UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to________________
Commission file number 001-38248
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RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
Nevada46-3951329
Nevada
46-3951329
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
901 W Walnut Hill Lane
Irving TXTexas
75038
(Address of Principal Executive Offices)(Zip Code)
(214) 771-9952
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(469) 250-1185
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.001 par valueRMBLThe Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No
¨
Indicate by check mark whether the registrant a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
x
Non-accelerated filer¨
Smaller reporting company
x
Emerging growth company¨
If an emerging growth company, indicateIndicate by check mark ifwhether the registrant has elected notfiled a report on and attestation to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)its management’s assessment of the Exchange Act.effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report Yes ☒ No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No
x
As of June 30, 2019,2021, the aggregate market value of shares of common stock held by non-affiliates of the registrant was approximately $69.4$119.6 million.
The number of shares of Class B Common Stock, $0.001 par value, outstanding on May 26, 2020April 5, 2022 was 2,162,71615,930,740 shares. In addition, 50,000 shares of Class A Common Stock, $0.001 par value, were outstanding on May 26, 2020.April 5, 2022.
Portions of the registrant’s proxy statement relating to its 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2021 are incorporated herein by reference in Part III.






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RUMBLEON, INC.
Table of Contents to Annual Report on Form 10-K
for the Year Ended December 31, 20192021

Table of Contents

[Reserved.]






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PART I
Annual Report on Form 10-K
for the Year Ended December 31, 2021
ITEM 1.    BUSINESS.
In this Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"), "we," "our," "us," "RumbleOn," and "the Company"the "Company" refer to RumbleOn, Inc. and its consolidated subsidiaries at December 31, 2021, unless the context requires otherwise.
Forward-Looking and Cautionary Statements
This Annual Report on2021 Form 10-K contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements that:
● 
We have a limited operating history and we cannot assure you we will achieve or maintain profitability;
● 
Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline;
● 
The initial development and progress of our business to date may not be indicative of our future growth prospects and, if we continue to grow rapidly, we may not be able to manage our growth effectively;

● 
There is substantial doubt about our ability to continue as a going concern;

● 
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available on terms acceptable to us or at all, we may not be able to develop and grow our business as anticipated and our business, operating results and financial condition may be harmed;
● 
We may fail to maintain our listing on The Nasdaq Stock Market;
● 
The success of our business relies heavily on our marketing and branding efforts, especially with respect to the RumbleOn website and our branded mobile applications, and these efforts may not be successful;
● 
The failure to develop and maintain our brand could harm our ability to grow unique visitor traffic and to expand our regional partner network;
● 
We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominentlydefined in the search results, our traffic would decline, and our business would be adversely affected;
● 
A significant disruption in service on our website orPrivate Securities Litigation Reform Act of our mobile applications could damage our reputation and result in a loss of consumers, which could harm our business, brand, operating results, and financial condition;
● 
We may be unable to maintain or grow relationships with information data providers or may experience interruptions in the data feeds they provide, which may limit the information that we are able to provide to our users and regional partners as well as adversely affect the timeliness of such information and may impair our ability to attract or retain consumers and our regional partners and to timely invoice all parties;
● 
If we are unable to provide a compelling vehicle buying experience to our users, the number of transactions between our users, RumbleOn and dealers will decline, and our revenue and results of operations will suffer harm;
● 
If key industry participants, including powersports and recreation vehicle dealers and regional auctions, perceive us in a negative light or our relationships with them suffer harm, our ability to operate and grow our business and our financial performance may be damaged;
● 
The growth of our business relies significantly on our ability to increase the number of regional partners in our network such that we are able to increase the number of transactions between our users and regional partners. Failure to do so would limit our growth;
● 
Our ability to grow our complementary product offerings may be limited, which could negatively impact our development, growth, revenue and financial performance;
● 
We rely on third-party financing providers to finance a portion of our customers' vehicle purchases;

● 
Our sales of powersports/recreation vehicles may be adversely impacted by increased supply of and/or declining prices for pre-owned vehicles and excess supply of new vehicles;
● 
We rely on a number of third parties to perform certain operating and administrative functions for the Company;
● 
We participate in a highly competitive market, and pressure from existing and new companies may adversely affect our business and operating results;
● 
Seasonality or weather trends may cause fluctuations in our unique visitors, revenue and operating results;
● 
We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect such information and data could damage our reputation and brand and harm our business and operating results;
● 
Failure to adequately protect our intellectual property could harm our business and operating results;
● 
We may in the future be subject to intellectual property disputes, which are costly to defend and could harm our business and operating results;
● 
We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations. Failure to comply with these laws and regulations could have a material adverse effect on our business, results of operations and financial condition;
● 
We provide transportation services and rely on external logistics to transport vehicles. Thus, we are subject to business risks and costs associated with the transportation industry. Many of these risks and costs are out of our control, and any of them could have a material adverse effect on our business, financial condition and results of operations;
● 
We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed;
● 
We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results;
● 
The recent outbreak of COVID-19 will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity;
● 
We may be unable to realize the anticipated synergies related to the Acquisitions, which could have a material adverse effect on our business, financial condition and results of operations;
● 
We may be unable to successfully integrate the Wholesale Entities' business and realize the anticipated benefits of the Acquisitions;
● 
Our business relationships, those of the Wholesale Entities or the combined company may be subject to disruption due to uncertainty associated with the Acquisitions;
● 
If we are unable to maintain effective internal control over financial reporting for the combined companies, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements;
● 
The Wholesale Entities may have liabilities that are not known, probable or estimable at this time;
● 
As a result of the Acquisitions, we and the Wholesale Entities may be unable to retain key employees;
● 
The trading price for our Class B Common Stock may be volatile and could be subject to wide fluctuations in per share price;
● 
Our principal stockholders and management own a significant percentage of our stock and an even greater percentage of the Company's voting power and will be able to exert significant control over matters subject to stockholder approval;

● 
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline;
● 
Because our Class B Common Stock may be deemed a low-priced "penny" stock, an investment in our Class B Common Stock should be considered high risk and subject to marketability restrictions;
● 
We do not currently or for the foreseeable future intend to pay dividends on our common stock;


We are subject to reduced reporting requirements so long as we are considered a "smaller reporting company" and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors;
● 
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock;
● 
Anti-takeover provisions may limit the ability of another party to acquire us, which could cause our stock price to decline;
● 
Although the Notes are referred to as convertible senior Notes, the Notes are effectively subordinated to any of our future secured debt and structurally subordinated to any liabilities of our subsidiaries;
● 
The Notes are our obligations only and a substantial portion of our operations are conducted through, and a substantial portion of our consolidated assets are held by, our subsidiaries;
● 
Operating our business requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay the Notes and any other debt;
● 
Recent and future regulatory actions and other events may adversely affect the trading price and liquidity of the Notes;
● 
The trading price for our Class B Common Stock may be volatile and could be subject to wide fluctuations in per share price which could adversely impact the trading price of the Notes;
● 
We may incur substantially more debt in the future or take other actions which would intensify the risks discussed in these risk factors;
● 
We may not have the ability to raise the funds necessary to settle the Notes in cash on a conversion, to repurchase the Notes on a fundamental change, or to repay the Notes at maturity. In addition, the terms of our future debt may contain limitations on our ability to pay cash on conversion or repurchase of the Notes;
● 
Redemption may adversely affect the return on the Notes;
● 
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results;
● 
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our Class B Common Stock;
● 
Future sales of our Class B Common Stock or equity-linked securities in the public market could lower the market price for our Class B Common Stock and adversely impact the trading price of the Notes;
● 
Holders of Notes are not entitled to any rights with respect to our Class B Common Stock, but they will be subject to all changes made with respect to them to the extent our conversion obligation includes shares of our Class B Common Stock;
● 
The conditional conversion feature of the Notes could result in holders receiving less than the value of our Class B Common Stock into which the Notes would otherwise be convertible;
● 
On conversion of the Notes, holders may receive less valuable consideration than expected because the value of our Class B Common Stock may decline after holders exercise their conversion rights but before we settle our conversion obligation;


● 
The increase in the conversion rate for Notes converted in connection with a make-whole fundamental change or a notice of redemption may not adequately compensate holders for any lost value of their Notes as a result of such transaction or redemption;
● 
The conversion rate of the Notes may not be adjusted for dilutive events;
● 
Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes;
● 
Certain provisions in the indenture governing the Notes may delay or make it more expensive for a third party to acquire us;
● 
Holders of Notes are not entitled to receive any shares of our Class B Common Stock otherwise deliverable upon conversion of the Notes to the extent that such receipt would cause such holders to become, directly or indirectly, a beneficial owner of shares of our Class B Common Stock in excess of 4.99% of the total number of the shares of our Class B Common Stock then issued and outstanding;
● 
We cannot assure you that an active trading market will develop for the Notes;
● 
Any adverse rating of the Notes may cause their trading price to fall; and
● 
Other statements regarding our future operations, financial condition and prospects, and business strategies.
1995. Forward-looking statements may appear throughout this report, including without limitation, the following sections: Item 1 "Business," Item 1A "Risk Factors," and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations. "Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences in our actual results include, but are not limited to, those discussed in this Annual Report on2021 Form 10-K, and in particular, the risks discussed under the caption "Risk Factors" in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (SEC)(the "SEC"). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to revise or update forward-looking statements, except as required by law.
Market and Industry Data
Some of the market and industry data contained in this Annual Report on2021 Form 10-K are based on independent industry publications or other publicly available information. Although we believe that these independent sources are reliable, we have not independently verified and cannot assure you as to the accuracy or completeness of this information. As a result, you should be aware that the market and industry data contained herein, and our beliefs and estimates based on such data, may not be reliable.
Our Company
RumbleOn is the nation's first, largest, and only publicly-traded, technology-based Omnichannel platform in the powersports industry. Headquartered in the Dallas Metroplex, RumbleOn is revolutionizing the customer experience for outdoor enthusiasts across the country and making powersport vehicles accessible to more people in more places than ever before. We are transforming the powersports customer experience by giving consumers what they want—a wide selection, great value and quality, transparency, and an easy, friction-free transaction. Every element of our business, from inventory procurement to fulfillment to overall ease of transactions, whether online or on-site at one of our now 55 retail locations or experience centers, has been built for a singular purpose – creating a customer experience without peer in the powersports industry.
Although our primary focus is on disrupting the customer experience in the powersports industry, we participate in the automotive industry through our wholly-owned distributors of used automotive inventory, Wholesale, Inc. ("Wholesale Inc") and Got Speed, Inc. (“Got Speed”). Our logistics services company, Wholesale Express, LLC ("Wholesale Express"), provides freight brokerage services facilitating transportation for dealers and consumers.
Incorporated in Nevada in 2013 as a development stage company, we have been building the RumbleOn brand and vision since 2016. Led by our co-founder, chairman, and Chief Executive Officer Marshall Chesrown, we have achieved and built upon key milestones:
April 2017: launched RumbleOn.com.
October 2017: celebrated our initial listing on The Nasdaq Stock Market.
October 2018: acquired Wholesale Inc and Wholesale Express.
August 2021: acquired the RideNow companies (the “RideNow Transaction”), a collection of 41 retail powersports locations with a geographic footprint spanning primarily the Sunbelt.
Item 1. 
Business.1


OverviewSeptember 2021: processed the first powersports vehicle through our Orlando Fulfillment Center.
February 2022: completed the initial funding of our captive consumer finance facility for RumbleOn Finance.
February 2022: acquired Freedom Powersports (the “Freedom Transaction”), adding ten retail locations in Texas, one in Alabama and two in Georgia.
February 2022: appointed seasoned finance executive, Narinder Sahai, as Chief Financial Officer and appointed RumbleOn’s President, Peter Levy, to President and Chief Operating Officer.
February 2022: unveiled the regional management structure, anchored by tenured team members of RideNow.
These key events well-position RumbleOn Inc., a Nevada corporation, is a technology driven, motor vehicle dealeras the first mover in transforming the powersports industry through our customer experience focused, technology-based, Omnichannel platform.
Our Industry and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.
Opportunity
We operate primarily in the powersports industry, offering significant scale and breadth of products and our Omnichannel platform from which we will provide our only of its kind powersports customer experience. From our view, powersports includes motorcycles, side-by-sides, ATV, UTV, snowmobile, and personal watercraft ("PWC"). Add in boats and traditional RVs and, according to the US Census Bureau, the total value of the powersports market for traditional retail dealers was approximately $70 billion in 2017. Notably, however, the Census Bureau statistics do not account for a huge peer-to-peer market in used powersports, which RumbleOn believes represents up to 70% of used powersports transactions, providing RumbleOn an infrastructure-lightoutstanding inventory sourcing opportunity and creating a total addressable powersports market in excess of $100 billion.
The powersports marketplace in the United States is highly fragmented. We face competition from traditional franchised dealers who sell both new and used vehicles; independent used powersports dealers; online and mobile sales platforms; and private parties. We believe that the principal competitive factors in our industry are delivering an outstanding consumer experience, competitive sourcing of quality inventory, breadth and depth of product selection, and value pricing.
Our competitors vary in size and breadth of their product offerings. We believe that our principal competitive advantages in powersports sales includes our ability to provide a high degree of customer satisfaction with the buying experience by virtue of our Omnichannel platform. We provide customers the opportunity to experience RumbleOn's offerings online, in-store, and through our mobile app, or any combination of those three options. Our ability to make a cash offer to purchase a vehicle with our customer-friendly purchase process, and our breadth of selection of the most popular makes and models available online and in-store provides a competitive sourcing and sales.
2


RumbleOn's Solution - Creating the Future of Powersports
RumbleOn is creating a best-in-class experience in powersports for our customers. Doing so requires offering an unmatched choice and selection and replicating an outstanding customer experience throughout the lifecycle of powersports ownership, one customer at a time.
Customers come to RumbleOn's 55 retail locations as well as our more than 60 websites to shop for new and quality used powersports products and soon for parts, accessories and merchandise. We address the entire powersports market. We are reimagining and revolutionizing the customer experience on the technology-led Omnichannel RumbleOn platform, and we are doing so for everyone — from the enthusiast to the novice, and everyone in between – with a focus on four key initiatives:
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Creating an end-to-end ownership experience enables building lifelong connectivity to our customers in several ways, and the experience we are building is not just about the initial transaction. We are also focused on the touch points that facilitatescontinue to keep our customers engaged throughout their powersports ownership experience. Quality assurance, clear and consistent pricing, professional pickup and delivery, customization, after sale service, and guarantees are just a few of the ways we are building a reliable and consistent customer experience. Our offerings —and our entire customer experience —are designed to turn a single transaction into a lifetime relationship.
Providing the best selection of high-quality inventory enables us to address the 'wants' of all powersports customers coast to coast. We are well-positioned to acquire high-quality used vehicles through the strength of our online Cash Offer Tool, a unique and important competitive advantage for RumbleOn. Affording our consumers the ability to visit a retail location and receive cash for their used powersports unit instantaneously gives them peace of all participantsmind, and provides us the opportunity to drive a meaningful amount of incremental used inventory onto our platform. We are also leveraging robust data from the Cash Offer Tool and now from 55 RideNow and Freedom Powersports retail locations to ensure that the right vehicle is in the supply chain, including RumbleOn, other dealersright place at the right time —with the right price.
Becoming the premier destination for used powersports vehicles and consumersintroducing more used inventory into our showrooms as well as online attracts new customers to Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal isour platform and, most importantly, new riders to transform the way VIN-specific pre-owned vehicles are bought andindustry due to affordability. On a comparable pro forma basis in Q4 2021, we increased the number of used retail powersport units sold by 87% year-over-year at the RideNow locations. We are focused on both new and used; however, the opportunity to dramatically increase the number of used retail powersports units presents our greatest near-term opportunity. In the current new vehicle supply-constrained environment, we can better control used inventory than new because used is not dependent on a manufacturer's production or distribution constraints. In fact, our broad access to used inventory is — and will continue to be— an important differentiator for RumbleOn in any market environment.
Offering powersports financing through our wholly-owned captive consumer finance subsidiary RumbleOn Finance is another way we are making powersports ownership easy and accessible to more of our customers. RumbleOn Finance provides an opportunity to bring new entrants to the powersports space by offering competitive financing solutions, especially for those customers for whom financing from traditional financial institutions or manufacturers is not readily available. In the future, our paperless online transactions will further enhance our unmatched, true Omnichannel experience and create incremental sales with no geographic boundaries.
Our Growth Strategies
The key metric to our powersports business is retail vehicle unit sales, both online or in-store. Unit sales drives revenue and provides the opportunity to build additional revenue through financing, parts, merchandise, and accessories, each of which are higher margin revenue streams. As we mature, and expand our Omnichannel customer experience, we will create
3


additional opportunities to expand revenue streams. However, additional revenue opportunities begin with retail vehicle unit sales and, as a result, our growth strategy is focused on this metric.
Our ability to increase vehicle unit sales is a function of our market penetration in existing markets, the number of markets we operate in, and our ability to build and maintain our brands by offering great value, transparency, and an outstanding customer experience.
Optimize Our Inventory Selection and Centralization
We will continue to optimize and broaden the selection of new and used powersports vehicles we make available to our customers. Expanding our inventory selection enhances the customer experience by ensuring each visitor, either online or in-store, finds a vehicle that matches his or her preferences. Optimizing our new inventory significantly depends on the allocations of our manufacturers ("OEM"). Optimizing our used inventory selection depends on our ability to source and acquire a sufficient number of appropriate used vehicles, including acquiring more vehicles directly from our customers.
We are also implementing a fulfillment system with near real-time inventory replenishment to make the right powersports unit available in the right quantities at the right locations. This centralization of inventory will launch company-wide virtual selling through access to all company-owned inventory and not just what might be available at an individual location. This will increase the probability that our customers can find their powersports unit on our platform, thereby enhancing the customer experience while eliminating geographic boundaries. With digital inventory integration and over 60 individual websites that share content, RumbleOn will be top-of-mind for powersports searches. All of the technology infrastructure required is under development and will be implemented throughout 2022 and beyond.
Continue to Innovate and Extend Our Technology Leadership
We will continue to make significant investments in improving and adding to our online customer offering. We believe that the complexity of the traditional powersports retail transaction provides substantial opportunity for technology investment and that our leadership and continued growth will enable us to responsibly invest in further enhancing the customer experience.
From our founding, we have been laying the groundwork to offer a friction-free and fully integrated customer experience both online and in-store. We are building the technology engine to enable this integration, while methodically expanding our retail footprint. We plan to begin rolling out our new and innovative technology throughout 2022 and will continuously make improvements to our technology offering.
In order to truly rebuild the customer experience, we are investing to build the technology engine across the organization. Our Cash Offer Tool is supplying proprietary data on hundreds of thousands of unique Vehicle Identification Number (VIN) inputs, in addition to actual retail sales and transaction data from RideNow and Freedom Powersports' databases. Marrying this data creates a data-driven "market maker" that does not exist in the industry today. Integrating real-time pricing and sales data from in-store transactions will also enable us to further optimize offers and pricing.
Expand Our Geographic Markets
Beyond innovative technology and inventory integration, we will use our retail locations to augment the online experience—and vice versa —to offer a simple, friction-free customer experience. A key component to transforming the customer experience to support our growth strategy is enhancing the in-store experience and we are strategically expanding our geographic retail footprint. Since the business combination with RideNow, we have acquired 14 additional retail locations and are currently operating in 55 retail locations, as shown below.

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We employ three primary considerations for expanding our bricks-and-mortar presence: (1) find great people, (2) identify desired geography, and (3) implement appropriate and balanced brand mix.
Finding Great People. We believe any great customer experience in powersports begins with great people providing users withconsumers the most comprehensive, efficient, timely and transparent transaction experiences. Whileopportunity to fulfill their passion. From our initialexecutive team to our customer facing emphasisprofessionals to our back-office and corporate personnel, the RumbleOn team is singularly focused on transforming the customer experience in powersports, both online and in-store. As we expand our physical presence, whether through mostnew retail locations or as we build out our fulfillment “experience” centers, finding great people who believe in our mission.
Identifying Desired Geography. We believe desired geography means more than finding new markets; it also means making sure we can put the right powersports vehicle in the right place at the right price to maximize our return on the asset. This is a key goal of 2018 was on motorcyclesour fulfillment “experience” centers and other powersports,we anticipate to roll out two such centers during 2022, first in 2019the Dallas Metroplex and then potentially in Arizona, Nevada, Northeast or Florida markets. And of course, we enhanced our platformare always looking for strategic acquisition candidates, whether a large group such as Freedom Powersports or a key tuck-in opportunity to accommodate nearly any VIN-specific vehicle,improve the capabilities of an existing location.
Implementing Appropriate Brand Mix. Powersports retail provides the opportunity to put many different new brands under one roof along the proper mix of used inventory. Of course, having that opportunity and via our October 2018 acquisitiontaking advantage of Wholesale, Inc., we made a concerted effort to grow our cars and light truck categories.
that opportunity correctly are two different things. In this Annual Report on Form 10-K (this "Form 10-K"),current supply-constrained environment, we refercan better control used inventory than new because used is not subject to RumbleOn, Inc., as "RumbleOn," "RMBL," the "Company," "we," "us," and "our," and similar words. All share amounts included in this Form 10-K have been adjusted for the one-for-twenty reverse stock split of our Class A Common Stock and Class B Common Stock, effective May 20, 2020.

Our Model
RumbleOn's goal is to disrupt the inefficient, friction-laden pre-owned vehicle supply chain through the use of innovative technology. We have created a modern, technology-based platform to acquire and distribute inventory transparently and efficiently at value-oriented prices.manufacturers’ production or distribution constraints. We intend to leverage this platformour key used inventory sourcing advantage to maximizekeep our retail locations fully stocked with the right mix of preferred brands based on market share, and thereby further enhance the customer experience.
Develop Broad Consumer Awareness of Our Brand
Important to the future of RumbleOn's brand is creating a unified customer experience across all locations, and the foundation will be our technology, our infrastructure, and our corporate culture. We recently unveiled our new regional management structure, with a new National Senior Vice President of Retail overseeing six Regional Directors who will lead the daily operations of multiple facilities primarily based on geographic location. These Regional Directors will share best practices
5


in customer service and general operations to enhance the overall profitperformance of our retail locations. This new regional management structure is well-aligned with our growth initiatives and returnwill provide a stable footing for our continued growth. We are in the early days of the rollout, but we are encouraged by the impact on vehicles that performance and the excitement it has clearly created.
RumbleOn buys/sells for its own account, as well to provide both dealers and consumers technology-based tools, financing and logistics-based solutions to simplify their business or aid them through the complex process of buying/selling a vehicle.
Our model is anchored on powerful technology that enables RumbleOn to efficiently acquire, process (including reconditioning, photos and inspection), market and distribute vehicles to dealers and consumers. Collectively, this allows us to maximize inventory value and reduce inventory risk as we effect the entire vehicle supply chain in a faster and more cost-efficient manner. There are two critical inputs that are key to understanding how we do this: 1) our innovative technology and 2) our inventory management.
Technology
Innovative Technology
Technology underpins everythingtechnology continues to underpin every endeavor at RumbleOn. If you wantRumbleOn through our ongoing mission to disrupt anthe powersports industry you have to have answer two fundamental questions:
1)            
What can we do to eliminate existingand our focus on the customer pain points?
2)            
How do we remove friction from a marketplace?
experience. We leverage technology and data to drive change in an industry that is as old as the automobile or motorcycle itself.change. At a high-level, we believe there are two main areas where leveraging these innovations provides us a competitive advantage and eliminates existingimproves the customer pain points and removes friction from a marketplace – 1)experience: (1) our proprietary supply chain and distribution software and 2)(2) our Omnichannel and our mobile-first web application strategy.application.
(1) RumbleOn's proprietary supply chain and distribution software:
We utilize internally developed software and real time API's to lookLooks at the overall supply chain and reconfigurereconfigures inventory for the purpose of acquisition and distribution. Our technology aggregates multiple data sources in real-time, tracking and cataloging inventory across the country.
We analyzeAnalyzes real-time market data to inform our acquisition decisions, continually capturing and archiving such data using advanced algorithms to calibrate pricing and estimate freight and reconditioning expenses. The values are then used in our Cash Offer toolTool to quickly determine a fair and reasonable, non-negotiable offer.
(2) RumbleOn's Omnichannel and mobile-first web application strategy:
Lastly, we continue to enhanceEnhances our website and mobile application to provide not only a compelling usercustomer experience, from the front-end user interface and powerful search tools to enabling secure data, document, and payment exchanges between parties, butparties. We also to help optimize search engine marketing andto provide a lower overall cost of customer acquisition. For example, the
To deliver our supply chain software and Omnichannel strategies, RumbleOn app has features such as auto-populating details into the Cash Offer tool when leverages its proprietary and exclusive-use technology portfolio, which includes:
a customer scans their VIN, we introduced simplified uploadingseries of vehicle photos by app users, we integratemodeling tools & technologies to try and block inappropriate content on our Classifieds site, and we are creating fun social experiences like our Road Trip Planner and successful blog campaigns.
Inventory Management
We believe our ability to access and acquire inventory efficiently and cost effectively, from both consumers and dealers, is a key differentiator for RumbleOn. Using pre-owned retail and wholesale vehicle market data obtained from a variety ofconsolidating internal and external data sources, we evaluate to provide profitability estimates for inventory available for purchase;
a significant numberproprietary series of vehicles daily across both online and traditional auction/dealer-based channels to determine their fit with end-buyer demand, internal profitability targets and our existing inventory needs by make, model, condition and price point.
The supply of pre-owned vehicles is influenced by a variety of factors, including: the total number of vehicles in operation; the rate of new vehicle sales, which in turn generate pre-owned vehicles; the number of pre-owned vehicles sold or remarketed through our consumer and dealer channels; model-year changes; fleet turnover; seasonality; natural disasters; and economic downturns.
As such, we are very focused on nimbly managing our overall inventory, and strive to maintain our current average days to sale under 30 days. We believe this not only minimizes potential impacts on profits from the items described above but also provides us significant competitive benefits; namely: i) we have flexibility to adjust our inventory in response to unforeseen market dynamics – such as adverse weather conditions, including tornadoes and hurricanes, or other events or conditions that impact purchasing decisions, including disruptions in the domestic and global economy due to the COVID-19 pandemic (discussed below); and ii) we can make swift decisions to capitalize on market anomalies or leverage arbitrage opportunities that may benefit our volume and margins in a more consistent fashion.


