,064
Construction		—		12,203,890		—			—			12,203,890
Automotive supplies		—		—		5,716,030			—			5,716,030
Total Revenue		12,741,064		12,203,890		5,716,030			—			30,660,984
Cost of sales		9,773,371		6,966,064		3,572,289			—			20,311,724
Operating expenses		2,892,973		4,153,938		3,119,435			1,286,813			11,453,159
Income (loss) from operations	$	74,720	$	1,083,888	$	(975,694	)	$	(1,286,813	)	$	(1,103,899	)

	Year Ended December 31, 2020
	Retail & Appliances			Construction			Automotive Supplies		Corporate Services			Total
Revenue
Furniture and appliances	$	7,625,222		$	—		$	—	$	—		$	7,625,222
Construction		—			1,120,224			—		—			1,120,224
Automotive supplies		—			—			—		—			—
Total Revenue		7,625,222			1,120,224			—		—			8,745,446
Cost of sales		5,866,413			665,022			—		—			6,531,435
Operating expenses		1,986,775			681,040			—		896,092			3,563,908
Loss from operations	$	(227,967	)	$	(225,838	)	$	—	$	(896,092	)	$	(1,349,897	)

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Cash Equivalents and Investments

12 Months Ended

Dec. 31, 2021

Cash and Cash Equivalents [Abstract]

CASH EQUIVALENTS AND INVESTMENTS

NOTE 4 — CASH EQUIVALENTS AND INVESTMENTS

	December 31, 2021		December 31, 2020
Cash and cash equivalents
Operating accounts	$	1,383,533	$	976,538
Restricted accounts		—		403,811
Subtotal	$	1,383,533	$	1,380,349
Held to Maturity Investments
Restricted accounts – certificates of deposit (4 – 24-month maturities, FDIC insured)	$	276,429	$	276,270
Subtotal	$	276,429	$	276,270
TOTAL	$	1,659,962	$	1,656,619

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Discontinued Operations

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 5 — DISCONTINUED OPERATIONS

ASC 360-10-45-9 requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable, and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. For the Goedeker Spin-Off, these criteria were achieved on September 10, 2020, when the board approved the Goedeker Spin-Off and subsequently on October 23, 2020, when the Company completed the Goedeker Spin-Off. These criteria were achieved in March 2021 for the Neese Spin-Off.

The discontinued operations as of December 31, 2021 and for the year ended December 31, 2021 are comprised entirely of the business of Neese. The discontinued operations as of December 31, 2020 and for the year ended December 31, 2020 are comprised of the businesses of Neese and Goedeker.

For comparability purposes, certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying consolidated statements of operations, consolidated statements of cash flows, and the consolidated balance sheets.

In accordance with ASC 205-20-S99, Allocation of Interest to Discontinued Operations, the Company elected to not allocate consolidated interest expense to discontinued operations where the debt is not directly attributable to or related to discontinued operations.

The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets as of December 31, 2021 and 2020:

	December 31, 2021		December 31, 2020
Current Assets – discontinued operations:
Cash	$	—	$	416,831
Accounts receivable, net		—		334,095
Inventories, net		—		305,080
Prepaid expenses and other current assets		—		268,602
Total current assets – discontinued operations		—		1,324,608
Noncurrent Assets – discontinued operations:
Property and equipment, net		—		1,925,844
Operating lease right of use assets		—		501,827
Goodwill		—		22,166
Intangible assets, net		—		7,933
Total noncurrent assets	$	—	$	2,457,770
Current liabilities – discontinued operations:
Accounts payable and accrued expenses	$	—	$	484,852
Current portion of operating lease liability		—		67,725
Notes payable – current portion		—		446,545
Total current liabilities – discontinued operations		—		999,122
Long term liabilities – discontinued operations:
Notes payable – long term, net of current portion		—		4,187,376
Accrued expenses – long term, related party		—		1,359,989
Financing lease liability, net of current portion		—		434,102
Total long term liabilities – discontinued operations	$	—	$	5,981,467

The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2021 and 2020:

	Years Ended December 31,
	2021			2020
REVENUES
Services	$	612,862		$	3,379,653
Sales of parts and equipment		324,189			3,322,945
Furniture and appliances		—			42,709,714
TOTAL REVENUE		937,051			49,412,312
OPERATING EXPENSES
Cost of sales		298,050			38,488,245
Personnel costs		485,774			6,534,408
Depreciation and amortization		360,746			1,547,378
Fuel		112,746			378,115
General and administrative		290,872			8,555,731
TOTAL OPERATING EXPENSES		1,548,188			55,503,877
LOSS FROM OPERATIONS		(611,137	)		(6,091,564	)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt		(320	)		(792,721	)
Gain on forgiveness of debt		380,247			—
Loss on extinguishment of debt		—			(1,852,426	)
Gain on sale of assets		548,723			130,748
Loss on acquisition receivable		—			(809,000	)
Change in warrant liability		—			(2,127,656	)
Interest expense		(78,308	)		(985,840	)
Other income (expense)		1,200			3,599
TOTAL OTHER INCOME (EXPENSE)		851,542			(6,433,296	)
NET LOSS BEFORE INCOME TAXES		240,405			(12,524,860	)
INCOME TAX EXPENSE		—			350,603
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS		240,405			(12,875,463	)
LESS NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		108,182			(5,036,832	)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS	$	132,223		$	(7,838,631	)

The following information presents the major classes of line items constituting significant operating, investing and financing cash flow activities in the unaudited consolidated statements of cash flows relating to discontinued operations:

	Years Ended December 31,
	2021			2020
Cash flows from operating activities of discontinued operations:
Net Income (Loss)	$	240,405		$	(12,875,461	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities of discontinued operations:
Depreciation and amortization		360,746			1,547,378
Amortization of financing costs and warrant features		2,187			842,174
Stock compensation		—			281,194
Amortization of operating lease right-of-use assets		19,007			63,253
Gain on forgiveness of PPP loans		(380,247	)		—
Loss on extinguishment of debt		—			2,052,118
Amortization of original interest discount		—			100,511
Gain on sale of equipment		(548,723	)		(130,748	)
Change in fair value of warrant liability		—			2,127,656
Write-off of acquisition receivable		—			809,000
Changes in operating assets and liabilities:
Accounts receivable		10,698			(3,327,816	)
Inventory		(161,286	)		(2,125,032	)
Prepaid expenses and other assets		49,222			(1,144,323	)
Accounts payable and accrued expenses		118,980			368,128
Operating lease liability		(19,007	)		(63,253	)
Vendor deposits		—			(252,688	)
Deferred tax asset		—			635,503
Customer deposits		—			14,427,180
Accrued expense long-term		137,438			454,209
Net cash provided by (used in) operating activities from discontinued operations	$	(170,580	)	$	3,788,983
Cash flows from investing activities in discontinued operations:
Proceeds from sale of equipment	$	675,000		$	209,500
Purchase of equipment		(30,697	)		(137,499	)
Net cash provided by investing activities in discontinued operations	$	644,303		$	72,001
Cash flows from financing activities in discontinued operations:
Proceeds from initial public offering	$	—		$	8,602,166
Proceeds from note payable		380,385			1,612,297
Repayments of notes payable		(589,078	)		(3,474,557	)
Repayment of floor plan		—			(10,581	)
Net borrowings from lines of credit		—			(1,339,430	)
Financing fees		—			(219,110	)
Repayment of financing lease		—			(721,151	)
Net cash provided by (used in) financing activities in discontinued operations	$	(208,693	)	$	4,449,634

The following are the financial instruments of the discontinued operations:

Lines of Credit

Burnley Capital LLC

On April 5, 2019, Goedeker, as borrower, and Holdco entered into a loan and security agreement with Burnley Capital LLC (“Burnley”) for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker Television on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was $571,997.

On August 4, 2020, Goedeker used a portion of the proceeds from its initial public offering (the “Goedeker IPO”) to repay the revolving note in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350, interest of $42 and prepayment, legal, and other fees of $85,802.

Northpoint Commercial Finance LLC

On June 24, 2019, Goedeker entered into a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR plus 7.99%. As of December 31, 2019, the balance of the line of credit was $678,993. Goedeker terminated the loan and security agreement on May 18, 2020.

Home State Bank

On June 13, 2018, Neese entered into a term loan agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% and with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2020. Neese met this covenant for the year ended December 31, 2020. On July 30, 2020, Neese entered into a change in terms agreement with Home State Bank to amend the terms of the term loan. Pursuant to the change in terms agreement: (i) the maturity date was extended to July 30, 2022; (ii) the interest rate was changed to 5.50%; (iii) Neese agreed to pay accrued interest in the amount of $95,970; (iv) Neese agreed to make payments of $30,000 beginning on September 30, 2020 and continuing thereafter on a monthly basis until maturity, at which time a final interest payment is due; (v) Neese agreed to make a payment of $260,000 on December 30, 2020 and December 30, 2021; (vi) Neese agreed to make two new advances under the note in the amounts $51,068 and $517,529 to repay in full Neese’s capital lease transactions due to Utica Leaseco LLC described below; (vii) Neese agreed to pay a loan fee of $17,500; and (viii) Home State Bank agreed to make a loan advance to checking for $17,500. The balance of the note amounts to $3,225,321, comprised of principal of $3,239,176, net of unamortized debt discount of $13,855 as of December 31, 2020.

If Neese sells property, plant, and equipment securing the loan, it must remit the appraised value of the equipment to Home State Bank. During the nine months ended September 30, 2021 and 2020, $400,000 and $145,690, respectively, was remitted to Home State Bank pursuant to this requirement.

Notes Payable and Warrant Liability

Arvest Loan

On August 25, 2020, Goedeker entered into a promissory note and security agreement with Arvest Bank for a loan in the principal amount of $3,500,000. As of October 23, 2020, the outstanding balance of this loan is $3,340,602, comprised of principal of $3,446,126, net of unamortized loan costs of $103,524.

PPP Loan

On April 8, 2020, Goedeker received a $642,600 PPP loan from the SBA under the provisions of the CARES Act. The PPP loan had an 18-month term and bore interest at a rate of 1.0% per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The PPP provides that the loan could be partially or wholly forgiven if the funds were used for certain qualifying expenses as described in the CARES Act. The balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability. On November 2, 2020, Goedeker repaid the PPP loan.

Small Business Community Capital II, L.P.

On April 5, 2019, Goedeker, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan in the principal amount of $1,500,000, pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0% of the outstanding equity securities of Goedeker on a fully-diluted basis for an aggregate price equal to $100. As of December 31, 2019, the balance of the note was $999,201.

On August 4, 2020, Goedeker used a portion of the proceeds from the Goedeker IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999.             

Goedeker classified the warrant as a derivative liability on the balance sheet at June 30, 2020 of $2,250,000 based on the estimated value of the warrant in the Goedeker IPO. The increase in the value of the warrant from the estimated value of $122,344 at December 31, 2020 resulted in a charge of $2,127,656 during the period January 1, 2020 through October 23, 2020 (date of distribution). Immediately prior to the closing of the Goedeker IPO on August 4, 2020, SBCC converted the warrant into 250,000 shares of common stock.

10% Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the Neese Sellers. The note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018. The note is unsecured and contains customary events of default. The note has not been repaid, so the Company is in default under this note. Under terms of the term loan with Home State Bank described above, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. Accordingly, the loan is shown as a long-term liability as of December 31, 2020. Additionally, Home State Bank limits the payment of interest on this note to $40,000 annually. The Company continued to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

Notes Payable, Related Parties

A portion of the purchase price for the acquisition of Goedeker Television was paid by the issuance by Goedeker to Steve Goedeker, as representative of Goedeker Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. As of December 31, 2019, the balance of the note was $3,300,444.

Pursuant to a settlement agreement, the parties entered into an amendment and restatement of the note that became effective as of the closing of the Goedeker IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the Goedeker IPO, Goedeker agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, Goedeker used a portion of the proceeds from the Goedeker IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.

In August 2020, Goedeker refinanced this note payable with proceeds from a loan from Arvest Bank. In connection with the refinance, Goedeker recorded a $757,239 loss on extinguishment of debt consisting of a $250,000 forbearance fee, write-off of unamortized loan discount of $338,873, and write-off of unamortized debt costs of $168,366.

Convertible Promissory Note

On April 5, 2019, the Company, Holdco and Goedeker entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company, pursuant to which they issued to Leonite Capital LLC a secured convertible promissory note in the aggregate principal amount of $714,286 due April 5, 2020. See Note 12 for further details of the convertible promissory note.

Financing Lease

The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neese’s equipment with Utica Leaseco, LLC (“Utica”), pursuant to a master lease agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees (collectively, the “Lessee”), which was amended on June 14, 2017. Under the master lease agreement, as amended, Utica loaned an aggregate of $3,240,000 for certain of Neese’s equipment listed therein, which it leases to the Lessee. A portion of the proceeds from the term loan from Home State Bank were applied to reduce the balance of this lease to $475,000. The lease was payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000.

On October 31, 2017, the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule was 51 months and agreed monthly payments are $25,807.

On July 29, 2020, the Company paid $568,597 to repay this capital lease transaction with Utica in full.

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Receivables

12 Months Ended

Dec. 31, 2021

Receivables [Abstract]

RECEIVABLES

NOTE 6 — RECEIVABLES

At December 31, 2021 and 2020, receivables consisted of the following:

	December 31, 2021			December 31, 2020
Credit card payments in process of settlement	$	116,187		$	158,924
Retainage		803,989			—
Trade receivables from customers		2,691,702			366,701
Vendor rebates receivable		126,118			—
Total receivables		3,737,996			525,625
Allowance for doubtful accounts		(359,000	)		—
Accounts receivable, net	$	3,378,996		$	525,625

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Inventories

12 Months Ended

Dec. 31, 2021

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 7 — INVENTORIES

At December 31, 2021 and 2020, the inventory balances are composed of finished goods for sale, as well as materials, parts, and components used in construction.

	December 31, 2021			December 31, 2020
Construction	$	1,543,980		$	6,308
Appliances		2,206,336			2,029,270
Automotive		2,064,834			—
Subtotal		5,815,150			2,035,578
Allowance for inventory obsolescence		(387,848	)		(12,824	)
Inventories, net	$	5,427,302		$	2,022,754

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Notes Payable

12 Months Ended

Dec. 31, 2021

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 11 — NOTES PAYABLE

Summary of Notes Payable

	December 31, 2021			December 31, 2020
Line of Credit	$	—		$	301,081
8% Subordinated Amortizing Promissory Notes		—			101,980
6% Subordinated Amortizing Promissory Notes		581,963			975,985
PPP loans		—			357,500
4.5% Unsecured Promissory Notes		—			41,675
Loans on vehicles		396,351			90,374
Financing leases		522,166			—
Subtotal		1,500,480			1,868,595
Line of Credit		—			(301,081	)
Current portion of notes payable		(793,174	)		(429,183	)
Long-term notes payable	$	707,306		$	1,138,331

Asien’s

Arvest Bank

On July 10, 2020, Asien’s entered into a promissory note and security agreement with Arvest Bank for a revolving loan for up to $400,000. The loan bore interest at 5.25% per annum, subject to change in accordance with the Variable Rate (as defined in the promissory note and security agreement), the calculation for which is the U.S. Prime Rate plus 2%. The remaining principal balance of the note at December 31, 2020 was $301,081 and it had accrued interest of $995. On October 8, 2021, the revolving loan was paid off and terminated for $301,240.

8% Subordinated Amortizing Promissory Note

A portion of the purchase price for acquisition of Asien’s on May 28, 2020 was paid by the issuance of an 8% subordinated amortizing promissory note in the principal amount of $200,000 by 1847 Asien to the Asien’s Seller. Interest on the outstanding principal amount were payable quarterly at the rate of eight percent (8%) per annum. The outstanding principal amount of the note amortized on a one-year straight-line basis in accordance with a specified amortization schedule, with all unpaid principal and accrued, but unpaid interest being fully due and payable on May 28, 2021. As of December 31, 2020, the remaining principal balance of the note was $101,980 and it had accrued interest of $1,095. The note and accrued interest were repaid in May 2021.

6% Amortizing Promissory Note

On July 29, 2020, 1847 Asien entered into a securities purchase agreement with the Asien’s Seller, pursuant to which the Asien’s Seller sold to 415,000 of the Company’s common shares to 1847 Asien a purchase price of $2.50 per share. As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, 1847 Asien and the Asien’s Seller entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described below, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon. The note is unsecured and contains customary events of default. The remaining principal balance of the note at December 31, 2021 is $583,961 and it has accrued interest of $21,758.

Inventory Financing Agreement

On September 25, 2020, Asien’s entered into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”), pursuant to which Wells Fargo may extend credit to Asien’s from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative covenants and events of default for a loan of this type. The agreement is secured by all assets of Asien’s and is guaranteed by 1847 Asien and the Company. As of December 31, 2021, Asien’s has not borrowed any funds under this agreement.

4.5% Unsecured Promissory Note

On October 30, 2017, Asien’s entered into a stock repurchase agreement with Paul A. Gwilliam and Terri L. Gwilliam, co-trustees of the Gwilliam Family Trust, pursuant to which Asien’s issued an unsecured promissory note in the aggregate principal amount of $540,000 for a term of 5 years. The note bore interest at the rate of the 4.25% per annum. The remaining principal balance of the note at December 31, 2020 was $41,675. The note and accrued interest were repaid in July 2021.

Loans on Vehicles

Asien’s has entered into seven retail installment sale contracts pursuant to which Asien’s agreed to finance its delivery trucks at rates ranging from 3.74% to 8.72% with an aggregate remaining principal amount of $146,043 as of December 31, 2021.

Kyle’s

Intercompany Secured Promissory Note

In connection with the acquisition of Kyle’s, the Company provided 1847 Cabinet with the funds necessary to pay the cash portion of the purchase price and cover acquisition expenses. In connection therewith, on September 30, 2020, 1847 Cabinet issued a secured promissory note to the Company in the principal amount of $4,525,000, which was amended and restated on December 11, 2020 and again on October 8, 2021 to increase the principal amount to $15,955,325. The note bears interest at the rate of 16% per annum. Interest on the note is cumulative and any unpaid accrued interest will compound on each anniversary date of the note. Interest is due and payable in arrears to the Company on December 1, March 1, June 1 and October 1, commencing on December 1, 2021. In the event payment

of principal or interest due under the note is not made when due, giving effect to any grace period which may be applicable, or in the event of any other default (as defined in the note), the outstanding principal balance shall from the date of default immediately bear interest at the rate of 5% above the then applicable interest rate for so long as such default continues. The Company may demand payment in full of the note at any time, even if 1847 Cabinet has complied with all of the terms of the note, and the note shall be due in full, without demand, upon the third party sale of all or substantially all the assets and business of 1847 Cabinet or the third party sale or other disposition of any capital stock of 1847 Cabinet. 1847 Cabinet may prepay the note at any time without penalty. If and to the extent any amounts are owing under the secured convertible promissory notes described below due to a default thereunder, in addition to payment obligations due under the note, 1847 Cabinet is required to immediately make payments to the Company so that the Company may make payments in compliance with the terms of the secured convertible promissory notes. The note contains customary covenants and events of default for loans of this type. The note is guaranteed by Kyle’s, High Mountain and Sierra Homes and is secured by a security interest in all of the assets of 1847 Cabinet, Kyle’s, High Mountain and Sierra Homes; provided that the rights of the Company to receive payments under the note are subordinated to the rights of the purchasers under secured convertible promissory notes described below (Note 12). The remaining principal balance of the note at December 31, 2021 is $6,549,073 and it has accrued interest of $35,416.

Loans on Vehicles

Kyle’s has entered into two retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of $64,255 as of December 31, 2021.

Financing Leases

Kyle’s has entered into two financing lease agreements for expansion equipment. The equipment was installed in December 2021. These agreements have terms of six years beginning at the time of installation.

On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, maturing on December 1, 2027. The balance payable was $276,896 as of December 31, 2021.

On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,375, maturing on December 1, 2027. The balance payable was $245,375 as of December 31, 2021.

Following is a summary of payments due on financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	99,075
2023		99,075
2024		99,075
2025		99,075
2026		99,075
Thereafter		99,075
Total payments		594,450
Less: amount representing interest		(72,178	)
Present value of minimum lease payments	$	522,272

As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 6 years.

Wolo

6% Secured Promissory Note

A portion of the purchase price for the acquisition of Wolo on March 30, 2021 was paid by the issuance of a 6% secured promissory note in the principal amount of $850,000 by 1847 Wolo to the Wolo Sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent (6%) per annum. On October 8, 2021, the promissory note was repaid in full.

Credit Agreement and Notes

On March 30, 2021, 1847 Wolo and Wolo entered into a credit agreement with Sterling National Bank for revolving loans in the principal amount of $1,000,000 and a term loan in the principal amount of $3,550,000. On October 8, 2021, the revolving loan and the term loan were repaid in full.

High Mountain/Innovative Cabinets

Loans on Vehicles/Equipment

High Mountain and Innovative Cabinets have entered into seventeen retail installment sale contracts pursuant to which they agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.80% with an aggregate remaining principal amount of $186,054 as of December 31, 2021.

Financing Leases

On February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. The balance payable was $11,044 as of December 31, 2021.

On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. The balance payable was $5,757 as of December 31, 2021.

Following is a summary of payments due on financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	8,161
2023		8,161
2024		1,515
2025		—
2026		—
Thereafter		—
Total payments		17,837
Less: amount representing interest		(1,036	)
Present value of minimum lease payments	$	16,801

As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 2.10 years.

PPP Loans

On April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under provisions of the CARES Act. The PPP loans have two-year terms and bear interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the

proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.

Following is a summary of payments due on notes payable and financing leases for the succeeding five years:

Year Ending December 31,	Amount
2022	$	820,400
2023		212,554
2024		179,868
2025		160,270
2026		118,647
Thereafter		206,701
Total payments	$	1,698,440

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Vesting Note Payable — Related Party

12 Months Ended

Dec. 31, 2021

Vesting Note Payable – Related Party [Abstract]

VESTING NOTE PAYABLE — RELATED PARTY

NOTE 12 — VESTING NOTE PAYABLE — RELATED PARTY

Vesting Promissory Note

A portion of the purchase price for the acquisition of Kyle’s on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to the Kyle’s Sellers in the principal amount of $1,050,000, which increased to a principal amount of up to $1,260,000 pursuant to the vested percentage calculation described below. Payment of the principal and accrued interest on the note is subject to vesting as described below. The note bears interest 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.

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.

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Convertible Promissory Notes

12 Months Ended

Dec. 31, 2021

Notes Payable [Abstract]

CONVERTIBLE PROMISSORY NOTES

NOTE 13 — CONVERTIBLE PROMISSORY NOTES

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).

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 61st 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.

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 the outstanding balance of the note into 100,000 common shares.

On July 21, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares.

On August 4, 2020, Goedeker used a portion of the proceeds from the Goedeker IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.

On September 2, 2020, the Company entered into amendment to the warrant issued to Leonite on April 5, 2019. Pursuant to the amendment, the parties amended the warrant to allow for the conversion of the warrant into 180,000 common shares in exchange for Leonite’s surrender of the remaining 20,000 common shares underlying this warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September 2, 2020, Leonite exercised the first warrant in accordance with the foregoing amendment and the Company issued 180,000 common shares to Leonite. As a result of this exercise, both warrants were cancelled.

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Operating Leases

12 Months Ended

Dec. 31, 2021

Operating Leases [Abstract]

OPERATING LEASES

NOTE 14 — OPERATING LEASES

Kyle’s

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. The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On June 9, 2021, Kyle’s entered into an additional industrial lease agreement with a third party. The lease commenced on January 1, 2022 and is for a term of 62 months, with an option for a renewal term of five years, and provides for a base rent of $3,336 for months 3-4 (with no payments for the first two months), with gradual increases to $7,508 for final year. In addition, Kyle’s is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants. The lease increased the operating lease right to use asset and corresponding operating lease liability by $361,158.

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	735,074
Accumulated amortization		(85,777	)
Net balance	$	649,297
Lease liability, current portion		113,105
Lease liability, long term		539,234
Total operating lease liabilities	$	652,339
Weighted Average Remaining Lease Term – operating leases		54 months
Weighted Average Discount Rate – operating leases		5.5	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	146,559
2023		169,839
2024		174,043
2025		146,885
2026		90,099
Thereafter		15,017
Total lease payments		742,442
Less imputed interest		(90,103	)
Maturities of lease liabilities	$	652,339

High Mountain

On December 1, 2017, High Mountain entered into a lease agreement with a third party. The lease commenced on January 1, 2018 and was for a period of 48 months, expiring on December 31, 2021. High Mountain is continuing to pay on a month-to-month basis until the new facility described below is ready. The base rent is $12,767 per month. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs. The lease agreement contains customary events of default, representations, warranties and covenants.

On October 29, 2021, High Mountain entered into a new lease agreement with a third party. The term of the lease will commence upon the completion of work, which is expected in March or April 2022, and is for a period of 61 months. The base rent is $29,400 for months 2-13 (with no payments for the first month), with gradual increases to $34,394 for months 50-61. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	2,055,995
Accumulated amortization		(337,812	)
Net balance	$	1,718,183
Lease liability, current portion		258,843
Lease liability, long term		1,459,339
Total operating lease liabilities	$	1,718,182
Weighted Average Remaining Lease Term – operating leases		61 Months
Weighted Average Discount Rate – operating leases		4.0	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	294,000
2023		364,560
2024		379,142
2025		394,308
2026		410,082
Thereafter		68,788
Total lease payments		1,910,880
Less imputed interest		(192,697	)
Maturities of lease liabilities	$	1,718,183

Innovative Cabinets

On January 20, 2020, Innovative Cabinets entered into a lease agreement with the third party. The term of the lease commenced on April 1, 2020 and is for a period of 36 months. The base rent is $2,936 for the first year, with gradual increases to $3,140 for the final year. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

On December 7, 2020, Innovative Cabinets entered into a lease agreement with the third party. The term of the lease commenced on January 1, 2021 and is for a period of 61 months. The base rent is $15,600 for 2021, with gradual increases to $18,085 for 2026. In addition, Innovative Cabinets is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties and covenants.

Supplemental balance sheet information related to these leases is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	1,232,993
Accumulated amortization		(454,609	)
Net balance	$	778,384
Lease liability, current portion		218,873
Lease liability, long term		584,833
Total operating lease liabilities	$	803,706
Weighted Average Remaining Lease Term – operating leases		42 Months
Weighted Average Discount Rate – operating leases		4.02	%

Future minimum lease payments under these operating lease as of December 31, 2021 were as follows:

2022	$	230,191
2023		208,020
2024		204,558
2025		210,695
2026		18,085
Total lease payments		871,549
Less imputed interest		(67,843	)
Maturities of lease liabilities	$	803,706

Wolo

On October 4, 1978, Wolo Mfg entered into a lease agreement with PKL Realty LLC (formerly P.K.L. Realty Corp). This lease agreement has been amended numerous times. Pursuant to the latest amendment entered into in July 2020, the lease expires on July 31, 2022 and provides for rent of $6,897 from August 8, 2021 to July 31, 2022. The lease agreement contains customary events of default representations, warranties and covenants.

Supplemental balance sheet information related to this lease is as follows:

	December 31, 2021
Operating lease right-of-use lease asset	$	153,663
Accumulated amortization		(106,924	)
Net balance	$	46,739
Lease liability, current portion		47,328
Lease liability, long term		—
Total operating lease liabilities	$	47,328
Weighted Average Remaining Lease Term – operating leases		7 months
Weighted Average Discount Rate – operating leases		6.0	%

Future minimum lease payments under this operating lease as of December 31, 2021 were as follows:

2022	$	48,279
Total lease payments		48,279
Less imputed interest		(951	)
Maturities of lease liabilities	$	47,328

Asien’s

Asien’s has an office and showroom space that has been leased on a month-by-month basis for $11,665 per month.

Supplemental cash flows information related to leases was as follows:

	December 31, 2021		December 31, 2020
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$	985,122	$	21,000
Right-of-use asset obtained in exchange for lease obligation:
Operating lease	$	3,040,854	$	373,916

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Future Financing Leases

Kyle’s has entered into three financing lease agreements for expansion equipment. The equipment has been installed and expected to be in service in the second quarter of 2022. These agreements have terms of six years beginning at the time of installation, no payment have been made on the lease agreement as of December 31, 2021 and the expected future minimum lease payments under the leases are $630,816.

Office Lease

An office space has been leased on a month-by-month basis.

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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

INCOME TAXES

NOTE 18 — INCOME TAXES

As of December 31, 2021 and 2020, the Company had net operating loss carry forwards of approximately $438,209 and $347,000, respectively, that may be available to reduce future years’ taxable income in varying amounts through 2041.

The provision for Federal income tax consists of the following:

The cumulative tax effect at the expected rate of (3.4)% and (4.8)% of significant items comprising the Company’s net deferred tax amount is as follows:

The components for the provision of income taxes include:

	December 31, 2021		December 31, 2020
Current Federal and State	$	143,000	$	—
Deferred Federal and State		75,300		83,900
Total (benefit) provision for income taxes	$	218,300	$	(83,900	)

A reconciliation of the statutory US Federal income tax rate to the Company’s effective income tax rate is as follows:

	December 31, 2021		December 31, 2020
Federal tax	21.0	%	21.0	%
State tax	1.7	%	4.1	%
Discontinued operations	0.0	%	(5.4	)%
Permanent items	(5.0	)%	(1.6	)%
Measurement Period Adjustment	(16.9	)%	0.0	%
Valuation Allowance	2.3	%	(22.6	)%
Other	(6.5	)%	(0.3	)%
Effective income tax rate	(3.4	)%	(4.8	)%

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The Company has a net cumulative current deferred tax asset of $242,000 and a net cumulative long-term deferred tax liability of ($2,312,000). The major components of deferred tax assets and liabilities are as follows:

	December 31, 2021			December 31, 2020
Deferred tax assets
Inventory obsolescence	$	107,000		$	4,000
Sales return reserve		—			48,000
Business interest limitation		481,000			20,000
Lease liability		712,000			95,000
Other		135,000			55,000
Loss carryforward		153,000			94,000
Valuation Allowance		—			(132,000	)
Total deferred tax assets	$	1,588,000		$	184,000
Deferred tax liabilities
Fixed assets	$	(230,000	)	$	(89,000	)
Right of Use Assets		(706,000	)		(95,000	)
Intangibles		(2,722,000	)		—
Total deferred tax liabilities	$	(3,658,000	)	$	(184,000	)
Total net deferred income tax assets (liabilities)	$	(2,070,000	)	$	—

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2011 and 2020, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties were $0 and $0, respectively. The tax years ended December 31, 2016 through December 31, 2021 are considered to be open under statute and therefore may be subject to examination by the Internal Revenue Service and various state jurisdictions.

The Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2021 and 2020.

	As of December 31,
	2021			2020
Prepaid income taxes (accrued tax liability)	$	(175,000	)	$	21,000
Deferred tax asset (liability)	$	(2,070,000	)	$	—

	Years Ended December 31,
	2021		2020
Income tax (benefit)/expense	$	218,000	$	(84,000	)

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Supplemental Disclosures of Cash Flow Information

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

NOTE 19 — SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the years ended December 31, 2021 and 2020 were as follows:

	Years Ended December 31,
	2021		2020
Interest paid	$	176,204	$	415,451
Income tax paid	$	50,000	$	—
Business combinations:
Net assets in acquisition of H&I	$	3,716,375	$	—
Wolo business combination	$	6,606,403	$	—
Kyle’s business combination	$	—	$	3,516,530
Asien’s business combination	$	—	$	1,182,925
Financing:
Due to seller (net cash paid to seller after closing)	$	977,685	$	4,622,792
Notes payable sellers	$	6,730,345	$	—
Line of credit, net of debt discount	$	—	$	568,597
Finance purchases of property and equipment	$	688,978	$
Convertible Promissory Note	$	—	$	1,353,979
Common Shares	$	—	$	1,115
Accrued common share dividends	$	242,160	$	—
Deemed Dividend related to issuance of preferred shares	$	1,527,086	$	3,051,478
1847 Goedeker Spin-Off Dividend	$	—	$	283,257
Distribution – Allocation shares	$	—	$	5,985,500
Additional Paid in Capital – common shares and warrants issued	$	757,792	$	4,711,385
Operating lease, ROU assets and liabilities	$	2,184,477	$	373,916

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Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2021

Basis of Presentation [Abstract]

Basis of Presentation

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and are presented in US dollars.

The results of Goedeker are included within discontinued operations for year ended December 31, 2020.

The results of 1847 Neese are included within discontinued operations for the years ended December 31, 2021 and 2020. The Company retrospectively updated the consolidated financial statements for the year ended December 31, 2020 to reflect this change.

Accounting Basis

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

Segment Reporting

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 stockholders. 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 services including sales, 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, extended warranties, 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

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Use of Estimates

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.

Impact of Covid-19

Impact of COVID-19

The impact of COVID-19 on the Company’s business has been considered in management’s estimates and assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides for economic assistance loans through the United States Small Business Administration (the “SBA”). On April 28, 2020, Asien’s received $357,500 in Paycheck Protection Program (“PPP”) loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the Small Business Administration (See Note 11).

Reclassifications

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company’s prior financial statements and accompanying notes to conform to the presentation for the year ended December 31, 2021. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder’s equity.

Revenue Recognition and Cost of Revenue

Revenue Recognition and Cost of Revenue

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

Retail and Appliances Segment

The Company collects 100% of the payment for special-order models including tax and 50% of the 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 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 5% of total revenue.

Customer deposits ‒ The Company records customer deposits when payments are received in advance of the delivery of the merchandise. The Company expects that substantially all of the customer deposits will be recognized within six months as the performance obligations are satisfied.

Construction Segment

The Company’s construction segment revenues are derived primarily through contracts with customers whereby the Company specializes in all aspects of products and services relating to finished carpentry, custom cabinetry, and countertops. The Company recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Since most contracts are bundled to include both material and installation services, the Company combines these items into one performance obligation as the overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. The Company does offer assurance-type warranties on certain of its installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For any contracts that are not complete at the reporting date, the Company recognizes revenue over time, because of the continuous transfer of control to the customer as work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. The Company utilizes the cost-to-cost measure of progress method as it believes this best depicts the transfer of control of assets to the customer, which occurs as costs are incurred.

When this method is used, the Company estimates the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, cash flow, and profitability from a particular contract may be adversely affected.

An insignificant portion of sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability and excluded from revenue on a net basis.

Contracts can be subject to modification to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

All contracts are billed either contractually or as work is performed. Billing on long-term contracts occurs primarily on a monthly basis throughout the contract period whereby the Company submits progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some contracts, the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered a significant financing component.

Cost of revenues earned include all direct material and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying the performance obligation.

Contract Assets and Contract Liabilities

The Company records a contract asset when it has satisfied its performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of the Company’s performance obligation. The difference between the beginning and ending balances of contract assets and liabilities primarily results from the timing of the Company’s performance and the customer’s payment. At times, the Company has a right to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included in contract assets or contract liabilities, as determined on a contract-by-contract basis.

Automotive Supplies Segment

The Company’s automotive supplies segment 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. Focused on the automotive and industrial after-market, the Company sells its products to big-box national retail chains, through specialty and industrial distributors, as well as online/mail order retailers and original equipment manufacturers.

The Company collects 100% of the payment for internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the agreed upon terms.

Performance Obligations — The revenue that the Company recognizes arises from orders it receives from contracts with customers. The Company’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers and each 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 shipment of the order. 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 sales includes the cost of purchased merchandise plus freight, warehouse salaries, tariffs, and any applicable delivery charges from the vendor to the Company.

Warranties vary and are typically 90 days to consumers and manufacturing defect warranty to are available to resellers. At times, depending on the product, the Company can also offer a warranty up to 12 months.

Receivables

Receivables

Receivables consist of trade accounts receivable from customer, credit card transactions in the process of settlement, and vendor rebates receivable. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivables are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivable. Retainage receivables represent the amount retained by customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered at risk. The allowance for doubtful accounts amounted to $359,000 and $0 for the years ended December 31, 2021 and 2020, respectively. Uncollectible balances are expensed in the periods they are determined to be uncollectible.

Inventory

Inventory

For Asien’s, inventory mainly consists of appliances that are acquired for resale and is valued at the average cost determined on a specific item basis. Inventory also consists of parts that are used in service and repairs and may or may not be charged to the customer depending on warranty and contractual relationship. Kyle’s typically orders inventory on a job-by-job basis and those jobs are put into production within hours of being received. The inventory in production is accounted for in the contract assets and liabilities and follows the percentage completion methodology. Inventories consisting of materials and supplies are stated at lower of costs or market. High Mountain and Innovative Cabinets’ inventory mainly consists of doors, door frames, baseboards, crown molding, cabinetry, countertops, custom cabinets, closet shelving, and other related products. The Company values inventory at each balance sheet date to ensure that it is carried at the lower of cost or net realizable value with cost determined based on the average cost basis. Wolo’s inventory consists of finished goods acquired for resale and is valued at the weighted-average cost determined on a

specific item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $387,848 and $12,824 at December 31, 2021 and 2020, respectively.