To support our emphasis on inventory management and reductionbusiness intelligence technologies that tracks the lifecycle of capital investment needs,a vehicle from acquisition through delivery;
an automated photography technology that combines high-quality photos to produce an interactive, 360-degree virtual tour of the vehicle;
a catalog of website that includes advanced filtering and search technology that assist multi-lead generation across participating partners;
a dedicated financing company for leveraging leads for faster turn on sales and delivery; and
a proprietary transportation management system and assignment technology to optimize the transport of purchased inventory for acquisition and dealer distribution.
In addition to our proprietary/exclusive use technology, we leverage also rely on third party technology, including the following:
a robust partnercloud based network that managesinfrastructure for hosting websites and inventory data;
software libraries, development environments, and tools;
services to allow customers to digitally sign contracts; and
customer service call center management software.
In short, our business is driven by data and technology at all stages of the process, from acquisition, inventory purchasing, reconditioning, inspectionsphotography, transportation, and distributionannotation through physical through online merchandising, sales, financing, trade-ins, logistics, and delivery.
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We protect our technology and other intellectual property through a combination of trademarks, domain names, copyrights, trade secrets, patented technology, and contractual provisions and restrictions on access and use of our inventory. Our current regional partners are located in the cities below:
Cincinnati, OH; Dallas, TX; Las Vegas, NV;
Atlanta, GA; Statesville, NC; Philadelphia, PA; Nashville, TN;
Orlando, FL; San Diego, CA; San Francisco, CA;
West Palm Beach, FL
Every unitproprietary information and technology. We have a portfolio of inventory we acquire is posted immediately to both our website and Dealer Direct virtual inventory tool, as well as sent to one of our regional partners who then uploads photos, prepares detailed inspection reports, reconditions the vehicle to a dealer's expectation and sets the vehicle for live auction sale in the near future. If the vehicle is sold to a consumer, it is reconditioned to the appropriate level for the buyer, which reduces unnecessary reconditioning costs and enables us to protect our margin when selling directly to a dealer who might prefer to manage or perform much of the reconditioning to their standards. More importantly, we are able to quickly establish new regional partners as needed to reduce our cost of sales and freight expense while creating more capacity for over-all sales growth. Currently, there are hundreds of potential expansion locations that welcome the opportunity for their business. These are owned by the likes of Cox Automotive (Manheim); Copart (National Powersports Auctions); KARS (Adesa auctions) just to name a few.
Competitive Positioning
We believe we are disrupting a massive opportunity in the market and unlike others, we are using this data-powered technology to serve consumers, dealers and service providers across the entire supply chain. Our comprehensive offering includes the following:
DealersConsumersOther
Dealer to Consumer SalesConsumer to Consumer SalesLender Listing Site
Dealer to Dealer SalesOnline Cash Offers from RumbleOnDealer Listing Site
Online Cash Offers from RumbleOnClassifieds (including transaction support)Data Aggregation
Inventory ManagementFinance a PurchaseAuction Locations
Dealer Branded Cash OffersWarranty ProductsTransport Providers
Dealer Listing SiteInspection ServicesInspection Services
Logistics SupportLogistics SupportPeer-to-Peer Payment
Presently we are buying and selling our entire inventory and delivering the same customer experience across our websites – rumbleon.com, RumbleOn Dealer Direct and other URL's also represented as powered by RumbleOn - providing us with a strategic advantage of having vertical brands. These solutions exist as separate websites and each fills a gap in the legacy buying and selling experience while taking advantage of vertical search of the same inventory across multiple consumer and dealer channels.
RumbleOn.com is our primary national online consumer facing platform. Consumers can currently get a real Cash Offer for their vehicle as well as purchase vehicles through this website. Customers can pay for their vehicle using cash or they may select from a range of finance options from unrelated third parties such as banks or credit unions, as well as RumbleOn Finance, our own financing platform. Additionally, customers have the option to protect their vehicle with Extended Protection Plans ("EPPs") and vehicle appearance protection products as part of our online checkout process. EPPs include extended service plans which are designed to cover unexpected expenses associated with mechanical breakdowns and guaranteed asset protection, which is intended to cover the unpaid balance on a vehicle loan in the event of a total loss of the vehicle or unrecovered theft as well as other traditional protection products.
RumbleOn Dealer Direct is currently being used by multiple dealers which allows them to leverage the RumbleOn inventory as a virtual inventory of their own at wholesale prices without having to wait for auction day.
Wholesale Inc. and AutoSport, Powered by RumbleOn(as well as any other sub-brands we may utilize) – The significant local brand awareness these parallel sites provide allows us to take advantage of existing organic search benefits and customer goodwill by creating a locally branded website with most of the same functionality as RumbleOn.com.
RumbleOn Classifieds was launched in December 2018 and is a one-stop free listing site for consumers who wish to pursue peer-to-peer transactions, similar to Craigslist. Consumers list the vehicle at the price they wish. RumbleOn then offers both buyers and sellers a suite of option tools to facilitate the transaction process, including assistance with titles, documentation, third-party inspection, financing, funds-transfer, and logistics. Classifieds allows us to not only buy more inventory from unsuccessful listings, but more importantly provide consumers who were unwilling to accept the RumbleOn Cash Offer price an opportunity to stay in the RumbleOn network.

RumbleOn Finance is our wholly owned consumer finance entity that provides vehicle buyers competitive borrowing alternatives fully underwritten internally. During the second half of 2019, RumbleOn Finance began originating finance transactions on powersports.
Our Market / Competition
We participate in both the automotive and powersports markets.
Automotive
The U.S. used car marketplace is highly fragmented, and we face competition from franchised dealers, who sell both new and used vehicles; independent used car dealers; online and mobile sales platforms; and private parties. There are approximately 18,000 franchised automotive dealerships, which sell both new and used vehicles, as well as approximately 43,000 used car independents in the U.S. according to NADA and Borrell Associates' 2017 Outlook, respectively. Moreover, the top 100 car retailers control approximately 8.6% of the used car market share in 2018 according to AutomotiveNews.
Collectively, there were approximately 273 million registered vehicles in operation in 2018. Additionally, in 2019 automakers sold approximately 17 million new cars and approximately 41 million used cars were sold, many of which were accompanied by trade-ins. Lastly, the National Auto Auction Association and Cox Automotive estimate there are more than 16 million vehicles annual sold through wholesale channels, with approximately 9.6 million sold through auctions , the vast majority of which are run through the two largest auction participants, Manheim and Adesa, 4.9 million dealer-to-dealer and 2.1 direct to consumer or offsite/online.
Based on the large number of new and used vehicles being sold each year, coupled with the relatively small market share of any single used car seller, we believe that both sources of used vehicles, and our ability to sell them, will continue to be sufficient to meet our current and future needs.
Powersports
We currently operate in the powersports and recreational vehicle market with significant scale and breadth of products. The Motorcycle Industry Council estimates that in 2018, 10.1 million U.S. households owned the 12.2 million motorcycles. Of these, 87% of these were on-highway models, our initial targeted segment. According to the Powersports Business 2016 Market Data Book, or the 2020 Market Data book, pre-owned motorcycletrademark registrations were 1.1 million units in 2015 with new unit sales of approximately 281,000. The owner demographic is favorable to the market outlook as millennials and baby boomers are maturing into the median ranges. The owner group is characterized by brand loyal riding enthusiasts. Additionally, the dealer market is fragmented with an estimated 10,000 outlets authorized to sell powersports and recreation vehicles that include new and pre-owned motorcycles, scooter, and all-terrain vehicles.
Our initial focus was on pre-owned Harley-Davidson motorcycles as it provided a targeted, identifiable segment to establish the functionality of the platform and the RumbleOn brand. Harley-Davidson is a highly regarded and dominant brand in the motorcycle market, (representing approximately 50% market share of new 601cc+ on-road motorcycles according to both Harley-Davidson public filings and the Motorcycle Industry Council) and there were approximately 3.1 million Harley Davidson riders in 2019, up approximately 55,00 from the prior year per the IHS Markit Motorcycles in Operations data. As our business has evolved we have expanded into other powersports and recreational vehicle with a strong emphasis on the "metric" brands of motorcycles (Honda, Yamaha, Kawasaki, Suzuki, etc.), which essentially doubled the available market and is a natural extension as these vehicles are often sold or traded for Harley-Davidson vehicles. The metric market and dealer profile closely mirror that of the Harley-Davidson market although it is more highly fragmented and the average pre-owned vehicle selling price is less than a pre-owned Harley Davidson. In addition, many of the metric dealers also retail other powersport vehicles including ATVs, UTVs, snowmobiles and personal watercraft providing RumbleOn an opportunity for product extensions by leveraging existing regional partner relationships.
The ATV, UTV/side-by-side, snowmobile and personal watercraft vehicle, or PWC, markets, are a logical next extension for our platform, as there is significant overlap in the motorcycle dealer base with dealers of these products. According to estimates from Polaris, approximately 770,000 ATV/UTV/side-by-sides and 100,000 snowmobiles sold in North America in 2018, and there are estimated to be approximately 1.2 million snowmobiles registered in the United States, with another 600,000 in Canada. Lastly, accordingincluding registrations for "RumbleOn," the National Marine Manufacturers AssociationRumbleOn logo, "RideNow," and the Personal Watercraft Industry Association, in 2016 there were more than 59,000 new PWCs sold inRideNow logo. We are the United States and there are currently more than 1.1 million PWCs registered in the United States.

The United States pre-owned powersports and recreational vehicle marketplace is highly fragmented, and we face competition from franchised dealers, who sell both new and pre-owned vehicles; independent dealers; online and mobile sales platforms; and private parties. We believe that the principal competitive factors in our industry are delivering an outstanding consumer experience, competitive sourcingholder of vehicles, breadth and depth of product selection, and value pricing. Our competitors vary in size and breadth of their product offerings. We believe that our principal competitive advantages in pre-owned vehicle retailing includes our ability to provide a high degree of customer satisfaction with the buying experience by virtue of our low, no-haggle prices and our 100% online marketplace platform including our website and mobile application and our ability to make a cash offer to purchase a vehicle with our customer-friendly sales process and our breadth of selection of the most popular makes and models available on our website. In addition, we believe our willingness to make a cash offer to purchase a customer's vehicle, whether or not the customer is buying a vehicle from us, provides a competitive sourcing advantage for retail vehicles allowing us to offer value-oriented pricing. We believe the principal competitive factors for our ancillary products and services include an ability to offer a full suite of products at competitive prices delivered in an efficient manner to the customer. We compete with a variety of entities in offering these productsdomestic and international domain names, including banks, finance companies, insurance and warranty providers and extended vehicle service contract providers. We believe"rumbleon.com."
Operational Structure
The following chart summarizes our competitive strengths in this category will include our ability to deliver products in an efficient manner to customers utilizing our technology and our ability to partner with key participants in each category to offer a full suiteorganizational structure as of products at competitive prices. Lastly, additional competitors may enter the businesses inDecember 31, 2021, but includes Freedom Powersports, which we will operate.acquired on February 18, 2022. This chart is provided for illustrative purposes only and does not reflect all legal entities owned or controlled by us:
The supply of pre-owned vehicles, including automobiles, light trucks and powersports, is influenced by a variety of factors, including: the total number of vehicles in operation; the rate of new vehicle sales, which in turn generate pre-owned vehicles; and the number of pre-owned vehicles sold or remarketed through our consumer and dealer channels. Based on the large number of new and used vehicles being sold each year, coupled with the relatively small market share of any single used car seller, we believe that both sources of used vehicles, and our ability to sell them, will continue to be sufficient to meet our current and future needs.
rmbl-20211231_g5.jpg
Seasonality
Historically, both the automotivepowersports and powersportautomotive industries have been seasonal with traffic and sales strongest in the spring and summer quarters. Sales and traffic are typically slowest in the winter quarter but increase typically in February and March,the spring season, coinciding with tax refunds and improved weather conditions. Given this seasonality, coupled with the fact that we are a growing company, leads us to expect our quarterly results of operations, including our revenue, gross profit, profit/loss,net income (loss), and cash flow to vary significantly in the future, based in part on vehicle buying patterns.accordingly. Over time, we expect to normalize to seasonal trends in both markets, with the corresponding impact that may result from the overall economic conditions.
Nashville Tornado
In the early morning hours of March 3, 2020, a severe tornado struck the greater Nashville area causing significant damagesegments, using data and logistics to our facilities in Nashville. We maintain insurance coverage for damage to our facilities andmove inventory as well as business interruption insurance. We continue in the process of reviewing damages and coverages with our insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, currently assessed by the insurance carrier at $3,369,087; and (3) loss of business income, for which we have coverage in the amount of $6,000,000.
All three components of our loss claim have been submitted to its insurers. Our inventory claim is subject to a dispute with the carrier as to the policy limits applicable toright place, at the loss. The building insurer has agreed to pay $3,369,087 onright time, at the building and personal property loss, reflecting a complete recovery, net of $5,000 reflecting our deductible. The insurer has made an interim payment on the building and personal property loss of $2,269,507 and has an outstanding balance of $1,094,580 which is expected to be paid during the second quarter of 2020. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. We believe there will be a full recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered.right price.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced significant disruption to our business, both in terms of disruption of our operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of our business. Our business is also dependent on the continued health and productivity of our associates throughout this crisis.

The COVID-19 situation has created an unprecedented and challenging time. Our current focus is on positioning the Company for a strong recovery when this crisis is over. We have taken steps to reduce our inventory and align our operating expenses to the state of the business. We plan to continue to operate as permitted to support our customers’ needs for reliable vehicles and to provide as many jobs as possible for our associates. Effective April 9, 2020, 169 associates were temporarily laid-off effective, however our receipt of PPP funds, as discussed below will allow us to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation future government mandates, as well as future business conditions. We will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce our operating expenses as we are able, however, we expect the consequences of the COVID-19 outbreak will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity.
Intellectual Property and Proprietary Rights
Our brand image and intellectual property are an important element of our business strategy.  As of December 31, 2019, we have a trademark registration for "RumbleOn", a patent covering near field communications to store and retrieve vehicle information, and various applications pending with the U.S. Patent and Trademark Office.
Government Regulation
Various aspects of our business are or may be subject, directly or indirectly, to U.S. federal and state laws and regulations. Failure to comply with such laws or regulations may result in the suspension or termination of our ability to do business in affected jurisdictions or the imposition of significant civil and criminal penalties, including fines or the award of significant damages against us and our dealers in class action or other civil litigation.
State Motor Vehicle Sales, AdvertisingSales. Our sale and Brokering Laws
The advertisingpurchase of vehicles, both new and salepre-owned, related products and services and third-party finance products, are subject to the state and local dealer licensing requirements in the jurisdictions in which we have retail or wholesale locations. Regulators of new or pre-owned motor vehicles is highly regulated by the statesjurisdictions where our customers reside, but in which we do business. Althoughnot have a dealer or financing license could require that we obtain a license or otherwise comply with various state regulations. Despite our belief
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that we are not subject to the licensing requirements of those jurisdictions in which we do not anticipate selling newhave a physical presence, regulators may seek to impose punitive fines for operating without a license or demand we seek a license in those jurisdictions, any of which may inhibit our ability to do business in those jurisdictions, increase our operating expenses and adversely affect our financial condition and results of operations.
Consumer Finance. The financing we offer customers is subject to federal and state laws regulating the advertising and provision of consumer finance options, the collection of consumer credit and financial information, along with requirements related to online payments and electronic funds transfers, of whether RumbleOn Finance or a third-party is the entity extending credit to such customers. Most states regulate retail installment sales, including setting a maximum interest rate, caps on certain fees, or maximum amounts financed. In addition, certain states require that finance companies file a notice of intent or have a sales finance license or an installment sellers license in order to solicit or originate installment sales in that state.
Logistics and Transportation. Our Wholesale Express logistics operations, which brokers and facilitates the transportation of vehicles state regulatory authorities or third parties could takeprimarily between and among dealers, is subject to motor-carrier rules and regulations promulgated by the position that someUnited States Department of Transportation ("DOT") and the regulations applicable to new vehicle dealers or to the manner instates through which automobiles, powersports and recreationaltheir customers' vehicles are advertisedtransported. Additionally, the vendors whom Wholesale Express relies upon are subject to federal and sold generally are directly applicablestate regulation concerning transport vehicle dimensions, transport vehicle conditions, driver motor vehicle record history, driver alcohol and drug testing, and driver hours of serves. More restrictive limitations on vehicle weight and size, condition, trailer length and configuration, methods of measurement, driver qualifications, or driver hours of service may increase the costs charged to Wholesale Express by its vendors, which may adversely affect our business.financial condition, operating results, and cash flows. If our products and services are determinedwe fail to not comply with relevant regulatory requirements,the DOT regulations or if those regulations become more stringent, we could be subject to significant civilincreased inspections, audits, or compliance burdens. Regulatory authorities could take remedial action including imposing fines, suspending, or shutting down our Wholesale Express operations.
Environmental Laws and criminal penalties, including fines, or the awardRegulations. We are subject to a variety of significant damages in class action or other civil litigation as well as orders interfering with our ability to continue providing our productsfederal, state, and services in certain states. In addition, even absent such a determination, to the extent dealers are uncertain about the applicability of such laws and regulations to our business, we may lose, or have difficulty increasing the number of dealers in our network, which would affect our future growth.
Several states havelocal environmental laws and regulations that strictlypertain to our operations. The regulations concern material storage, air quality, waste handling, and water pollution control. The regulations also regulate or prohibitour use and operation of gasoline storage tanks, gasoline dispensing equipment, oil tanks, and paint booths among other things. Our business involves the brokeringuse, handling, and disposal of hazardous materials and wastes, including motor vehicles or the makingoil, gasoline, solvents, lubricants, paints, and other substances. We manage our compliance through permitting and operational control.
Facilities and Personnel. Our facilities and business operations are subject to laws and regulations relating to environmental protection and health and safety, and our employment practices are subject to various laws and regulations, including complex federal, state, and local wage and hour and anti-discrimination laws. We may also be liable for employee misconduct and violations of so-called "bird-dog" payments by dealers to third parties in connection with the sale of motor vehicles through persons other than licensed salespersons. If our products or services are determined to fall within the scope of such laws or regulations we may be forced to implement new measures, which could be costly, to reduce our exposure to those obligations, including the discontinuation of certain products or services in affected jurisdictions. Additionally, such a determination could subject us to significant civil or criminal penalties, including fines, or the award of significant damages in class action or other civil litigation.
In addition to generally applicable consumer protection laws, many states in which we may do business either have or may implement laws and regulations that specifically regulate the advertising for sale of new or pre-owned automobiles, powersports and recreational vehicles. These state advertising laws and regulations may not be uniform from state to state, sometimes imposing inconsistent requirements on the advertiser. If the content displayed on the websites we operate is determined or alleged to be inaccurate or misleading, we could be subject to significant civil and criminal penalties, including fines, or the award of significant damages in class action or other civil litigation. Moreover, such allegations, even if unfounded or decided in our favor, could be extremely costly to defend, could require us to pay significant sums in settlements, and could interfere with our ability to continue providing our products and services in certain states.are subject.

Federal Advertising Regulations
Regulations. The Federal Trade Commission ("FTC"("FTC") has authority to take actions to remedy or prevent advertising practices that it considers to be unfair or deceptive and that affect commerce in the United States. If the FTC takes the position in the future that any aspect of our business constitutes an unfair or deceptive advertising practice, responding to such allegations could require us to pay significant damages, settlements, and civil penalties, or could require us to make adjustments to our products and services, any or all of which could result in substantial adverse publicity, loss of participating dealers, lost revenue, increased expenses, and decreased profitability.
Federal Antitrust Laws
Laws. The antitrust laws prohibit, among other things, any joint conduct among competitors that would lessen competition in the marketplace. Some of the information that we may obtain from dealers may be sensitive and, if disclosed inappropriately, could potentially be pre-owned by dealers to impede competition or otherwise diminish independent pricing activity. A governmental or private civil action alleging the improper exchange of information, or unlawful participation in price maintenance or other unlawful or anticompetitive activity, even if unfounded, could be costly to defend and adversely impact our ability to maintain and grow our dealer network.
business.
In addition, governmental or private civil actions related to the antitrust laws could result in orders suspending or terminating our ability to do business or otherwise altering or limiting certain of our business practices, including the manner in which we handle or disclose pricing information, or the imposition of significant civil or criminal penalties, including fines or the award of significant damages against us in class action or other civil litigation.
Other. In addition to these laws and regulations that apply specifically to our business, we are also subject to laws and regulations affecting public companies, including securities laws and the listing rules of The Nasdaq Stock Market ("Nasdaq"). The violation of any of these laws or regulations could result in administrative, civil, or criminal penalties or in a cease-and-desist order against our business operations, any of which could damage our reputation and have a material adverse effect on
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our business, sales and results of operations. We have incurred and will continue to incur capital and operating expenses and other costs to comply with these laws and regulations.
The foregoing description of laws and regulations to which we are or may be subject is not exhaustive, and the regulatory framework governing our operations is subject to continuous change. The enactment of new laws and regulations or the interpretation of existing laws and regulations in an unfavorable way may affect the operation of our business, directly or indirectly, which could result in substantial regulatory compliance costs, civil or criminal penalties, including fines, adverse publicity, loss of participating dealers, lost revenue, increased expenses, and decreased profitability. Further, investigations by government agencies, including the FTC, into allegedly anticompetitive, unfair, deceptive or other business practices by us, could cause us to incur additional expenses and, if adversely concluded, could result in substantial civil or criminal penalties and significant legal liability.
Employees
As of December 31, 2019,2021, we hadapproximately 3001,949 full time and 4 part time70 part-time employees.
Corporate History
RumbleOn, Inc. was originally incorporated in the State of Nevada in October 2013 as a development stage company under the name Smart Server, Inc. In July 2016, Berrard Holdings Limited Partnership ("Berrard Holdings") acquired 273,750 shares of common stock of the Company from the prior owner of such shares pursuant to an Amended and Restated Stock Purchase Agreement, dated July 13, 2016. The shares acquired by Berrard Holdings represented 99.5% of the Company's then issued and outstanding shares of common stock. Steven Berrard, a director and our Chief Financial Officer, has voting and dispositive control over Berrard Holdings.
In October 2016, Berrard Holdings sold an aggregate of 165,625 shares of the Company's common stock to Marshall Chesrown, our Chairman of the Board and Chief Executive Officer, and certain other purchasers. The 120,625 shares acquired by Mr. Chesrown represented 43.9% of the Company's then issued and outstanding shares of common stock. The remaining shares owned by Berrard Holdings after giving effect to the transaction represented 39.3% of the Company's then issued and outstanding shares of common stock.
On January 8, 2017, the Company entered into an Asset Purchase Agreement (the "NextGen Agreement") with NextGen Dealer Solutions, LLC ("NextGen"), Halcyon Consulting, LLC ("Halcyon"), and members of Halcyon signatory thereto ("Halcyon Members," and together with Halcyon, the "Halcyon Parties") pursuant to which NextGen agreed to sell to the Company substantially all of the assets of NextGen in exchange for a payment of approximately $750,000 in cash, the issuance to NextGen of 76,191 unregistered shares of Company common stock (the "Purchaser Shares"), the issuance of a subordinated secured promissory note issued by the Company in favor of NextGen in the amount of $1,333,333 (the "Acquisition Note") and the assumption by the Company of certain specified post-closing liabilities of NextGen under the contracts being assigned to the Company as part of the transaction (the "NextGen Acquisition").
On January 9, 2017, the Company's Board of Directors (the "Board") and stockholders holding 318,750 of the Company's issued and outstanding shares of common stock approved an amendment to the Company's Articles of Incorporation (the "Certificate of Amendment") to change the name Smart Server, Inc. to RumbleOn, Inc. and to create an additional class of Company common stock. The Certificate of Amendment became effective on February 13, 2017, after the notice and accompanying Information Statement describing the amendment was furnished to non-consenting stockholders of the Company in accordance with Nevada and Federal securities law.

Immediately before approving the Certificate of Amendment, the Company had authorized 5,000,000 shares of common stock, $0.001 par value (the "Authorized Common Stock"), including 320,000 issued and outstanding shares of common stock (the "Outstanding Common Stock," and together with the Authorized Common Stock, the "Common Stock"). Pursuant to the Certificate of Amendment, the Company designated 50,000 shares of Authorized Common Stock as Class A Common Stock (the "Class A Common Stock"), which Class A Common Stock ranks pari passu with all of the rights and privileges of the Common Stock, except that holders of Class A Common Stock are entitled to 10 votes per share of Class A Common Stock issued and outstanding and (ii) all other shares of Common Stock, including all shares of Outstanding Common Stock were deemed Class B Common Stock (the "Class B Common Stock"), which Class B Common Stock are identical to the Class A Common Stock in all respects, except that holders of Class B Common Stock will be entitled to one vote per share of Class B Common Stock issued and outstanding.
On January 9, 2017, the Company's Board and stockholders holding 318,750 of the Company's issued and outstanding shares of common stock approved the issuance to (i) Mr. Chesrown of 43,750 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Chesrown and (ii) Mr. Berrard of 6,250 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Berrard.
On February 8, 2017 (the "Closing Date"), RumbleOn and its wholly owned subsidiary NextGen Pro, LLC ("NextGen Pro") completed the NextGen Acquisition in exchange for approximately $750,000 in cash, the Purchaser Shares, the Acquisition Note, and the other consideration described above. The Acquisition Note was originally set to mature on the third anniversary of the Closing Date (the "Maturity Date"). Interest accrues and is paid semi-annually originally (i) at a rate of 6.5% annually from the Closing Date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the Closing Date through the Maturity Date. In January 2020, the Acquisition Note was amended to extend the Maturity Date to January 31, 2021, modify the interest rate to 10% annually and also provide the holder the option to convert the Acquisition Note at any time at a price of $3.00 per share of Class B Common Stock. The Company's obligations under the Acquisition Note are secured by substantially all the assets of the NextGen Pro pursuant to an Unconditional Guaranty Agreement (the "Guaranty Agreement"), by and among Halcyon and NextGen Pro, and a related Security Agreement between the parties, each dated as of the Closing Date, as amended in January 2020. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all of the Company's obligations under the Acquisition Note.
On October 26, 2018, we entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") by and among the Company, the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder," and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and Marshall Chesrown and Steven Berrard, providing for the merger (the "Wholesale Merger") of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company. On October 29, 2018, we entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement.
Also, on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which we acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express").
Wholesale Inc. is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express, LLC is a related logistics company. The Wholesale Merger and the Express Acquisition were both completed on October 30, 2018 (the "Wholesale Closing Date"). As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of our previously designated Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the "Series B Preferred"). As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Net proceeds from a private placement completed in October 2018 and $5,000,000 funded under our credit facility were used to partially fund the cash consideration of the Wholesale Merger and the Express Acquisition. Each share of Series B Preferred automatically converted on a one-for-one basis into shares of the Company's Class B Common Stock on March 4, 2019.

On February 3, 2019, the Company completed the acquisition of all of the equity interests of Autosport USA, Inc. ("Autosport"), anindependent pre-owned vehicle distributor,pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC, a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. Aggregate consideration for the Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) a fifteen-month $500,000 promissory note in favor of the Seller, plus (iii) a three-year $1,536,000 convertible promissory note in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Acquisition, the Company also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to a promissory note payable to Seller. The fair value of the contingent earn-out payment was considered immaterial at the date of acquisition and was excluded from the purchase price allocation. As of December 31, 2019, there have been no payments earned under the performance thresholds.
Available Information
Our Internet website is www.rumbleon.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), are available, free of charge, under the Investor Relations tab of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Additionally, the SEC maintains a website located at www.sec.gov that contains the information we file or furnish electronically with the SEC.

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ITEM 1A.    RISK FACTORS.
Risk Factors
InvestingDescribed below are certain risks to our business and the industry in our common stock involves a high degree of risk. Investorswhich we operate. You should carefully consider the risks described below, together with the financial and all of the other information set forthcontained in this Annual Report on2021 Form 10-K including our financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our common stock.other public disclosures. If any of the events or developments described below occur,following risks occurs, our business, financial condition, or results of operations,cash flows, or prospects could be materially orand adversely affected. As a result, our future results could differ materially from historical results and from guidance we may provide regarding our expectations for future financial performance and the trading price of our Class B common stock could decline.
Risks Relating to Our Business
We are subject to the auditor attestation requirement on the assessment of our internal control over financial reporting for our year ended December 31, 2021 and we and our auditors have identified material weaknesses in our internal control over financial reporting as disclosed in this 2021 Form 10-K.
The Company is now subject to the requirement to include in this 2021 Form 10-K our auditor’s attestation report on its assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act (“SOX”). We and our auditors have identified deficiencies in our internal control over financial reporting as disclosed in this 2021 Form 10-K as required under Section 404 of SOX. As some of these deficiencies are deemed material weaknesses in internal control over financing reporting, our auditors have issued an adverse opinion in their assessment of our internal control over financial reporting. The issuance of an adverse opinion regarding our internal control over financial reporting could adversely impact investor confidence in the accuracy, reliability, and completeness of our financial reports.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to effectively remediate these material weaknesses and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, investors could lose confidence in our financial and other public reporting, which would harm our business.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. In connection with the preparation of our consolidated financial statements as of December 31, 2021 and 2020 and for the years then ended, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses in our internal control over financial reporting have been identified:
Information technology general controls particularly as such controls related to user access, program change management, and ineffective complementary user-organization controls, which limited management’s ability to rely on technology dependent controls relevant to the preparation of our financial statements.
Controls over the period end close process, including the review and approval process of journal entries, balance sheet account reconciliations, segregation of duties conflicts, and consolidation of intercompany entries.
Documentation and design of controls over the recording and reconciliation of inventory.
Review of key assumptions and estimates related to purchase accounting for significant acquisitions.
The control environment, risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated in a timely manner.
If we are unable to effectively remediate these material weaknesses and maintain effective internal control over financial reporting, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements.
The RideNow and Freedom Powersports entities we acquired were not subject to SOX regulations and they may lack the internal control over financial reporting required of a public company, which could ultimately affect our ability to ensure compliance with the requirements of Section 404 of SOX.
The RideNow and Freedom Powersports entities we acquired were not previously subject to SOX regulations and accordingly were not required to establish and maintain an internal control infrastructure meeting the standards promulgated under SOX. Our management's assessment of internal control over financial reporting and the auditor attestation, both included
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in this 2021 Form 10-K, did not include or address the internal control environment of the RideNow entities, which were acquired during the quarterly period ended September 30, 2021, or the Freedom entities, which were acquired during the quarterly period ending March 31, 2022.
We are in the process of integrating our internal control over financial reporting and our other control environments with those of the acquired RideNow and Freedom Powersports entities. In the course of integration, we may encounter difficulties and unanticipated issues combining our respective accounting systems due to the complexity of our financial reporting processes. We may also identify errors or misstatements that could require accounting adjustments. If we are unable to integrate and maintain effective internal control over financial reporting, timely or at all, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class B common stock may decline.
Powersports consumers may not accept our transformative business model.
As described throughout this 2021 Form 10-K, we are transforming the traditional powersports customer experience and building the first and only true Omnichannel experience in the industry. If customers do not accept our products, services, and offerings we may not benefit from the investments needed to build this transformative customer experience to the extent anticipated or at all. Also, in building the first and only true Omnichannel experience, we expect to incur significant expenses and face various other challenges, such as expanding our customer experience team and building out a fulfillment and logistics network. Any of these risks, if realized, could decline,materially and investors could lose alladversely affect our business, financial condition, and results of operations.
We may not be able to acquire the number of vehicles to satisfy consumer demand or our expectations for the business.
A material part of our plan is predicated on being able to have sufficient inventory, both new and used, to satisfy customer demand or meet our financial objectives. New inventory is ultimately controlled by our OEMs and their investment.
Risks Relatedwillingness to Our Business
allocate inventory to us and their ability to manufacture and distribute a sufficient number of vehicles given a current environment of manufacturing slowdowns, computer chip shortages, and logistic/transportation challenges (collectively, the “Demand/Supply Imbalances”). Used inventory is acquired directly from consumers via our online Cash Offer Tool or consumer trade-in transactions. If either channel for used vehicle acquisition were disrupted, for example as a result of another COVID-like lockdown, technology challenges, continued acceptance of online transactions, poor customer ratings, or other such events, the Company may not have enough used vehicles to meet customer demand, which may adversely affect our business, financial condition, and results of operations.
We have a limitedand may continue to acquire strategic retail locations and other complementary businesses and technologies, which could divert management's attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and impact our operating historyresults.
Our success will depend, in part, on our ability to grow our business in response to the demands of consumers, other constituents within the powersports industry, and we cannot assure you we will achieve or maintain profitability.
Our business model is unproven, andcompetitive pressures. In the past, we have a limited operating history. We are onlymet these demands in the initial development stagepart by acquiring complementary businesses and technologies.
The identification of our business. We expect to make significant investments in the further developmentsuitable acquisition candidates can be difficult; time-consuming, and expansion of our businesscostly, and these investments may not result in the successful development, operation, or growth of our business on a timely basis or at all. We may not generate sufficient revenue and we may incur significant losses in the future for a number of reasons, including a lack of demand for our products and services, increasing competition, weakness in the automotive, powersports and recreational vehicle industries generally, as well as other risks described in these Risk Factors, and we may encounter unforeseen expenses, difficulties, complications and delays, and other unknown factors relating to the development and operation of our business. Accordingly, we may not be able to successfully developcomplete identified acquisition opportunities. The risks we face in connection with our acquisition strategy include:
diversion of management time and operatefocus from operating our business generate revenue,to addressing acquisition integration challenges;
integration of the acquired company's accounting, management information, human resources, and other administrative systems;
coordination of technology, research and development, and sales and marketing functions;
retention of employees from the acquired company;
cultural challenges associated with integrating employees from the acquired company into our organization;
the need to implement or achieveimprove controls, procedures, and policies at a business that before the acquisition may have lacked effective controls, procedures, and policies;
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potential write-offs of intangibles or maintain profitability.
Our annual and quarterly operating resultsother assets acquired in such transactions that may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expecthave an adverse effect on our operating results in a given period; and
liability for activities of the acquired company before the acquisition.
Our failure to be subjectaddress these risks or other matters encountered in connection with future acquisitions and investments could cause us to annualfail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and quarterly fluctuations, and they will be affected by numerous factors, including:
● 
a changeharm our business generally. Future acquisitions could also result in consumer discretionary spending;
● 
a shift indilutive issuances of our equity securities, the mix and typeincurrence of vehicles we selldebt, contingent liabilities, amortization expenses, or the impairment of goodwill, any of which could result in lower sales price and lower gross profit;
● 
weather, which may impact the ability or desire for potential end customers to consider whether they wish to own a powersports and recreational vehicle;
● 
the timing and cost of, and level of investment in, development activities relating to our software development and services, which may change from time to time;
● 
our ability to attract, hire and retain qualified personnel;
● 
expenditures that we will or may incur to acquire or develop additional product and service offerings;
● 
future accounting pronouncements or changes in our accounting policies; and

● 
the changing and volatile U.S., European and global economic environments.
If our annual or quarterly operating results fall below the expectations of investors or securities analysts, the price of our Class B Common Stock could decline substantially. Furthermore, any annual or quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that annual and quarterly comparisons ofharm our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
The initial development and progress of our business to date may not be indicative of our future growth prospects and, if we continue to grow rapidly, we may not be able to manage our growth effectively.
We expect that, in the future, as our revenue increases, our rate of growth will decline. In addition, we will not be able to grow as fast or at all if we do not accomplish the following:
● 
maintain and grow our regional partner network;
● 
increase the number of users of our products and services, and in particular the number of unique visitors to our website and our branded mobile applications;
● 
increase the number of transactions between our users and both RumbleOn and our regional partners;
● 
introduce third party ancillary products and services;
● 
acquire sufficient number of pre-owned vehicles at attractive cost; and
● 
sell sufficient number of pre-owned vehicles at acceptable prices.
We may not successfully accomplish any of these objectives. We plan to continue our investment in future growth. We expect to continue to expend substantial financial and other resources on:
● 
marketing and advertising;
● 
product and service development; including investments in our website, business processes, infrastructure, inventory, product and service development team and the development of new products and services and new features for existing products; and
● 
general administration, including legal, accounting and other compliance expenses related to being a public company.
In addition, our anticipated growth may place and may continue to place significant demands on our management and our operational and financial resources. As we grow, we expect to hire additional personnel. Also, our organizational structure will become more complex as we add additional staff, and we will need to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures.
There is substantial doubt about our ability to continue as a going concern.
Our audited financial statements for the year ended December 31, 2019 were prepared under the assumption that we would continue our operations as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Our independent registered public accounting firm for the year ended December 31, 2019 included a “going concern” paragraph in its report on our financial statements as of, and for the year ended December 31, 2019, indicating that the Company has incurred recurring losses from operations and negative cash flows from operations, and these conditions, along with the uncertainty arising from the impact of COVID-19 and other matters set forth in Note 1 to our audited financial statements, raise substantial doubt about the Company’s ability to continue as a going concern.  If the Company is unable to generate sufficient liquidity from the actions taken in respect of the COVID-19 pandemic, current working capital, results of operations, and expected continued inventory financing, there is no assurance that sufficient financing will be available to us when needed to allow us to continue as a going concern.  

condition.
We may require additional financing or capital to pursue our business objectives and respond to business opportunities,growth challenges or unforeseen circumstances. If financing or capital is not available on terms acceptable to us or at all, we may not be able to develop and grow our business as anticipated and our business, operating results, and financial condition may be harmed.
WeWe intend to continue to make investments to support the development and growth of our business, including expanding our inventory base and we may require additionalgrowing our RumbleOn Finance business. Additional financing or capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However, additional funds may not be available when we need them,it, on terms that are acceptable to us, or at all. Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing. Also, the incurrence of leverage, the debt service requirements resulting therefrom, and the possibility of a need for financing or any additional financing could have important and negative consequences, including the following: (a) the Company's ability to obtain additional financing for working capital, capital expenditures, or general corporate or other purposes may be impaired in the future; (b) certain future borrowings may be at variable rates of interest, which will expose the Company to the risk of increased interest rates; (c) the Company may need to use a portion of the money it earns to pay principal and interest on their credit facilities, which will reduce the amount of money available to finance operations and other business activities, repay other indebtedness, and pay distributions; and (d) substantial leverage may limit the Company's flexibility to adjust to changing economic or market conditions, reduce their ability to withstand competitive pressures and make them more vulnerable to a downturn in general economic conditions.

If we raise additional fundscapital through further issuances of equity or convertible debt, securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition, and prospects could be adversely affected.
Investments made in the development, growth, and expansion of our business may not yield our expected results and may not result in successful growth of our business.
We expect to make significant investments in the further development and expansion of our business and these investments may not result in the development, growth or expansion of our business on a timely basis or at all. We may not generate sufficient revenue and we may incur significant losses in the future for several reasons, including a lack of demand for our products and services, increasing competition, and weakness in the powersports industry generally. We may encounter unforeseen expenses, difficulties, complications, and delays, relating to the development and operation of our business as well as our organic and acquisition growth strategies. Accordingly, we may not be able to successfully develop, grow, and expand our business, generate revenue, or achieve and maintain profitability.
We may failexperience difficulties integrating acquired businesses.
Achieving the anticipated benefits of our acquisitions will depend in significant part upon our integrating any acquired entity's businesses, operations, processes and systems in an efficient and effective manner. We may not be able to maintain our listingaccomplish the integration process smoothly, successfully, or on a timely basis, which may result in unforeseen expenses or the failure to recognize the anticipated benefits of acquired businesses. The Nasdaq Stock Market.necessity of coordinating geographically separated organizations, systems of controls, and facilities and addressing possible differences in business backgrounds, corporate cultures, and management philosophies may increase the difficulties of integration. Companies operate numerous systems and controls, including those involving management information, accounting and finance, legal and regulatory compliance, inventory intake and control, sales, billing, employee benefits, and payroll. The integration of an acquired company's operations requires the dedication of significant internal and external resources, which may divert management’s attention from the day-to-day business of the company and be costly. Employee uncertainty and lack of focus during the integration process may also disrupt the business of the Company. Any inability of management to successfully and timely integrate an acquired company could have a material adverse effect on the business and results of operations of the Company and result in not achieving the anticipated benefits of the acquisition.
To the extent we acquire additional businesses, we may incur substantial costs.
Our Class B Common Stock is listed for trading on NASDAQ under the trading symbol "RMBL" For our Class B Common StockWe have incurred, and expect to continue to incur, a number of non-recurring costs associated with our acquisitions. The substantial majority of these non-recurring costs will consist of transaction and regulatory costs related to acquisitions. We will also incur transaction fees and costs related to formulating and implementing integration plans, including system consolidation costs and employment-related costs. We continue to assess the magnitude of these costs, and additional
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unanticipated costs may be listed on NASDAQ,incurred from the acquisitions and integration. Although we must meet NASDAQ's continued listing standards. A failureanticipate that the elimination of duplicative costs and the realization of other efficiencies and synergies related to meet these standards, including our failurethe integration should allow us to meetoffset integration-related costs over time, this net benefit may not be achieved in the minimum bid price requirement, could result in our Class B Common Stock being delisted,near term, or at all.
We have incurred significant indebtedness, which could adversely affect us, including our business flexibility, and will increase our interest expense.
We have substantially increased indebtedness following completion of the market liquidityRideNow and Freedom transactions, which could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing our interest expense. We also incurred various costs and expenses related to the financing of the RideNow and Freedom transactions. The increased levels of indebtedness following completion of the RideNow and Freedom transactions, including the applicable interest payments, could also reduce funds available for working capital, capital expenditures, and other general corporate purposes, and may create competitive disadvantages for us relative to other companies with lower debt levels. If we do not achieve the expected synergies and cost savings from the RideNow and Freedom transactions, or if our financial performance does not meet our current expectations, then our ability to service the indebtedness may be adversely impacted.
We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.
We believe our success will depend on the efforts and talents of our executives and employees, including Marshall Chesrown, our Chairman and Chief Executive Officer. In addition, the loss of any senior management, regional directors, or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all. Our future success depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If we fail in attracting well-qualified employees or retaining and motivating existing employees, our business could be materially and adversely affected.
Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to annual and quarterly fluctuations, and they will be affected by numerous factors, including:
a change in consumer discretionary spending;
a shift in the mix and type of vehicles we sell which could result in lower sales price and lower gross profit;
the timing and cost of development and operating activities relating to our business, which may change from time to time;
expenditures that we will or may incur to advance our growth strategies; and
future accounting pronouncements or changes in our accounting policies.
If our annual or quarterly operating results fall below the expectations of investors or securities analysts, the price per share of our Class B Common Stock, impair the valuecommon stock could fluctuate or decline substantially. We believe that annual and quarterly comparisons of your investment,our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
The failure to develop and maintain our brand could harm our business. Weability to grow unique visitor traffic.
Developing and maintaining the RumbleOn brand will depend largely on the success of our efforts to maintain the trust of and deliver value to our users. If our potential users perceive that we are not focused on providing them with a better pre-owned powersports experience, our reputation and the strength of our brand will be adversely affected.
Complaints or negative publicity about our business practices, our marketing and advertising campaigns, our compliance with applicable laws and regulations, data privacy and security issues, and other aspects of our business, irrespective of their validity, could diminish users' confidence in and the use of our products and services and adversely affect our brand. There can providebe no assurance that we will continuebe able to satisfy NASDAQ'sdevelop, maintain, or enhance our brand, and failure to do so would harm our business growth prospects and operating results.
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If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own sales channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed.
Our continued listing standardssuccess will depend on our ability to maintain and enhance the value of our retail brands across all of our sales channels, including in the communities in which we operate, and to attract consumers to our Omnichannel experience.
Consumers are increasingly shopping for new and used vehicles, vehicle repair and maintenance services, and other vehicle products and services online and through mobile applications, including through third-party online and mobile sales platforms, with which we compete, that are designed to generate consumer sales leads that are sold to vehicle dealers. If we fail to preserve the value of our retail brands, maintain our listingreputation, or attract consumers to our Omnichannel offering, our business could be adversely impacted.
An isolated business incident at a single store could materially adversely affect our other stores, retail brands, reputation, and sales channels, particularly if such incident results in adverse publicity, governmental investigations, or litigation. In addition, the growing use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on NASDAQ.
social media about RumbleOn, RideNow, Freedom, or any of our brands, locations, or websites could materially damage our retail brands, reputation, and sales channels.
The success of our business relies heavily on our marketing and branding efforts, especially with respect to the RumbleOn website and our branded mobile applications, and these efforts may not be successful.
We believe that an important component of our development and growth will be the business derived from the RumbleOn website and our branded mobile applications. Because RumbleOn is a consumer brand, we rely heavily on marketing and advertising to increase the visibility of this brand with potential users of our products and services.
Our business model relies on our ability to scale rapidly and to decrease incremental user acquisition costs as we grow. Some of our methods of marketing and advertising may not be profitable because they may not result in the acquisition of sufficient users visiting our website and mobile applications such that we may recover these costs by attaining corresponding revenue growth. If we are unable to recover our marketing and advertising costs through increases in user traffic and in the number of transactions by users of our platform, it could have a material adverse effect on our growth, results of operations and financial condition.
The failure to develop and maintain our brand could harm our ability to grow unique visitor traffic and to expand our regional partner network.
Developing and maintaining the RumbleOn brand will depend largely on the success of our efforts to maintain the trust of our users and dealers and to deliver value to each of our users and dealers. If our potential users perceive that we are not focused primarily on providing them with a better pre-owned vehicle buying experience, our reputation and the strength of our brand will be adversely affected.
Complaints or negative publicity about our business practices, our marketing and advertising campaigns, our compliance with applicable laws and regulations, the integrity of the data that we provide to users, data privacy and security issues, and other aspects of our business, irrespective of their validity, could diminish users' and dealers' confidence in and the use of our products and services and adversely affect our brand. There can be no assurance that we will be able to develop, maintain or enhance our brand, and failure to do so would harm our business growth prospects and operating results.
We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline, and our business would be adversely affected.
We depend in part on Internet search engines and social media such as GoogleGoogle™, BingBing™, and FacebookFacebook™ to drive traffic to our website. For example, when a user searches the internet for a particular type of powersports or recreational vehicle, we will rely on a high organic search ranking of our webpages in these search results to refer the user to our website. However, our ability to maintainobtain such high, non-paid search result rankings is not within our control. Our competitors'competitors' Internet search engine and social media efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If Internet search engines or social media companies modify their search algorithms or display technologies in ways that are detrimental to us, or if our competitors'competitors' efforts are more successful than ours, overall growth in our user base could slow or our user base could decline. Internet search engine providers could provide recreation vehicle dealer and pricing information directly in search results, align with our competitors or choose to develop competing services. Any reduction in the number of users directed to our website through Internet search engines could harm our business and operating results.

A significant disruption in service on our website or of our mobile applications could damage our reputation and result in a loss of consumers, which could harm our business, brand, operating results, and financial condition.
Our brand, reputation and ability to attract consumers, affinity groups and advertisers depend on the reliable performance of our technology infrastructure and content delivery. We may experience significant interruptions with our systems in the future. Interruptions in these systems, whether due to system failures, computer viruses, or physical or electronic break-ins, could affect the security or availability of our products on our website and mobile application, and prevent or inhibit the ability of consumers to access our products. Problems with the reliability or security of our systems could harm our reputation, result in a loss of consumers, dealers and affinity group marketing partners, and result in additional costs.
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We intend to locate our communications, network, and computer hardware used to operate our website and mobile applications at facilities in various parts of the country to minimize the risk and create an environment where we can remain online if one of the facilities in which our equipment is housed goes offline. Nevertheless, we willdo not own or control the operation of these facilities, and our systems and operations willmay be vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes, and similar events. The occurrence of any of these events could result in damage to our systems and hardware or could cause them to fail.
Problems faced by any third-party web hosting providers we may utilize could adversely affect the experience of our consumers. Any third-party web hosting providers could close their facilities without adequate notice. Any financial difficulties, up to and including bankruptcy, faced by any third-party web hosting providers or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict. If our third-party web hosting providers are unable to keep up with our growing capacity needs, our business could be harmed.
Any errors, defects, disruptions, or other performance or reliability problems with our network operations could cause interruptions in access to our products as well as delays and additional expense in arranging new facilities and services and could harm our reputation, business, operating results, and financial condition.
We may be unable to maintain or grow relationships with information data providers or may experience interruptions in the data feeds they provide, which may limit the information that we are able to provide to our users and regional partners as well as adversely affect the timeliness of such information and may impair our ability to attract or retain consumers and our regional partners and to timely invoice all parties.
We expect to receive data from third-party data providers, including our partner network, dealer management system data feed providers, data aggregators and integrators, survey companies, purveyors of registration data and possibly others. There may be some instances in which we use this information to collect a transaction fee from those dealers and recognize revenue from the related transactions.
From time to time, we may experience interruptions in one or more data feeds that we receive from third-party data providers, in a manner that affects our ability to operate our business. These interruptions may occur for a number of reasons, including changes to the software used by these data feed providers and difficulties in renewing our agreements with third-party data feed providers. Additionally, when an interruption ceases, we may not always be able to collect the appropriate fees and any such shortfall in revenue could be material to our operating results.
If we are unable to provide a compelling vehicle buying experience to our users, the number of transactions between our users, RumbleOn and dealers will decline, and our revenue and results of operations will suffer harm.
We cannot assure you that we are able to provide a compelling vehicle buying experience to our users, and our failure to do so will mean that the number of transactions between our users, RumbleOn and dealers will decline, and we will be unable to effectively monetize our user traffic. We believe that our ability to provide a compelling powersport and recreation vehicle buying experience is subject to a number of factors, including:
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our ability to launch new products that are effective and have a high degree of consumer engagement; and
● 
compliance of our network partners with applicable laws, regulations and the rules of our platform.

If key industry participants, including powersports and recreation vehicle dealers and regional auctions, perceive us in a negative light or our relationships with them suffer harm, our ability to operate and grow our business and our financial performance may be damaged.
We anticipate that we will derive a significant portion of our revenue from by existing vehicle dealers for dealer services we may provide them. In addition, we utilize a select set of regional partners to perform services for our benefit, including, among other things, vehicle reconditioning, vehicle storage and vehicle photography. If our relationships with our network of regional partners suffer harm in a manner that leads to the departure of these regional partners from our network, then our ability to operate our business, grow revenue, and lower our costs will be adversely affected.
We cannot assure you that we will maintain strong relationships with the regional partners in our network or that we will not suffer partner attrition in the future. We may also have disputes with regional partners from time to time, including relating to the collection of fees from them and other matters. We may need to modify our products, change pricing or take other actions to address regional partner concerns in the future. If we are unable to create and maintain a compelling value proposition for regional partners to become and remain in our network, our network will not grow and may begin to decline. If a significant number of these regional partners decided to leave our network or change their financial or business relationship with us, then our business, growth, operating results, financial condition and prospects could suffer. Additionally, if we are unable to attract regional partners to our network, our growth could be impaired.
The growth of our business relies significantly on our ability to increase the number of regional partners in our network such that we are able to increase the number of transactions between our users and regional partners. Failure to do so would limit our growth.
Our ability to grow the number of regional partners in our network is an important factor in growing our business. We may be viewed in a negative light by vehicle dealers, and there can be no assurance that we will be able to maintain or grow the number of regional partners in our network.
Our ability to grow our complementary product offerings may be limited, which could negatively impact our development, growth, revenue and financial performance.
As we introduce or expand additional offerings forto our platform, such as recreation vehicle trade-ins, lead management, transaction processing, financing, maintenance and insurance, we may incur losses or otherwise fail to enter these markets successfully. Our expansion into these markets may place us in competitive and regulatory environments with which we are unfamiliar and involves various risks, including the need to invest significant resources and the possibility that returns on such investments will not be achieved for several years, if at all. In attempting to establish such new product offerings, we may incur significant expenses and face various other challenges, such as expanding our sales force and management personnel to cover these markets and complying with complicated regulations that apply to these markets. In addition, we may not successfully demonstrate the value of these ancillary products to consumers or dealers, and failure to do so would compromise our ability to successfully expand into these additional revenue streams.
We rely on third-party financing providers to finance a portion of our customers' vehicle purchases.
WeIn addition to RumbleOn Finance, our captive consumer financing entity, we rely on third-party financing providers to finance a portion of our customers'customers' vehicle purchases. Accordingly, our revenue and results of operations are partially dependent on the actions of these third parties. We provide financing to qualified customers through a number of third-party financing providers. If one or more of these third-party providers cease to provide financing to our customers, provide financing to fewer customers or no longer provide financing on competitive terms, it could have a material adverse effect on our business, sales and results of operations. Additionally, if we were unable to replace the current third-party providers upon the occurrence of one or more of the foregoing events, it could also have a material adverse effect on our business, sales and results of operations.
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We rely on third-party providers to supply extended protection products ("EPP")to our customers.
We rely on third-party providers to supplyEPP products to our customers. Accordingly, our revenue and results of operations will be partially dependent on the actions of these third-parties.third parties. If one or more of these third-party providers cease to provide EPP, products, make changes to their products or no longer provide their products on competitive terms, it could have a material adverse effect on our business, revenue and results of operations. Additionally, if we were unable to replace the current third-party providers upon the occurrence of one or more of the foregoing events, it could also have a material adverse effect on our business, revenue and results of operations.