Property and Equipment

Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Trucks and Vehicles	3-6

Goodwill and Intangible Assets

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5-15
Marketing-Related	Straight-line basis	5

Long-Lived Assets

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating 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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, certificates of deposit and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

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 three-level hierarchy is as follows:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or inputs that are corroborated by market data.

Level 3 — Unobservable inputs that are not corroborated by market date.

The Company’s held to maturity securities are comprised of certificates of deposit.

Derivative Instrument Liability

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.

Income Taxes

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 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.

Basic Income (Loss) Per Share

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the year ended December 31, 2021, potentially dilutive securities were included in diluted loss per share under the treasury method: 5,200,460 for outstanding warrants, 2,257,404 for principal and accrued interest of series A convertible preferred shares, and 10,131,076 for the principal and accrued interest of convertible notes. As the Company had a net loss for the year ended December 31, 2020, the following 2,632,278 potentially dilutive securities were excluded from diluted loss per share: 2,632,278 for outstanding warrants.

Operating Leases

Operating Leases

ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

Going Concern Assessment

Going Concern Assessment

Management assesses going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

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. For the year ended December 31, 2021, the Company incurred operating losses from continuing operations of $3,721,157 (before deducting losses attributable to non-controlling interests and excluding net income from discontinued operations), cash flows used in operations of $897,566 (excluding the cashflow from discontinued operations) and negative working capital of $1,295,692 (excluding the negative working capital from discontinued operations).

Management has prepared estimates of operations for fiscal year 2022 and believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K, which indicate improved operations and the Company’s ability to continue operations as a going concern.

The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted CARES Act provides for economic assistance loans through the SBA. On April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under the CARES Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the

proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.

The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.

Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on Form 10-K indicate improved operations and the Company’s ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

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Disaggregation of Revenues and Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Schedule of revenues

	Three Months Ended March 31, 2022
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,204,625	$	—	$	—	$	2,204,625
Appliance accessories, parts, and other		316,159		—		—		316,159
Automotive horns		—		—		1,199,856		1,199,856
Automotive lighting		—		—		442,135		442,135
Custom cabinets and countertops		—		4,167,801		—		4,167,801
Finished carpentry		—		3,743,302		—		3,743,302
Total Revenues	$	2,520,784	$	7,911,103	$	1,641,991	$	12,073,878

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,899,361	$	—	$	—	$	2,899,361
Appliance accessories, parts, and other		365,005		—		—		365,005
Automotive horns		—		—		—		—
Automotive lighting		—		—		—		—
Custom cabinets and countertops		—		1,515,909		—		1,515,909
Finished carpentry		—		—		—		—
Total Revenues	$	3,264,366	$	1,515,909	$	—	$	4,780,275

Schedule of segment information revenues

	Three Months Ended March 31, 2022
	Retail and Appliances			Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	2,520,784		$	7,911,103	$	1,641,991		$	—		$	12,073,878
Operating expenses										—
Cost of sales		1,871,450			4,879,591		998,089			—			7,749,130
Personnel		230,388			1,134,210		300,328			(87,226	)		1,577,700
Depreciation and amortization		79,797			379,704		51,870			—			511,371
General and administrative		449,494			1,116,558		386,781			213,374			2,166,207
Total Operating Expenses		2,631,129			7,510,063		1,737,068			126,148			12,004,408
Income (Loss) from Operations	$	(110,345	)	$	401,040	$	(95,077	)	$	(126,148	)	$	69,470

	Three Months Ended March 31, 2021
	Retail and Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	3,264,366	$	1,515,909	$	—		$	—		$	4,780,275
Operating expenses						—			—
Cost of sales		2,506,652		754,030		—			—			3,260,682
Personnel		253,083		231,589		—			—			484,672
Depreciation and amortization		44,675		77,431		—			—			122,106
General and administrative		434,587		215,311		598,295			76,003			1,324,196
Total Operating Expenses		3,238,997		1,278,361		598,295			76,003			5,191,656
Income (Loss) from Operations	$	25,369	$	237,548	$	(598,295	)	$	(76,003	)	$	(411,381	)

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Property and Equipment (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of Property and equipment

	March 31, 2022			December 31, 2021
Equipment and machinery	$	1,127,897		$	808,592
Office furniture and equipment		107,903			105,203
Transportation equipment		901,426			864,121
Leasehold improvements		123,651			112,356
Total property and equipment		2,260,877			1,890,272
Less: Accumulated depreciation		(339,910	)		(194,961	)
Property and equipment, net	$	1,920,967		$	1,695,311

Classification	December 31, 2021			December 31, 2020
Buildings and leasehold improvements	$	135,804		$	42,601
Equipment and machinery		836,622			171,179
Office furniture and equipment		53,725			2,613
Transportation equipment		864,121			213,850
Total		1,890,272			430,243
Less: Accumulated depreciation		(194,961	)		(31,740	)
Property and equipment, net	$	1,695,311		$	398,503

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Intangible Assets (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

	March 31, 2022			December 31, 2021
Customer relationships	$	5,791,000		$	5,791,000
Marketing related		5,917,000			5,917,000
Technology related		623,000			623,000
Total intangible assets		12,331,000			12,331,000
Less: accumulated amortization		(1,251,795	)		(887,103	)
Intangible assets, net	$	11,079,205		$	11,443,897

	December 31, 2021			December 31, 2020
Customer Relationships
Identifiable intangible assets	$	5,791,000		$	3,189,000
Accumulated amortization		(399,480	)		(63,419	)
Customer relationship identifiable intangible assets, net		5,391,520			3,125,581
Marketing Related
Identifiable intangible assets		5,917,000			841,000
Accumulated amortization		(418,404	)		(81,114	)
Marketing related identifiable intangible assets, net		5,498,596			759,886
Technology Related
Identifiable intangible assets		623,000			—
Accumulated amortization		(69,219	)		—
Technology related identifiable intangible assets, net		553,781			—
Total Identifiable intangible assets, net	$	11,443,897		$	3,885,467

Schedule of estimated amortization expense

Year Ending December 31,	Amount
2022 – remaining	$	1,094,088
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,079,205

2022	$	1,458,780
2023		1,458,780
2024		1,458,750
2025		1,325,745
2026		1,157,523
Thereafter		4,584,319
Total	$	11,443,897

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Selected Account Information (Tables)

3 Months Ended

Mar. 31, 2022

Quarterly Financial Information Disclosure [Abstract]

Schedules of receivables

	March 31, 2022			December 31, 2021
Trade accounts receivable	$	3,235,644		$	2,691,702
Vendor rebates receivable		12,194			126,118
Credit card payments in process of settlement		—			116,187
Retainage		1,029,976			803,989
Total receivables		4,277,814			3,737,996
Allowance for doubtful accounts		(359,000	)		(359,000	)
Accounts receivable, net	$	3,918,814		$	3,378,996

Schedules of inventories

	March 31, 2022			December 31, 2021
Appliances	$	2,554,539		$	2,206,336
Automotive		1,824,260			2,064,834
Construction		1,814,543			1,543,980
Total inventories		6,193,342			5,815,150
Less reserve for obsolescence		(387,848	)		(387,848	)
Total inventories, net	$	5,805,494		$	5,427,302

Schedules of accounts payable and accrued expenses

	March 31, 2022		December 31, 2021
Trade accounts payable	$	3,810,165	$	3,117,825
Credit cards payable		80,536		52,300
Accrued payroll liabilities		397,717		263,590
Accrued interest		853,402		711,258
Accrued dividends		384,977		242,160
Other accrued liabilities		384,779		431,539
Total accounts payable and accrued expenses	$	5,911,576	$	4,818,672

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Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Lessee, Operating Lease, Disclosure [Table Text Block]

	March 31, 2022			December 31, 2021
Operating lease right-of-use assets	$	3,094,573		$	3,192,604
Lease liabilities, current portion		595,039			613,696
Lease liabilities, long-term		2,542,790			2,607,862
Total operating lease liabilities	$	3,137,829		$	3,221,558
Weighted-average remaining lease term (months)		54			59
Weighted average discount rate		4.29	%		4.29	%

Schedule of maturities of operating lease liabilities

Year Ending December 31,	Amount
2022 – remaining	$	524,519
2023		738,690
2024		753,868
2025		747,860
2026		495,994
Thereafter		212,580
Total		3,473,511
Less: imputed interest		(335,682	)
Total operating lease liabilities	$	3,137,829

Schedule of maturities of finance lease liabilities

Year Ending December 31,	Amount
2022 – remaining	$	137,882
2023		184,711
2024		168,254
2025		161,487
2026		161,487
Thereafter		166,688
Total payments		980,509
Less: amount representing interest		(138,235	)
Present value of minimum finance lease payments	$	842,274

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Acquisitions (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Business Combinations [Abstract]

Schedule of unaudited pro forma results

	March 31, 2022			March 31, 2021
Revenues	$	12,073,878		$	13,373,918
Net income (loss)		(927,208	)		317,547
Net loss attributable to 1847 Holdings common shareholders’		(1,008,245	)		(1,398,248	)
Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted	$	(0.21	)	$	(0.29	)

	Years Ended December 31,
	2021			2020
Revenues, net	$	51,589,004		$	42,131,589
Net income (loss)	$	(4,445,617	)	$	1,733,005
Basic earnings (loss) per share	$	(0.94	)	$	0.36
Diluted earnings (loss) per share	$	(0.94	)	$	0.36
Basic Number of Shares (*)		4,749,971			4,807,429
Diluted Number of Shares (*)		4,749,971			4,807,429

*        shares assuming as if issued as of January 1.

Schedule of preliminary analysis for the Asien's purchase

Purchase Consideration at fair value:
Common shares	$	1,037,500
Notes payable		855,000
Cash paid to Seller (post-closing)		233,000
Amount of consideration	$	2,125,500
Assets acquired and liabilities assumed at fair value
Cash	$	1,501,285
Accounts receivable		235,746
Inventories		1,457,489
Other current assets		41,427
Property and equipment		157,052
Customer related intangibles		462,000
Marketing related intangibles		547,000
Accounts payable and accrued expenses		(280,752	)
Customer deposits		(2,405,703	)
Notes payable		(509,272	)
Other liabilities		(23,347	)
Net assets acquired	$	1,182,925
Total net assets acquired	$	1,182,925
Consideration paid		2,125,500
Goodwill	$	942,575

Purchase consideration at fair value:
Common shares	$	3,675,000
Notes payable		498,979
Cash		4,389,792
Amount of consideration	$	8,563,771
Assets acquired and liabilities assumed at fair value
Cash	$	130,000
Accounts receivable		385,095
Costs in excess of billings		122,016
Other current assets		13,707
Property and equipment		200,737
Customer related intangibles		2,727,000
Marketing related intangibles		294,000
Accounts payable and accrued expenses		(263,597	)
Billings in excess of costs		(43,428	)
Other liabilities		(49,000	)
Net tangible assets acquired	$	3,516,530
Total net assets acquired	$	3,516,530
Consideration paid		8,563,771
Goodwill	$	5,047,241

Purchase consideration at fair value:
Notes payable	$	850,000
Cash		6,550,000
Net cash paid to Seller (post-closing)		944,056
Amount of consideration	$	8,344,056
Assets acquired and liabilities assumed at fair value
Cash	$	1,171,655
Accounts receivable		1,860,107
Inventory		1,944,929
Customer related intangibles		233,000
Marketing related intangibles		992,000
Technology related intangibles		623,000
Other current assets		218,154
Deferred tax liability		(325,000	)
Accounts payable and accrued expenses		(111,442	)
Net tangible assets acquired	$	6,606,403
Total net assets acquired	$	6,606,403
Consideration paid		8,344,056
Goodwill	$	1,737,653

Purchase consideration at preliminary fair value:
Cash	$	10,687,500
Notes payable, net of debt discount		4,753,673
Amount of consideration	$	15,441,173
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	208,552
Accounts receivable		1,042,194
Inventory		1,848,729
Contract assets		367,177
Other current assets		80,771
Marketing intangible		1,610,000
Customer intangible		4,843,000
Property and equipment		610,882
Operating lease assets		831,951
Other assets		—
Accounts payable and accrued expenses		(1,207,424	)
Contract liabilities		(3,770,081	)
Deferred tax liabilities		(1,670,000	)
Lease liabilities		(856,377	)
Financing leases		(18,600	)
Loans payable		(204,399	)
Net tangible assets acquired	$	3,716,375
Total net assets acquired	$	3,716,375
Consideration paid		15,441,173
Preliminary goodwill	$	11,724,798

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Shareholders’ Deficit (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Stockholders' Equity Note [Abstract]

Schedule of changes in warrants outstanding

	Warrants	Weighted- Average Exercise Price
Outstanding at December 31, 2021	5,200,460	$	2.38
Granted	426,999		3.00
Exercised	—		—
Forfeited	—		—
Outstanding at March 31, 2022	5,627,459	$	2.43
Exercisable at March 31, 2022	5,627,459	$	2.43

Schedule of warrant activity

	Number of Common Share Warrants	Weighted average exercise price		Weighted average life (years)	Intrinsic value of Warrants
Outstanding, January 1, 2021	2,632,278	$	2.50	2.76	$	—
Granted	2,568,182		2.26	3.58		—
Exercised	—		—	—		—
Canceled	—		—	—		—
Outstanding, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500
Exercisable, December 31, 2021	5,200,460	$	2.38	2.36	$	512,500

Schedule of options

	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Term in Years
Outstanding at January 1, 2020	—		$	—	—
Granted	90,000			2.50	5.0
Exercised	77,500			2.50	—
Forfeited	—			—	—
Cancelled	(12,500	)		2.50	—
Expired	—		$	—	—
Outstanding at December 31, 2020	—		$	—	—
Exercisable at December 31, 2020

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Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Loss Per Share [Abstract]

Schedule of weighted average shares outstanding and the basic and diluted loss per common share

Basic and Diluted Loss Per Share	March 31, 2022
Net loss per common share attributable to 1847 Holdings common shareholders’	$	(1,008,245	)
Weighted average common shares outstanding		4,915,655
Basic and diluted loss per share	$	(0.21	)

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2021

Basis of Presentation [Abstract]

Schedule of property and equipment useful lives

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Trucks and Vehicles	3-6

Schedule of identifiable intangible assets

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5-15
Marketing-Related	Straight-line basis	5

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Business Segments (Tables)

12 Months Ended

Dec. 31, 2021

Business Segments [Abstract]

Schedule of business segments

	Year Ended December 31, 2021
	Retail & Appliances		Construction		Automotive Supplies			Corporate Services			Total
Revenue
Furniture and appliances	$	12,741,064	$	—	$	—		$	—		$	12,741,064
Construction		—		12,203,890		—			—			12,203,890
Automotive supplies		—		—		5,716,030			—			5,716,030
Total Revenue		12,741,064		12,203,890		5,716,030			—			30,660,984
Cost of sales		9,773,371		6,966,064		3,572,289			—			20,311,724
Operating expenses		2,892,973		4,153,938		3,119,435			1,286,813			11,453,159
Income (loss) from operations	$	74,720	$	1,083,888	$	(975,694	)	$	(1,286,813	)	$	(1,103,899	)

	Year Ended December 31, 2020
	Retail & Appliances			Construction			Automotive Supplies		Corporate Services			Total
Revenue
Furniture and appliances	$	7,625,222		$	—		$	—	$	—		$	7,625,222
Construction		—			1,120,224			—		—			1,120,224
Automotive supplies		—			—			—		—			—
Total Revenue		7,625,222			1,120,224			—		—			8,745,446
Cost of sales		5,866,413			665,022			—		—			6,531,435
Operating expenses		1,986,775			681,040			—		896,092			3,563,908
Loss from operations	$	(227,967	)	$	(225,838	)	$	—	$	(896,092	)	$	(1,349,897	)

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Cash Equivalents and Investments (Tables)

12 Months Ended

Dec. 31, 2021

Cash and Cash Equivalents [Abstract]

Schedule of cash and cash equivalents

	December 31, 2021		December 31, 2020
Cash and cash equivalents
Operating accounts	$	1,383,533	$	976,538
Restricted accounts		—		403,811
Subtotal	$	1,383,533	$	1,380,349
Held to Maturity Investments
Restricted accounts – certificates of deposit (4 – 24-month maturities, FDIC insured)	$	276,429	$	276,270
Subtotal	$	276,429	$	276,270
TOTAL	$	1,659,962	$	1,656,619

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Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Schedule of major classes of assets and liabilities of the discontinued operations

	December 31, 2021		December 31, 2020
Current Assets – discontinued operations:
Cash	$	—	$	416,831
Accounts receivable, net		—		334,095
Inventories, net		—		305,080
Prepaid expenses and other current assets		—		268,602
Total current assets – discontinued operations		—		1,324,608
Noncurrent Assets – discontinued operations:
Property and equipment, net		—		1,925,844
Operating lease right of use assets		—		501,827
Goodwill		—		22,166
Intangible assets, net		—		7,933
Total noncurrent assets	$	—	$	2,457,770
Current liabilities – discontinued operations:
Accounts payable and accrued expenses	$	—	$	484,852
Current portion of operating lease liability		—		67,725
Notes payable – current portion		—		446,545
Total current liabilities – discontinued operations		—		999,122
Long term liabilities – discontinued operations:
Notes payable – long term, net of current portion		—		4,187,376
Accrued expenses – long term, related party		—		1,359,989
Financing lease liability, net of current portion		—		434,102
Total long term liabilities – discontinued operations	$	—	$	5,981,467

Schedule of consolidated statements of operations from discontinued operations

	Years Ended December 31,
	2021			2020
REVENUES
Services	$	612,862		$	3,379,653
Sales of parts and equipment		324,189			3,322,945
Furniture and appliances		—			42,709,714
TOTAL REVENUE		937,051			49,412,312
OPERATING EXPENSES
Cost of sales		298,050			38,488,245
Personnel costs		485,774			6,534,408
Depreciation and amortization		360,746			1,547,378
Fuel		112,746			378,115
General and administrative		290,872			8,555,731
TOTAL OPERATING EXPENSES		1,548,188			55,503,877
LOSS FROM OPERATIONS		(611,137	)		(6,091,564	)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt		(320	)		(792,721	)
Gain on forgiveness of debt		380,247			—
Loss on extinguishment of debt		—			(1,852,426	)
Gain on sale of assets		548,723			130,748
Loss on acquisition receivable		—			(809,000	)
Change in warrant liability		—			(2,127,656	)
Interest expense		(78,308	)		(985,840	)
Other income (expense)		1,200			3,599
TOTAL OTHER INCOME (EXPENSE)		851,542			(6,433,296	)
NET LOSS BEFORE INCOME TAXES		240,405			(12,524,860	)
INCOME TAX EXPENSE		—			350,603
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS		240,405			(12,875,463	)
LESS NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		108,182			(5,036,832	)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS	$	132,223		$	(7,838,631	)