Our sales of powersports/recreationpowersports vehicles may be adversely impacted by increased supply of and/or declining prices for pre-owned vehicles and excess supply of new vehicles.
We believe when prices for pre-owned vehicles have declined, it can have the effect of reducing demand among retail purchasers for new vehicles (at or near manufacturer'smanufacturer's suggested retail prices). Further, vehicle manufacturers can and do take actions that influence the markets for new and pre-owned vehicles. For example, introduction of new models with significantly different functionality, technology, or other customer satisfiers can result in increased supply of pre-owned vehicles, and a corresponding decrease in price of pre-owned vehicles. Also, while historically manufacturers have taken steps designed to balance production volumes for new vehicles with demand, those steps have not always proven effective. In other instances, manufacturers have chosen to supply new vehicles to the market in excess of demand at reduced prices which has the effect of reducing demand for pre-owned vehicles.
We rely on a number of third parties to perform certain operating and administrative functions for the Company.
us.
We rely on a number of third parties to perform certain operating and administrative functions for us. We may experience problems with outsourced services, such as unfavorable pricing, untimely delivery of services, or poor quality. Also, these third parties may experience adverse economic conditions due to difficulties in the global economy that could lead to difficulties supporting our operations. In light of the amount and types of functions that we will outsource, these service provider risks could have a material adverse effect on our business and results of operations.
We participate in a highly competitive market, and pressure from existing and new companies may adversely affect our business and operating results.
We face significant competition from both existing powersport retailers as well as companies that provide listings, information, lead generation, and vehicle buyingpowersport-buying and selling services designed to reach businesses and consumers and enable dealers to reach these consumers. We willconsumers and inventory sources.
Our current and future competitors may include:
traditional powersport dealerships that could increase investment in technology and infrastructure to compete fordirectly with our online model;
internet and online powersports sites that could change their models to directly compete with us, such as Amazon, eBay Motors, Google, and CycleTrader; and
manufacturers seeking to have a share of overall vehicle purchases as well as vehicledirect relationship with customers or to support their dealer's marketing and technology spend. To the extent that vehicle dealers view alternative strategies to be superior to RumbleOn, we may not be able to maintain or grow the number of dealers in our network, we may sell fewer vehicles to users of our platform, and our business, operating results and financial condition will be harmed.
networks.
We also expect that competitors, both new competitorsand existing, will continue to enter the online vehicleand traditional powersports retail industry with competing brands, business models, products, and services, which could make it difficult to acquire inventory, attract customers, and sell vehicles at a profitable price. For example, traditional dealerships could transition their selling efforts to the internet, allowing them to more efficiently sell powersports across state lines and compete directly with our online offering and no-haggle pricing model. Some of these companies have an adverse effect on our revenue, businesssignificantly greater resources than we do and financial results.
may be able to provide customers access to a greater inventory of vehicles at lower prices or purchase vehicles from consumers at higher prices while delivering a competitive overall experience.
Our competitors could significantlymay also impede our ability to expandreach consumers in certain jurisdictions. For example, our network of dealers and regional auctions and to reach consumers. Our competitors may also developincrease their search engine optimization efforts and market new technologies that render our existing or future products and services less competitive, unmarketable or obsolete. In addition, if our competitors develop products or services with similar or superior functionality to our solutions, we may need to decrease the pricesoutbid us for our solutions in order to remain competitive. If we are unable to maintain our current pricing structure due to competitive pressures, our revenue will be reduced, and our operating results will be negatively affected.
search terms on various search engines.
Our current and potential competitors may have significantly moregreater financial, technical, marketing, and other resources than we have, and the ability to devote greater resources to the development, promotion and support of their products and services. Additionally, they may have more extensive recreation vehicle industry relationships, than we have, longer operating histories, and greater name recognition.recognition than we have. As a result, these competitors may be better able to respond more quickly with new technologies and to
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undertake more extensive marketing or promotional campaigns. If we are unable to compete with these companies, the demand for our used vehicles, products, and services could substantially decline.
In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our current or future third-party data providers, technology partners, or other parties with whom we may have relationships, thereby limiting our ability to develop, improve, and promote our solutions. We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our revenue, business, and financial results.
Restrictive covenants in certain of our debt agreements could limit our growth and implementation of our business strategy.
Our debt agreements impose operating and financial restrictions on us. These restrictions limit our ability and that of our subsidiaries to, among other things: (i) incur additional indebtedness; (ii) make investments or loans; (iii) create liens; (iv) consummate mergers and similar fundamental changes; (v) make restricted payments; (vi) make investments in unrestricted subsidiaries; (vii) enter into transactions with affiliates; and (viii) use of proceeds of asset sales.
We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenants under certain of our debt agreements. The restrictions contained in the covenants could: (i) limit our ability to plan for or react to market conditions, to meet capital needs or otherwise to restrict our activities or business strategy; and (ii) adversely affect our ability to finance our operations, enter into acquisitions or divestitures to engage in other business activities that would be in our interest.
A breach of any of these covenants or our inability to comply with the required financial ratios or financial condition tests could result in a default under our debt agreements that, if not cured or waived, could result in acceleration of all indebtedness outstanding thereunder and cross-default rights under our other debt. In addition, in the event of an event of default under our credit facilities, the affected lenders could foreclose on the collateral securing such credit facility and require repayment of all borrowings outstanding thereunder. If the amounts outstanding under the credit facilities or any of our other indebtedness were to be accelerated, our assets may not be sufficient to repay in full the amounts owed to the lenders or to our other debt holders.
The phase-out of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates.
On March 5, 2021, the administrator for LIBOR announced that it will permanently cease to publish most LIBOR settings beginning on January 1, 2022 and cease to publish the overnight, one-month, three-month, six-month, and 12-month LIBOR settings on July 1, 2023. The replacement of LIBOR with an alternative rate or benchmark may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows, and liquidity. We cannot predict the effect of the discontinuance of LIBOR or the establishment and use of alternative rates or benchmarks. We may need to amend certain contracts or enter into new ones and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to our interest expense.
Seasonality or weather trends may cause fluctuations in our unique visitors, revenue and operating results.
Our revenue trends are likely to be a reflection of consumers'consumers' vehicle buying patterns. While different types of recreation vehicles are designed for different seasons (motorcycles are typically for non-snow seasons, while snowmobiles are typically designed for winter), our revenue may be cyclical if, for example, powersport and recreation vehicles represent a large percentage of our revenue. Historically, the used vehicle industry has been seasonal with traffic and sales strongest in the spring and summer quarters. Sales and traffic are typically slowest in the fall quarter but increase in February and March, coinciding with tax refund season. Our business will also be impacted by cyclical trends affecting the overall economy, as well as by actual or threatened severe weather events.

We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect such information and data could damage our reputation and brand and harm our business and operating results.
We collect, process, store, share, disclose and use personal information and other data provided by consumers, dealers and auctions. We rely on encryption and authentication technology licensed from third parties to effect secure transmission of such information. We may need to expend significant resources to protect against security breaches or to address problems
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caused by breaches. Any failure or perceived failure to maintain the security of personal and other data that is provided to us by consumers and dealers could harm our reputation and brand and expose us to a risk of loss or litigation and possible liability, any of which could harm our business and operating results. In addition, from time to time, it is possible that concerns will be expressed about whether our products, services, or processes compromise the privacy of our users. Concerns about our practices with regard to the collection, use or disclosure of personal information or other privacy related matters, even if unfounded, could harm our business and operating results.
There are numerous federal, state and local laws around the world regarding privacy and the collection, processing, storing, sharing, disclosing, using and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which may be costly to comply with and may be inconsistent between countries and jurisdictions or conflict with other rules. We generally comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices or that new regulations could be enacted. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which may include personally identifiable information or other user data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause consumers and vehicle dealers to lose trust in us, which could have an adverse effect on our business. Additionally, if vendors, developers or other third parties that we work with violate applicable laws or our policies, such violations may also put consumer or dealer information at risk and could in turn harm our reputation, business and operating results.
Failure to adequately protect our intellectual property could harm our business and operating results.
A portion of our success may be dependent on our intellectual property, the protection of which is crucial to the success of our business. We expect to rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions to protect our intellectual property. In addition, we will attempt to protect our intellectual property, technology, and confidential information by requiring our employees and consultants to enter into confidentiality and assignment of inventions agreements and third parties to enter into nondisclosure agreements. These agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property, or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property, or technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features, software, and functionality or obtain and use information that we consider proprietary.
Competitors may adopt service names similar to ours, thereby harming our ability to build brand identity and possibly leading to user confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the term "RumbleOn""RumbleOn" or "RMBL."RMBL."
We currently hold the "RumbleOn.com"numerous Internet domain name and various other related domain names. The regulation of domain names in the United States is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names that use the name RumbleOn or RMBL.
We may in the future be subject to intellectual property disputes, which are costly to defend and could harm our business and operating results.
We may from time to timetime-to-time face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including from our competitors or non-practicing entities.
Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may require us to stop offering some features, purchase licenses or modify our products and features while we develop non-infringing substitutes or may result in significant settlement costs.

In addition, we use open sourceopen-source software in our products and will use open sourceopen-source software in the future. From time to time, we may face claims against companies that incorporate open sourceopen-source software into their products, claiming ownership of, or demanding release of, the source code, the open sourceopen-source software or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open sourceopen-source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our platform or services, any of which would have a negative effect on our business and operating results.
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Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, our operating results and our reputation.
We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations. Failure to comply with these laws and regulations could have a material adverse effect on our business, results of operations and financial condition.
We are subject to a wide range of federal, state and local laws and regulations. Our sale and purchase of pre-owned vehicles and related activities, including the sale of complementary products and services, are subject to state and local licensing requirements, federal and state laws regulating advertising of vehicles and related products and services, state laws related to title and registration and state laws regulating the sale of vehicles and related products and services. The applicability of these regulatory and legal compliance obligations is dependent on the evolving interpretations of these laws and regulations and how our operations are, or are not, subject to them. The financing we resell customers is subject to federal and state laws regulating the provision of consumer finance. Our facilities and business operations are subject to laws and regulations relating to environmental protection and health and safety. In addition to these laws and regulations that apply specifically to our business, we are also subject to laws and regulations affecting public companies, including securities laws and Nasdaq listing rules. The violation of any of these laws or regulations could result in administrative, civil or criminal penalties or in a cease-and-desist order against our business operations, any of which could damage our reputation and have a material adverse effect on our business, sales and results of operations. We have incurred and will continue to incur capital and operating expenses and other costs to comply with these laws and regulations.
We currently provide transportation services and rely upon third-party logistics and transportation providers to move vehicles between and among customers, our distribution network partners and auction partners; we and these transportation providers are subject to the regulatory jurisdiction of the United States Department of Transportation (the "DOT") and individual states through which our vehicles travel, which have broad administrative powers with respect to our logistics operations. Vehicle dimensions, driver alcohol and drug testing and driver hours of service are also subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, methods of measurement, driver qualifications or driver hours of service would increase our costs, and if we are unable to pass these cost increases on to our customers, our operating expenses may increase and adversely affect our financial condition, operating results and cash flows. If we or our providers fail to comply with the DOT regulations or regulations become more stringent, we could be subject to increased inspections, audits or compliance burdens. Regulatory authorities could take remedial action including imposing fines or shutting down our operations. If any of these events occur, our financial condition, operating results and cash flows would be adversely affected.
Our sale of pre-owned vehicles, related products and services and third-party finance products is subject to the state and local licensing requirements of the jurisdictions in which we operate. Regulators of jurisdictions where our customers reside but in which we do not have a dealer or financing license could require that we obtain a license or otherwise comply with various state regulations. Despite our belief that we are not subject to the licensing requirements of those jurisdictions, regulators may seek to impose punitive fines for operating without a license or demand we seek a license in those jurisdictions, any of which may inhibit our ability to do business in those jurisdictions, increase our operating expenses and adversely affect our financial condition and results of operations.
The foregoing description of laws and regulations to which we are or may be subject is not exhaustive, and the regulatory framework governing our operations is subject to evolving interpretations and continuous change.
We provide transportation services and rely on external logistics to transport vehicles. Thus, we are subject to business risks and costs associated with the transportation industry. Many of these risks and costs are out of our control, and any of them could have a material adverse effect on our business, financial condition and results of operations.
We provide transportation services and rely on external logistics to transport vehicles between and among customers or distribution network providers, and auction partners. As a result, we are exposed to risks associated with the transportation industry such as weather, traffic patterns, gasoline prices, recalls affecting our vehicle fleet, local and federal regulations, vehicular crashes, insufficient internal capacity, rising prices of external transportation vendors, fuel prices, taxes, license and registration fees, insurance premiums, self-insurance levels, difficulty in recruiting and retaining qualified drivers, disruption of our technology systems, and increasing equipment and operational costs. Our failure to successfully manage our logistics and fulfillment process could cause a disruption in our inventory supply chain and distribution, which may adversely affect our operating results and financial condition.
A failure to obtain or maintain adequate insurance coverage could adversely affect our results of operations.

We depend on key personnelAlthough we have been able to operateobtain reasonably priced insurance coverage to meet our business,requirements in the past, there is no assurance that we will be able to do so in the future. For example, catastrophic events can result in decreased coverage limits, more limited coverage, and ifincreased premium costs or deductibles. If we are unable to retain, attract and integrate qualified personnel, our abilityobtain adequate insurance coverage, we would be subject to develop and successfully grow our business could be harmed.
We believe our success will depend onincreased out-of-pocket expenses in the efforts and talentsevent of our executives and employees, including Marshall Chesrown, our Chairman and Chief Executive Officer, and Steven R. Berrard, our Chief Financial Officer. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute our business plan and strategy,a claim and we may not be able to find adequate replacements on a timely basis, or at all. Our executive officers are at-will employees, which means 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. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business could be materially and adversely affected.
We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.
Our success will depend, in part, on our ability to grow our business in response to the demands of consumers, dealers and other constituents within the vehicle industry as well as competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions include:
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diversion of management time and focus from operating our business to addressing acquisition integration challenges;
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coordination of technology, research and development and sales and marketing functions;
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transition of the acquired company's users to our website and mobile applications;
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retention of employees from the acquired company;
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cultural challenges associated with integrating employees from the acquired company into our organization;
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integration of the acquired company's accounting, management information, human resources, and other administrative systems;
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the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls, procedures, and policies;
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potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect on our operating results in a given period;
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liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; and
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litigation or other claims in connection with the acquired company, including claims from terminated employees, consumers, former stockholders, or other third parties.
Our failure to address these risks or other problems encountered in connection with our future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, or the impairment of goodwill, anyprocure certain contracts, either of which could harmmaterially adversely affect our financial condition. Also, the anticipated benefitsposition, results of any acquisitions may not materialize to the extent we anticipateoperations, cash flows, or at all.

liquidity.
The recent outbreak of COVID-19 will likelypandemic and associated impacts on economic activity have a significant negative impactand may continue to have material adverse effects on our business, sales, results of operations, financial condition, and liquidity.
cash flows.
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced significant disruption to our business, both in terms of disruption of our operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of our business. Our business is also dependent on the continued health and productivity of our associates throughout this crisis. Individually and collectively, we expect the consequencesonset of the COVID-19 outbreak will likelypandemic and associated impacts on economic activity, including lower new powersports vehicle production due to Demand/Supply Imbalances, have a significant negative impacthad adverse effects on our results of operations and financial condition during the year ended December 31, 2021. We expect these conditions to continue through 2022. The effect of these Demand/Supply Imbalances required that we adjust our inventory management to align with market conditions. The COVID-19 pandemic and associated impacts on economic activity, including the Demand/Supply Imbalances, may have material adverse effects on our business, sales, results of operations, financial condition, and liquidity.cash flows, and we can provide no assurance as to the duration of the adverse impacts of COVID-19 and the Demand/Supply Imbalances.
Risks Relating to the Powersports Retail Industry and our Retail Locations
The powersports retail industry is sensitive to unfavorable changes in general economic conditions and various other factors that could affect demand for our products and services, which could have a material adverse effect on our business and results of operations.
Future performance at our retail locations will be impacted by general economic conditions including: changes in employment levels; consumer demand, preferences and confidence levels; the availability and cost of credit; fuel prices; levels of discretionary personal income; and interest rates. We are also subject to economic, competitive, and other conditions prevailing in the various markets in which we operate our retail locations, even if those conditions are not prominent nationally.
Retail powersports sales are cyclical and historically have experienced periodic downturns characterized by oversupply and weak demand, which could result in a need to lower the prices at which we sell our powersports offering, which would reduce revenue per vehicle sold and margins. Additionally, a shift in consumer’s vehicle preferences driven by pricing, fuel costs or other factors may have a material adverse effect on our liquidityrevenue, margins, and results of operations.
Adverse conditions affecting one or more of the powersports manufacturers with which we hold franchises, or their inability to deliver a desirable mix of vehicles could have a material adverse effect on our new vehicle retail business.
Historically, our retail locations have generated most of their revenue through new vehicle sales and related sales of higher-margin products and services, such as finance and insurance products and vehicle-related parts and service. As a result,
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business and results of operations depends on various aspects of vehicle manufacturers’ operations, many of which are outside of its control. Our ability to sell new vehicles is dependent on its manufacturers’ ability to design and produce, and willingness to allocate and deliver to us, a desirable mix of popular new vehicles that consumers demand. Popular vehicles may often be difficult to obtain from manufacturers for a number of reasons, including the fact that manufacturers generally allocate their vehicles based on sales history and associated capital expenditures. Further, if a manufacturer fails to produce desirable vehicles or develops a reputation for producing undesirable vehicles or produces vehicles that do not comply with applicable laws or government regulations, our revenue could be negatively impacted if these conditions continue foradversely affected as consumers shift their vehicle purchases away from that brand.
Although we seek to limit dependence on any one OEM, there can be no assurance the brand mix allocated and delivered to us will be sufficiently diverse to protect us from a significant perioddecline in the desirability of time and we may be required to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels, and meet our financial obligations. Currently capital and credit markets have been disruptedvehicles manufactured by the crisis and oura particular manufacturer or disruptions in a manufacturer’s ability to obtain any required financing is not guaranteedproduce vehicles. For the year ended December 31, 2021, OEMs representing 10% or more of RumbleOn’s revenue from new powersports vehicle sales were as follows:
Manufacturer (Vehicle Brands):% of Total
New Vehicle Revenue
Polaris33.5%
BRP22.6%
Harley-Davidson16.1%
In addition, the powersports manufacturing supply chain spans the globe. As such, supply chain disruptions may affect the flow of vehicle and largely dependent upon evolving market conditionsparts inventories to an OEM’s manufacturing partners or to us. Until such time as current Demand/Supply Imbalances are resolved, we will continue to experience disruptions in the supply of vehicle and other factors.
The extent to which the COVID-19 outbreak ultimately impactsparts inventories. Such continue disruptions could have a material adverse effect on our business, sales, results of operations, financial condition, and liquidity will dependcash flows.
Our retail powersports sales may be materially adversely affected by changes in costs or availability of consumer financing.
A significant portion of our retail powersports sales are financed through RumbleOn Finance and other third-party consumer finance lenders. Reductions in the availability of credit to consumers have contributed to declines in our sales in past periods. Reductions in available consumer credit or increased costs of that credit could result in a decline in sales, which would have a material adverse effect on future developments,our financial condition and results of operations.
Lenders that have historically provided financing to those buyers who, for various reasons, do not have access to traditional financing, including those buyers who have a poor credit history or lack the down payment necessary to purchase a vehicle, are often referred to as subprime lenders. If market conditions cause subprime lenders to tighten credit standards, or if interest rates increase, the ability to obtain financing from subprime lenders for these consumers to purchase vehicles could become limited, resulting in a decline in vehicle sales, which in turn, could have a material adverse effect on our financial condition and results of operations.
Substantial competition in powersports sales and services may have a material adverse effect on our business.
The powersports retail and service industry is highly competitive with respect to price, service, location, and selection. Our competition includes: (i) franchised powersport dealerships in its markets that sell the same or similar new and used vehicles; (ii) privately negotiated sales of used powersport vehicles; (iii) other used powersport vehicle retailers, including regional and national rental companies; (iv) internet-based used powersport vehicle brokers that sell used vehicles to consumers; (v) service center and parts supply chain stores; and (vi) independent service and repair shops.
We do not have a material cost advantage over other retailers in purchasing new vehicles from manufacturers. We typically rely on our advertising, merchandising, sales expertise, service reputation, strong local branding, and location to sell our products. Because our dealer agreements grant only a non-exclusive right to sell a manufacturer’s product within a specified market area, our revenue, gross profit, and overall profitability may be materially adversely affected if competing dealerships expand their market share. Further, our vehicle manufacturers may decide to award additional franchises in our markets in ways that negatively impact our sales.
We are highly uncertaindependent on our relationships with the manufacturers of vehicles we sell and cannot be predicted, includingare subject to restrictions imposed by these vehicle manufacturers. Any of these restrictions or any changes or
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deterioration of these relationships could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We are dependent on our relationships with the duration and spreadmanufacturers of the outbreak,vehicles we sell, which have the ability to exercise a great deal of control and influence over its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our businessday-to-day operations, as a result of the terms of its global economic impact,dealer, framework, and related agreements. We may obtain new vehicles from manufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers’ trademarks only to the extent permitted under these agreements. The terms of these agreements may conflict with our interests and objectives and may impose limitations on key aspects of our operations, including our acquisition strategy.
For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness, and customer satisfaction, and require us to obtain manufacturer consent before we can acquire dealerships selling a manufacturer’s vehicles. From time to time, we may be precluded under agreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent we are not meeting certain performance criteria at existing stores until performance improves in accordance with the agreements, subject to applicable state franchise laws. In addition, many vehicle manufacturers place limits on the total number of franchises that any economic downturngroup of affiliated dealerships may own and certain manufacturers place limits on the number of franchises or recessionshare of total brand vehicle sales that has occurredmay be maintained by an affiliated dealership group on a national, regional or local basis, as well as limits on store ownership in contiguous markets, which limits may occurbe applicable to the Company as a result of the Transaction. If we reach any of these limits, we may be prevented from making further acquisitions, or we may be required to dispose of certain dealerships, which could adversely affect our future growth. We cannot provide assurance that manufacturers will approve future acquisitions timely, if at all, which could significantly impair the execution of our acquisition strategy.
Manufacturers can also establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocation of franchises in our current markets could have a material adverse effect on the business, financial condition, and results of operations of our retail locations in the future.market in which the action is taken.
If vehicle manufacturers reduce or discontinue sales incentive, warranty, or other promotional programs, our financial condition, results of operations, and cash flows may be materially adversely affected.
Risks RelatedWe benefit from sales incentive, warranty, and other promotional programs of vehicle manufacturers that are intended to promote and support their respective new vehicle sales. Key incentive programs include: (i) customer rebates on new vehicles; (ii) dealer incentives on new vehicles; (iii) special financing or leasing terms; (iv) warranties on new and used vehicles; and (v) sponsorship of used vehicle sales by authorized new vehicle dealers.
Vehicle manufacturers often make changes to their incentive programs. Any reduction or discontinuation of manufacturers’ incentive programs for any reason, including a supply and demand imbalance, may reduce our sales volume which, in turn, could have a material adverse effect on its results of operations, cash flows, and financial condition.
If state laws that protect powersports retailers are repealed, weakened, or superseded by our framework agreements with manufacturers, our retail locations may be more susceptible to termination, non-renewal, or renegotiation of their dealer agreements, which could have a material adverse effect on our business, results of operations, and financial condition.
Applicable state laws generally provide that a vehicle manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with written notice setting forth “good cause” and stating the grounds for termination or non-renewal. Some state laws allow dealers to file protests or petitions or allow them to attempt to comply with the manufacturer’s criteria within a notice period to avoid the termination or non-renewal. Our agreements with certain manufacturers contain provisions that, among other things, attempt to limit the protections available to dealers under these laws, and, though unsuccessful to date, manufacturers’ ongoing lobbying efforts may lead to the Acquisitions (the "Acquisitions")repeal or revision of Wholesalethese laws. If these laws are repealed in the states in which we operate, manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of these state laws, it may also be more difficult for us to renew dealer agreements upon expiration. Changes in laws that provide manufacturers the ability to terminate our dealer agreements could materially adversely affect our business, financial condition, and results of operations.
21