Schedule of consolidated statements of cash flows relating to discontinued operations

	Years Ended December 31,
	2021			2020
Cash flows from operating activities of discontinued operations:
Net Income (Loss)	$	240,405		$	(12,875,461	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities of discontinued operations:
Depreciation and amortization		360,746			1,547,378
Amortization of financing costs and warrant features		2,187			842,174
Stock compensation		—			281,194
Amortization of operating lease right-of-use assets		19,007			63,253
Gain on forgiveness of PPP loans		(380,247	)		—
Loss on extinguishment of debt		—			2,052,118
Amortization of original interest discount		—			100,511
Gain on sale of equipment		(548,723	)		(130,748	)
Change in fair value of warrant liability		—			2,127,656
Write-off of acquisition receivable		—			809,000
Changes in operating assets and liabilities:
Accounts receivable		10,698			(3,327,816	)
Inventory		(161,286	)		(2,125,032	)
Prepaid expenses and other assets		49,222			(1,144,323	)
Accounts payable and accrued expenses		118,980			368,128
Operating lease liability		(19,007	)		(63,253	)
Vendor deposits		—			(252,688	)
Deferred tax asset		—			635,503
Customer deposits		—			14,427,180
Accrued expense long-term		137,438			454,209
Net cash provided by (used in) operating activities from discontinued operations	$	(170,580	)	$	3,788,983
Cash flows from investing activities in discontinued operations:
Proceeds from sale of equipment	$	675,000		$	209,500
Purchase of equipment		(30,697	)		(137,499	)
Net cash provided by investing activities in discontinued operations	$	644,303		$	72,001
Cash flows from financing activities in discontinued operations:
Proceeds from initial public offering	$	—		$	8,602,166
Proceeds from note payable		380,385			1,612,297
Repayments of notes payable		(589,078	)		(3,474,557	)
Repayment of floor plan		—			(10,581	)
Net borrowings from lines of credit		—			(1,339,430	)
Financing fees		—			(219,110	)
Repayment of financing lease		—			(721,151	)
Net cash provided by (used in) financing activities in discontinued operations	$	(208,693	)	$	4,449,634

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Receivables (Tables)

12 Months Ended

Dec. 31, 2021

Receivables [Abstract]

Schedule of receivables

	December 31, 2021			December 31, 2020
Credit card payments in process of settlement	$	116,187		$	158,924
Retainage		803,989			—
Trade receivables from customers		2,691,702			366,701
Vendor rebates receivable		126,118			—
Total receivables		3,737,996			525,625
Allowance for doubtful accounts		(359,000	)		—
Accounts receivable, net	$	3,378,996		$	525,625

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Inventories (Tables)

12 Months Ended

Dec. 31, 2021

Inventory Disclosure [Abstract]

Schedule of inventory

	December 31, 2021			December 31, 2020
Construction	$	1,543,980		$	6,308
Appliances		2,206,336			2,029,270
Automotive		2,064,834			—
Subtotal		5,815,150			2,035,578
Allowance for inventory obsolescence		(387,848	)		(12,824	)
Inventories, net	$	5,427,302		$	2,022,754

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2021

Notes Payable [Abstract]

Schedule of notes payable

	December 31, 2021			December 31, 2020
Line of Credit	$	—		$	301,081
8% Subordinated Amortizing Promissory Notes		—			101,980
6% Subordinated Amortizing Promissory Notes		581,963			975,985
PPP loans		—			357,500
4.5% Unsecured Promissory Notes		—			41,675
Loans on vehicles		396,351			90,374
Financing leases		522,166			—
Subtotal		1,500,480			1,868,595
Line of Credit		—			(301,081	)
Current portion of notes payable		(793,174	)		(429,183	)
Long-term notes payable	$	707,306		$	1,138,331

Schedule of payments due on financing leases

Year Ending December 31,	Amount
2022	$	99,075
2023		99,075
2024		99,075
2025		99,075
2026		99,075
Thereafter		99,075
Total payments		594,450
Less: amount representing interest		(72,178	)
Present value of minimum lease payments	$	522,272

Year Ending December 31,	Amount
2022	$	8,161
2023		8,161
2024		1,515
2025		—
2026		—
Thereafter		—
Total payments		17,837
Less: amount representing interest		(1,036	)
Present value of minimum lease payments	$	16,801

Schedule of payments due on notes payable and financing leases for the succeeding five years

Year Ending December 31,	Amount
2022	$	820,400
2023		212,554
2024		179,868
2025		160,270
2026		118,647
Thereafter		206,701
Total payments	$	1,698,440

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Operating Leases (Tables)

12 Months Ended

Dec. 31, 2021

Operating Leases [Abstract]

Schedule of supplemental balance sheet information

	December 31, 2021
Operating lease right-of-use lease asset	$	735,074
Accumulated amortization		(85,777	)
Net balance	$	649,297
Lease liability, current portion		113,105
Lease liability, long term		539,234
Total operating lease liabilities	$	652,339
Weighted Average Remaining Lease Term – operating leases		54 months
Weighted Average Discount Rate – operating leases		5.5	%

	December 31, 2021
Operating lease right-of-use lease asset	$	2,055,995
Accumulated amortization		(337,812	)
Net balance	$	1,718,183
Lease liability, current portion		258,843
Lease liability, long term		1,459,339
Total operating lease liabilities	$	1,718,182
Weighted Average Remaining Lease Term – operating leases		61 Months
Weighted Average Discount Rate – operating leases		4.0	%

	December 31, 2021
Operating lease right-of-use lease asset	$	1,232,993
Accumulated amortization		(454,609	)
Net balance	$	778,384
Lease liability, current portion		218,873
Lease liability, long term		584,833
Total operating lease liabilities	$	803,706
Weighted Average Remaining Lease Term – operating leases		42 Months
Weighted Average Discount Rate – operating leases		4.02	%

	December 31, 2021
Operating lease right-of-use lease asset	$	153,663
Accumulated amortization		(106,924	)
Net balance	$	46,739
Lease liability, current portion		47,328
Lease liability, long term		—
Total operating lease liabilities	$	47,328
Weighted Average Remaining Lease Term – operating leases		7 months
Weighted Average Discount Rate – operating leases		6.0	%

Schedule of future minimum lease payments

2022	$	146,559
2023		169,839
2024		174,043
2025		146,885
2026		90,099
Thereafter		15,017
Total lease payments		742,442
Less imputed interest		(90,103	)
Maturities of lease liabilities	$	652,339

2022	$	294,000
2023		364,560
2024		379,142
2025		394,308
2026		410,082
Thereafter		68,788
Total lease payments		1,910,880
Less imputed interest		(192,697	)
Maturities of lease liabilities	$	1,718,183

2022	$	230,191
2023		208,020
2024		204,558
2025		210,695
2026		18,085
Total lease payments		871,549
Less imputed interest		(67,843	)
Maturities of lease liabilities	$	803,706

2022	$	48,279
Total lease payments		48,279
Less imputed interest		(951	)
Maturities of lease liabilities	$	47,328

Schedule of supplemental cash flows information related to leases

	December 31, 2021		December 31, 2020
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$	985,122	$	21,000
Right-of-use asset obtained in exchange for lease obligation:
Operating lease	$	3,040,854	$	373,916

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Schedule of provision of income taxes

	December 31, 2021		December 31, 2020
Current Federal and State	$	143,000	$	—
Deferred Federal and State		75,300		83,900
Total (benefit) provision for income taxes	$	218,300	$	(83,900	)

Schedule of reconciliation of the statutory US federal income tax rate

	December 31, 2021		December 31, 2020
Federal tax	21.0	%	21.0	%
State tax	1.7	%	4.1	%
Discontinued operations	0.0	%	(5.4	)%
Permanent items	(5.0	)%	(1.6	)%
Measurement Period Adjustment	(16.9	)%	0.0	%
Valuation Allowance	2.3	%	(22.6	)%
Other	(6.5	)%	(0.3	)%
Effective income tax rate	(3.4	)%	(4.8	)%

Schedule of major components of deferred tax assets and liabilities

	December 31, 2021			December 31, 2020
Deferred tax assets
Inventory obsolescence	$	107,000		$	4,000
Sales return reserve		—			48,000
Business interest limitation		481,000			20,000
Lease liability		712,000			95,000
Other		135,000			55,000
Loss carryforward		153,000			94,000
Valuation Allowance		—			(132,000	)
Total deferred tax assets	$	1,588,000		$	184,000
Deferred tax liabilities
Fixed assets	$	(230,000	)	$	(89,000	)
Right of Use Assets		(706,000	)		(95,000	)
Intangibles		(2,722,000	)		—
Total deferred tax liabilities	$	(3,658,000	)	$	(184,000	)
Total net deferred income tax assets (liabilities)	$	(2,070,000	)	$	—

Schedule of prepaid and deferred tax assets and liabilities

	As of December 31,
	2021			2020
Prepaid income taxes (accrued tax liability)	$	(175,000	)	$	21,000
Deferred tax asset (liability)	$	(2,070,000	)	$	—

	Years Ended December 31,
	2021		2020
Income tax (benefit)/expense	$	218,000	$	(84,000	)

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Supplemental Disclosures of Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Elements [Abstract]

Schedule of supplemental disclosures of cash flow information

	Years Ended December 31,
	2021		2020
Interest paid	$	176,204	$	415,451
Income tax paid	$	50,000	$	—
Business combinations:
Net assets in acquisition of H&I	$	3,716,375	$	—
Wolo business combination	$	6,606,403	$	—
Kyle’s business combination	$	—	$	3,516,530
Asien’s business combination	$	—	$	1,182,925
Financing:
Due to seller (net cash paid to seller after closing)	$	977,685	$	4,622,792
Notes payable sellers	$	6,730,345	$	—
Line of credit, net of debt discount	$	—	$	568,597
Finance purchases of property and equipment	$	688,978	$
Convertible Promissory Note	$	—	$	1,353,979
Common Shares	$	—	$	1,115
Accrued common share dividends	$	242,160	$	—
Deemed Dividend related to issuance of preferred shares	$	1,527,086	$	3,051,478
1847 Goedeker Spin-Off Dividend	$	—	$	283,257
Distribution – Allocation shares	$	—	$	5,985,500
Additional Paid in Capital – common shares and warrants issued	$	757,792	$	4,711,385
Operating lease, ROU assets and liabilities	$	2,184,477	$	373,916

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Liquidity and Going Concern Assessment (Details)	3 Months Ended
	Mar. 31, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Borrowings on loans year	1 year
Cash and cash equivalents	$ 1,638,924
Incurred operating income	69,470
Cash flows used in operations	536,260
Negative working capital.	$ 924,324
Service debt obligations term	1 year

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Disaggregation of Revenues and Segment Reporting (Details)	3 Months Ended
	Mar. 31, 2022
Segment Reporting [Abstract]
Reportable segments	3

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Disaggregation of Revenues and Segment Reporting (Details) - Schedule of revenues - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Revenues
Appliances	$ 2,204,625	$ 2,899,361
Appliance accessories, parts, and other	316,159	365,005
Automotive horns	1,199,856
Automotive lighting	442,135
Custom cabinets and countertops	4,167,801	1,515,909
Finished carpentry	3,743,302
Total Revenues	12,073,878	4,780,275	$ 30,660,984	$ 8,745,446
Retail and Appliances [Member]
Revenues
Appliances	2,204,625	2,899,361
Appliance accessories, parts, and other	316,159	365,005
Automotive horns
Automotive lighting
Custom cabinets and countertops
Finished carpentry
Total Revenues	2,520,784	3,264,366
Construction [Member]
Revenues
Appliances
Appliance accessories, parts, and other
Automotive horns
Automotive lighting
Custom cabinets and countertops	4,167,801	1,515,909
Finished carpentry	3,743,302
Total Revenues	7,911,103	1,515,909
Automotive Supplies [Member]
Revenues
Appliances
Appliance accessories, parts, and other
Automotive horns	1,199,856
Automotive lighting	442,135
Custom cabinets and countertops
Finished carpentry
Total Revenues	$ 1,641,991

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Disaggregation of Revenues and Segment Reporting (Details) - Schedule of segment information revenues - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Segment Reporting Information [Line Items]
Revenues	$ 12,073,878	$ 4,780,275	$ 30,660,984	$ 8,745,446
Operating expenses
Cost of sales	7,749,130	3,260,682
Personnel	1,577,700	484,672	3,247,441	734,867
Depreciation and amortization	511,371	122,106	908,982	176,612
General and administrative	2,166,207	1,324,196
Total Operating Expenses	12,004,408	5,191,656	$ 1,548,188	$ 55,503,877
Income (Loss) from Operations	69,470	(411,381)
Retail and Appliances [Member]
Segment Reporting Information [Line Items]
Revenues	2,520,784	3,264,366
Operating expenses
Cost of sales	1,871,450	2,506,652
Personnel	230,388	253,083
Depreciation and amortization	79,797	44,675
General and administrative	449,494	434,587
Total Operating Expenses	2,631,129	3,238,997
Income (Loss) from Operations	(110,345)	25,369
Construction [Member]
Segment Reporting Information [Line Items]
Revenues	7,911,103	1,515,909
Operating expenses
Cost of sales	4,879,591	754,030
Personnel	1,134,210	231,589
Depreciation and amortization	379,704	77,431
General and administrative	1,116,558	215,311
Total Operating Expenses	7,510,063	1,278,361
Income (Loss) from Operations	401,040	237,548
Automotive Supplies [Member]
Segment Reporting Information [Line Items]
Revenues	1,641,991
Operating expenses
Cost of sales	998,089
Personnel	300,328
Depreciation and amortization	51,870
General and administrative	386,781	598,295
Total Operating Expenses	1,737,068	598,295
Income (Loss) from Operations	(95,077)	(598,295)
Corporate Services [Member]
Segment Reporting Information [Line Items]
Revenues
Operating expenses
Cost of sales
Personnel	(87,226)
Depreciation and amortization
General and administrative	213,374	76,003
Total Operating Expenses	126,148	76,003
Income (Loss) from Operations	$ (126,148)	$ (76,003)

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Property and Equipment (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 146,679	$ 24,309	$ 166,413	$ 31,740

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Property and Equipment (Details) - Schedule of Property and equipment - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	$ 2,260,877	$ 1,890,272
Less: Accumulated depreciation	(339,910)	(194,961)
Property and equipment, net	1,920,967	1,695,311
Equipment and machinery [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	1,127,897	808,592
Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	107,903	105,203
Transportation equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	901,426	864,121
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	$ 123,651	$ 112,356

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Intangible Assets (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Intangible Assets (Details) [Line Items]
Amortization expense	$ 364,692	$ 97,797	$ 742,571	$ 144,533
Weighted average estimated useful life			8 years 2 months 12 days
Asien’s [Member] | Customer Relationships [Member]
Intangible Assets (Details) [Line Items]
Identifiable intangible assets			$ 1,009,000
Kyle’s [Member] | Trade Names [Member]
Intangible Assets (Details) [Line Items]
Identifiable intangible assets			3,021,000
Wolo [Member] | Customer Relationships [Member]
Intangible Assets (Details) [Line Items]
Identifiable intangible assets			1,848,000
High Mountain and Innovative Cabinets [Member] | Customer Relationships [Member]
Intangible Assets (Details) [Line Items]
Identifiable intangible assets			$ 6,453,000

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Intangible Assets (Details) - Schedule of intangible assets - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Total intangible assets gross	$ 12,331,000	$ 12,331,000
Less: accumulated amortization	(1,251,795)	(887,103)
Intangible assets, net	11,079,205	11,443,897
Customer Relationships [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Total intangible assets gross	5,791,000	5,791,000
Marketing Related [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Total intangible assets gross	5,917,000	5,917,000
Technology Related [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Total intangible assets gross	$ 623,000	$ 623,000

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Intangible Assets (Details) - Schedule of estimated amortization expense - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Schedule of estimated amortization expense [Abstract]
2022 – remaining	$ 1,094,088	$ 1,458,780
2023	1,458,780	1,458,780
2024	1,458,750	1,458,750
2025	1,325,745	1,325,745
2026	1,157,523	1,157,523
Thereafter	4,584,319	4,584,319
Total	$ 11,079,205	$ 11,443,897

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Selected Account Information (Details) - Schedules of receivables - USD ($)	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Schedules of receivables [Abstract]
Trade accounts receivable	$ 3,235,644	$ 2,691,702
Vendor rebates receivable	12,194	126,118
Credit card payments in process of settlement		116,187	$ 158,924
Retainage	1,029,976	803,989
Total receivables	4,277,814	3,737,996
Allowance for doubtful accounts	(359,000)	(359,000)
Accounts receivable, net	$ 3,918,814	$ 3,378,996

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Selected Account Information (Details) - Schedules of inventories - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Public Utilities, Inventory [Line Items]
Total inventories	$ 6,193,342	$ 5,815,150
Less reserve for obsolescence	(387,848)	(387,848)
Total inventories, net	5,805,494	5,427,302
Appliances [Member]
Public Utilities, Inventory [Line Items]
Total inventories	2,554,539	2,206,336
Automotive [Member]
Public Utilities, Inventory [Line Items]
Total inventories	1,824,260	2,064,834
Construction in Progress [Member]
Public Utilities, Inventory [Line Items]
Total inventories	$ 1,814,543	$ 1,543,980

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Selected Account Information (Details) - Schedules of accounts payable and accrued expenses - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Schedules of accounts payable and accrued expenses [Abstract]
Trade accounts payable	$ 3,810,165	$ 3,117,825
Credit cards payable	80,536	52,300
Accrued payroll liabilities	397,717	263,590
Accrued interest	853,402	711,258	$ 25,159
Accrued dividends	384,977	242,160
Other accrued liabilities	384,779	431,539
Total accounts payable and accrued expenses	$ 5,911,576	$ 4,818,672

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Leases (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Leases [Abstract]
Operating lease expense	$ 235,438	$ 85,924
Purchase of machinery and equipment	$ 316,798
Maturity date	January 2028
Weighted-average remaining lease term	5 years 6 months

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Leases (Details) - Schedule of condensed consolidated balance sheet - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Schedule of condensed consolidated balance sheet [Abstract]
Operating lease right-of-use assets	$ 3,094,573	$ 3,192,604
Lease liabilities, current portion	595,039	613,696
Lease liabilities, long-term	2,542,790	2,607,862
Total operating lease liabilities	$ 3,137,829	$ 3,221,558
Weighted-average remaining lease term (months)	54 years	59 years
Weighted average discount rate	4.29%	4.29%

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Leases (Details) - Schedule of maturities of operating lease liabilities	Mar. 31, 2022 USD ($)
Schedule of maturities of operating lease liabilities [Abstract]
2022 – remaining	$ 524,519
2023	738,690
2024	753,868
2025	747,860
2026	495,994
Thereafter	212,580
Total	3,473,511
Less: imputed interest	(335,682)
Total operating lease liabilities	$ 3,137,829

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Leases (Details) - Schedule of maturities of finance lease liabilities	Mar. 31, 2022 USD ($)
Schedule of maturities of finance lease liabilities [Abstract]
2022 – remaining	$ 137,882
2023	184,711
2024	168,254
2025	161,487
2026	161,487
Thereafter	166,688
Total payments	980,509
Less: amount representing interest	(138,235)
Present value of minimum finance lease payments	$ 842,274

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Acquisitions (Details) - USD ($)	1 Months Ended		3 Months Ended		12 Months Ended
	Sep. 30, 2020	Jul. 29, 2020	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2021	Oct. 08, 2021	Mar. 30, 2021
Acquisitions (Details) [Line Items]
Purchase price per share (in Dollars per share)						$ 0.01
Convertible promissory notes				$ 4,753,673	$ 4,753,673
Principal amount	$ 1,260,000
Net of debt discount				1,126,672	1,126,672
Minimum [Member]
Acquisitions (Details) [Line Items]
Estimated useful life			3 years
Maximum [Member]
Acquisitions (Details) [Line Items]
Estimated useful life			7 years
Wolo Acquisition [Member]
Acquisitions (Details) [Line Items]
Capital stock outstanding percentage							100.00%
Business acquisition purchase price							$ 8,344,056
Contributed revenue			$ 1,661,754
Net loss continuing operation			325,417
Business acquisition purchase price in cash				6,550,000	6,550,000
Business acquisition purchase price payable in promissory note				850,000	850,000
Fair value of the net tangible assets				6,606,403	6,606,403
Cash due to seller				$ 8,344,056	$ 8,344,056
Percentage of secured promissory note				6.00%	6.00%
Working capital				$ 944,056	$ 944,056
High mountain door & trim [Member]
Acquisitions (Details) [Line Items]
Capital stock outstanding percentage						100.00%
Business acquisition purchase price						$ 15,441,173
Contributed revenue			6,249,349
Net loss continuing operation			$ 271,647
Asiens [Member] | Minimum [Member] | Property, Plant and Equipment [Member]
Acquisitions (Details) [Line Items]
Estimated useful life					5 years
Asiens [Member] | Maximum [Member] | Property, Plant and Equipment [Member]
Acquisitions (Details) [Line Items]
Estimated useful life					13 years
Asiens [Member] | May 28, 2020 [Member]
Acquisitions (Details) [Line Items]
Business acquisition purchase price				1,918,000	$ 1,918,000
Business acquisition purchase price in cash				233,000	233,000
Business acquisition purchase price payable in promissory note				200,000	200,000
Business acquisition purchase price payable earn out payments				$ 655,000	$ 655,000
Business acquisition shares of common stock (in Shares)				415,000	415,000
Mutual value				$ 830,000	$ 830,000
Business acquisition value of common stock				$ 1,037,500	$ 1,037,500
Purchase price per share (in Dollars per share)				$ 2.5	$ 2.5
Amortizing promissory note		6.00%
Fair value of the net tangible assets				$ 1,182,925	$ 1,182,925
Kyle’s Acquisition [Member]
Acquisitions (Details) [Line Items]
Business acquisition purchase price				6,839,792	6,839,792
Business acquisition purchase price in cash				4,389,792	4,389,792
Business acquisition purchase price payable in promissory note				$ 1,050,000	$ 1,050,000
Business acquisition shares of common stock (in Shares)				700,000	700,000
Mutual value				$ 1,400,000	$ 1,400,000
Business acquisition value of common stock				3,675,000	3,675,000
Fair value of the net tangible assets				$ 3,516,530	$ 3,516,530
Subordinate note, percentage				8.00%	8.00%
Kyle’s Acquisition [Member] | Minimum [Member] | Property, Plant and Equipment [Member]
Acquisitions (Details) [Line Items]
Estimated useful life					3 years
Kyle’s Acquisition [Member] | Maximum [Member] | Property, Plant and Equipment [Member]
Acquisitions (Details) [Line Items]
Estimated useful life					7 years
H&I Acquisition [Member]
Acquisitions (Details) [Line Items]
Purchase price					$ 15,441,173
Cash				$ 10,687,500	$ 10,687,500
Promissory notes					6.00%
Principal amount					$ 5,880,345
Fair value of the net assets				3,716,376	$ 3,716,376
Profoma [Member]
Acquisitions (Details) [Line Items]
Revenue, description					The revenue and net loss before non-controlling interest of Asien’s from May 29, 2020 through December 31, 2020 included in the consolidated income statement amounted to approximately $7,625,222 and $431,641, respectively. The revenue and net loss before non-controlling interest of Kyle’s from October 1, 2020 through December 31, 2020 included in the consolidated statement of operations amounted to approximately $1,120,224 and $380,500, respectively. The revenue and net loss before non-controlling interest of Wolo from April 1, 2021 through December 31, 2021 included in the consolidated income statement amounted to approximately $5,716,030 and $1,970,239, respectively.
Income statement approximately				10,249,281
Income statement respectively				$ 81,773

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Acquisitions (Details) - Schedule of unaudited pro forma results - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Schedule of unaudited pro forma results [Abstract]
Revenues	$ 12,073,878	$ 13,373,918
Net income (loss)	(927,208)	317,547
Net loss attributable to 1847 Holdings common shareholders’	$ (1,008,245)	$ (1,398,248)
Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted (in Dollars per share)	$ (0.21)	$ (0.29)

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Related Parties (Details) - USD ($)		1 Months Ended	3 Months Ended			7 Months Ended	12 Months Ended
	Jan. 03, 2018	Apr. 15, 2013	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 07, 2020	Apr. 05, 2019
Related Parties (Details) [Line Items]
Management fee			$ 0	$ 0			$ 0	$ 0
Nature of Common Ownership or Management Control Relationships				$75,000
Total management fees			275,000	$ 260,000			981,389	253,022
Base rent per month			7,000
Total rent expense			21,776
Initial principal amount										$ 714,286
Principal amount									$ 56,900
Maturity date									Dec. 07, 2021
Advanced amount								56,900
Accrued interest			853,402		$ 25,159	$ 25,159	711,258	25,159
Minimum [Member]
Related Parties (Details) [Line Items]
Increase in base rent			7,210
Maximum [Member]
Related Parties (Details) [Line Items]
Increase in base rent			7,426
Manager [Member]
Related Parties (Details) [Line Items]
Advances from related parties				74,928	71,358	71,358	74,927	71,358
1847 Asien/Asien's [Member]
Related Parties (Details) [Line Items]
Expensed management fees			75,000	75,000
Cabinet [Member]
Related Parties (Details) [Line Items]
Expensed management fees			125,000	75,000	75,000		345,556
Wolo [Member]
Related Parties (Details) [Line Items]
Expensed management fees			$ 75,000	0			235,833
Manager received fee							110,000
Advances [Member]
Related Parties (Details) [Line Items]
Advances from related parties				$ 118,834	$ 118,834	118,834	118,834	$ 118,834
Manager [Member]
Related Parties (Details) [Line Items]
Advances from related parties							74,928
Asien [Member]
Related Parties (Details) [Line Items]
Expensed management fees						$ 178,022	$ 300,000
Management Services Agreement [Member]
Related Parties (Details) [Line Items]
Description of management fee		On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”).
Repayment, description			The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees.
Offsetting Management Services Agreements [Member]
Related Parties (Details) [Line Items]
Additional advances, description			Pursuant to the offsetting management services agreements, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the Parent Management Fee in any fiscal quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to the Manager under other offsetting management services agreements.
Promissory Note [Member]
Related Parties (Details) [Line Items]
Repayment, description							Pursuant to the offsetting management services agreements, 1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, Goedeker appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, 1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that (i) pro rated payments shall be made in the first quarter and the last quarter of the term, (ii) if the aggregate amount of management fees paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of the Company’s gross income with respect to such fiscal year, then the management fee to be paid by such subsidiaries for any remaining fiscal quarters in such fiscal year shall be reduced, on a pro rata basis determined by reference to the management fees to be paid to the Manager by all of the subsidiaries of the Company, until the aggregate amount of the management fee paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal year, does not exceed 9.5% of the Company’s gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the Parent Management Fee with respect to such fiscal quarter, then the management fee to be paid by such subsidiaries for such fiscal quarter shall be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such fiscal quarter, does not exceed the Parent Management Fee calculated and payable with respect to such fiscal quarter.
Additional advances, description	The note provided that the Company could request additional advances from the Manager up to an aggregate additional amount of $150,000.
Initial principal amount	$ 50,000
Fixed annual interest rate							8.00%

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Mezzanine Equity (Details) - USD ($)				1 Months Ended					2 Months Ended	3 Months Ended	12 Months Ended
	Mar. 24, 2022	Oct. 12, 2021	Sep. 29, 2021	Feb. 17, 2022	Feb. 16, 2022	Mar. 26, 2021	Nov. 20, 2020	Sep. 29, 2020	Feb. 24, 2022	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Oct. 08, 2021	Oct. 26, 2020
Mezzanine Equity (Details) [Line Items]
Senior convertible preferred shares		2,632,278	4,450,460			4,450,460	4,450,460	4,450,460
Dividends rate (in Dollars per share)										$ 2	$ 2
Common shares calculated based percentage										80.00%	80.00%
Calculated based fixed price per share (in Dollars per share)										$ 1.57	$ 1.57
Dividend payment date per share (in Dollars per share)										$ 1.57	$ 1.57
Accumulated accrued and unpaid dividends percentage										115.00%	115.00%
Common shares stated value per share (in Dollars per share)										$ 2
Conversion price (in Dollars per share)										$ 1.75	$ 1.75
Common shares outstanding percentage										4.99%	4.99%
Ownership common shares outstanding										9.99%	4.99%
Convertible preferred shares percentage										115.00%	115.00%
Redemption price, including dividends (in Dollars)		$ 6,395,645
Consolidations adjustments to conversion price, description										On the first day of the 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum 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 24th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.
Additional equity interest										10.00%	10.00%
Convertible preferred shares amount (in Dollars)										$ 121,455	$ 1,032,806
Accrued dividends (in Dollars)										$ 128,318
Subject to adjustment percentage										3.00%
Common shares fixed price (in Dollars per share)										$ 2.7
Adjustments to shares conversion description										On the first day of the 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically 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.
Conversion price per share price adjustment (in Dollars per share)										$ 0.0075
Aggregate units issued	106,666					398,838			320,333
Aggregate units price per share (in Dollars per share)									$ 3
Gross proceeds (in Dollars)	$ 320,000								$ 961,000		$ (6,054,241)
Issuance costs (in Dollars)	15,000
Net proceeds (in Dollars)	$ 1,266,000
Exercise price per share (in Dollars per share)						$ 2.5					$ 3			$ 2.5
Fair value of warrants (in Dollars)										$ 152,350
Convertible preferred shares amount (in Dollars)										$ 13,760
Shares issued										1,684,849	1,818,182		250,000
Common Shares [Member]
Mezzanine Equity (Details) [Line Items]
Exercise price per share (in Dollars per share)	$ 3
Series A Senior Convertible Preferred Shares [Member]
Mezzanine Equity (Details) [Line Items]
Dividend rate, Percentage										14.00%	14.00%
Convertible preferred shares		2,632,278			133,333
Convertible dividends		6,395,645			152,381
Net proceeds (in Dollars)										$ 1,266,000
Exercise price per share (in Dollars per share)						$ 2.5
Preferred shares outstanding		1,818,182								1,684,849	1,818,182
Shares issued					152,851
Series A Convertible Preferred Shares [Member]
Mezzanine Equity (Details) [Line Items]
Convertible preferred shares percentage										14.00%
Executed share				583,334
Fair value of shares (in Dollars)										$ 1,113,650
Preferred shares issued										426,999	426,999
Preferred shares outstanding										0	0
Series B Preferred Stock [Member]
Mezzanine Equity (Details) [Line Items]
Preferred shares outstanding										426,999	0
Liquidation Rights [Member]
Mezzanine Equity (Details) [Line Items]
Convertible preferred shares percentage										115.00%
Conversion Rights [Member]
Mezzanine Equity (Details) [Line Items]
Common shares stated value per share (in Dollars per share)										$ 3
Conversion price (in Dollars per share)										$ 3
Redemption Rights [Member]
Mezzanine Equity (Details) [Line Items]
Convertible preferred shares percentage										115.00%
VWAP [Member]
Mezzanine Equity (Details) [Line Items]
Common shares fixed price (in Dollars per share)										$ 2.7

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Shareholders’ Deficit (Details) - USD ($)										1 Months Ended							3 Months Ended		12 Months Ended
	Mar. 23, 2022	Feb. 24, 2022	Feb. 16, 2022	Oct. 12, 2021	Oct. 08, 2021	Sep. 29, 2021	Jun. 04, 2020	May 11, 2020	May 04, 2020	Feb. 16, 2022	Mar. 26, 2021	Nov. 20, 2020	Oct. 26, 2020	Sep. 30, 2020	Sep. 29, 2020	May 28, 2020	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Mar. 24, 2022	Dec. 31, 2020
Shareholders’ Deficit (Details) [Line Items]
Common shares, authorized																	500,000,000		500,000,000		500,000,000
Common stock, shares issued																	4,995,232		4,842,851
Common stock, shares outstanding																	4,995,232		4,842,851
Common shares, issued					250,000												1,684,849		1,818,182
Dividend per share (in Dollars per share)	$ 0.05
Common stock dividend (in Dollars)	$ 249,762
Aggregate gross proceeds description		the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of $320,000. 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 $3.00 per common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free interest rate of 0.31%; (iv) expected life of three years; (v) estimated fair value of the common shares of $1.94 per share; and (vi) various probability assumptions related to redemption, calls and price resets. The fair value of the warrants was $379,533 or $0.89 per warrant, resulting in the amount allocated to the warrants, based on their relative fair of $152,350, which was recorded as additional paid in capital.
Warrant description																	The warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.		Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period.The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.
Weighted average remaining contractual life																	2 years 2 months 1 day
Intrinsic value (in Dollars)																	$ 497,500
Allocation shares, authorized																			1,000		1,000
Ownership of allocation shares by manager																			100.00%
Allocation of profit percentage																			20.00%
Allocation shares are issued and outstanding																			1,000
Senior convertible preferred shares				2,632,278		4,450,460					4,450,460	4,450,460			4,450,460
Dividends rate (in Dollars per share)																	$ 2		$ 2
Common shares calculated based percentage																	80.00%		80.00%
Calculated based fixed price per share (in Dollars per share)																	$ 1.57		$ 1.57
Dividend payment date per share (in Dollars per share)																	$ 1.57		$ 1.57
Accumulated accrued and unpaid dividends percentage																	115.00%		115.00%
Conversion price (in Dollars per share)																	$ 1.75		$ 1.75
Ownership common shares outstanding																	9.99%		4.99%
Shareholder limitation, description																			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.
Convertible preferred shares percentage																	115.00%		115.00%
Consolidations adjustments to conversion price, description																			•        On the first day of the 24th 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 36th 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.
Conversion price, description																			Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075.
Additional equity interest																	10.00%		10.00%
Sale of stock share													442,443	2,189,835
Sale of stock price (in Dollars per share)											$ 1.65			$ 1.9
Aggregate gross proceeds (in Dollars)														$ 4,160,684					$ 137,500
Purchase price unit (in Dollars)													$ 840,640
Exercise price per share (in Dollars per share)											$ 2.5		$ 2.5						$ 3
Deemed dividend of beneficial conversion feature (in Dollars)											$ 1,527,086								$ 2,874,478
Sale of stock, shares											1,818,182
Aggregate gross proceeds (in Dollars)											$ 3,000,000
Convertible preferred shares amount (in Dollars)																	$ 121,455		$ 1,032,806
Common shares, issued																			4,842,851		4,842,851
Common shares, outstanding																			4,444,013		4,444,013
Common stock fair value (in Dollars)							$ 245,000
Common stock issued upon acquisition		320,333									398,838									106,666
Issued per share (in Dollars per share)											$ 1.9
Purchase price per unit (in Dollars per share)											$ 1.65
Issued common shares											398,838
Expected life																			2 years 1 month 6 days
Principal amount (in Dollars)																	$ 111,986
Common stock exercise price (in Dollars per share)																			$ 2.5
Warrant term description																			The warrants have a term of three years and are callable by the Company after one year if the 30-day average stock price is in excess of $5 and the trading volume in the Company’s shares exceed 100,000 shares a day over such period. The Company can also redeem the warrants during the term for $0.50 a warrant in the first year; $1.00 a warrant in the second year; and $1.50 a warrant in the third year.
Exercise price per share (in Dollars per share)					$ 0.01
Warrant for purchase shares					500,000
Price per share (in Dollars per share)					$ 2.5
Options, description								the Company granted options to directors Paul A. Froning and Robert D. Barry to purchase 60,000 and 30,000 common shares, respectively, each at an exercise price of $2.50 per share. The options vested immediately on the date of grant and terminate on May 11, 2025. On September 29, 2020, Mr. Barry exercised the options cashless and on September 30, 2020, Mr. Froning exercised the options for proceeds of $150,000.
Series A Senior Convertible Preferred Shares [Member]
Shareholders’ Deficit (Details) [Line Items]
Common shares, issued			152,851							152,851
Convertible preferred shares			133,333
Dividend rate, Percentage																	14.00%		14.00%
Sale of stock price (in Dollars per share)											$ 1.65
Aggregate gross proceeds (in Dollars)											$ 3,000,000
Exercise price per share (in Dollars per share)											$ 2.5
Sale of stock, shares											1,818,182
Accrued dividends attributable amount (in Dollars)																			$ 128,319
Accrued dividends (in Dollars)																			$ 176,949
Convertible preferred shares				2,632,278						133,333
Convertible dividends				6,395,645						152,381
Preferred shares outstanding				1,818,182													1,684,849		1,818,182
Dividend yield											0.00%
Weighted average risk-free interest rate											0.16%
Expected life											3 years
Principal amount (in Dollars)											$ 1,472,914
Series A Senior Convertible Preferred Shares [Member] | Minimum [Member]
Shareholders’ Deficit (Details) [Line Items]
Expected volatility											62.52%
Estimated fair value (in Dollars per share)											$ 2.6
Series A Senior Convertible Preferred Shares [Member] | Maximum [Member]
Shareholders’ Deficit (Details) [Line Items]
Expected volatility											63.25%
Estimated fair value (in Dollars per share)											$ 5.25
Leonite [Member]
Shareholders’ Deficit (Details) [Line Items]
Common stock issued									100,000
Common stock outstanding (in Dollars)									$ 100,000
Loss on conversion of debt (in Dollars)									$ 175,000
Asien's Seller [Member]
Shareholders’ Deficit (Details) [Line Items]
Common stock issued																415,000
Common stock fair value (in Dollars)																$ 1,037,500
Service Provider [Member]
Shareholders’ Deficit (Details) [Line Items]
Common stock issued							100,000