We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations. Failure to comply with current or new laws and regulations could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.
We are subject to a wide range of federal, state, and local laws and regulations, such as those relating to motor vehicle, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety. The regulatory bodies that regulate our business include, at the federal level: the Consumer Financial Protection Bureau, the FTC, the DOT, the Occupational Health and Safety Administration, the Department of Justice, and the Federal Communications Commission; at the state level: various state dealer licensing authorities, state consumer protection agencies including state attorney general offices, and state financial and insurance regulatory agencies; and at the municipal level our business is regulated by various municipal authorities covering licensing, zoning, occupancy, and tax obligations. We are subject to compliance audits of our operations by many of these authorities
Vehicle Sales. Our sale and purchase of vehicles, both new and pre-owned, related products and services and third-party finance products, are subject to the state and local dealer licensing requirements in the jurisdictions in which we have retail or wholesale locations. Regulators of jurisdictions where our customers reside, but in which we do not have a dealer or financing license could require that we obtain a license or otherwise comply with various state regulations. Despite our belief that we are not subject to the licensing requirements of those jurisdictions in which we do not have a physical presence, regulators may seek to impose punitive fines for operating without a license or demand we seek a license in those jurisdictions, any of which may inhibit our ability to do business in those jurisdictions, increase our operating expenses and adversely affect our financial condition and results of operations.
Consumer Finance. The financing we offer customers is subject to federal and state laws regulating the advertising and provision of consumer finance options, the collection of consumer credit and financial information, along with requirements related to online payments and electronic funds transfers, of whether RumbleOn Finance or a third-party is the entity extending credit to such customers. Most states regulate retail installment sales, including setting a maximum interest rate, caps on certain fees, or maximum amounts financed. In addition, certain states require that finance companies file a notice of intent or have a sales finance license or an installment sellers license in order to solicit or originate installment sales in that state.
Logistics and Transportation. Our Wholesale Express (collectively,logistics operations, which brokers and facilitates the "Wholesale Entities").transportation of vehicles primarily between and among dealers, is subject to motor-carrier rules and regulations promulgated by the DOT and the states through which their customers’ vehicles are transported. Additionally, the vendors whom Wholesale Express relies upon are subject to federal and state regulation concerning transport vehicle dimensions, transport vehicle conditions, driver motor vehicle record history, driver alcohol and drug testing, and driver hours of serves. More restrictive limitations on vehicle weight and size, condition, trailer length and configuration, methods of measurement, driver qualifications, or driver hours of service may increase the costs charged to Wholesale Express by its vendors, which may adversely affect our financial condition, operating results, and cash flows. If we fail to comply with the DOT regulations or if those regulations become more stringent, we could be subject to increased inspections, audits, or compliance burdens. Regulatory authorities could take remedial action including imposing fines, suspending, or shutting down our Wholesale Express operations.
Environmental Laws and Regulations. We are subject to a variety of federal, state, and local environmental laws and regulations that pertain to our operations. The regulations concern material storage, air quality, waste handling, and water pollution control. The regulations also regulate our use and operation of gasoline storage tanks, gasoline dispensing equipment, oil tanks, and paint booths among other things. Our business involves the use, handling, and disposal of hazardous materials and wastes, including motor oil, gasoline, solvents, lubricants, paints, and other substances. We manage our compliance through permitting and operational control.
Facilities and Personnel. Our facilities and business operations are subject to laws and regulations relating to environmental protection and health and safety, and our employment practices are subject to various laws and regulations, including complex federal, state, and local wage and hour and anti-discrimination laws. We may also be unableliable for employee misconduct and violations of laws or regulations to realizewhich we are subject.
Federal Advertising Regulations. The FTC has authority to take actions to remedy or prevent advertising practices that it considers to be unfair or deceptive and that affect commerce in the anticipated synergiesUnited States. If the FTC takes the position in the future that any aspect of our business constitutes an unfair or deceptive advertising practice, responding to such allegations could require us to pay significant damages, settlements, and civil penalties, or could require us to make adjustments to our products and services, any or all of which could result in substantial adverse publicity, loss of participating dealers, lost revenue, increased expenses, and decreased profitability.
22


Federal Antitrust Laws. The antitrust laws prohibit, among other things, any joint conduct among competitors that would lessen competition in the marketplace. Some of the information that we may obtain from dealers may be sensitive and, if disclosed inappropriately, could potentially be pre-owned by dealers to impede competition or otherwise diminish independent pricing activity. A governmental or private civil action alleging the improper exchange of information, or unlawful participation in price maintenance or other unlawful or anticompetitive activity, even if unfounded, could be costly to defend and adversely impact our ability to maintain and grow our dealer network.In addition, governmental or private civil actions related to the Acquisitions,antitrust laws could result in orders suspending or terminating our ability to do business or otherwise altering or limiting certain of our business practices, including the manner in which we handle or disclose pricing information, or the imposition of significant civil or criminal penalties, including fines or the award of significant damages against us in class action or other civil litigation.
Other. In addition to these laws and regulations that apply specifically to our business, we are also subject to laws and regulations affecting public companies, including securities laws and Nasdaq listing rules. The violation of any of these laws or regulations could result in administrative, civil or criminal penalties or in a cease-and-desist order against our business operations, any of which could damage our reputation and have a material adverse effect on our business, sales and results of operations. We have incurred and will continue to incur capital and operating expenses and other costs to comply with these laws and regulations.
The foregoing description of laws and regulations to which we are or may be subject is not exhaustive, and the regulatory framework governing our operations is subject to evolving interpretations and continuous change. Violation of the laws or regulations to which we are subject could result in consumer class actions or other lawsuits, government investigations, and administrative, civil, or criminal sanctions against us and, which may include significant fines and penalties that could have a material adverse effect on our business, financial condition and results of operations.
future prospects.
We expect to realize significant synergies related to the Acquisitions. We also expect to incur costs to achieve these synergies. While we believe these synergies are achievable, our ability to achieve such estimated synergies in the amounts and timeframe expected is subject to various assumptions by our management based on expectations that are subject to a number of risks which may or may not be realized, as well as the incurrence of other costs in our operations that may offset all or a portion of such synergies and other factors outside our control. As a consequence, we may not be able to realize all of these synergies within the time frame expected or at all, or the amounts of such synergies could be significantly reduced. In addition, we may incur additional and unexpected costs to realize these synergies. Failure to achieve the expected synergies could significantly reduce the expected benefits associated with imported product restrictions or limitations, foreign trade and currency fluctuations.
Our business involves the Acquisitions and adversely affect our business.
We may be unable to successfully integratesale of vehicles, parts, or vehicles composed of parts that are manufactured outside the Wholesale Entities' business and realize the anticipated benefits of the Acquisitions.
United States. As a result, its operations are subject to risks of doing business outside of the Acquisitions, we are required to devote significant management attentionUnited States and resources to integrating the businessimporting merchandise, including import duties, exchange rates, trade restrictions, work stoppages, natural or man-made disasters, and operations of Wholesale. Potential difficulties we may encountergeneral political and socio-economic conditions in the integration process include the following:
● 
the inability to successfully combine our business and the businesses of Wholesale in a manner that results in the anticipated benefits and synergies of the Acquisitions not being realized in the time frame currently anticipated or at all;
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the loss of sales, customers or business partners of ours or of the Wholesale Entities' as a result of such parties deciding not to continue business at the same or similar levels with usother countries. The United States or the Wholesale Entities after the Acquisitions;
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challenges associated with operating the combined business in markets and geographies incountries from which we do not currently operate;
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difficulty integrating our direct sales and distribution channels with the Wholesale Entities'products are imported may, from time to effectively sell the vehiclestime, impose new quotas, duties, tariffs, or other restrictions or limitations, or adjust presently prevailing quotas, duties, or tariffs. The imposition of the combined company;

● 
the complexities associated with managing our company and integrating personnel from the Wholesale Entities, resulting in a significantly larger combined company, while at the same time providing high quality servicesnew, or adjustments to customers;
● 
unanticipated issues in coordinating accounting, information technology, communications, administration andprevailing, quotas, duties, tariffs, or other systems;
● 
difficulty addressing possible differences in corporate culture and management philosophies;
● 
the failure to retain key employees of oursrestrictions or of the Wholesale Entities;
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potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Acquisitions;
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performance shortfalls as a result of the diversion of management's attention caused by consummating the Acquisitions and integrating the Wholesale Entities' operations; and
● 
managing the increased debt levels incurred in connection with the Acquisitions.
An inability to realize the anticipated benefits and cost synergies of the Acquisitions, as well as any delays encountered in the integration process, could have a material adverse effect on the operating results of the combined company, which may materially adversely affect the value of our Class B Common Stock.
In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefit of our plan for integration may not be realized. Actual synergies, if achieved at all, may be lower than what we expect and may take longer to achieve than anticipated. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Acquisitions may be offset by costs incurred or delays in integrating the companies. If we are not able to adequately address these challenges, we may be unable to successfully integrate the Wholesale Entities' operations into our own or, even if we are able to combine the business operations successfully, to realize the anticipated benefits of the integration of the companies.
Our business relationships, those of the Wholesale Entities or the combined company may be subject to disruption due to uncertainty associated with the Acquisitions.
Parties with which we or the Wholesale Entities do business may experience uncertainty associated with the Acquisitions, including with respect to current or future business relationships with us, the Wholesale Entities or the combined company. Our and the Wholesale Entities' business relationships may be subject to disruption, as customers, distributors, suppliers, vendors, and others may seek to receive confirmation that their existing business relations with us or the Wholesale Entities, as the case may be, will not be adversely impacted as a result of the Acquisitions or attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us, the Wholesale Entities, or the combined company as a result of the Acquisitions. Any of these other disruptionslimitations could have a material adverse effect on our or the Wholesale Entities' businesses,business, financial condition, or results of operations, or on the business, financial condition or results of operationsand cash flows. Relative weakness of the combined company, and could also have an adverse effect on our ability to realize the anticipated benefits of the Acquisitions.
If we are unable to maintain effective internal control over financial reporting for the combined companies, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements.
  We may encounter difficulties and unanticipated issues in combining our respective accounting systems due to the complexity of the financial reporting processes. We may also identify errors or misstatements that could require adjustments. If we are unable to implement and maintain effective internal control over financial reporting, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decline.

The Wholesale Entities may have liabilities that are not known, probable or estimable at this time.
As a result of the Acquisitions, the Wholesale Entities are subsidiaries of the Company and remain subject to their past, current and future liabilities. There could be unasserted claims or assessmentsU.S. dollar against or affecting the Wholesale Entities, including the failure to comply with applicable laws, regulations, orders and consent decrees or infringement or misappropriation of third-party intellectual property or other proprietary rights that we failed or were unable to discover or identify in the course of performing our due diligence investigation of the Wholesale Entities. In addition, there are liabilities of the Wholesale Entities that are neither probable nor estimable at this time that may become probable or estimableforeign currencies in the future including indemnification requests received from customers of the Wholesale Entities relatingmay result in an increase in costs to claims of infringement or misappropriation of third party intellectual property or other proprietary rights, tax liabilities arising in connection with ongoing or future tax auditsus and liabilities in connection with other past, current and future legal claims and litigation. Any such liabilities, individually or in the aggregate,retail price of such vehicles or parts, which could have a material adverse effect on our financial results. We may learn additional information about the Wholesale Entities thatdiscourage consumers from purchasing such vehicles and adversely affects us, such as unknown, unasserted, or contingent liabilitiesimpact its revenue and issues relating to compliance with applicable laws or infringement or misappropriation of third-party intellectual property or other proprietary rights.
As a result of the Acquisitions, we and the Wholesale Entities may be unable to retain key employees.
Our success after the Acquisitions depends in part upon our ability to retain key employees of ours and the Wholesale Entities. Key employees may depart because of a variety of reasons relating to the Acquisitions. If we and the Wholesale Entities are unable to retain key personnel who are critical to the successful integration and future operations of the combined company, we could face disruptions in our operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the Acquisitions.
profitability.
Risks Related to Ownership of our Common Stock
The trading price for our Class B Common Stock
Our largest stockholders may have the ability to exert substantial influence over actions to be volatile and could be subject to wide fluctuations in per share price.taken or approved by our stockholders.
Our Class B Common Stock is listed for trading on The NASDAQ Capital Market under the trading symbol "RMBL," however historically there has been a limited public market for our Class B Common Stock. The liquidity of any market for the sharesAt April 5, 2022, two of our Class B Common Stock will depend onstockholders beneficially owned approximately 31.5% of the Company’s voting power. As a number of factors, including:
● 
result, these individuals may have the number of stockholders;
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ability to exert substantial influence over actions to be taken or approved by our operating performance and financial condition;
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the market for similar securities;
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the extent of coverage of us by securities or industry analysts; and
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the interest of securities dealers in making a marketstockholders. Also, in the shares of our common stock.
The market price for our Class B Common Stockfuture, these stockholders may be highly volatile and could be subject to wide fluctuations. In addition, the priceacquire or dispose of shares of our Class B Common Stock could decline significantly if our future operating results fail to meetcommon stock and thereby increase or exceeddecrease their ownership stake in us. Significant fluctuations in the expectationslevels of market analysts and investors and actual or anticipated variations in our quarterly operating results could negatively affect our share price.
Other factors may also contribute to volatility of the priceownership of our Class B Common Stocklargest stockholders could impact the volume of trading, liquidity, and could subject our Class B Common Stock to wide fluctuations. These include:
● 
developments in the financial markets and worldwide or regional economies;
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announcements of innovations or new products or services by us or our competitors;
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announcements by the government relating to regulations that govern our industry;
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significant sales of our Class B Common Stock or other securities in the open market;
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variations in interest rates;
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changes in the market valuations of other comparable companies; and
● 
changes in accounting principles.

Our principal stockholders and management own a significant percentage of our stock and an even greater percentage of the Company's voting power and will be able to exert significant control over matters subject to stockholder approval.
Our executive officers and directors as a group beneficially own shares of our Class A Common Stock and Class B Common Stock representing approximately 32.46% in aggregate of our voting power, including approximately 26.37% in aggregate voting power held by Messrs. Chesrown and Berrard as the only holders of our 50,000 outstanding shares of our Class A Common Stock, which has 10 votes for each one share outstanding. As a result, these stockholders have the ability to exert significant control over matters requiring stockholder approval. For example, these stockholders are able to exert significant control over elections of directors, amendments of our organizational documents' approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as a stockholder or to take other action that you may believe are not in your best interest as a stockholder. This may also adversely affect the market price of our Class B Common Stock.
common stock.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our Class B Common Stockcommon stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Because our Class B Common Stock may be deemed a low-priced "penny" stock, an investment in our Class B Common Stock should be considered high risk and subject to marketability restrictions.
When the trading price of our Class B Common Stock is $5.00 per share or lower, it is deemed a penny stock, as defined in Rule 3a51-1 under the Exchange Act, and subject to the penny stock rules of the Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
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deliver to the customer, and obtain a written receipt for, a disclosure document;23

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disclose certain price information about the stock;
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disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
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send monthly statements to customers with market and price information about the penny stock; and
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in some circumstances, approve the purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules.
Consequently, if our Class B Common Stock is $5.00 per share price or lower, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the Class B Common Stock and may affect the ability of holders to sell their Class B Common Stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
We do not currently or for the foreseeable future intend to pay dividends on our common stock.
We have never declared or paid any cash dividends on our common stock. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earning in the development and expansion of our business. As a result, any return on your investment in our common stock will be limited to the appreciation in the price of our common stock, if any.
We are currently subject to reduced reporting requirements so long as we are considered a "smaller reporting company" and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
We are currently subject to reduced reporting requirements so long as we are considered a "smaller reporting company." We cannot predict if investors will find our common stock less attractive because we maycurrently rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
Anti-takeover provisions may limit the ability of another party to acquire us, which could causeadversely impact our stock price to decline.
price.
Nevada law and our charter, bylaws, and other governing documents contain provisions that could discourage, delay or prevent a third party from acquiring us, even if doing so may be beneficial to our stockholders, which could cause our stock price to decline. In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock.
Risks Related toITEM 1B.    UNRESOLVED STAFF COMMENTS.
None.
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ITEM 2.    PROPERTIES.

At December 31, 2021, our operations comprised 41 powersports retail locations and 19 other facilities that serve our automotive operations, logistics business, fulfillment and vehicle storage, and regional corporate and administrative needs. Following completion of the Company's 6.75% Convertible Senior Notes due 2025 (the "Notes")Freedom Transaction, we operate 55 powersports retail and fulfillment center locations, primarily across the Sunbelt, as set forth below.
Powersports Retail and Fulfillment Center
BMW Motorcycles of HuntsvilleALIndian Motorcycle Kansas CityKS
El Cajon Harley-DavidsonAZHammond Harley-DavidsonLA
Harley-Davidson of TucsonAZBaton Rouge Harley-DavidsonLA
Old Pueblo Harley-DavidsonAZIndian Motorcycle ConcordNC
RideNow Powersports Apache JunctionAZDucati Las VegasNV
RideNow Powersports GoodyearAZRideNow Powersports on BoulderNV
RideNow Powersports on InaAZRideNow Powersports on RanchoNV
RideNow Powersports SurpriseAZPowder Keg Harley-DavidsonOH
RideNow Powersports TucsonAZFort Thunder Harley-DavidsonOK
Tucson IndianAZBlack Gold Harley-DavidsonTX
Arrowhead Harley-DavidsonAZFreedom Powersports Burleson*TX
Chandler Harley-DavidsonAZFreedom Powersports DecaturTX
Indian Motorcycle ChandlerAZFreedom Powersports Fort Worth*TX
Indian Motorcycle PeoriaAZFreedom Powersports Hurst*TX
RideNow 3333 PhoenixAZBMW Motorcycles of Fort WorthTX
RideNow Powersports PhoenixAZCentral Texas Harley-DavidsonTX
Roadrunner Harley-DavidsonAZDallas Harley-DavidsonTX
RideNow SoCalCAFreedom Powersports Dallas*TX
RideNow GainesvilleFLFreedom Powersports Farmers BranchTX
RideNow Powersports Beach BlvdFLFreedom Powersports Lewisville*TX
RumbleOn Fulfilment CenterFLFreedom Powersports Weatherford*TX
Indian Motorcycle Daytona BeachFLFreedom Powersports McKinney*TX
Indian Motorcycle OcalaFLRideNow AustinTX
RideNow Powersports Daytona BeachFLRideNow Powersports ForneyTX
RideNow Powersports JacksonvilleFLRideNow Powersports GeorgetownTX
Warhorse Harley-DavidsonFLRattlesnake Mountain Harley-DavidsonWA
Freedom Powersports CantonGARideNow Powersports Tri-CitiesWA
Freedom Powersports McDonough*GA
(*) Owned property, subject to lien. All our other properties are leased.
Although the Notes
ITEM 3.    LEGAL PROCEEDINGS.
We are referred to as convertible senior Notes, the Notes are effectively subordinatednot a party to any material legal proceedings as set forth in Item 103 of Regulation S-K, other than ordinary routine litigation incidental to our future secured debtbusiness. On October 13, 2021, Plaintiff William Miller voluntarily dismissed without prejudice a previously filed complaint against the Company and structurally subordinated to any liabilities of our subsidiaries.its Board in connection with the RideNow Transaction.
The Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes, equal in right of payment with all of our liabilities that is not so subordinated, effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries. In the event of our bankruptcy, liquidation, reorganization, or other winding up, our assets that secure debt ranking senior or equal in right of payment to the Notes will be available to pay obligations on the Notes only after the secured debt has been repaid in full from these assets, and the assets of our subsidiaries will be available to pay obligations on the Notes only after all claims senior to the Notes have been repaid in full. There may not be sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. The indenture governing the Notes (the "Indenture") does not prohibit us from incurring additional senior debt or any future secured debt, nor does it prohibit any of our current or future subsidiaries from incurring additional liabilities.ITEM 4.    MINE SAFETY DISCLOSURES.
Not Applicable.
25


PART II
ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES.
Market Information
As of December 31, 2019, excluding operating lease liabilities and the derivative liability, our total consolidated net indebtedness was approximately $82,585,522, of which an aggregate of $60,494,304 was secured indebtedness, and approximately $59,160,970 of such secured indebtedness is directly attributable to the Company's vehicles in inventory or held for sale, and the security of those lenders includes all of the vehicles financed by such lenders as well as all of the assets of our subsidiaries Wholesale Inc. and AutoSport USA, Inc. As of December 31, 2019, approximately $80,092,280 of our total consolidated indebtedness was senior indebtedness.
The Notes are our obligations only and a substantial portion of our operations are conducted through, and a substantial portion of our consolidated assets are held by, our subsidiaries.
The Notes are our obligations exclusively. A substantial portion of our operations is conducted through, and a substantial portion of our consolidated assets is held by, our subsidiaries. Accordingly, our ability to service our debt, including the Notes, depends, in part, on the results of operations of our subsidiaries and on the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans, or otherwise, to pay amounts due on our obligations, including the Notes. However, our subsidiaries are separate and distinct legal entities, are not guaranteeing the Notes, and have no obligation, contingent or otherwise, to make payments on the Notes or to make any funds available for that purpose. In addition, dividends, loans, or other distributions to us from such subsidiaries may be subject to contractual and other restrictions and are subject to other business considerations. Our right to receive any assets of any of our subsidiaries on such subsidiary's bankruptcy, liquidation, or reorganization, and, therefore, the right of the holders of Notes to participate in those assets, will be subject to prior claims of creditors of the subsidiary, including trade creditors, and such subsidiary may not have sufficient assets remaining to make any payments to us as a shareholder or otherwise. We advise holders of Notes that there may not be sufficient assets remaining to pay amounts due on any or all the Notes then outstanding.

Operating our business requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay the Notes and any other debt.
Our ability to make payments of the principal of, to pay interest on, or to refinance the Notes or other indebtedness depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, obtaining additional debt financing, or issuing additional equity securities, any of which may be on terms that are not favorable to us or, in the case of equity securities, highly dilutive. Our ability to refinance the Notes or our other indebtedness will depend on the capital markets, our business, and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with any such covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.
Recent and future regulatory actions and other events may adversely affect the trading price and liquidity of the Notes.
We expect that many investors in, and potential purchasers of, the Notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the Notes. Investors would typically implement such a strategy by selling short the Class B Common Stock underlying the Notes and dynamically adjusting their short position while continuing to hold the Notes. Investors may also implement this type of strategy by entering into swaps on our Class B Common Stock in lieu of or in addition to short selling the Class B Common Stock.
The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our Class B Common Stock) and securities convertible into or exchangeable for equity securities. Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a "Limit Up-Limit Down" program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any government or regulatory action that restricts the ability of investors in or potential purchasers of the Notes to effect short sales of our Class B Common Stock, borrow our Class B Common Stock, or enter into swaps on our Class B Common Stock could adversely affect the trading price and the liquidity of the Notes.
The trading price for our Class B Common Stock may be volatile and could be subject to wide fluctuations in per share price which could adversely impact the trading price of the Notes.
Our Class B Common Stock is listed for trading on The NASDAQ Capital Market under the trading symbol "RMBL," however historically there has been a limited public market for our Class B Common Stock. The liquidity of any market for the shares of our Class B Common Stock will depend on a number of factors, including:
● 
the number of stockholders;
● 
our operating performance and financial condition;
● 
the market for similar securities;
● 
the extent of coverage of us by securities or industry analysts; and
● 
the interest of securities dealers in making a market in the shares of our common stock.
The market price for our Class B Common Stock may be highly volatile and could be subject to wide fluctuations. In addition, the price of shares of our Class B Common Stock could decline significantly if our future operating results fail to meet or exceed the expectations of market analysts and investors and actual or anticipated variations in our quarterly operating results could negatively affect our share price.

Other factors may also contribute to volatility of the price of our Class B Common Stock and could subject our Class B Common Stock to wide fluctuations. These include:
● 
developments in the financial markets and worldwide or regional economies;
● 
announcements of innovations or new products or services by us or our competitors;
● 
announcements by the government relating to regulations that govern our industry;
● 
significant sales of our Class B Common Stock or other securities in the open market;
● 
variations in interest rates;
● 
changes in the market valuations of other comparable companies; and
● 
changes in accounting principles.
A decrease in the market price of our Class B Common Stock would likely adversely impact the trading price of the Notes. The market price of our Class B Common Stock could also be affected by possible sales of our Class B Common Stock by investors who view the Notes as a more attractive means of investing in us and by hedging or arbitrage trading activity that we expect to develop involving our Class B Common Stock. This trading activity could adversely affect the trading price of the Notes.
We may incur substantially more debt in the future or take other actions which would intensify the risks discussed in these risk factors.
We and our subsidiaries may be able to incur substantial additional debt in the future (including secured debt), subject to the restrictions contained in our debt instruments. We are not restricted under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt, refinancing our debt, repurchasing our stock, pledging our assets, making investments, paying dividends, guaranteeing debt, or taking a number of other actions that are not limited by the terms of the indenture governing the Notes, any of which could have the effect of diminishing our ability to make payments on the Notes when due.
We may not have the ability to raise the funds necessary to settle the Notes in cash on a conversion, to repurchase the Notes on a fundamental change, or to repay the Notes at maturity. In addition, the terms of our future debt may contain limitations on our ability to pay cash on conversion or repurchase of the Notes.
Holders of the Notes have the right to require us to repurchase all or a portion of their Notes on the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding the fundamental change repurchase date, as described in the Indenture. In addition, on conversion of the Notes, unless we elect to deliver only shares of our Class B Common Stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. Moreover, we are required to repay the Notes in cash at their maturity unless earlier converted or repurchased. Our ability to meet our obligations to holders of the Notes depends on our operating results and cash flow. However, we may not have enough available funds on hand or be able to obtain financing at the time we are required to make payments with respect to Notes at maturity, on surrender for repurchase, or on conversion.
In addition, our ability to repurchase the Notes or to pay cash on conversions of the Notes may be limited by law, regulations, or agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture governing the Notes or to pay any cash payable on future conversions of the Notes or at maturity as required by such indenture would constitute a default under such indenture. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments on conversions of the Notes, if settled in cash.
Redemption may adversely affect the return on the Notes.
We may not redeem the Notes prior to January 14, 2023. We may redeem for cash all or any portion of the Notes, at our option, on or after January 14, 2023 if the last reported sale price ofOctober 29, 2017, our Class B Common Stock has been at least 130% of the conversion price of the Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. We may choose to redeem some or all of the Notes, including at times when prevailing interest rates are relatively low. Holders of the Notes may not be able to reinvest the proceeds from the redemption of the Notes in a comparable security at an effective interest rate as high as the interest ratelisted on the Notes being redeemed.