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Shareholders’ Deficit (Details) - Schedule of changes in warrants outstanding - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Schedule of changes in warrants outstanding [Abstract]
Warrants Outstanding at beginning	5,200,460
Weighted Average Exercise Price Outstanding at beginning	$ 2.38
Warrants ,Granted	426,999	2,568,182
Weighted Average Exercise Price, Granted	$ 3	$ 2.26
Warrants ,Exercised
Weighted Average Exercise Price, Exercised
Warrants ,Forfeited
Weighted Average Exercise Price, Forfeited
Warrants Outstanding at ending	5,627,459	5,200,460
Weighted Average Exercise Price Outstanding at enging	$ 2.43	$ 2.38
Warrants ,Exercisable	5,627,459
Weighted Average Exercise Price, Exercisable	$ 2.43

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Loss Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Series A Senior Convertible Preferred Shares [Member]
Loss Per Share (Details) [Line Items]
Potential common share	20,871,528	4,450,460
Series B Senior Convertible Preferred Shares [Member]
Loss Per Share (Details) [Line Items]
Potential common share	20,871,528

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Loss Per Share (Details) - Schedule of weighted average shares outstanding and the basic and diluted loss per common share - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Schedule of weighted average shares outstanding and the basic and diluted loss per common share [Abstract]
Net loss per common share attributable to 1847 Holdings common shareholders’	$ (1,008,245)	$ (2,446,236)	$ (5,815,824)	$ (18,928,384)
Weighted average common shares outstanding	4,915,655	4,466,171	4,749,971	3,692,429
Basic and diluted loss per share	$ (0.21)	$ (0.55)	$ (0.7)	$ (2.6)

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Subsequent Events (Details) - USD ($)		1 Months Ended		3 Months Ended	12 Months Ended
	Feb. 24, 2022	Apr. 20, 2022	Mar. 24, 2022	Mar. 31, 2022	Dec. 31, 2021	Jan. 14, 2022	Mar. 26, 2021	Oct. 26, 2020	Sep. 30, 2020
Subsequent Events (Details) [Line Items]
Exercise price per share (in Dollars per share)					$ 3		$ 2.5	$ 2.5
Dividend rights description					Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). 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 VWAP for the common shares 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 regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; 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 $2.70 or higher.
Unpaid interest rate					115.00%
Conversion rights, description					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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B 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 B 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. 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
Interest rate					115.00%
Per share (in Dollars per share)					$ 0.0075
Warrant description				The warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.	Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period.The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.
Outstanding percentage				4.99%	4.99%
Price per share (in Dollars per share)							$ 1.65		$ 1.9
Series B Senior Convertible Preferred Shares [Member]
Subsequent Events (Details) [Line Items]
Preferred shares (in Shares)					583,334
Subsequent Event [Member]
Subsequent Events (Details) [Line Items]
Purchase agreement, description		the Company entered into a securities purchase agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant to which the Company sold 28,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. 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 $3.00 per share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.
Aggregate shares (in Shares)	320,333
Aggregate price per share (in Dollars per share)	$ 3
Aggregate gross proceeds (in Dollars)	$ 961,000		$ 320,000
Additional units (in Shares)			106,666
Exercise price per share (in Dollars per share)			$ 3
Price per share (in Dollars per share)						$ 0.05
12th Month [Member] | Series B Senior Convertible Preferred Shares [Member]
Subsequent Events (Details) [Line Items]
Percent per annum					5.00%
Dividend [Member]
Subsequent Events (Details) [Line Items]
Dividend paid (in Dollars)					$ 242,160
24 th month [Member] | Series B Senior Convertible Preferred Shares [Member]
Subsequent Events (Details) [Line Items]
Percent per annum					5.00%
Shall automatically increase percentage					10.00%
36 th month [Member] | Series B Senior Convertible Preferred Shares [Member]
Subsequent Events (Details) [Line Items]
Percent per annum					5.00%
Shall automatically increase percentage					10.00%

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Organization and Nature of Business (Details)				1 Months Ended					12 Months Ended
	Aug. 04, 2020	Jan. 10, 2019	Mar. 03, 2017	Sep. 23, 2021	Apr. 19, 2021	Dec. 22, 2020	Aug. 27, 2020	Mar. 27, 2020	Dec. 31, 2021
Organization and Nature of Business (Details) [Line Items]
State of incorporation									1847 Holdings LLC (the “Company”) was formed under the laws of the State of Delaware on January 22, 2013.
Acquired interest, description					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”).
Asien Inc [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description								As a result of this transaction, the Company owns 95% of 1847 Asien, with the remaining 5% held by a third-party, and 1847 Asien owns 100% of Asien’s.
Cabinet [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description							As a result of this transaction, the Company owns 92.5% of 1847 Cabinet, with the remaining 7.5% held by a third-party, and 1847 Cabinet owns 100% of Kyle’s.
Wolo Inc [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description						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.
High Mountain [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description				As a result of this transaction, 1847 Cabinet owns 92.5% of High Mountain and Innovative Cabinets, with the remaining 7.5% held by a third-party.
Neese [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description			As a result of this transaction, the Company owned 55% of 1847 Neese, with the remaining 45% held by the Neese Sellers.
Goedeker Television [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description		As a result of this transaction, the Company owned 70% of Holdco, with the remaining 30% held by third parties, and Holdco owned 100% of Goedeker.
Goedeker IPO [Member]
Organization and Nature of Business (Details) [Line Items]
Acquired interest, description	Following this transaction, and the closing of Goedeker’s initial public offering on August 4, 2020 (the “Goedeker IPO”), the Company owned approximately 54.41% of Goedeker.

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Summary of Significant Accounting Policies (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Apr. 28, 2020
Summary of Significant Accounting Policies (Details) [Line Items]
Payroll protection program			$ 357,500
Percentage relates to total revenue	5.00%
Allowance for doubtful accounts	$ 359,000	$ 0
Estimated obsolescence allowance	$ 387,848	$ 12,824
Outstanding warrants (in Shares)	2,257,404
Principal and accrued interest (in Shares)	10,131,076
Incurred operating losses	$ 3,721,157
Cash flows used in operations	897,566
Negative working capital	$ 1,295,692
Asien’s [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Payroll protection program			$ 357,500
Wolo [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Payment for internet and phone orders, percentage	100.00%

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Summary of Significant Accounting Policies (Details) - Schedule of property and equipment useful lives	12 Months Ended
	Dec. 31, 2021
Building and Improvements [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment	4 years
Machinery and Equipment [Member] | Minimum [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment	7 years
Trucks and Vehicles [Member] | Minimum [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment	3 years
Trucks and Vehicles [Member] | Maximum [Member]
Public Utility, Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment	6 years

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Summary of Significant Accounting Policies (Details) - Schedule of identifiable intangible assets	12 Months Ended
	Dec. 31, 2021
Customer-Related [Member]
Indefinite-Lived Intangible Assets [Line Items]
Amortization Basis	Straight-line basis
Customer-Related [Member] | Minimum [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life (years)	5 years
Customer-Related [Member] | Maximum [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life (years)	15 years
Marketing-Related [Member]
Indefinite-Lived Intangible Assets [Line Items]
Amortization Basis	Straight-line basis
Marketing-Related [Member] | Minimum [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life (years)	5 years
Marketing-Related [Member] | Maximum [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life (years)	5 years

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Business Segments (Details) - Schedule of business segments - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Revenue
Furniture and appliances	$ 12,741,064	$ 7,625,222
Construction	12,203,890	1,120,224
Automotive supplies	5,716,030
Total Revenue	30,660,984	8,745,446
Cost of sales	20,311,724	6,531,435
Operating expenses	11,453,159	3,563,908
Income (loss) from operations	(1,103,899)	(1,349,897)
Retail & Appliances [Member]
Revenue
Furniture and appliances	12,741,064	7,625,222
Construction
Automotive supplies
Total Revenue	12,741,064	7,625,222
Cost of sales	9,773,371	5,866,413
Operating expenses	2,892,973	1,986,775
Income (loss) from operations	74,720	(227,967)
Construction [Member]
Revenue
Furniture and appliances
Construction	12,203,890	1,120,224
Automotive supplies
Total Revenue	12,203,890	1,120,224
Cost of sales	6,966,064	665,022
Operating expenses	4,153,938	681,040
Income (loss) from operations	1,083,888	(225,838)
Automotive Supplies [Member]
Revenue
Furniture and appliances
Construction
Automotive supplies	5,716,030
Total Revenue	5,716,030
Cost of sales	3,572,289
Operating expenses	3,119,435
Income (loss) from operations	(975,694)
Corporate Services [Member]
Revenue
Furniture and appliances
Construction
Automotive supplies
Total Revenue
Cost of sales
Operating expenses	1,286,813	896,092
Income (loss) from operations	$ (1,286,813)	$ (896,092)

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Cash Equivalents and Investments (Details) - Schedule of cash and cash equivalents - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Cash and cash equivalents
Operating accounts	$ 1,383,533	$ 976,538
Restricted accounts		403,811
Subtotal	1,383,533	1,380,349
Held to Maturity Investments
Restricted accounts – certificates of deposit (4 – 24-month maturities, FDIC insured)	276,429	276,270
Subtotal	276,429	276,270
TOTAL	$ 1,659,962	$ 1,656,619

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Discontinued Operations (Details) - USD ($)					1 Months Ended							3 Months Ended		9 Months Ended		12 Months Ended
	Aug. 04, 2020	Apr. 08, 2020	Apr. 05, 2019	Jun. 13, 2018	Oct. 23, 2020	Aug. 31, 2020	Aug. 25, 2020	Jul. 29, 2020	Jun. 30, 2020	Jun. 24, 2019	Oct. 31, 2017	Mar. 31, 2022	Mar. 31, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Discontinued Operations (Details) [Line Items]
Loan and security agreement, description			(i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker Television on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was $571,997.
Total payoff amount	$ 118,194
Principal amount	32,350
Interest amount	42
Prepayment legal and other fees	85,802
Loans aggregate maximum loan amount									$ 2,250,000	$ 1,000,000
Interest rate										7.99%
Line of credit																		$ 678,993
Term loan agreement, description				Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% and with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2020. Neese met this covenant for the year ended December 31, 2020. On July 30, 2020, Neese entered into a change in terms agreement with Home State Bank to amend the terms of the term loan. Pursuant to the change in terms agreement: (i) the maturity date was extended to July 30, 2022; (ii) the interest rate was changed to 5.50%; (iii) Neese agreed to pay accrued interest in the amount of $95,970; (iv) Neese agreed to make payments of $30,000 beginning on September 30, 2020 and continuing thereafter on a monthly basis until maturity, at which time a final interest payment is due; (v) Neese agreed to make a payment of $260,000 on December 30, 2020 and December 30, 2021; (vi) Neese agreed to make two new advances under the note in the amounts $51,068 and $517,529 to repay in full Neese’s capital lease transactions due to Utica Leaseco LLC described below; (vii) Neese agreed to pay a loan fee of $17,500; and (viii) Home State Bank agreed to make a loan advance to checking for $17,500. The balance of the note amounts to $3,225,321, comprised of principal of $3,239,176, net of unamortized debt discount of $13,855 as of December 31, 2020.
Appraised value of equipment														$ 400,000	$ 145,690
Loan principal amount							$ 3,500,000
Debt outstanding balance of loan					$ 3,340,602													$ 999,201
Debt comprised of principal amount					3,446,126
Net of unamortized loan costs					103,524
PPP loan, description		Goedeker received a $642,600 PPP loan from the SBA under the provisions of the CARES Act. The PPP loan had an 18-month term and bore interest at a rate of 1.0% per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The PPP provides that the loan could be partially or wholly forgiven if the funds were used for certain qualifying expenses as described in the CARES Act. The balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability.
Small business community capital term loan principal amount			$ 1,500,000
Debt term principal amount			$ 1,500,000
Senior capital stock, percentage			5.00%
Fully-diluted basis for an aggregate price			$ 100
Loan and security agreement total payoff amount	1,122,412
Debt consisting of principal amount	1,066,640
Interest	11,773
prepayment, legal, and other fees	$ 43,999
Warrant from the estimated value																	$ 122,344
Derivative liability charge amount					$ 2,127,656
Warrant into shares of common stock (in Shares)	250,000
Goedeker television, description																as representative of Goedeker Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. As of December 31, 2019, the balance of the note was $3,300,444.
Payments of principal and interest, description																(i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the Goedeker IPO, Goedeker agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, Goedeker used a portion of the proceeds from the Goedeker IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.
Loss on extinguishment of debt						$ 757,239							$ 360,302			$ 360,302
Forbearance fee						250,000
Write-off of unamortized loan discount						338,873
Write-off of unamortized debt costs						$ 168,366
Secured convertible promissory note aggregate principal amount			$ 714,286
Balance of lease																$ 475,000
Lease payment, description																The lease was payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000.
Lease description											the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule was 51 months and agreed monthly payments are $25,807.
Capital lease								$ 568,597
Utica [Member]
Discontinued Operations (Details) [Line Items]
Proceeds from loan																$ 3,240,000
10% Promissory Note [Member]
Discontinued Operations (Details) [Line Items]
Description for prepayment of the promissory note and accrued interest																the principal amount of $1,025,000 by 1847 Neese and Neese to the Neese Sellers. The note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018. The note is unsecured and contains customary events of default. The note has not been repaid, so the Company is in default under this note. Under terms of the term loan with Home State Bank described above, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. Accordingly, the loan is shown as a long-term liability as of December 31, 2020. Additionally, Home State Bank limits the payment of interest on this note to $40,000 annually. The Company continued to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

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Discontinued Operations (Details) - Schedule of major classes of assets and liabilities of the discontinued operations - Previously Reported [Member] - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Current Assets – discontinued operations:
Cash		$ 416,831
Accounts receivable, net		334,095
Inventories, net		305,080
Prepaid expenses and other current assets		268,602
Total current assets – discontinued operations		1,324,608
Noncurrent Assets – discontinued operations:
Property and equipment, net		1,925,844
Operating lease right of use assets		501,827
Goodwill		22,166
Intangible assets, net		7,933
Total noncurrent assets		2,457,770
Current liabilities – discontinued operations:
Accounts payable and accrued expenses		484,852
Current portion of operating lease liability		67,725
Notes payable – current portion		446,545
Total current liabilities – discontinued operations		999,122
Long term liabilities – discontinued operations:
Notes payable – long term, net of current portion		4,187,376
Accrued expenses – long term, related party		1,359,989
Financing lease liability, net of current portion		434,102
Total long term liabilities – discontinued operations		$ 5,981,467

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Discontinued Operations (Details) - Schedule of consolidated statements of operations from discontinued operations - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
REVENUES
Services			$ 612,862	$ 3,379,653
Sales of parts and equipment			324,189	3,322,945
Furniture and appliances				42,709,714
TOTAL REVENUE			937,051	49,412,312
OPERATING EXPENSES
Cost of sales			298,050	38,488,245
Personnel costs			485,774	6,534,408
Depreciation and amortization			360,746	1,547,378
Fuel			112,746	378,115
General and administrative			290,872	8,555,731
TOTAL OPERATING EXPENSES	$ 12,004,408	$ 5,191,656	1,548,188	55,503,877
LOSS FROM OPERATIONS			(611,137)	(6,091,564)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt			(320)	(792,721)
Gain on forgiveness of debt			380,247
Loss on extinguishment of debt				(1,852,426)
Gain on sale of assets			548,723	130,748
Loss on acquisition receivable				(809,000)
Change in warrant liability				(2,127,656)
Interest expense			(78,308)	(985,840)
Other income (expense)			1,200	3,599
TOTAL OTHER INCOME (EXPENSE)			851,542	(6,433,296)
NET LOSS BEFORE INCOME TAXES			240,405	(12,524,860)
INCOME TAX EXPENSE				350,603
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS			240,405	(12,875,463)
LESS NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS			108,182	(5,036,832)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS			$ 132,223	$ (7,838,631)

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Discontinued Operations (Details) - Schedule of consolidated statements of cash flows relating to discontinued operations - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities of discontinued operations:
Net Income (Loss)	$ 240,405	$ (12,875,461)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities of discontinued operations:
Depreciation and amortization	360,746	1,547,378
Amortization of financing costs and warrant features	2,187	842,174
Stock compensation		281,194
Amortization of operating lease right-of-use assets	19,007	63,253
Gain on forgiveness of PPP loans	(380,247)
Loss on extinguishment of debt		2,052,118
Amortization of original interest discount		100,511
Gain on sale of equipment	(548,723)	(130,748)
Change in fair value of warrant liability		2,127,656
Write-off of acquisition receivable		809,000
Changes in operating assets and liabilities:
Accounts receivable	10,698	(3,327,816)
Inventory	(161,286)	(2,125,032)
Prepaid expenses and other assets	49,222	(1,144,323)
Accounts payable and accrued expenses	118,980	368,128
Operating lease liability	(19,007)	(63,253)
Vendor deposits		(252,688)
Deferred tax asset		635,503
Customer deposits		14,427,180
Accrued expense long-term	137,438	454,209
Net cash provided by (used in) operating activities from discontinued operations	(170,580)	3,788,983
Cash flows from investing activities in discontinued operations:
Proceeds from sale of equipment	675,000	209,500
Purchase of equipment	(30,697)	(137,499)
Net cash provided by investing activities in discontinued operations	644,303	72,001
Cash flows from financing activities in discontinued operations:
Proceeds from initial public offering		8,602,166
Proceeds from note payable	380,385	1,612,297
Repayments of notes payable	(589,078)	(3,474,557)
Repayment of floor plan		(10,581)
Net borrowings from lines of credit		(1,339,430)
Financing fees		(219,110)
Repayment of financing lease		(721,151)
Net cash provided by (used in) financing activities in discontinued operations	$ (208,693)	$ 4,449,634

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Receivables (Details) - Schedule of receivables - USD ($)	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Schedule of receivables [Abstract]
Credit card payments in process of settlement		$ 116,187	$ 158,924
Retainage	$ 1,029,976	803,989
Trade receivables from customers		2,691,702	366,701
Vendor rebates receivable		126,118
Total receivables		3,737,996	525,625
Allowance for doubtful accounts		(359,000)
Accounts receivable, net		$ 3,378,996	$ 525,625

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Inventories (Details) - Schedule of inventory - Previously Reported [Member] - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Inventory [Line Items]
Subtotal	$ 5,815,150	$ 2,035,578
Allowance for inventory obsolescence	(387,848)	(12,824)
Inventories, net	5,427,302	2,022,754
Construction [Member]
Inventory [Line Items]
Subtotal	1,543,980	6,308
Appliances [Member]
Inventory [Line Items]
Subtotal	2,206,336	2,029,270
Automotive [Member]
Inventory [Line Items]
Subtotal	$ 2,064,834

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Property and Equipment (Details) - Schedule of property and equipment - Previously Reported [Member] - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Total	$ 1,890,272	$ 430,243
Less: Accumulated depreciation	(194,961)	(31,740)
Property and equipment, net	1,695,311	398,503
Buildings and leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Total	135,804	42,601
Equipment and machinery [Member]
Property, Plant and Equipment [Line Items]
Total	836,622	171,179
Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Total	53,725	2,613
Trucks and other vehicles [Member]
Property, Plant and Equipment [Line Items]
Total	$ 864,121	$ 213,850

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Intangible Assets (Details) - Schedule of intangible assets - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Technology related identifiable intangible assets, net	$ 553,781
Total Identifiable intangible assets, net	11,443,897	3,885,467
Marketing related identifiable intangible assets, net	5,498,596	759,886
Customer relationship identifiable intangible assets, net	5,391,520	3,125,581
Customer Relationships [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Identifiable intangible assets, gross	5,791,000	3,189,000
Accumulated amortization	(399,480)	(63,419)
Marketing Related [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Identifiable intangible assets, gross	5,917,000	841,000
Accumulated amortization	(418,404)	(81,114)
Technology Related [Member]
Intangible Assets (Details) - Schedule of intangible assets [Line Items]
Identifiable intangible assets, gross	623,000
Accumulated amortization	$ (69,219)

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Intangible Assets (Details) - Schedule of estimated annual amortization expense - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Schedule of estimated annual amortization expense [Abstract]
2022	$ 1,094,088	$ 1,458,780
2023	1,458,780	1,458,780
2024	1,458,750	1,458,750
2025	1,325,745	1,325,745
2026	1,157,523	1,157,523
Thereafter	4,584,319	4,584,319
Total	$ 11,079,205	$ 11,443,897

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Acquisitions (Details) - Schedule of preliminary analysis for the Asien's purchase	12 Months Ended
	Dec. 31, 2021 USD ($)
Asien’s Acquisition [Member]
Purchase Consideration at fair value:
Common shares	$ 1,037,500
Notes payable, net of debt discount	855,000
Net cash paid to Seller (post-closing)	233,000
Amount of consideration	2,125,500
Assets acquired and liabilities assumed at fair value
Cash	1,501,285
Accounts receivable	235,746
Inventories	1,457,489
Other current assets	41,427
Property and equipment	157,052
Customer related intangibles	462,000
Marketing related intangibles	547,000
Accounts payable and accrued expenses	(280,752)
Customer deposits	(2,405,703)
Notes payable	(509,272)
Other liabilities	(23,347)
Net tangible assets acquired	1,182,925
Total net assets acquired	1,182,925
Consideration paid	2,125,500
Goodwill	942,575
Kyle’s Acquisition [Member]
Purchase Consideration at fair value:
Common shares	3,675,000
Notes payable, net of debt discount	498,979
Cash	4,389,792
Amount of consideration	8,563,771
Assets acquired and liabilities assumed at fair value
Cash	130,000
Accounts receivable	385,095
Costs in excess of billings	122,016
Other current assets	13,707
Property and equipment	200,737
Customer related intangibles	2,727,000
Marketing related intangibles	294,000
Accounts payable and accrued expenses	(263,597)
Billings in excess of costs	(43,428)
Other liabilities	(49,000)
Net tangible assets acquired	3,516,530
Total net assets acquired	3,516,530
Consideration paid	8,563,771
Goodwill	5,047,241
Wolo Acquisition [Member]
Purchase Consideration at fair value:
Notes payable, net of debt discount	850,000
Cash	6,550,000
Net cash paid to Seller (post-closing)	944,056
Amount of consideration	8,344,056
Assets acquired and liabilities assumed at fair value
Cash	1,171,655
Accounts receivable	1,860,107
Inventories	1,944,929
Other current assets	218,154
Deferred tax liabilities	(325,000)
Customer related intangibles	233,000
Marketing related intangibles	992,000
Technology related intangibles	623,000
Accounts payable and accrued expenses	(111,442)
Net tangible assets acquired	6,606,403
Total net assets acquired	6,606,403
Consideration paid	8,344,056
Goodwill	1,737,653
H&I Acquisition [Member]
Purchase Consideration at fair value:
Notes payable, net of debt discount	4,753,673
Cash	10,687,500
Amount of consideration	15,441,173
Assets acquired and liabilities assumed at fair value
Cash	208,552
Accounts receivable	1,042,194
Inventories	1,848,729
Contract assets	367,177
Other current assets	80,771
Deferred tax liabilities	(1,670,000)
Lease liabilities	(856,377)
Financing leases	(18,600)
Loans payable	(204,399)
Property and equipment	610,882
Operating lease assets	831,951
Other assets
Customer related intangibles	4,843,000
Marketing related intangibles	1,610,000
Accounts payable and accrued expenses	(1,207,424)
Contract liabilities	(3,770,081)
Net tangible assets acquired	3,716,375
Total net assets acquired	3,716,375
Consideration paid	15,441,173
Goodwill	$ 11,724,798

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Acquisitions (Details) - Schedule of income statement - Business Acquisitions [Member] - USD ($)		12 Months Ended
		Dec. 31, 2021	Dec. 31, 2020
Condensed Income Statements, Captions [Line Items]
Revenues, net		$ 51,589,004	$ 42,131,589
Net income (loss)		$ (4,445,617)	$ 1,733,005
Basic earnings (loss) per share		$ (0.94)	$ 0.36
Diluted earnings (loss) per share		$ (0.94)	$ 0.36
Basic Number of Shares	[1]	4,749,971	4,807,429
Diluted Number of Shares	[1]	4,749,971	4,807,429

[1] shares assuming as if issued as of January 1.

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Notes Payable (Details) - USD ($)					1 Months Ended				3 Months Ended	12 Months Ended
	Oct. 12, 2021	Oct. 08, 2021	May 06, 2021	Aug. 04, 2020	Mar. 30, 2021	Jul. 29, 2020	Apr. 28, 2020	Oct. 30, 2017	Mar. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 07, 2020	Jul. 10, 2020	Jul. 02, 2020	May 28, 2020	Jun. 24, 2019	Feb. 14, 2019
Notes Payable (Details) [Line Items]
Revolving credit, description										The loan bore interest at 5.25% per annum, subject to change in accordance with the Variable Rate (as defined in the promissory note and security agreement), the calculation for which is the U.S. Prime Rate plus 2%.
Secured promissory note, percentage																7.99%
Remaining principal balance											$ 301,081
Accrued interest										$ 467,689
Revolving loan paid off		$ 301,240
Debt instrument, maturity date, description									January 2028
Purchase price per share (in Dollars per share)									$ 1.75	$ 1.75
Promissory note, description										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.
Financing leases, description														On September 25, 2020, Asien’s entered into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”), pursuant to which Wells Fargo may extend credit to Asien’s from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative covenants and events of default for a loan of this type. The agreement is secured by all assets of Asien’s and is guaranteed by 1847 Asien and the Company. As of December 31, 2021, Asien’s has not borrowed any funds under this agreement.4.5% Unsecured Promissory NoteOn October 30, 2017, Asien’s entered into a stock repurchase agreement with Paul A. Gwilliam and Terri L. Gwilliam, co-trustees of the Gwilliam Family Trust, pursuant to which Asien’s issued an unsecured promissory note in the aggregate principal amount of $540,000 for a term of 5 years. The note bore interest at the rate of the 4.25% per annum. The remaining principal balance of the note at December 31, 2020 was $41,675. The note and accrued interest were repaid in July 2021.Loans on VehiclesAsien’s has entered into seven retail installment sale contracts pursuant to which Asien’s agreed to finance its delivery trucks at rates ranging from 3.74% to 8.72% with an aggregate remaining principal amount of $146,043 as of December 31, 2021.Kyle’sIntercompany Secured Promissory NoteIn connection with the acquisition of Kyle’s, the Company provided 1847 Cabinet with the funds necessary to pay the cash portion of the purchase price and cover acquisition expenses. In connection therewith, on September 30, 2020, 1847 Cabinet issued a secured promissory note to the Company in the principal amount of $4,525,000, which was amended and restated on December 11, 2020 and again on October 8, 2021 to increase the principal amount to $15,955,325. The note bears interest at the rate of 16% per annum. Interest on the note is cumulative and any unpaid accrued interest will compound on each anniversary date of the note. Interest is due and payable in arrears to the Company on December 1, March 1, June 1 and October 1, commencing on December 1, 2021. In the event payment of principal or interest due under the note is not made when due, giving effect to any grace period which may be applicable, or in the event of any other default (as defined in the note), the outstanding principal balance shall from the date of default immediately bear interest at the rate of 5% above the then applicable interest rate for so long as such default continues. The Company may demand payment in full of the note at any time, even if 1847 Cabinet has complied with all of the terms of the note, and the note shall be due in full, without demand, upon the third party sale of all or substantially all the assets and business of 1847 Cabinet or the third party sale or other disposition of any capital stock of 1847 Cabinet. 1847 Cabinet may prepay the note at any time without penalty. If and to the extent any amounts are owing under the secured convertible promissory notes described below due to a default thereunder, in addition to payment obligations due under the note, 1847 Cabinet is required to immediately make payments to the Company so that the Company may make payments in compliance with the terms of the secured convertible promissory notes. The note contains customary covenants and events of default for loans of this type. The note is guaranteed by Kyle’s, High Mountain and Sierra Homes and is secured by a security interest in all of the assets of 1847 Cabinet, Kyle’s, High Mountain and Sierra Homes; provided that the rights of the Company to receive payments under the note are subordinated to the rights of the purchasers under secured convertible promissory notes described below (Note 12). The remaining principal balance of the note at December 31, 2021 is $6,549,073 and it has accrued interest of $35,416.Loans on VehiclesKyle’s has entered into two retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of $64,255 as of December 31, 2021.Financing LeasesKyle’s has entered into two financing lease agreements for expansion equipment. The equipment was installed in December 2021. These agreements have terms of six years beginning at the time of installation.On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, maturing on December 1, 2027. The balance payable was $276,896 as of December 31, 2021.On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,375, maturing on December 1, 2027. The balance payable was $245,375 as of December 31, 2021.Following is a summary of payments due on financing leases for the succeeding five years: Year Ending December 31,   Amount 2022   $ 99,075   2023     99,075   2024     99,075   2025     99,075   2026     99,075   Thereafter     99,075   Total payments     594,450   Less: amount representing interest     (72,178 ) Present value of minimum lease payments   $ 522,272   As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 6 years.Wolo6% Secured Promissory NoteA portion of the purchase price for the acquisition of Wolo on March 30, 2021 was paid by the issuance of a 6% secured promissory note in the principal amount of $850,000 by 1847 Wolo to the Wolo Sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent (6%) per annum. On October 8, 2021, the promissory note was repaid in full.Credit Agreement and NotesOn March 30, 2021, 1847 Wolo and Wolo entered into a credit agreement with Sterling National Bank for revolving loans in the principal amount of $1,000,000 and a term loan in the principal amount of $3,550,000. On October 8, 2021, the revolving loan and the term loan were repaid in full.High Mountain/Innovative CabinetsLoans on Vehicles/EquipmentHigh Mountain and Innovative Cabinets have entered into seventeen retail installment sale contracts pursuant to which they agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.80% with an aggregate remaining principal amount of $186,054 as of December 31, 2021.Financing LeasesOn February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. The balance payable was $11,044 as of December 31, 2021.On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. The balance payable was $5,757 as of December 31, 2021.			The balance payable was $11,044 as of December 31, 2021.
Principal amount												$ 56,900
Principal balance of revolving credit				$ 32,350
Financing lease purchase equipment	$ 245,375		$ 276,896
Balance payable										$ 245,375
Weighted average term										2 years 1 month 6 days
Weighted Average Remaining Lease Term [Member]
Notes Payable (Details) [Line Items]
Weighted average term										6 years
Arvest Bank [Member]
Notes Payable (Details) [Line Items]
Revolving loan													$ 400,000
Accrued Interest [Member]
Notes Payable (Details) [Line Items]
Accrued interest											995
8% Subordinated Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Remaining principal balance											101,980
Accrued interest											1,095
6% Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Debt instrument, maturity date, description						On July 29, 2020, 1847 Asien entered into a securities purchase agreement with the Asien’s Seller, pursuant to which the Asien’s Seller sold to 415,000 of the Company’s common shares to 1847 Asien a purchase price of $2.50 per share.
Sold of common shares (in Shares)						415,000
Purchase price per share (in Dollars per share)						$ 2.5
Promissory note, description						As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500.
Paul A. Gwilliam and Terri L. Gwilliam [Member]
Notes Payable (Details) [Line Items]
Principal amount								$ 540,000
Term of loan								5 years
Comprised of principal											$ 41,675
8% Subordinated Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Interest rate										8.00%
Asien's Seller [Member] | 8% Subordinated Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Debt instrument, maturity date, description										The outstanding principal amount of the note amortized on a one-year straight-line basis in accordance with a specified amortization schedule, with all unpaid principal and accrued, but unpaid interest being fully due and payable on May 28, 2021.
Paul A. Gwilliam and Terri L. Gwilliam [Member]
Notes Payable (Details) [Line Items]
Interest rate								4.25%
Asein's [Member] | PPP Loans [Member]
Notes Payable (Details) [Line Items]
Promissory note, description							The Company may demand payment in full of the note at any time, even if 1847 Cabinet has complied with all of the terms of the note, and the note shall be due in full, without demand, upon the third party sale of all or substantially all the assets and business of 1847 Cabinet or the third party sale or other disposition of any capital stock of 1847 Cabinet. 1847 Cabinet may prepay the note at any time without penalty. If and to the extent any amounts are owing under the secured convertible promissory notes described below due to a default thereunder, in addition to payment obligations due under the note, 1847 Cabinet is required to immediately make payments to the Company so that the Company may make payments in compliance with the terms of the secured convertible promissory notes. The note contains customary covenants and events of default for loans of this type. The note is guaranteed by Kyle’s, High Mountain and Sierra Homes and is secured by a security interest in all of the assets of 1847 Cabinet, Kyle’s, High Mountain and Sierra Homes; provided that the rights of the Company to receive payments under the note are subordinated to the rights of the purchasers under secured convertible promissory notes described below (Note 12). The remaining principal balance of the note at December 31, 2021 is $6,549,073 and it has accrued interest of $35,416.Loans on VehiclesKyle’s has entered into two retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of $64,255 as of December 31, 2021.Financing LeasesKyle’s has entered into two financing lease agreements for expansion equipment. The equipment was installed in December 2021. These agreements have terms of six years beginning at the time of installation.On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, maturing on December 1, 2027. The balance payable was $276,896 as of December 31, 2021.On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,375, maturing on December 1, 2027. The balance payable was $245,375 as of December 31, 2021.Following is a summary of payments due on financing leases for the succeeding five years: Year Ending December 31,   Amount 2022   $ 99,075   2023     99,075   2024     99,075   2025     99,075   2026     99,075   Thereafter     99,075   Total payments     594,450   Less: amount representing interest     (72,178 ) Present value of minimum lease payments   $ 522,272   As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 6 years.Wolo6% Secured Promissory NoteA portion of the purchase price for the acquisition of Wolo on March 30, 2021 was paid by the issuance of a 6% secured promissory note in the principal amount of $850,000 by 1847 Wolo to the Wolo Sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent (6%) per annum. On October 8, 2021, the promissory note was repaid in full.Credit Agreement and NotesOn March 30, 2021, 1847 Wolo and Wolo entered into a credit agreement with Sterling National Bank for revolving loans in the principal amount of $1,000,000 and a term loan in the principal amount of $3,550,000. On October 8, 2021, the revolving loan and the term loan were repaid in full.High Mountain/Innovative CabinetsLoans on Vehicles/EquipmentHigh Mountain and Innovative Cabinets have entered into seventeen retail installment sale contracts pursuant to which they agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.80% with an aggregate remaining principal amount of $186,054 as of December 31, 2021.Financing LeasesOn February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. The balance payable was $11,044 as of December 31, 2021.On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. The balance payable was $5,757 as of December 31, 2021.Following is a summary of payments due on financing leases for the succeeding five years: Year Ending December 31,   Amount 2022   $ 8,161   2023     8,161   2024     1,515   2025     —   2026     —   Thereafter     —   Total payments     17,837   Less: amount representing interest     (1,036 ) Present value of minimum lease payments   $ 16,801   As of December 31, 2021, the weighted-average remaining lease term for all finance leases is 2.10 years.PPP LoansOn April 28, 2020, Asien’s received $357,500 in PPP loans from the SBA under provisions of the CARES Act. The PPP loans have two-year terms and bear interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. Asien’s used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange Bank that its loan had been forgiven in its entirety by the SBA.
Intercompany Secured Promissory Note [Member] | 8% Subordinated Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Remaining principal balance										$ 6,549,073
Accrued interest										35,416
Kyle's [Member]
Notes Payable (Details) [Line Items]
Balance payable										276,896
1847 Asien/Asien's [Member] | Arvest Bank [Member]
Notes Payable (Details) [Line Items]
Secured promissory note, percentage													5.25%
Prime rate plus percent													2.00%
1847 Asien/Asien's [Member] | Asien's Seller [Member] | 6% Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Remaining principal balance										583,961
Accrued interest										$ 21,758
Asein's [Member] | 8% Subordinated Amortizing Promissory Note [Member]
Notes Payable (Details) [Line Items]
Paid by issuance percentage															8.00%
Increasing principal amount															$ 200,000
1847 Cabinet/Kyle's [Member] | Intercompany Secured Promissory Note [Member]
Notes Payable (Details) [Line Items]
Secured promissory note, percentage										5.00%
Loans on Vehicles [Member]
Notes Payable (Details) [Line Items]
Remaining principal balance										$ 146,043
Principal balance of revolving credit										$ 64,255
Loans on Vehicles [Member] | Asein's [Member] | Minimum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										3.74%
Loans on Vehicles [Member] | Asein's [Member] | Maximum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										8.72%
Loans on Vehicles [Member] | Kyle's [Member] | Minimum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										5.90%
Loans on Vehicles [Member] | Kyle's [Member] | Maximum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										6.54%
Loans on Vehicles [Member] | High Mountain/Innovative Cabinets [Member]
Notes Payable (Details) [Line Items]
Aggregate remaining principal amount										$ 186,054
Loans on Vehicles [Member] | High Mountain/Innovative Cabinets [Member] | Minimum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										3.74%
Loans on Vehicles [Member] | High Mountain/Innovative Cabinets [Member] | Maximum [Member]
Notes Payable (Details) [Line Items]
Finance at rates ranging										6.80%
Credit Agreement and Notes [Member]
Notes Payable (Details) [Line Items]
Term loan, description					On July 29, 2020, 1847 Asien entered into a securities purchase agreement with the Asien’s Seller, pursuant to which the Asien’s Seller sold to 415,000 of the Company’s common shares to 1847 Asien a purchase price of $2.50 per share. As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, 1847 Asien and the Asien’s Seller entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described below, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon. The note is unsecured and contains customary events of default. The remaining principal balance of the note at December 31, 2021 is $583,961 and it has accrued interest of $21,758.Inventory Financing AgreementOn September 25, 2020, Asien’s entered into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”), pursuant to which Wells Fargo may extend credit to Asien’s from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative covenants and events of default for a loan of this type. The agreement is secured by all assets of Asien’s and is guaranteed by 1847 Asien and the Company. As of December 31, 2021, Asien’s has not borrowed any funds under this agreement.4.5% Unsecured Promissory NoteOn October 30, 2017, Asien’s entered into a stock repurchase agreement with Paul A. Gwilliam and Terri L. Gwilliam, co-trustees of the Gwilliam Family Trust, pursuant to which Asien’s issued an unsecured promissory note in the aggregate principal amount of $540,000 for a term of 5 years.
Borrowing base, description										Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described below, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon.
6% Secured Promissory Note [Member]
Notes Payable (Details) [Line Items]
Interest rate										6.00%
Principal amount					$ 850,000
Annual interest rate					6.00%