The conditional conversion feature ofNasdaq Global Select Market (“NASDAQ”) under the Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the Notes is triggered, holders of such Notes will be entitled to convert their Notes at any time during specified periods at their option. If any holder elects to convert its Notes, unless we elect to satisfy our conversion obligation by delivering only shares of our Class B Common Stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current liability rather than a long-term liability, which would result in a material reduction of our net working capital and may harm our business.
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our Class B Common Stock.
The conversion of some or all of the Notes may dilute the ownership interests of our stockholders. On conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our Class B Common Stock, or a combination of cash and shares of our Class B Common Stock. In addition, in certain circumstances, we will make an interest make-whole payment to a converting holder which may be paid in cash or shares ofsymbol “RMBL.” Before October 29, 2017, our common stock. If we elect to settle our conversion obligation (or the interest make-whole payment) in shares of our Class B Common Stock or a combination of cash and shares of our Class B Common Stock, any sales in the public market of our Class B Common Stock issuable on such conversion could adversely affect prevailing market prices of our Class B Common Stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class B Common Stock could depress the market price of our Class B Common Stock.
Future sales of our Class B Common Stock or equity-linked securities in the public market could lower the market price for our Class B Common Stock and adversely impact the trading price of the Notes.
In the future, we may raise funds by selling additional equity, equity-linked securities, or debt securities. In addition, a substantial number of shares of our Class B Common Stock is reserved for issuancestock traded on the exercise ofOTCQB Market under the symbol “RMBL,” and before January 1, 2017, our common stock options, settlement of restricted stock units, and conversion of the Notes. We cannot predict the size of future issuances or the effect, if any, that they may havewas not traded, except for 250 shares, which traded on the market price for our Class B Common Stock. The issuance and sale of substantial amounts of our Class B Common Stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of the Notes and the market price of our Class B Common Stock, and impair our ability to raise capital through the sale of additional equity or equity-linked securities.
OTC Markets Pink Sheets on January 22, 2016.
Holders of Notes are not entitled to any rights with respect to our Class B Common Stock but they will be subject to all changes made with respect to them to the extent our conversion obligation includes shares
As of our Class B Common Stock.
Holders of Notes are not entitled to any rights with respect to our Class B Common Stock (including, without limitation, rights to receive any dividends or other distributions on our Class B Common Stock) prior to the conversion date relating to such Notes (ifApril 5, 2022, we have elected to settle the conversion by delivering only shares of our Class B Common Stock, other than paying cash in lieu of delivering any fractional share) or the last trading day of the observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our Class B Common Stock in respect of the conversion). But, holders of Notes will be subject to all changes affecting our Class B Common Stock. For example, if an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining thehad approximately 320 stockholders of record entitled to vote on the amendment occurs prior to the conversion date with respect to any Notes surrendered for conversion, then the holder surrendering such Notes will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes affecting our Class B Common Stock.
The conditional conversion feature of the Notes could result in holders receiving less than the value of our Class B Common Stock into which the Notes would otherwise be convertible.
Prior to the close of business on the business day immediately preceding July 1, 2024, holders may convert their Notes only if specified conditions are met. If the specific conditions for conversion are not met, holders will not be able to convert their Notes during that period, and they may not be able to receive the15,930,740 outstanding shares of Class B Common Stock (or the valueand two holders of such shares in cash or a combinationrecord of cash and50,000 outstanding shares of Class BA Common Stock) into which the Notes would otherwise be convertible.Stock.
Dividends

On conversion of the Notes, holders may receive less valuable consideration than expected because the value of our Class B Common Stock may decline after holders exercise their conversion rights but before we settle our conversion obligation.
Under the Notes, a converting holder will be exposedWe have never declared or paid any cash dividends. We currently do not intend to fluctuationspay cash dividends in the value of our Class B Common Stock during the period from the date such holder surrenders Notes for conversion until the date we settle our conversion obligation.
On conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our Class B Common Stock, or a combination of cash and shares of our Class B Common Stock (including, if applicable, any interest make-whole payment we elect, or are deemed to have elected to satisfy by delivering shares of our Class B Common Stock). If we elect to satisfy our conversion obligation in cash or a combination of cash and shares of our Class B Common Stock, the amount of consideration that holders will receiveforeseeable future on conversion of their Notes will be determined by reference to the volume-weighted average price of our Class B Common Stock for each trading day in a 40-trading day observation period and an interest make-whole payment, if applicable.
Accordingly, if the price of our Class B Common Stock decreases during the applicable period, the amount and value of consideration holders receive will be adversely affected. In addition, if the market price of our Class B Common Stock at the end of such period is below the volume-weighted average price of our Class B Common Stock during such period, the value of any shares of our Class B Common Stock that holders will receive in satisfaction of our conversion obligation will be less than the value used to determine the number of shares that holders will receive.
If we elect to satisfy our conversion obligation only in shares of our Class B Common Stock on conversion of the Notes, we will, subject to the blocker provisions to the extent applicable, be required to deliver the shares of common stock. We intend to reinvest any earning in the development and expansion of our Class B Common Stock, together withbusiness. Any cash fordividends in the future to common stockholders will be payable when, as and if declared by our board of directors, based upon the Board's assessment. Therefore, there can be no assurance that any fractional share,dividends on the secondcommon stock will ever be paid.
ITEM 6.    [RESERVED.]


26


ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited Consolidated Financial Statements and the accompanying notes included in this 2021 Form 10-K. Unless differences among reportable segments are material to an understanding of our business daytaken as a whole, we present the discussion in this MD&A on a consolidated basis. Terms not defined in this MD&A have the meanings ascribed to them in the Consolidated Financial Statements. All dollars are reported in thousands, except per share and per unit amounts.
Organization
RumbleOn was incorporated in October 2013 under the laws of the State of Nevada as SmartServer, Inc. In 2016, following the conversion date (providedacquisition of SmartServer by RumbleOn founders Marshall Chesrown and Steven Berrard, we changed our name to RumbleOn, Inc. Since that with respect to any conversion date followingtime, we have grown our business through organic development and strategic acquisitions into the regular record date immediately preceding the maturity date where physical settlement applies to the related conversion, we will settle any such conversion on the maturity date). Accordingly, if the price of our Class B Common Stock decreases during this period, the value of the shares that holders receive will be adversely affectedfirst and would be less than the conversion value of the Notes on the conversion date.
The increaseonly true Omnichannel powersports retailer. Headquartered in the conversion rateDallas Metroplex, RumbleOn is revolutionizing the customer experience for Notes convertedoutdoor enthusiasts across the country and making powersport vehicles accessible to more people, in connection with a make-whole fundamental change or a noticemore places than ever before.
Overview
RumbleOn is the nation’s first technology-based Omnichannel marketplace in powersports, leveraging proprietary technology to transform the powersports supply chain from acquisition of redemption may not adequately compensate holders for any lost valuesupply through distribution of their Notesretail and wholesale. RumbleOn provides an unparalleled technology suite and ecommerce experience, national footprint of physical locations, and full-line manufacturer representation to transform the entire customer experience. Our goal is to integrate the best of both the physical and the digital, and make the transition between the two seamless.
We buy and sell new and used vehicles through multiple company-owned websites and affiliate channels, as a resultwell as via our proprietary cash offer tool and network of such transaction or redemption.
If a make-whole fundamental change occurs prior to the maturity date for the Notes or if we deliver a notice of redemption with respect to the Notes, we will, under certain circumstances, increase the conversion rate for the Notes by a number of additional shares of our Class B Common Stock for Notes converted in connection with such make-whole fundamental change or notice of redemption. The increasemore than 41 company-owned retail locations at December 31, 2021 primarily located in the conversion rate will be determined based on the date onSunbelt. Deepening our presence in existing markets and expanding into new markets through strategic acquisitions helps perpetuate our flywheel. Our cash offer technology brings in high quality inventory, which the make-whole fundamental change occurs or becomes effective, or the date we deliver the notice of redemption, as the case may be,attracts more riders and the price paid (or deemed to be paid) per share of our Class B Common Stockdrives volume in the make-whole fundamental change or determined with respect to the notice of redemption, as the case may be. The increase in the conversion rate for Notes converted in connection with a make-whole fundamental change or a notice of redemption may not adequately compensate you for any lost value of your Notes as a result of such transaction or redemption. In addition, if the "stock price" (as defined in the Indenture) is greater than $1.00 per share or less than the Make-Whole Adjustment Reference Price (as defined in the Indenture”), no additional shares of Class B Common Stock will be added to the conversion rate. Moreover, in no event will the conversion rate per $1,000 principal amount of Notes as a result of this adjustment exceed 61.6523 shares of Class B Common Stock, subject to adjustment in the same manner as the conversion rate for the Notes.
Our obligation to increase the conversion rate for Notes converted in connection with a make-whole fundamental change or a notice of redemption could be considered a penalty, in which case the enforceability would be subject to general principles of reasonableness and equitable remedies.
The conversion rate of the Notes may not be adjusted for dilutive events.
The conversion rate of the Notes is subject to adjustment for certain events, including, but not limited to, the issuance of certain stock dividends on our Class B Common Stock, the issuance of certain rights or warrants, subdivisions or combinations of our Class B Common Stock, distributions of capital stock, indebtedness, or assets, cash dividends, and certain issuer tender or exchange offers as described under the Indenture. However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of Class B Common Stock for cash, that may adversely affect the trading price of the Notes or our Class B Common Stock. An event that adversely affects the value of the Notes may occur, and that event may not result in an adjustment to the conversion rate. We have no obligation to consider the specific interests of the holders of the Notes in engaging in any such offering or transaction.

Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes.
On the occurrence of a fundamental change, you have the right to requireused unit sales. This flywheel enables us to repurchase all or a portion of your Notes. However, the fundamental change provisions do not afford protection to holders of Notes in the event of other transactions that could adversely affect the Notes. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to repurchase the Notes. In the event of any such transaction, the holders would not have the right to require us to repurchase the Notes, even though each of these transactions could increase the amount of our indebtedness or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of Notes.
Certain provisions in the indenture governing the Notes may delay or make it more expensive for a third party to acquire us.
Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us. For example, the indenture governing the Notes requires us, at the noteholders' election, to repurchase the Notes for cash on the occurrence of a fundamental changequickly and in certain circumstances, to increase the conversion rate for a holder that converts its Notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase the Notes or increase the conversion rate, which could make it more costly for a third party to acquire us. Furthermore, the indenture for the Notes prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the indenture could deter or prevent a third party from making bids to acquire us even when the acquisition may be favorable to you.
Holders of Notes are not entitled to receive any shares of our Class B Common Stock otherwise deliverable upon conversion of the Notes to the extent that such receipt would cause such holders to become, directly or indirectly, a beneficial owner of shares of our Class B Common Stock in excess of 4.99% of the total number of the shares of our Class B Common Stock then issued and outstanding.
Notwithstanding anything to the contrary herein, holders of Notes are not entitled to receive any shares of our Class B Common Stock otherwise deliverable upon conversion of the Notes to the extent, but only to the extent, that such receipt would cause such holders to become, directly or indirectly, the "beneficial owner" (within the meaning of Section 13(d) under the Exchange Act and the rules promulgated thereunder) of our Class B Common Stock in excess 4.99% of the total number of the shares of our Class B Common Stock then issued and outstanding. Any purported delivery of shares of our Class B Common Stock upon conversion of the Notes shall be void and have no effect to the extent, but only to the extent, that such delivery would result in any person becoming the beneficial owner of shares of our Class B Common Stock outstanding at such time in excess of the beneficial ownership limits then applicable to such person.
effectively gain market share. As a result of our growth to date, RumbleOn enjoys a leading, first-mover position in the beneficial ownership limits, shares of Class B Common Stock otherwise deliverable upon conversion of Notes may be delayed, or never deliveredhighly fragmented $100 billion+ powersports market.
RumbleOn’s powersports business offers motorcycles, all-terrain vehicles, utility terrain vehicles, personal watercraft, and all other powersports products, parts, apparel, and accessories. Facilitating our platform, RumbleOn’s retail distribution locations represent all major OEMs and their representative brands, including those listed below.

RumbleOn’s Representative Brands
AlumacraftHondaSea-Doo
ArgoIndianSlingshot
BenelliKawasakiSSR
BMWKayo SportsSuzuki
Can-AmKTMTideWater
CF MotoManitouTriumph
DucatiPolarisVanderhall
Harley-DavidsonRykerYamaha
HisunScarabSpyder
RumbleOn leverages technology and data to streamline operations, improve profitability, and drive lifetime engagement by offering a best-in-class customer experience with unmatched Omnichannel capabilities. Our Omnichannel platform offers consumers the fastest, easiest, and most transparent transactions available in powersports. RumbleOn customers have access to the most comprehensive powersports vehicle offering, including the ability to buy, sell, trade, and finance online, in store at all. These limitations on beneficial ownership may force you to sell sharesany of our Class B Common Stockbricks-and-mortar locations, or other securities you ownboth. RumbleOn offers financing solutions for consumers; trusted physical
27


retail and service locations; online or in-store instant cash offers, and access to pre-owned inventory; and apparel, parts, service, and accessories. In addition to our powersports operations, we operate in ordercomplementary businesses including the brokerage of vehicle transportation and the wholesale distribution automotive business.
KEY OPERATING METRICS
We regularly review a number of key operating metrics to receive shares you would otherwiseevaluate our segments, measure our progress, and make operating decisions. Our key operating metrics reflect what we believe will be entitledthe primary drivers of our business, including increasing brand awareness, maximizing the opportunity to receive upon conversion. If holders convert their Notessource vehicles from consumers and do not receive any shares otherwise deliverable upon conversion,dealers, and enhancing the selection and timing of vehicles we make available for sale to our customers. Our key operating metrics also enhance management’s ability to translate this information into sales through multiple sales channels. The Key Operations Metrics table below includes the results of the RideNow Entities exclusively from August 31, 2021 (the “Acquisition Date”) through December 31, 2021. Please note that RideNow’s results prior to the Acquisition Date are not be responsible for any lost value duereflected in the presentation below. The Acquired Entities have certain lines of business, including new vehicle sales, material finance and insurance revenue, and parts and service revenue, that RumbleOn did not have prior to a delayed delivery, or if theythe RideNow Transaction. As such all increases in these line items are never delivered as aexclusively the result of the conversion restrictions described above.
We cannot assure youacquisition and the reader should note that an active trading market will develop for the Notes.
Priormost period-over-period dollar comparisons (as opposed to the 2020 Note Offering (as defined below), there has been no trading market for the Notes, and we do not intend to apply to list the Notes on any securities exchange or to arrange for quotation on any automated dealer quotation system. We have been informedper unit amounts) are materially impacted by the initial purchaser that it intended to make a market in the Notes after the 2020 Note Offering. However, the initial purchaser may cease its market-making at any time without notice. The liquidityintroduction of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. We cannot assure you that an active trading market will develop for the Notes. If an active trading market does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. In that case you may not be able to sell your Notes at a particular time or you may not be able to sell your Notes at a favorable price.new business (the “Acquisition Effect”)
Any adverse rating of the Notes may cause their trading price to fall.
We do not intend to seek a rating on the Notes. However, if a rating service were to rate the Notes and if such rating service were to lower its rating on the Notes below the rating initially assigned to such Notes or otherwise announce its intention to put such Notes on credit watch, the trading price of the Notes could decline.

Item 1B.
Unresolved Staff Comments.
None.
Item 2. 
Properties.
Powersports and Automotive Segments
Revenue
We currently maintain our corporate offices at 901 W Walnut Hill Lane, Irving, Texas 75038, that initially comprises 23,337 square feet, which amount shall increase to (i) 30,337 rentable square feet on November 1, 2020Revenue of is comprised of vehicle sales, finance and (ii) 37,337 rentable square feet on November 1, 2021. Base rent is currently $60,287 per month and increases to $78,371 on November 1, 2020 and to $96,454 on November 1, 2021. We also pay our pro rata share of the building's operating expenses. This lease expires on April 30, 2023; however we can elect to extend the term for up to seven years at a rate equal to (i) the lesser of prevailing rental rates at the time of renewal or (ii) 5% of the annual Base Rent for the immediately preceding term. We provided the sublandlord a security deposit of approximately $10,000. In addition, in March 2019 we entered into a short-term sublease expiring in October 2019 in Las Colinas, Texas for approximately 11,000 square feet to support the company's initiatives.
We are a co-leasee on a warehouse space in Missouri from which we operate our licensed dealer operation; total shared monthly rent for the building is $4,250.
We have two main facilities in the greater Nashville, TN metropolitan area that we assumed as part as the acquisitions of Wholesale. One serves as a general office/administrative location as well as a staging and reconditioning property, while the other serves as ainsurance products bundled with retail vehicle sales location where we display vehicles and operate a traditional used car sales lot, with minimal vehicle maintenance services provided. Each location has a lease term expiring on October 30, 2021, and for each property we have two (2) renewal option, each of which provides for five (5) additional years with ten percent (10%) increase in the base rent. The collective rent for the two locations is approximately $23,500 per month.
We also lease or sub-lease space to support the operations in (i) West Palm Beach, FL that we assumed as part of the Autosport acquisition and for which we pay approximately $75,000 per year and (ii) Las Vegas, NV to support the development of the RumbleOn Finance business and for which we pay approximately $160,000 per year. Both the FL and NV ancillary location leases currently expire in the second half of 2020.
The Company is establishing fulfillment centers in strategic locations throughout the United States. Initial locations, for which leases have been executed include Arlington, Texas, Ocoee, Florida and North Las Vegas, Nevada.
We moved into the Arlington, Texas center in September 2019. This location is approximately 7,000 square feet. The lease has an initial term of 24.5 months and has one three-year renewal option. We pay approximately $57,000 per year.
The Ocoee, Florida center is approximately 56,012 square feet and is scheduled to open in the first half of 2020. This lease has an initial term of 64 months with one five-year renewal option. Annual rent will be approximately $470,000.
We moved into the North Las Vegas center in October 2019. This location is approximately 43,916 square feet and has an initial term of 36 months. Annual rent is approximately $270,000.
Vehicle Logistics and Transportation Services
The needs of the Vehicle Logistics and Transportation Services segment of our operations have been serviced out of facilities we lease in Mesa, AZ, and Detroit, MI, as well as a portion of space we have in Nashville, TN. Collective annual rent for the MI and AZ locations is approximately $125,000. In December 2019 we moved into 5,853 of space in Chandler, Arizona to support our Wholesale Express operations. The lease has a 39-month term and our annual rent is approximately $120,000.
Item 3. 
Legal Proceedings.
We are not a party to any material legal proceedings other than ordinary routine litigation incidental to our business.
Item 4. 
Mine Safety Disclosures.
Not Applicable.

PART II
Item 5. 
Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase Of Equity Securities
Market Information
As of October 29, 2017, our Class B Common Stock has been listed on the Nasdaq Global Select Market ("NASDAQ") under the symbol RMBL. Before October 29, 2017, our common stock traded on the OTCQB Market under the symbol RMBL, and before January 1, 2017, our common stock was not traded, except for 250 shares, which traded on the OTC Markets Pink Sheets on January 22, 2016.
Holders of Common Stock
As of May 26, 2020, we had approximately 52 stockholders of record of 2,162,716 issued and outstanding shares of Class B Common Stock and two holders of record of 50,000 issued and outstanding shares of Class A Common Stock.
Dividends
We have never declared or paid any cash dividends. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earning in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our board of directors, based upon the Board's assessment of:
● 
our financial condition;
● 
earnings;
● 
need for funds;
● 
capital requirements;
● 
prior claims of preferred stock to the extent issued and outstanding; and
● 
other factors, including any applicable law.
Therefore, there can be no assurance that any dividends on the common stock will ever be paid.
Item 6. 
Selected Financial Data
This item is not applicable, as we are considered a smaller reporting company.


Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The management's discussion and analysis of financial condition and results of operations should be read in conjunction with the audited financial statements and accompanying notes included in this annual report.
Overview
We are a technology driven, motor vehicle dealer and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.
We operate an infrastructure-light platform that facilitates the ability of all participants in the supply chain, including RumbleOn, other dealers and consumers to Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal is to transform the way VIN-specific pre-owned vehicles are bought and sold by providing users with the most comprehensive, efficient, timely and transparent transaction experiences. While our initial customer facing emphasis through most of 2018 was on motorcycles and other powersports vehicles, we continue to enhance our platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Since our acquisition of Wholesale, Inc. ("Wholesale") in October 2018, we have significantly increased our sales of cars and light truck categories ("automotive"). Of the 43,143 vehicles we sold in 2019, 29,952 (69.4%) were automotive and 13,191 (30.6%) were powersports vehicles. In 2018 we sold 12,529 vehicles of which 4,005 (32.0%) were automotive and 8,524 (68.0%) were powersports vehicles.
The COVID-19 situation has created an unprecedented and challenging time. Our current focus is on positioning the Company for a strong recovery when this crisis is over. We have taken steps to reduce our inventory and align our operating expenses to the state of the business. We plan to continue to operate as permitted to support our customers’ needs for reliable vehicles and to provide as many jobs as possible for our associates. As noted above, 169 associates were temporarily laid-off effective April 9, 2020, however our receipt of PPP funds, as discussed below will allow us to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation future government mandates, as well as future business conditions. We will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce our operating expenses as we are able, however, we expect the consequences of the COVID-19 outbreak will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity.
Acquisition of Wholesale and Wholesale Express
On October 26, 2018, we entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with our newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, Steven Brewster and Janelle Brewster (each a "Stockholder", and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder, and Marshall Chesrown and Steven R. Berrard, providing for the merger (the "Wholesale Merger") of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as our wholly-owned subsidiary. Also on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Steven Brewster and Justin Becker (together the "Express Sellers"(“F&I”), and Steven Brewster as representative of the Express Sellers, pursuant to which we acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC ("Wholesale Express"parts, service and accessories/merchandise (“PSA”). On October 30, 2018 (the "Wholesale Acquisition Date"), we completed the Wholesale Merger and Express Acquisition. Wholesale is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express is a related logistics company. The results of operations of Wholesale and Wholesale Express from the Wholesale Acquisition Date to December 31, 2018 (the " Wholesale Acquisition Period") are included in the Company's consolidated financial statements for the year ended December 31, 2018. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Wholesale and Wholesale Express for periods before the Wholesale Acquisition Date. For additional information, see Note 4 – "Acquisitions" in the accompanying Notes to the Consolidated Financial Statements.
Acquisition of Autosport
On February 3, 2019 (the "Autosport Acquisition Date"), the Company completed the acquisition (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. The results of operations of Autosport from the Autosport Acquisition Date to December 31, 2019 (the "Autosport Acquisition Period," and together with the Wholesale Acquisition Period, the "Acquisition Period") are included in the Company's consolidated financial statements for the year ended December 31, 2019. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Autosport for periods before the Autosport Acquisition Date. For additional information, see Note 4 – "Acquisitions" in the accompanying Notes to the Consolidated Financial Statements.


Reportable Segments
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting:(1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution of principally motorcycles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services primarily between dealerships and auctions. Our vehicle logistics and transportation service reportable segment has been determined to represent one operating segment and reporting unit.The accounting policies of the segments are the same and are described in Note 1 – "Description of Business and Significant Accounting Policies" in the accompanying Notes to the Consolidated Financial Statements.
For the year ended December 31, 2019, our powersports segment accounted for approximately 12.0% of our total revenue and approximately 24.4% of our total gross profit, our automotive segment accounted for approximately 85.3% of our total revenue and approximately 62.7% of our total gross profit, and our vehicle logistics and transportation service segment accounted for approximately 2.7% of our total revenue and approximately 12.9% of our total gross profit. For the year ended December 31, 2018, our vehicle distribution segment accounted for approximately 97.0% of our total revenue and approximately 91.5% of our total gross profit, and our vehicle logistics and transportation service segment accounted for approximately 3.0% of our total revenue and approximately 8.5% of our total gross profit.
Key Operation Metrics - Powersports and Automotive Segments
We regularly review a number of metrics, to evaluate our vehicle distribution business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our growth, including increasing brand awareness, maximizing the opportunity to source the purchase of low cost pre-owned vehicles from consumers and dealers while enhancing the selection of vehicles we make available to our customers. Our key operating metrics also demonstrate our ability to translate these drivers into sales and to monetize these retail sales through a variety of product offerings.