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Notes Payable (Details) - Schedule of notes payable - 1847 Holdings LLC [Member] - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Notes Payable (Details) - Schedule of notes payable [Line Items]
Line of Credit		$ 301,081
8% Subordinated Amortizing Promissory Notes		101,980
6% Subordinated Amortizing Promissory Notes	581,963	975,985
PPP loans		357,500
4.5% Unsecured Promissory Notes		41,675
Loans on vehicles	396,351	90,374
Financing leases	522,166
Subtotal	1,500,480	1,868,595
Line of Credit		(301,081)
Current portion of notes payable	(793,174)	(429,183)
Long-term notes payable	$ 707,306	$ 1,138,331

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Notes Payable (Details) - Schedule of payments due on financing leases	Dec. 31, 2021 USD ($)
Notes Payable (Details) - Schedule of payments due on financing leases [Line Items]
2022	$ 99,075
2023	99,075
2024	99,075
2025	99,075
2026	99,075
Thereafter	99,075
Total payments	594,450
Less: amount representing interest	(72,178)
Present value of minimum lease payments	522,272
Payments Due on Financing Leases [Member]
Notes Payable (Details) - Schedule of payments due on financing leases [Line Items]
2022	8,161
2023	8,161
2024	1,515
2025
2026
Thereafter
Total payments	17,837
Less: amount representing interest	(1,036)
Present value of minimum lease payments	$ 16,801

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Notes Payable (Details) - Schedule of payments due on notes payable and financing leases for the succeeding five years	Dec. 31, 2021 USD ($)
Schedule of payments due on notes payable and financing leases for the succeeding five years [Abstract]
2022	$ 820,400
2023	212,554
2024	179,868
2025	160,270
2026	118,647
Thereafter	206,701
Total payments	$ 1,698,440

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Vesting Note Payable — Related Party (Details) - USD ($)	1 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2021
Vesting Note Payable — Related Party (Details) [Line Items]
Principal amount	$ 1,260,000
Principal amount, percentage	8.00%
Vested principal, description		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.
Unpaid interest		36 months
Unvested principal amount		$ 350,000
Vesting Promissory Note [Member]
Vesting Note Payable — Related Party (Details) [Line Items]
Principal amount	$ 1,050,000

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Convertible Promissory Notes (Details) - USD ($)	1 Months Ended							12 Months Ended
	Sep. 30, 2020	Sep. 02, 2020	Aug. 04, 2020	Jul. 21, 2020	May 11, 2020	May 04, 2020	Apr. 05, 2019	Dec. 31, 2021	Dec. 31, 2020	Oct. 08, 2022	Oct. 08, 2021	Dec. 07, 2020
Convertible Promissory Notes (Details) [Line Items]
Aggregate principle amount								$ 24,860,000
Aggregate original issue discount								497,200
Total purchase price								24,362,800
Payment of expense								617,825
Net proceeds								23,744,975
Purchase price for the acquisition								$ 10,687,500
Secured convertible promissory notes, description								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.
Remaining principal balance								$ 23,787,936
Debt discounts								3,072,064
Accrued interest								$ 467,689
Bear interest, description								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.
Prepayment fee								10.00%
Conversion price (in Dollars per share)								$ 2.5
Beneficial ownership limitation, percentage								4.99%
Subject to equitable adjustments for stock splits (in Dollars per share)								$ 2.5
Aggregate principal amount												$ 56,900
Legal discount fees								$ 64,286
Share issued (in Shares)								50,000
Shares value	$ 4,160,684							$ 137,500
Debt discount related to the warrants								$ 292,673
Amortized financing cost									$ 292,673
Increase the principal amount of the note					$ 207,145
Warrant to purchase, description								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.
Consisting of principal amount									$ 301,081
Warrant to common shares (in Shares)		180,000
Surrender of common shares underlying warrant (in Shares)		20,000
Common stock underlying warrant (in Shares)		200,000
Issued common stock (in Shares)		180,000
Maximum [Member]
Convertible Promissory Notes (Details) [Line Items]
Ownership percentage								9.99%
Subsequent Event [Member]
Convertible Promissory Notes (Details) [Line Items]
Convert percentage										20.00%
Leonite Converted [Member]
Convertible Promissory Notes (Details) [Line Items]
Outstanding balance of note				$ 50,000		$ 100,000
Shares of common stock (in Shares)				50,000		100,000
Goedeker [Member]
Convertible Promissory Notes (Details) [Line Items]
Total payoff amount			$ 780,653
Consisting of principal amount			771,431
Interest			$ 9,222
6% Subordinated Convertible Promissory Notes [Member]
Convertible Promissory Notes (Details) [Line Items]
Aggregate principle amount											$ 5,880,345
Remaining principal balance								$ 4,838,997
Accrued interest								$ 108,262
Bear interest, description								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.
Issuance of subordinated convertible promissory notes											6.00%
Net of debt discount								$ 1,041,348
Leonite Capital Note [Member]
Convertible Promissory Notes (Details) [Line Items]
Bear interest, description							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.
Aggregate principal amount							$ 714,286

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Operating Leases (Details) - USD ($)			12 Months Ended
	Jun. 09, 2021	Sep. 01, 2020	Jul. 31, 2022	Dec. 31, 2021
Operating Leases (Details) [Line Items]
Lease agreement, description	Kyle’s entered into an additional industrial lease agreement with a third party. The lease commenced on January 1, 2022 and is for a term of 62 months, with an option for a renewal term of five years, and provides for a base rent of $3,336 for months 3-4 (with no payments for the first two months), with gradual increases to $7,508 for final year.
Operating lease liability				$ 361,158
Rent amount				$ 12,767
High mountain, description				The base rent is $29,400 for months 2-13 (with no payments for the first month), with gradual increases to $34,394 for months 50-61. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating costs during the lease term.
Base rent				$ 15,600
Lease gradual increases				18,085
Forecast [Member]
Operating Leases (Details) [Line Items]
Rent amount			$ 6,897
Kyle's [Member]
Operating Leases (Details) [Line Items]
Lease rent, description		The lease is for a term of five years, with an option for a renewal term of five years, and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60.
Innovative Cabinets [Member]
Operating Leases (Details) [Line Items]
Base rent				2,936
Lease gradual increases				3,140
Asien's [Member]
Operating Leases (Details) [Line Items]
Monthly lease payment				$ 11,665

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Operating Leases (Details) - Schedule of supplemental balance sheet information	Dec. 31, 2021 USD ($)
Kyle's [Member]
Operating Leases (Details) - Schedule of supplemental balance sheet information [Line Items]
Operating lease right-of-use lease asset	$ 735,074
Accumulated amortization	(85,777)
Net balance	649,297
Lease liability, current portion	113,105
Lease liability, long term	539,234
Total operating lease liabilities	$ 652,339
Weighted Average Remaining Lease Term – operating leases	54 months
Weighted Average Discount Rate – operating leases	5.50%
High Mountain [Member]
Operating Leases (Details) - Schedule of supplemental balance sheet information [Line Items]
Operating lease right-of-use lease asset	$ 2,055,995
Accumulated amortization	(337,812)
Net balance	1,718,183
Lease liability, current portion	258,843
Lease liability, long term	1,459,339
Total operating lease liabilities	$ 1,718,182
Weighted Average Remaining Lease Term – operating leases	61 months
Weighted Average Discount Rate – operating leases	4.00%
Innovative Cabinets [Member]
Operating Leases (Details) - Schedule of supplemental balance sheet information [Line Items]
Operating lease right-of-use lease asset	$ 1,232,993
Accumulated amortization	(454,609)
Net balance	778,384
Lease liability, current portion	218,873
Lease liability, long term	584,833
Total operating lease liabilities	$ 803,706
Weighted Average Remaining Lease Term – operating leases	42 months
Weighted Average Discount Rate – operating leases	4.02%
Wolo [Member]
Operating Leases (Details) - Schedule of supplemental balance sheet information [Line Items]
Operating lease right-of-use lease asset	$ 153,663
Accumulated amortization	(106,924)
Net balance	46,739
Lease liability, current portion	47,328
Lease liability, long term
Total operating lease liabilities	$ 47,328
Weighted Average Remaining Lease Term – operating leases	7 months
Weighted Average Discount Rate – operating leases	6.00%

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Operating Leases (Details) - Schedule of future minimum lease payments	Dec. 31, 2021 USD ($)
Kyle's [Member]
Operating Leases (Details) - Schedule of future minimum lease payments [Line Items]
2022	$ 146,559
2023	169,839
2024	174,043
2025	146,885
2026	90,099
Thereafter	15,017
Total lease payments	742,442
Less imputed interest	(90,103)
Maturities of lease liabilities	652,339
High Mountain [Member]
Operating Leases (Details) - Schedule of future minimum lease payments [Line Items]
2022	294,000
2023	364,560
2024	379,142
2025	394,308
2026	410,082
Thereafter	68,788
Total lease payments	1,910,880
Less imputed interest	(192,697)
Maturities of lease liabilities	1,718,183
Innovative Cabinets [Member]
Operating Leases (Details) - Schedule of future minimum lease payments [Line Items]
2022	230,191
2023	208,020
2024	204,558
2025	210,695
2026	18,085
Total lease payments	871,549
Less imputed interest	(67,843)
Maturities of lease liabilities	803,706
Wolo [Member]
Operating Leases (Details) - Schedule of future minimum lease payments [Line Items]
2022	48,279
Total lease payments	48,279
Less imputed interest	(951)
Maturities of lease liabilities	$ 47,328

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Operating Leases (Details) - Schedule of supplemental cash flows information related to leases - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$ 985,122	$ 21,000
Right-of-use asset obtained in exchange for lease obligation:
Operating lease	$ 3,040,854	$ 373,916

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Shareholders’ Deficit (Details) - Schedule of warrant activity - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Schedule of warrant activity [Abstract]
Number of Common Share Warrants, Outstanding, Beginning	5,200,460	2,632,278
Weighted average exercise price, Outstanding, Beginning	$ 2.38	$ 2.5
Weighted average life (years), Outstanding, Beginning		2 years 9 months 3 days
Intrinsic value of Warrants, Outstanding, Beginning	$ 512,500
Number of Common Share Warrants, Granted	426,999	2,568,182
Weighted average exercise price, Granted	$ 3	$ 2.26
Weighted average life (years), Granted		3 years 6 months 29 days
Intrinsic value of Warrants, Outstanding, Granted
Number of Common Share Warrants, Exercised
Weighted average exercise price, Exercised
Weighted average life (years), Exercised
Intrinsic value of Warrants, Outstanding, Exercised
Number of Common Share Warrants, Canceled
Weighted average exercise price, Canceled
Weighted average life (years), Canceled
Intrinsic value of Warrants, Outstanding, Canceled
Number of Common Share Warrants, Outstanding, Ending		5,200,460
Weighted average exercise price, Outstanding, Ending		$ 2.38
Weighted average life (years), Outstanding, Ending		2 years 4 months 9 days
Intrinsic value of Warrants, Outstanding, Outstanding, Ending		$ 512,500
Number of Common Share Warrants, Exercisable, Ending		5,200,460
Weighted average exercise price, Exercisable, Ending		$ 2.38
Weighted average life (years), Exercisable, Ending		2 years 4 months 9 days
Intrinsic value of Warrants, Outstanding, Exercisable, Ending		$ 512,500

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Shareholders’ Deficit (Details) - Schedule of options	12 Months Ended
	Dec. 31, 2020 $ / shares shares
Number of options [Member]
Shareholders’ Deficit (Details) - Schedule of options [Line Items]
Number of Options Outstanding | shares
Number of Options Outstanding Granted | shares	90,000
Number of Options Exercised | shares	77,500
Number of Options Forfeited | shares
Number of Options Cancelled | shares	(12,500)
Number of Options Expired | shares
Number of Options Exercisable | shares
Weighted Average Exercise Price [Member]
Shareholders’ Deficit (Details) - Schedule of options [Line Items]
Weighted Average Exercise Price Outstanding
Weighted Average Exercise Price Granted	2.5
Weighted Average Exercise Price Exercised	2.5
Weighted Average Exercise Price Forfeited
Weighted Average Exercise Price Cancelled	2.5
Weighted Average Exercise Price Expired
Weighted Average Exercise Price Outstanding
Weighted Average Exercise Price Exercisable
Weighted Average Contractual Term in Years [Member]
Shareholders’ Deficit (Details) - Schedule of options [Line Items]
Weighted Average Contractual Term in Years Outstanding
Weighted Average Contractual Term in Years Granted	5 years
Weighted Average Contractual Term in Years Exercised
Weighted Average Contractual Term in Years Forfeited
Weighted Average Contractual Term in Years Cancelled
Weighted Average Contractual Term in Years Expired
Weighted Average Contractual Term in Years Outstanding
Weighted Average Contractual Term in Years Exercisable

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Commitments and Contingencies (Details)	Dec. 31, 2021 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Expected future minimum lease payments	$ 630,816

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Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income Taxes [Abstract]
Net operating loss carry forwards	$ 438,209	$ 347,000
Cumulative tax effect description	The cumulative tax effect at the expected rate of (3.4)% and (4.8)% of significant items comprising the Company’s net deferred tax amount is as follows:
Net cumulative current deferred tax asset	$ 242,000
Net cumulative long-term deferred tax liability	(2,312,000)
Accrued interest and penalties	$ 0	$ 0

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Income Taxes (Details) - Schedule of provision of income taxes - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Schedule of provision of income taxes [Abstract]
Current Federal and State	$ 143,000
Deferred Federal and State	75,300	$ 83,900
Total (benefit) provision for income taxes	$ 218,300	$ (83,900)

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Income Taxes (Details) - Schedule of reconciliation of the statutory US federal income tax rate	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Schedule of reconciliation of the statutory US federal income tax rate [Abstract]
Federal tax	21.00%	21.00%
State tax	1.70%	4.10%
Discontinued operations	0.00%	(5.40%)
Permanent items	(5.00%)	(1.60%)
Measurement Period Adjustment	(16.90%)	0.00%
Valuation Allowance	2.30%	(22.60%)
Other	(6.50%)	(0.30%)
Effective income tax rate	(3.40%)	(4.80%)

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Income Taxes (Details) - Schedule of major components of deferred tax assets and liabilities - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Schedule of major components of deferred tax assets and liabilities [Abstract]
Inventory obsolescence	$ 107,000	$ 4,000
Sales return reserve		48,000
Business interest limitation	481,000	20,000
Lease liability	712,000	95,000
Other	135,000	55,000
Loss carryforward	153,000	94,000
Valuation Allowance		(132,000)
Total deferred tax assets	1,588,000	184,000
Fixed assets	(230,000)	(89,000)
Right of Use Assets	(706,000)	(95,000)
Intangibles	(2,722,000)
Total deferred tax liabilities	(3,658,000)	(184,000)
Total net deferred income tax assets (liabilities)	$ (2,070,000)

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Income Taxes (Details) - Schedule of prepaid and deferred tax assets and liabilities - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Schedule of prepaid and deferred tax assets and liabilities [Abstract]
Prepaid income taxes (accrued tax liability)	$ (175,000)	$ 21,000
Deferred tax asset (liability)	(2,070,000)
Income tax (benefit)/expense	$ 218,000	$ (84,000)

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Supplemental Disclosures of Cash Flow Information (Details) - Schedule of supplemental disclosures of cash flow information - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Schedule of supplemental disclosures of cash flow information [Abstract]
Interest paid	$ 176,204	$ 415,451
Income tax paid	50,000
Business combinations:
Net assets in acquisition of H&I	3,716,375
Wolo business combination	6,606,403
Kyle’s business combination		3,516,530
Asien’s business combination		1,182,925
Financing:
Due to seller (net cash paid to seller after closing)	977,685	4,622,792
Notes payable sellers	6,730,345
Line of credit, net of debt discount		568,597
Finance purchases of property and equipment	688,978
Convertible Promissory Note		1,353,979
Common Shares		1,115
Accrued common share dividends	242,160
Deemed Dividend related to issuance of preferred shares	1,527,086	3,051,478
1847 Goedeker Spin-Off Dividend		283,257
Distribution – Allocation shares		5,985,500
Additional Paid in Capital – common shares and warrants issued	757,792	4,711,385
Operating lease, ROU assets and liabilities	$ 2,184,477	$ 373,916