Powersports:
 
2019
 
 
2018
 
Vehicles sold
  13,191 
  8,524 
Regional Partners
  7 
  7 
Average days to sale
  34 
  32 
Total vehicle revenue
 101,008,976 
 61,204,416 
Gross Profit
 12,335,460 
 6,870,350 
Automotive:
 
2019
 
 
2018
 
Vehicles sold
  29,952 
  4,005 
Regional Partners
  7 
  9 
Average days to sale
  23 
  26 
Total vehicle revenue
 717,042,511 
 91,369,996 
Gross Profit
 31,728,617 
 5,608,491 

Vehicles Sold
We define vehicles sold as the number of pre-owned vehicles sold to consumers and dealers in each period, net of returns under our various return policies. We view vehicles sold as a key measure of our growth for several reasons. First, vehicles sold is the primary driver of our revenue and, indirectly, gross profit, since vehicle sales enable multiple complementary revenue streams, including financing, vehicle service contracts and trade-ins. Second, growth in vehicles sold increases the base of available customers for referrals and repeat sales. Third, growth in vehicles sold is an indicator of our ability to successfully scale our logistics, fulfillment, and customer service operations.
Regional Partners
Our operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with regional partners. We utilize these regional partners to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. As regional partners are added throughout the U.S., the cost and time associated with distribution programs will be significantly reduced as the pickup and delivery of pre-owned vehicles will become more localized thus reducing shipping costs and the average days to sale for pre-owned vehicles.
Average Days to Sale
We define average days to sale as the average number of days between vehicle acquisition by us and delivery to a customer for all pre-owned vehicles sold in a period. However, this metric does not include any pre-owned vehicles that remain unsold at period end. We view average days to sale as a useful metric due to its impact on pre-owned vehicle average selling price. We anticipate that average days to sale will increase in future periods until we reach an optimal pooled inventory level and fully scale our acquisition and sales channel processes.
Revenue
Revenue is primarily comprised of pre-owned vehicle sales. We sell both new and pre-owned vehicles through consumerretail and dealerwholesale channels. F&I and PSA revenue is almost exclusively earned through retail channels. Automotive sales channels.are almost exclusively via wholesale channels, and therefore, contribute to a very small portion of F&I revenue. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling tothrough the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The number of pre-owned vehicles sold to any given channel may vary from period to period based on customer demand, market conditionsthese factors. Subject to the lingering impact of COVID-19 and available inventory. Wethe resulting Demand/Supply Imbalances, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building as well asand direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
Gross Profit
Gross profit is generated on pre-owned vehicle sales fromreflects the difference between the vehicle selling price and ourthe cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs (collectively, we refer to reconditioning and transportation costs as “Recon and Transport”).The aggregate dollar gross profit achieved fromand gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the consumer and dealer salessale price. Vehicles sold through retail channels are different. Pre-owned vehicles sold to consumers through our website generally have the highest dollar gross profit sinceper vehicle given the vehicle is sold directly to the consumer.Pre-owned vehicles soldthrough wholesale channels, including directly to other dealers or through auction channels, including via our website are sold at a price below the retail price offereddealer-to-deal auction market, generally have lower margins and do not include other ancillary gross profit attributable to consumers, thus the dealerfinancing and RumbleOn are sharing the gross profit. Pre-owned vehicles sold to dealers through auctions are sold at market. accessory.Factors affecting gross profit from period to period include the mix of pre-ownednew versus used vehicles sold, the distribution channel through which they are sold, the sources from which we acquire and hold inacquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalancesDemand/Supply Imbalances in our sales channels, which could temporarily lead to average selling prices and gross profits increasing or decreasing in any given channel.
Vehicles Sold

Key Operations Metrics – Powersports
 
 
2019
 
 
2018
 
Key Operation Metrics:
 
 
 
 
 
 
Vehicles sold
  13,191 
  8,524 
 
    
    
Total Powersports Revenue
 $101,008,976 
 $61,204,416 
Gross Profit
 $12,335,461 
 $6,870,350 
Gross Profit per vehicle
 $935 
 $806 
Gross Margin
  12.2%
  11.2%
Average selling price
 $7,657 
 $7,180 
 
    
    
Consumer:
    
    
Vehicles sold
  955 
  733 
 
    
    
Total Consumer Revenue
 $8,295,615 
 $6,506,265 
Gross Profit
 $2,058,743 
 $1,272,135 
Gross Profit per vehicle
 $2,156 
 $1,736 
Gross Margin
  24.8%
  19.6%
Average selling price
 $8,687 
 $8,876 
 
    
    
Dealer:
    
    
Vehicles sold
  12,236 
  7,791 
 
    
    
Total Dealer Revenue
 $92,713,361 
 $54,698,150 
Gross Profit
 $10,276,718 
 $5,598,215 
Gross Profit per vehicle
 $840 
 $719 
Gross Margin
  11.1%
  10.2%
Average selling price
 $7,577 
 $7,021 
Key Operations Metrics – Automotive
 
 
2019 (1)
 
 
2018 (2)
 
Key Operation Metrics:
 
 
 
 
 
 
Total vehicles sold
  29,952 
  4,005 
 
    
    
Total Automotive Revenue
 $717,042,511 
 $91,369,996 
Gross Profit
 $31,728,617 
 $5,608,490 
Gross Profit per vehicle
 $1,059 
 $1,400 
Gross Margin
  4.4%
  6.1%
Average selling price
 $23,940 
 $22,814 
 
    
    
Consumer:
    
    
Vehicles sold
  2,792 
  512 
 
    
    
Total Consumer Revenue
 $75,950,236 
 $12,532,850 
Gross Profit
 $9,939,683 
 $2,091,978 
Gross Profit per vehicle
 $3,560 
 $4,086 
Gross Margin
  13.1%
  16.7%
Average selling price
 $27,203 
 $24,478 
 
    
    
Dealer:
    
    
Vehicles sold
  27,160 
  3,493 
 
    
    
Total Dealer Revenue
 $641,092,275 
 $78,837,146 
Gross Profit
 $21,788,934 
 $3,516,512 
Gross Profit per vehicle
 $802 
 $1,007 
Gross Margin
  3.4%
  4.5%
Average selling price
 $23,604 
 $22,570 
We define vehicles sold as the number of vehicles sold through both wholesale and retail channels in each period, net of returns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit. Vehicles sold also enables complementary revenue streams, such as financing. Vehicles sold increases our base of customers and improves brand
(1)            
Inclusive only of the Autosport Acquisition Period.28

(2)            
Inclusive only of the Wholesale Acquisition Period.

Key Operation Metrics - Vehicle Logistics and Transportation Services Segment
We regularly review a number of metrics, to evaluate our vehicle logistics and transportation business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our growth, including increasing brand awareness and maximizingrepeat sales. Vehicles sold also provides the opportunity to drive increased transportationsuccessfully scale our logistics, fulfillment, and logisticscustomer service operations.
Total Gross Profit per Unit
Total gross profit per unit volume. Our key operating metrics also demonstrate our ability to translate these drivers into revenue and increased profitability.


 
 
2019
 
 
2018 (1)
 
Revenue
 $31,931,488 
 $4,931,558 
 
    
    
Vehicles Delivered
  77,449 
  11,571 
 
    
    
Gross Profit
 $6,553,899 
 $1,067,963 
 
    
    
Gross Profit Per Vehicle Delivered
 $85 
 $92 
(1)            
Inclusive onlyis the aggregate gross profit of the Wholesale Acquisition Period.
Company in a given period, divided by retail units sold in that period including gross profit generated from the sale of the new and used vehicles, income related to the origination of loans originated to finance the vehicle, revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, gross profit on the sale of PSA products, and gross profit generated from wholesale sales of vehicles.
Vehicle Logistics Segment
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. The freight brokerage agreements are fulfilled by independent third-party transporters who are obligated tomust meet our performance obligations and standards.Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms. Revenue is recognized as risks and rewards of transportation of the vehicle is transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross. In the normal course of operations, Wholesale Express also provides transportation services to Wholesale. Revenue and cost of revenue for these services for the year ended December 31, 2019 and the Wholesale Acquisition Period was $9,353,628 and $1,107,739, respectively, and was eliminated in the consolidated financial statements for the years ended December 31, 2019 and 2018, respectively.Inc.
Vehicles Delivered
We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private party individuals. Vehicles delivered is the primary driver of revenue growthPowersports and in turn profitability in the vehicle logistics and transportation services segment.
Gross Profit
Gross profit is generated on the difference between the price received from a customer under a freight brokerageagreement for the transport of a vehicle from a point of origin to a designated destination minus our cost to contract an independent third-party transporter to fulfill our obligation under the freight brokerage agreement with the customer. We define gross profit per vehicle delivered as the aggregate gross profit in a given period divided by the number of pre-owned vehicles delivered in that period.
COMPONENTS OF RESULTS OF OPERATIONS
Automotive Segments
Revenue
Revenue for our powersports and automotive segmentsof is derived from our online marketplace and auctions and primarily includes the salecomprised of pre-owned vehicles to consumer and dealers.
Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States.
The Company recognizes revenue using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which we historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of our revenue recognition, and we recognized no cumulative effect adjustment upon adoption. See Item 8 of Part II, Financial Statements and Supplementary Data—Note 1 "Description of Business and Significant Accounting Policies – Revenue Recognition" for a further description of the Company's revenue recognition.


Pre-owned Vehicle Sales
Pre-owned vehicle sales, are primarily comprised of revenue of pre-ownedfinance and insurance products bundled with retail vehicle sales.
sales (“F&I”), and parts, service and accessories/merchandise (“PSA”).We sell both new and pre-owned vehicles through consumerretail and dealerwholesale channels. F&I and PSA revenue is almost exclusively earned through retail channels. Automotive sales channels.are almost exclusively via wholesale channels, and therefore, contribute to a very small portion of F&I revenue. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling tothrough the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The number of pre-owned vehicles sold to any given channel may vary from period to period based on customer demand, market conditionsthese factors. Subject to the lingering impact of COVID-19 and available inventory.
Pre-owned vehicle sales represent the aggregate sales of pre-owned vehicles to consumers and dealers through our website or at auctions. Weresulting Demand/Supply Imbalances, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building as well asand direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
Gross Profit
The numberGross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of pre-owned vehicles we sell depends on our volumerevenue associated with acquiring the vehicle and preparing it for sale. Cost of website traffic, volume of cash offers made, our inventory levelsrevenue includes the vehicle acquisition cost, inbound transportation cost, and selection, the effectiveness of our branding and marketing efforts, the quality of our customer sales experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition and general economic conditions. On a quarterly basis, the number of pre-owned vehicles we sell is also affected by seasonality, with demandparticularly for pre-owned vehicles, reaching the high point in the first half of each year, commensuratereconditioning costs (collectively, we refer to reconditioning and transportation costs as “Recon and Transport”).The aggregate gross profit and gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the timing of tax refunds,sale price. Vehicles sold through retail channels generally have the highest dollar gross profit per vehicle given the vehicle is sold directly to the consumer.Pre-owned vehicles soldthrough wholesale channels, including directly to other dealers or through auction channels, including via our dealer-to-deal auction market, generally have lower margins and diminishing through the rest of the year, with the lowest relative level of pre-owned vehicle sales expecteddo not include other ancillary gross profit attributable to occur in the fourth calendar quarter.
Our average retail selling price depends onfinancing and accessory.Factors affecting gross profit from period to period include the mix of pre-ownednew versus used vehicles sold, the distribution channel through which they are sold, the sources from which we acquire and hold inacquired such inventory, retail market prices, in our markets, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost pre-owned vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances,Demand/Supply Imbalances in our sales channels, which could temporarily lead to average selling pricesgross profits increasing or decreasing.decreasing in any given channel.
Vehicles Sold
TheWe define vehicles sold as the number of pre-owned vehicles sold through both wholesale and retail channels in each period, net of returns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit. Vehicles sold also enables complementary revenue streams, such as financing. Vehicles sold increases our base of customers and improves brand
28


awareness and repeat sales. Vehicles sold also provides the opportunity to dealers at auctionssuccessfully scale our logistics, fulfillment, and customer service operations.
Total Gross Profit per Unit
Total gross profit per unit is determined basedthe aggregate gross profit of the Company in a given period, divided by retail units sold in that period including gross profit generated from the sale of the new and used vehicles, income related to the origination of loans originated to finance the vehicle, revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, gross profit on a numberthe sale of factors including: (i) filling auction sales channel market demand opportunities to maximize salesPSA products, and gross margin; (ii) a need to balance the Company's overall inventory mix and quantity levels against days toprofit generated from wholesale sales targets; and (iii) a need to liquidate those pre-owned vehicles that do not meet the Company's quality standards to be sold through Rumbleon.com.
of vehicles.
Vehicle Logistics and Transportation ServicesSegment
Revenue
Vehicle logistics and transportation services revenueRevenue is generated primarily by entering into derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated towho must meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment ofWholesale Express is considered the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as all risks and rewards of transportation ofprincipal in the vehicle are transferred to the owner during delivery.
Cost of Revenue – Pre-owned Vehicles Sales
Cost of revenuedelivery transactions since it is primarily comprised of cost of pre-owned vehicle sales.
Cost of pre-owned vehicle sales to consumers and dealers includesresponsible for fulfilling the cost to acquire pre-owned vehicles andservice. In the reconditioning and transportation costs associated with preparing these vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific pre-owned vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of pre-owned vehicle sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.


Cost of Revenue – Vehicle Logistics and Transportation Services
Cost of vehicle transportation and logistics services primarily include the costs of independent third-party transporters to deliver a vehicle from a point of origin to a designated destination.
Selling, General and Administrative Expense
Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising and marketing, development and operating our product procurement and distribution system, managing our logistics system, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. Selling, general and administrative expenses also include the transportation cost associated with selling vehicles but excludes the cost of reconditioning, inspecting, and auction fees which are included in Cost of revenue. Selling, general and administrative expenses will continue to increase substantially in future periods as we execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures, but we anticipate they will decline as a percentage of sales revenue.
Depreciation and Amortization
Depreciation and amortization is comprised of the: (i) amortization of capitalized and acquired technology development; and (ii) depreciation of vehicles, leasehold improvements, furniture and equipment. Depreciation and amortization will continue to increase as continued investments are made in connection with the expansion and growth of the business.
Interest Expense
Interest expense includes interest incurred on notes payable and other long-term debt, which was used to fund startup costs and expenses, technology development, inventory, our transportation fleet, property and equipment and the acquisition of NextGen.
Seasonality
The volume of vehicles sold will generally fluctuate from quarter-to-quarter. This seasonality is caused by several factors including weather, the timing of pre-owned vehicles available for sale from selling consumers, the availability and quality of vehicles, holidays, and the seasonality of the retail market for pre-owned vehicles. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle auction accessibility as well as additional costs associated with the holidays and winter weather.
RESULTS OF OPERATIONS
The following table provides our resultsnormal course of operations, for the year ended December 31, 2019 and 2018, including key financial information relating to our business and operations. This financial information should be read in conjunction with our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of Part II. The results of operations of Wholesale and Wholesale Express are included in the Company's consolidated financial statements for the year ended December 31, 2018 for the Wholesale Acquisition Period. The results of operations of Autosport are included in the Company's Consolidated Financial Statements for the year ended December 31, 2019 for the Autosport Acquisition Period. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respectalso provides transportation services to Wholesale or Wholesale Express for periods before the Wholesale Acquisition Date and Autosport for the periods before the Autosport Acquisition Date.Inc.

 
 
For the Year ended December 31, 2019 (1)
 
 

 
 
 
 
Powersports
 
 
Automotive
 
 
Vehicle Logistics and Transportation Services
 
 
Elimination(3)
 
 
Total
 
 
2018(2)
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Powersports
 101,008,976 
 - 
 - 
 - 
 $101,008,976 
 $61,204,416 
Automotive (2)
  - 
  717,042,511 
  - 
  - 
  717,042,511 
  91,369,996 
   Transportation and Vehicle Logistics (2)
  - 
  - 
  31,931,488 
  (9,353,628)
  22,577,860 
  3,823,819 
Total Revenue
  101,008,976 
  717,042,511 
  31,931,488 
  (9,353,628)
  840,629,347 
  156,398,231 
 
    
    
    
    
    
    
Cost of Revenue:
    
    
    
    
    
    
Powersports
  88,673,515 
  - 
  - 
  - 
  88,673,515 
  54,334,066 
Automotive (2)
  - 
  685,313,894 
  - 
  - 
  685,313,894 
  85,761,505 
Transportation (2)
  - 
  - 
  25,377,590 
  (9,353,628)
  16,023,962 
  2,755,856 
Total Cost of Revenue
  88,673,515 
  685,313,894 
  25,377,590 
  (9,353,628)
  790,011,371 
  142,851,427 
 
    
    
    
    
    
    
Gross Profit
 12,335,461 
 31,728,617 
 6,553,898 
 $- 
 $50,617,976 
 $13,546,804 
(1)            
Inclusive only of the Autosport Acquisition Period.
(2)            
Inclusive only of the Wholesale Acquisition Period.
(3)            
Intercompany freight services from Wholesale Express are eliminated in the consolidated financial statements
Powersports and Automotive Segments
Revenue
Revenue of is comprised of vehicle sales, finance and insurance products bundled with retail vehicle sales (“F&I”), and parts, service and accessories/merchandise (“PSA”).We sell both new and pre-owned vehicles through retail and wholesale channels. F&I and PSA revenue is almost exclusively earned through retail channels. Automotive sales are almost exclusively via wholesale channels, and therefore, contribute to a very small portion of F&I revenue. These sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling through the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The following tablenumber of vehicles sold to any given channel may vary from period to period these factors. Subject to the lingering impact of COVID-19 and the resulting Demand/Supply Imbalances, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building and direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
Gross Profit
Gross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs (collectively, we refer to reconditioning and transportation costs as “Recon and Transport”).The aggregate gross profit and gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the sale price. Vehicles sold through retail channels generally have the highest dollar gross profit per vehicle given the vehicle is sold directly to the consumer.Pre-owned vehicles soldthrough wholesale channels, including directly to other dealers or through auction channels, including via our dealer-to-deal auction market, generally have lower margins and do not include other ancillary gross profit attributable to financing and accessory.Factors affecting gross profit from period to period include the mix of new versus used vehicles sold, the distribution channel through which they are sold, the sources from which we acquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of Demand/Supply Imbalances in our sales channels, which could temporarily lead to gross profits increasing or decreasing in any given channel.
Vehicles Sold
We define vehicles sold as the number of vehicles sold through both wholesale and retail channels in each period, net of returns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit. Vehicles sold also enables complementary revenue streams, such as financing. Vehicles sold increases our base of customers and improves brand
28


awareness and repeat sales. Vehicles sold also provides the opportunity to successfully scale our resultslogistics, fulfillment, and customer service operations.
Total Gross Profit per Unit
Total gross profit per unit is the aggregate gross profit of the Company in a given period, divided by retail units sold in that period including gross profit generated from the sale of the new and used vehicles, income related to the origination of loans originated to finance the vehicle, revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, gross profit on the sale of PSA products, and gross profit generated from wholesale sales of vehicles.
Vehicle Logistics Segment
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The freight brokerage agreements are fulfilled by independent third-party transporters who must meet our performance obligations and standards. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. In the normal course of operations, forWholesale Express also provides transportation services to Wholesale Inc.
Vehicles Delivered
We define vehicles delivered as the years endednumber of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private parties. Vehicles delivered are the primary driver of revenue and in turn profitability in the vehicle logistics segment.
Total Gross Profit Per Unit
Total gross profit per vehicle transported represents the difference between the price received from non-affiliated customers and our cost to contract an independent third-party transporter divided by the number of third party vehicles transported.
29


Results of Operations
Year Ended December 31, 2019 and 2018 for the powersports and automotive segments, including key financial information relating2021 Compared to these segments. Our vehicle distribution segment consists of the distribution of powersports and automotive vehicles, as further described below. This financial information should be read in conjunction with our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of Part II. The results of operations of Wholesale are included in the Company's Consolidated Financial StatementsDecember 31, 2020
RumbleOn Total Company Metrics
Year Ended December 31,
20212020YoY
Change
Total CompanyFinancial Overview ($ in 000s)Revenue
Powersports$323,303 $46,654 $276,649 
Automotive460,888 337,085 123,803 
Vehicle logistics43,878 31,816 12,062 
Parts and service and other66,969 — 66,969 
Finance and insurance43,402 872 42,530 
Total revenue938,440 416,427 522,013 
Gross Profit
Powersports58,431 6,594 51,837 
Automotive30,746 28,284 2,462 
Vehicle logistics9,600 7,616 1,984 
Parts and service and other30,267 — 30,267 
Finance and insurance29,133 872 28,261 
Total Gross Profit$158,177 $43,366 $114,811 
Effect of the Nashville Tornado$— $(1,215)$1,215 
Gross Profit reported in the consolidated statements of operations (1)
$158,177 $31,627 $126,550 
Total SG&A Expenses$164,077 $53,659 $110,418 
Operating Loss$(8,868)$(18,560)$9,692 
Net Loss$(9,725)$(24,999)$15,274 
Adjusted EBITDA (2)
$31,013 $(5,791)$36,804 
Unit MetricsVehicles Sold
Retail16,154 458 15,696 
Wholesale18,612 17,566 1,046 
Total Vehicles Sold34,766 18,024 16,742 
Revenue per Unit Sold
Retail$18,516 $13,541 $4,975 
Wholesale$28,395 $21,542 $6,853 
Other$3,330 $1,991 $1,339 
Total Revenue$26,993 $23,330 $3,663 
Gross Profit per Unit
Retail$4,520 $5,114 $(594)
Wholesale$2,433 $1,902 $531 
Other$1,147 $1,904 $(757)
Total Gross Profit$4,550 $2,425 $2,125 
_________________________
(1)Automotive gross profit for the year ended December 31, 20182020 included an inventory reserve adjustment on $7,879 related to the Nashville Tornado.
(2)Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered an alternative to net loss or cash flow from operations, as determined by GAAP. We believe that Adjusted EBITDA is a useful measure to us and to our investors because it excludes certain financial and capital structure items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. See the section titled “Adjusted EBITDA” below for the Wholesale Acquisition Period. The resultsa reconciliation of operations of Autosport are included in the Company's Consolidated Financial StatementsAdjusted EBITDA to Net Loss.

30


Revenue
Total vehicle revenue increased by $522,013 to $938,440 for the year ended December 31, 20192021compared to $416,427 in 2020. The Acquisition Effect specific to new vehicles, F&I and PAS revenue accounted for approximately $279,131 of the Autosport Acquisition Period. In this Management's Discussion and Analysisincrease, with $169,632 of Financial Condition and Results of Operations, no comparable information is discussed with respect to Wholesale for periods before Wholesale Acquisition Date and Autosport fornew vehicle sales, which the periodsCompany did not sell before the Autosport Acquisition Date.

 
 
2019
 
 
2018
 
Revenue:
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
Powersports
 $101,008,976 
 $61,204,416 
Automotive (1)
  717,042,511 
  91,369,996 
Total vehicle revenue
  818,051,487 
  152,574,412 
 
    
    
Cost of Revenue:
    
    
Powersports
  88,673,515 
  54,334,066 
Automotive (1)
  685,313,894 
  85,761,505 
Total cost of revenue
  773,987,409 
  140,095,571 
 
    
    
Gross Profit
  44,064,078 
  12,478,841 
 
    
    
Selling, General and Administrative
  82,006,330 
  34,934,997 
 
    
    
Depreciation and Amortization
  1,779,021 
  982,772 
 
    
    
Operating loss
  (39,721,273)
 ��(23,438,928)
 
    
    
Interest expense
  (7,186,418)
  (1,780,685)
Decrease in derivative liability
  1,302,500 
  - 
Loss on early extinguishment of debt
  (1,499,250)
  - 
Net loss before provision for income taxes
  (47,104,441)
  (25,219,613)
 
    
    
Benefit for income taxes
  - 
  - 
 
    
    
Net loss
 $(47,104,441)
 $(25,219,613)
(1)            
Inclusive only ofRideNow Transaction. On a unit basis, the Company sold 16,742 more vehicles in 2021 than in 2020, again, primarily related to the Acquisition Period.
Effect.
Gross Profit
Total revenueGross profit increased in total by $665,477,075 to $818,051,487 for$114,811 during the year ended December 31, 20192021 compared to $152,574,412 for2020, driven collectively by the same periodAcquisition Effect of 2018. The increase was primarily due to an increase in the number of pre-ownedsignificantly more vehicles sold to 43,143 for the year ended December 31, 2019 as compared to 12,529 for the same period of 2018. The increase in vehicles sold was a result of the continued expansion of our powersports business and the acquisition of Wholesale. Powersport vehicle sales, revenue increased by $39,804,560 to $101,008,976 for the year ended December 31, 2019 as compared to $61,204,416 for the same period in 2018. Automotive sales revenue increased by $625,672,515 to $717,042,511 for the year ended December 31, 2019 as compared to $91,369,996 for the Wholesale Acquisition Period.
Total cost of revenue increased $633,891,838 to $773,987,409 for the year ended December 31, 2019 compared to $140,095,571 for the same period of 2018. The increase was primarily due to an increase in the number of pre-owned vehicles sold for the year ended December 31, 2019 as compared to the same period of 2018 and the acquisition of Wholesale. Powersport total cost of revenue increased by $34,339,449 to $88,673,515 for the year ended December 31, 2019 as compared to the same period of 2018. Automotive total cost of revenue increased by $599,552,389 to $685,313,894 for the year ended December 31, 2019 as compared to $85,761,505 for the Wholesale Acquisition Period.
Powersports
The following table provides the results of operations for the year ended December 31, 2019 and 2018 for our powersports segment, including key financial information relating to the powersports business. This financial information should be read in conjunction with our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of Part II.

 
 
2019
 
 
2018
 
Powersports
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle revenue:
 
 
 
 
 
 
Consumer
 $8,295,615 
 $6,506,266 
Dealer
  92,713,361 
  54,698,150 
Total vehicle revenue
 $101,008,976 
 $61,204,416 
 
    
    
Vehicle gross Profit:
    
    
Consumer
 $2,058,743 
 $1,272,135 
Dealer
  10,276,718 
  5,598,215 
Total vehicle gross profit
 $12,335,461 
 $6,870,350 
 
    
    
Vehicles sold:
    
    
Consumer
  955 
  733 
Dealer
  12,236 
  7,791 
Total vehicles Sold
  13,191 
  8,524 
 
    
    
Gross profit per vehicle:
    
    
Consumer
 $2,156 
 $1,736 
Dealer
 $840 
 $719 
Total
 $935 
 $806 
 
    
    
Gross margin per vehicle:
    
    
Consumer
  24.8%
  19.6%
Dealer
  11.1%
  10.2%
Total
  12.2%
  11.2%
 
    
    
Average vehicle selling price:
    
    
Consumer
 $8,687 
 $8,876 
Dealer
 $7,577 
 $7,021 
Total
 $7,657 
 $7,180 
Powersports Vehicle Revenue
Total powersports vehicle revenue increased by $39,804,560 to $101,008,976 for the year ended December 31, 2019 compared to $61,204,416 for the same period of 2018. The growth in powersports revenue was primarily due to an increase in the number of pre-owned vehicles sold to 13,191 for the year ended December 31, 2019 as compared to 8,524 for the same period of 2018, and an increase in the average selling price per vehicle and an increase in the gross margin dollars per unit sold. Gross profit increase were evident across all businesses, including both new and used powersport vehicle sales, F&I, PAS, automotive, and transportation and logistics. The Acquisition Effect was the primary driver of the powersport vehicle gross profit, while Demand/Supply Imbalances drove automotive gross profit as well as vehicle logistics and transportation gross profit.
31


Year Ended December 31, 2021 Compared to $7,657December 31, 2020
RumbleOn Powersports Metrics
Year Ended December 31,
20212020YoY
Change
PowersportsRevenue $ in 000s)New retail vehicles$169,632 $— $169,632 
Used vehicles
Used vehicles retail86,072 5,330 80,742 
Wholesale67,599 41,324 26,275 
Total used vehicle revenue153,671 46,654 107,017 
Finance and insurance43,402 872 42,530 
Parts and service and other66,969 — 66,969 
Total revenue$433,674 $47,526 $386,148 
Gross Profit ($ in 000s)New retail vehicles$33,278 $— $33,278 
Used vehicles
Retail10,609 1,470 9,139 
Wholesale14,545 5,124 9,421 
Total used vehicle gross profit25,154 6,594 18,560 
Finance and insurance29,133 872 28,261 
Parts and service and other30,267 — 30,267 
Total gross profit$117,832 $7,466 $110,366 
Vehicle SalesNew retail vehicles10,555010,555
Used vehicles
Retail5,5994585,141
Wholesale6,2314,8251,406
Used vehicle11,8305,2836,547
Total vehicles sold22,3855,28317,102
Revenue per vehicleNew retail vehicles$16,071 $— $16,071 
Used vehicles
Retail15,373 11,638 3,735 
Wholesale10,849 8,745 2,104 
Used vehicle12,990 8,831 4,159 
Finance and insurance2,687 1,905 782 
Parts and service and other4,146 — 4,146 
Total revenue per retail vehicle$22,662 $13,541 $9,121 
Gross Profit per vehicleNew vehicle$3,153 $— $3,153 
Used vehicle2,126 3,210 (1,084)
Finance and insurance1,803 1,904 (101)
Parts and service1,874 — 1,874 
Total gross profit per retail vehicle (1)
$6,394 $5,114 $1,280 
____________________
(1)Per vehicle values calculated as revenue or gross profit as applicable, divided by its respective units sold, except the other and total categories which are divided by total used units sold.
32



Revenue
Total vehicle revenue increased by $386,148 to $433,674 for the year ended December 31, 2019 from $7,1802021compared to $47,526 in 2020. The Acquisition Effect specific to new vehicles, F&I and PAS revenue accounted for approximately $169,632, $42,530, and $66,969, respectively, of the same period of 2018. The increase in units sold was driven by a significant growth in visitsincrease; the Company did not sell new vehicles prior to the RumbleOn website, an increase in requests for cash offersRideNow Transaction. The total number of vehicles sold increased by consumers and dealers, expanded levels of inventory available for sale, an enhanced digital and social media advertising campaign, increased awareness of the RumbleOn brand and customer referrals and the launch of our Dealer Direct online acquisition platform which allows dealers17,102 to use our web or mobile application to view, bid and buy inventory when and where they want. The increase in the average selling price of pre-owned vehicles22,385 for the year ended December 31, 2019 as compared2021, driven primarily from the Acquisition Effect; new vehicle sales accounted for 10,555 of the increase, used units increased by 6,547. It is notable that 78.5% of the used unit increase is to retail consumers, who on average pay over $2,700 more per vehicle than wholesale customers. Overall, the same periodaverage revenue per vehicle increased by $9,121 from $13,541 to $22,662, much of 2018 was duewhich is attributable to a shift in inventory mix available for salehigher price point vehicles like UTVs and higher sales prices.side-by-sides. We anticipate that pre-owned vehicleunit purchasing levels and sales will continue to grow as we further increase selectionpenetration in existing markets, build out fulfillment centers and availability of our online pre-owned vehicle inventory and enhance our website with additional functionality while continuing to efficiently source and scale our addressable markets of consumers and dealers through brand building, direct response marketing and event marketing and the expansion of our consumer classified listing site.acquire new dealers.
Gross Profit
Powersports Cost of Revenue
Powersport cost of vehicle revenuegross profit increased by $34,339,449 to $88,673,515$110,366 for the year ended December 31, 20192021 compared to 2020. This increase in gross profit was primarily due to the Acquisition Effect; $33,278 was specific to new vehicles, $18,560 was due to used vehicles sales and consisted of: (i)F&I, and PAS collectively accounted for $58,528 of the acquisition costincrease. Gross Profit per vehicle increased $1,280 per unit, from $5,114 in 2020 to $6,394 in 2021. The Acquisition Effect was the primary driver of vehicles sold to consumersthis, as all new vehicle sales fell into this category, however F&I and dealers of $85,143,181 fromparts and service represent new revenue channels for the sale of 13,191 pre-owned vehicles at an average acquisition cost of $6,455 and (ii) aggregate reconditioning and transportation costs of $3,530,334. ForCompany in 2021 after the year endedRideNow Transaction.
Year Ended December 31, 2018,2021 Compared to December 31, 2020
RumbleOn Automotive Metrics
AutomotiveYear Ended December 31,
20212020YoY
Change
Revenue$460,888 $337,085 $123,803 
Gross Profit (1)
$30,746 $28,284 $2,462 
Vehicles sold12,38112,741(360)
Revenue per vehicle$37,225 $26,457 $10,768 
Gross Profit per vehicle$2,483 $2,220 $263 
(1) Total Gross profit per vehicle retailed is calculated by dividing the $54,334,066 costsum of new vehicle, used vehicle, and finance, and insurance gross profit by total retail vehicle unit sales.
Revenue
Total automotive vehicle revenue consisted of: (i) the acquisition cost of vehicles soldincreased by $123,803 to consumers and dealers of $52,061,289 from the sale of 8,524 pre-owned vehicles at an average acquisition cost of $6,108 and (ii) aggregate reconditioning and transportation costs of $2,272,777.

Powersports Gross Profit
Powersport vehicle gross profit increased $5,465,111 to $12,335,461$460,888 for the year ended December 31, 2019 as2021 compared to $6,870,350$337,085 for the same period of 2018. The increase was primarily due to an increase2020 despite a 2.8% decrease in the total number of pre-owned vehiclesautomotive units sold at an average higherto 12,381. The revenue per vehicle in 2021 benefited from the Demand/Supply Imbalances, while the corresponding period was materially impacted by the Nashville Tornado and the effect of shelter-in-place orders and other responses to COVID-19.
Gross Profit
Automotive vehicle gross profit increased by $2,462 to $30,746 for the year ended December 31, 2019 as2021 compared to $28,284 in 2020. A 2.8% decrease in the same periodnumber of 2018. Theautomotive vehicles sold was more than offset by a 11.9% increase in powersport gross profit was driven primarily by an increase inthe gross profit per automotive vehicle sold to $935$2,483.
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Year Ended December 31, 2021 Compared to December 31, 2020
RumbleOn Logistics Metrics
LogisticsYear Ended December 31,
20212020YoY
Change
Revenue$48,804 $35,887 $12,917 
Gross Profit$9,600 $7,616 $1,984 
Vehicles transported84,54061,31423,226
Revenue per vehicle transported$577 $585 $(8)
Gross Profit per vehicle transported$114 $124 $(10)
Revenue
Total revenue increased by $12,917 or a 12.2% gross margin36.0% to $48,804 for the year ended December 31, 2019 as2021 compared to $806 or 11.2 % gross margin for the same period of 2018.$35,887 in 2020. The increase was primarily a result of: (i) a shift in inventory mix available for sale and higher sales prices and (ii) an increase in transportation and dealer fees.
Automotive
The following table provides the results of operations for the year ended December 31, 2019 and 2018 for the automotive segment including key financial information relating to the automotive business. Our automotive distribution business was added on the Wholesale Acquisition Date in connection with the Wholesale acquisition. The results of operations of Autosport are included in the Company's Consolidated Financial Statements for the year ended December 31, 2019 for the Autosport Acquisition Period. This financial information should be read in conjunction with our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of Part II.  In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Wholesale for periods before the Wholesale Acquisition Date and Autosport for the periods before the Autosport Acquisition Date.
 
 
2019(1)
 
 
2018(2)
 
Automotive
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle revenue:
 
 
 
 
 
 
Consumer
 $75,950,236 
 $12,532,850 
Dealer
  641,092,275 
  78,837,146 
Total vehicle revenue
  717,042,511 
  91,369,996 
 
    
    
Gross Profit:
    
    
Consumer
 $9,939,683 
 $2,091,978 
Dealer
  21,788,934 
  3,516,512 
Total vehicle gross profit
 $31,728,617 
 $5,608,490 
 
    
    
Vehicles sold:
    
    
Consumer
  2,792 
  512 
Dealer
  27,160 
  3,493 
Total vehicles sold
  29,952 
  4,005 
 
    
    
Gross profit per vehicle
    
    
Consumer
 $3,560 
 $4,086 
Dealer
 $802 
 $1,007 
Total
 $1,059 
 $1,400 
 
    
    
Gross margin per vehicle
    
    
Consumer
  13.1%
  16.7%
Dealer
  3.4%
  4.5%
Total
  4.4%
  6.1%
 
    
    
Average selling price:
    
    
Consumer
 $27,203 
 $24,478 
Dealer
 $23,604 
 $22,570 
Total
 $23,940 
 $22,814 
(1)            
Inclusive only of the Autosport Acquisition Period.
(2)            
Inclusive only of the Wholesale Acquisition Period.

Automotive Revenue
Totaltotal revenue increased by $625,672,515 to $717,042,511 for the year ended December 31, 2019 compared to $91,369,996 for the Wholesale Acquisition Period. For the year ended December 31, 2019, 29,952 pre-owned vehicles were sold at an average selling price of $23,940. During the Wholesale Acquisition Period, 4,005 preowned vehicles were sold at an average selling price of $22,814. The average selling price of pre-owned vehicles sold will fluctuate from period to period as a result of changes in the sales mix to consumers and dealers in any given period.
Total revenue from the sale to consumers for the year ended December 31, 2019 was $75,950,236 comprised of the sale of 2,792 preowned vehicles at an average selling price of $27,203. Total revenue from the sale to consumers for the Wholesale Acquisition Period was $12,532,850 comprised of the sale of 512 preowned vehicles at an average selling price of $24,478.
Total revenue from the sale to dealers for the year ended December 31, 2019 was $641,092,275 comprised of the sale of 27,160 preowned vehicles at an average selling price of $23,604. Total revenue from the sale to dealers for the Wholesale Acquisition Period was $78,837,146 comprised of the sale of 3,493 preowned vehicles at an average selling price of $22,570. Substantially all sales to dealers were conducted through third-party auctions.
Automotive Cost of Revenue
Total cost of revenue for the year ended December 31, 2019 was $685,313,894, which included $66,010,553 from the sales to consumers and $619,303,341 from sales to dealers. During the year ended December 31, 2019, we sold 29,952 preowned vehicles that had (i) an acquisition cost of $673,039,189 and (ii) aggregate reconditioning and transportation costs of $12,274,705. Total cost of revenue for the Wholesale Acquisition Period was $85,761,505, which included $10,440,871 from the sales to consumers, $75,320,634 from sales to dealers. During the Wholesale Acquisition Period, we sold 4,005 preowned vehicles that had (i) an acquisition cost of $84,009,915 and (ii) aggregate reconditioning and transportation costs of $1,751,590.
Total cost of revenue from the sale to consumers for the year ended December 31, 2019 was $66,010,553 comprised of the sale of 2,792 vehicles that had: (i) a per vehicle acquisition cost of $23,069 and (ii) aggregate reconditioning and transportation costs of $1,600,597. Total cost of revenue from the sale to dealers for the year ended December 31, 2019 was $619,303,341 comprised of the sale of 27,160 preowned vehicles that had: (i) a per vehicle acquisition cost of $22,409 and (ii) aggregate reconditioning and transportation costs of $10,674,108.
Total cost of revenue from the sale to consumers for the Wholesale Acquisition Period was $10,440,872 comprised of the sale of 512 vehicles that had: (i) a per vehicle acquisition cost of $19,847 and (ii) aggregate reconditioning and transportation costs of $278,961. Total cost of revenue from the sale to dealers for the Wholesale Acquisition Period was $75,320,634 comprised of the sale of 3,493 preowned vehicles that had: (i) a per vehicle acquisition cost of $21,142 and (ii) aggregate reconditioning and transportation costs of $1,472,629. The average cost of pre-owned vehicles sold will fluctuate from period to period as a result of changes in the sales mix to consumers and dealers in any given period.
Automotive Gross Profit
Total gross profit for the year ended December 31, 2019 was $31,728,617 from sales to consumers and dealers. Gross profit per vehicle sold to consumers and dealers was $1,059 or a 4.4% gross margin. Total gross profit for the Wholesale Acquisition Period was $5,608,490, which included $2,091,978 from the sales to consumers and $3,516,512 from sales to dealers. Gross profit per vehicle sold to consumers and dealers was $1,400 or a 6.1% gross margin.
Total gross profit per vehicle sold to consumers for the year ended December 31, 2019 was $3,560 or a 13.1% gross margin. Total gross profit per vehicle sold to dealers for the year ended December 31, 2019 was $802 or a 3.4% gross margin. Total gross profit per vehicle sold to consumers for the Wholesale Acquisition Period was $4,086 or a 16.7% gross margin. Total gross profit per vehicle sold to dealers for the Wholesale Acquisition Period was $1,007 or a 4.5% gross margin. The gross profit of pre-owned vehicles sold will fluctuate from period to period as a result of changes in the sales mix to consumers and dealers in any given period.

Vehicle Logistics and Transportation Services Segment
The following table provides our results of operations for the year ended December 31, 2019 and 2018 for our vehicle logistics and transportation services segment, including key financial information relating to this segment. Our vehicle logistics and transportation services were added on the Wholesale Acquisition Date in connection with the Express Acquisition. The results of operations of Wholesale Express are included in the Company's Consolidated Financial Statements for the year ended December 31, 2018 for the Wholesale Acquisition Period. This financial information should be read in conjunction with our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of Part II. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Wholesale Express for periods before the Wholesale Acquisition Date.
 
 
2019
 
 
2018
 
Vehicle Logistics and Transportation Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 $31,931,488 
 $4,931,558 
 
    
    
Cost of revenue
  25,377,590 
  3,863,595 
 
    
    
Gross profit
  6,553,898 
  1,067,963 
 
    
    
Selling, general and administrative
  4,617,920 
  1,028,933 
 
    
    
Depreciation and Amortization
  7,405 
  1,234 
 
    
    
Operating income
  1,928,573 
  37,796 
 
    
    
Interest Expense
  1,186 
  - 
 
    
    
Net Income before income tax
 $1,927,387 
 $37,796 
 
    
    
Vehicles delivered
  77,449 
  11,571 
 
    
    
Revenue per delivery
 $412 
 $426 
 
    
    
Gross profit per delivery
 $85 
 $92 
 
    
    
Gross margin per delivery
  20.5%
  21.7%
Vehicle Logistics and Transportation Services Revenue
Total revenue for the year ended December 31, 2019 was $31,931,488 resultingresulted from the transport of 77,449 preowned84,540 vehicles at an average pricerevenue per vehicle transported of $412. Total$577 compared to revenue for the Acquisition Period was $4,931,558 resulting from the transport of 11,571 preowned61,314 vehicles at an average pricea revenue per vehicle transported of $426. $585 in 2020.
In the normal course of operations, the Company utilizes transportation services of Wholesale Express.its vehicle logistics and transportation services segment. For the yearyears ended December 31, 20192021 and the Wholesale Acquisition Period,2020, intercompany freight services provided by Wholesale Express was $9,353,628$4,925 and $1,107,739,$4,071, respectively and was eliminated in the consolidated financial statements.
Vehicle Logistics and Transportation Services Cost of Revenue
Total cost of revenue for the year ended December 31, 2019 was $25,377,590 and was comprised of the delivery of 77,449 units at a delivery cost per unit of $328. Total cost of revenue for the Wholesale Acquisition Period was $3,863,595 and was comprised of the delivery of 11,571 units at a delivery cost per unit of $334. Included in cost of revenue for the year ended December 31, 2019 and the Wholesale Acquisition Period, was freight services purchases from Wholesale Express of $9,353,628 and $1,107,739, respectively and was eliminated in the consolidated financial statements.
Vehicle Logistics and Transport Services Gross Profit
Total gross profit for the year ended December 31, 2019 was $6,553,8982021 increased $1,984 or $8526.1% to $9,600, or $114 per unitvehicle transported, as compared to $1,067,963$7,616 or $92$124 per unit forvehicle transported in 2020. The increased gross profit was attributed to an increase in the Wholesale Acquisition Period.number of vehicle transported offset by slightly lower revenue per vehicle transported and gross profit per vehicle transported.
Year Ended December 31, 2021 Compared to December 31, 2020

Selling, General and Administrative Expense
Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising and marketing, development and operating our product procurement and distribution system, managing our logistics system, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. Selling, general and administrative expenses will continue to increase in future periods as we execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures, but we anticipate they will decline as a percentage of sales revenue.
December 31,YOY
20212020Change
Compensation and related costs$63,473 $22,756 $40,717 
Stock based compensation29,219 2,978 26,241 
Advertising and marketing14,425 5,287 9,138 
Professional fees4,714 3,148 1,566 
Technology development and software1,992 1,421 571 
Facilities9,568 2,837 6,731 
General and administrative40,686 15,232 25,454 
Total SG&A Expenses$164,077 $53,659 $110,418 
 
 
2019
 
 
2018
 
Selling general and administrative:
 
 
 
 
 
 
Compensation and related costs
 $33,502,020 
 $10,656,107 
Advertising and marketing
  18,228,262 
  11,457,572 
Professional fees
  2,542,357 
  1,788,425 
Technology development
  2,408,338 
  1,152,108 
General and administrative
  29,943,272 
  10,909,718 
 
 $86,624,249 
 $35,963,930 
Selling, general and administrative expenses increased by $50,660,319110,418 for the year ended December 31, 2021 compared to $86,624,2492020. In each case other than technology development and software, the increases were the result of the Acquisition Effect,
34


with over 1,800 additional employees, marketing initiatives at the store level, general and administrative costs associated with a larger team, and lease/facility expense related to 40+ new locations from the RideNow Transaction. In the case of technology and development, in the third quarter of 2021 we began some strategic technology projects focused on inventory management, infrastructure, and integration efforts. Notwithstanding the preceding, both the Nashville Tornado and the nationwide economic slowdown of COVID-19 late in the first quarter of 2020 lasting until the spring of 2021, resulted in artificially lower costs incurred in 2020.
Depreciation and Amortization
Depreciation and amortization increased by $3,960 to $6,103 for the year ended December 31, 20192021 compared to $35,963,930$2,143 for the same period of 2018. The increase was a result of a $29,750,886 increase for Wholesale and Express in 2019 as compared to the Wholesale Acquisition Period, and the recognition of an impairment loss on goodwill of $1,850,000. The remainder of the $19,059,433 increase was from the continued rapid growth and expansion of our business which resulted in: (i) an increase in expenses associated with advertising and marketing; (ii) increase headcount associated with the development and operating our product procurement, distribution and logistics systems, human resources, marketing and business development; (iii) continued investment in technology development; (iv) increases in transportation costs and auction fees associated with selling vehicles; and (v) an increase in other corporate overhead costs and expenses, including accounting and finance.
Compensation and related costs increased by $22,845,913 to $33,502,020 for the year ended December 31, 2019 compared to $10,656,107 for the same period of 2018. The increase was primarily a result of a $15,859,146 increase for Wholesale and Express in 2019 as compared to the Wholesale Acquisition Period. The remainder of the increase of $6,986,767 was driven by the rapid expansion of our business which resulted in increased headcount to support this growth. The Company had approximately 297 employees at the end of 2019 versus 288 employees at the end of 2018. As our business grows, we will continue to add headcount in all areas of the Company, which will result in an increase in compensation and related expenses in absolute dollar terms but significantly decrease as a percentage of total revenue.
Advertising and marketing increased by $6,770,690 to $18,228,262 for the year ended December 31, 2019 compared to $11,457,572 for the same period of 2018. The increase was primarily a result of a $2,451,098 increase for Wholesale and Express in 2019 as compared to the Wholesale Acquisition Period. . The remainder of the increase of $4,319,592 is a result of a significant increase in our marketing spend among our digital, social and search marketing campaigns.
We are continuing to successfully develop our omnichannel marketing strategy, targeting both consumers and dealers, by combining brand building, lead generation, and content marketing to efficiently source and scale our addressable markets. In addition to a strong social media marketing strategy, our digital paid advertising efforts also include programmatic, display advertisements, IP and Geo-Targeting, cascading data retargeting, organic search and content creation, video marketing, personalized automation, and aggressive event and experiential marketing. Our traditional mediums have expanded further into localized radio, OOH advertising and the production of future television and connected TV brand awareness advertising for 2020. We believe our lifestyle focus of nurturing the buyer/seller personas of both consumers and dealers ensures loyalty which will drive both high participation in the buying and selling process, while increasing referrals and third-party partnerships. This nurturing will scale tremendously as we prepare to launch personalized video experiences, unique to each user looking to acquire a cash offer through the end of 2020 and the appendage and unification of our current user data, to provide a more targeted message for each stage of the customers' journey.In addition to our paid channels, in future periods we intend to attract new customers through increased media spending and public relations efforts while continuing to invest in our proprietary technology platforms and the overall user experience. As we continue to gain share in our addressable market, we expect advertising and marketing spending will continue to increase in absolute dollar terms but will decrease as a percentage of total revenue.
Professional fees increased by $753,932 to $2,542,357 for the year ended December 31, 2019 compared to $1,788,425 for the same period of 2018. The increase was primarily a result of a $243,151 increase for Wholesale and Express in 2019 as compared to the Wholesale Acquisition Period. The remainder of the increase of $510,781 was primarily a result of legal, accounting and other professional fees and expenses incurred in connection with the activities associated with the rapid growth and expansion of the business. Fees and expenses were incurred for: (i) equity financings; (ii) debt financings; (iii) acquisition activities; (iv) general corporate matters; (v) the preparation of quarterly and annual financial statements; and (vi) the preparation and filing of regulatory reports required of the Company for public reporting purposes For additional information, see Note 4 – "Acquisitions" and Note 8 - "Notes Payable and Lines of Credit" and Note 9 - "Stockholders' Equity," in the accompanying Notes to the Consolidated Financial Statements.

Technology development expenses increased $1,256,230 to $2,408,338 for the year ended December 31, 2019 compared to $1,152,108 for the same period of 2018. The increase was a result of a significant increase in headcount and third-party contractors to meet an increase level of technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to existing platforms for: (i) Retail online auction; (ii) Native App in IOS and Android; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure. Total technology costs and expenses incurred for the year ended December 31, 2019 were $5,494,081 of which $3,085,743 was capitalized. For the year ended December 31, 2018, total technology costs and expenses incurred were $3,314,815 of which $2,162,707 was capitalized. For the year ended December 31, 2019, a third-party contractor billed $1,028,884 of the total technology development costs as compared to $2,117,739 for the same period of 2018. The amortization of capitalized technology development costs for the year ended December 31, 2019 was $1,436,088 as compared to $825,782 for the same period of 2018. We expect our technology development expenses to increase as we continue to upgrade and enhance our technology infrastructure, invest in our products, expand the functionality of our platform and provide new product offerings. We also expect technology development expenses to continue to be affected by variations in the amount of capitalized internally developed technology.
General and administrative expenses increased by $19,033,554 to $29,943,272 for the year ended December 31, 2019 compared to $10,909,718 for the same period of 2018. The increase was primarily a result of a $11,197,491 increase for Wholesale and Express in 2019 as compared to the Wholesale Acquisition Period. The remainder of the increase of $7,836,063 is a result of the recognition of an impairment loss on goodwill of $1,850,000 and the cost and expenses associated with the continued progress made and growth experienced in the development of our business, expansion of our Dallas and Nashville operation centers and meeting the requirements of being a public company. The increase in general and administrative costs and expenses consists primarily of: (i) insurance of $926,385; (ii) travel of $595,710; (iii) office supplies and process application software of $236,191; (iv) rent of $1,247,411; (v) transportation cost and auction fees associated with selling vehicles of $8,457,250. As our business grows, we will continue to add cost and expenses in all areas of the Company, which will result in an increase in selling and administrative costs in absolute dollar terms but significantly decrease as a percentage of total revenue.
Depreciation and Amortization
Depreciation and amortization increased by $802,420 to $1,786,426 for the year ended December 31, 2019 compared to $984,006 for the same period of 2018. The increase in depreciation and amortization is a result of the cumulative investments made in connection with the expansion and growthdevelopment of the business which for the year ended December 31, 2019 included capitalized technology acquisition and development costs of $3,085,743.$1,266 and $2,707 in additions to property and equipment for the year ended December 31, 2021 as compared to $1,887 of capitalized technology acquisition and development costs and $3,530 in additions to property and equipment for the year ended December 31, 2020. For the year ended December 31, 2019,2021, amortization of capitalized technology development was $1,436,088$1,710 as compared to $825,782$1,887 for the same period of 2018.2020. Depreciation and amortization on vehicle, furniture, equipment and leasehold improvements was $350,338$210 as compared to $158,224$256 for the same period of 2018.2020.
Interest Expense
Interest expense increased by $5,406,919$9,955 to $7,187,604$16,405 for the year ended December 31, 20192021 compared to $1,780,685 for the same period of 2018.$6,450 in 2020. Interest expense consists of interest on the: (i) Hercules Loan;term loan credit agreement (the “Oaktree Credit Facility”); (ii) Private Placement Notes;various floorplan facilities; (iii) the subordinated secured promissory note issued to NextGen (the "NextGen Note");private placement notes; and (iv) the Credit Facility and the NextGear Credit Line (each as defined below) (together, the "Line of Credit-Floor Plans"); (v) Notes; and (vi) the notes issued in connection with the Autosport Acquisition (the "Convertible Notes-Autosport").convertible senior notes. The increase resulted from: (i)in interest on a higher level of debt outstanding; (ii) the amortization of the beneficial conversion feature on the Private Placement Notes; (iii) the amortization of the debt issuance costs on the Hercules Loan, Notes and Convertible Notes-Autosport; and (iv) amortization of transaction costs on the Notes. Interest expense for the year ended December 31, 2019 for the: (i) Hercules Loan was $758,4662021 as compared to the same period of 2020 is primarily related to the RideNow Transaction, as we borrowed $280,000 in new debt on the Closing Date from the Oaktree Credit Facility and included $342,841RideNow had various floorplan facilities with powersports manufacturers. The Company assumed floorplan facilities as part of debt issuance cost amortization; (ii) Private Placement Notes was $316,091; (iii) Line of Credit-Floor Plans was $3,239,293; (iv) Convertible Notes-Autosport was $228,002 and included $103,005 of debt discount amortization; (v) Notes was $2,523,064 and included $1,218,064 of debt discount and transaction fee amortization; (vi) NextGen Note was $110,484. Interest expense forthe RideNow Transaction, which were used throughout the year ended December 31, 2018 for the: (i) Hercules Loan was $770,810 and included $304,213,2021 to finance the purchase of debt issuance cost amortization; (ii) Private Placement Notes was $259,177 which included $205,926 of debt discount amortization; (iii) NextGeninventory. See Note was $87,617; and (iv) Line of Credit – Floor Plans was $663,081. Included in interest expense is $513,305 for Wholesale for the Wholesale Acquisition Period. See Part II, Financial Statements and Supplementary Data—Note 8—"9—Notes Payable and Lines of Credit"for additional discussion.
Seasonality
Historically, both the powersports and automotive industries have been seasonal with traffic and sales strongest in the spring and summer quarters. Sales and traffic are typically slowest in the winter quarter but increase typically in the spring season, coinciding with tax refunds and improved weather conditions. Given this seasonality, we expect our quarterly results of operations, including our revenue, gross profit, profit/loss, and cash flow to vary accordingly. Over time, we expect to normalize to seasonal trends in both segments, using data and logistics to move inventory to the right place, at the right time, at the right price.
Loss Contingencies and Insurance Recoveries
On May 14, 2019,March 3, 2020, a severe tornado damaged the Company's Nashville facilities, and the Company madeincurred the following losses: (1) inventory, assessed by the insurance carrier at approximately $13,000; (2) building and personal property assessed by the insurance carrier at $2,783; and (3) loss of business income, for which the company has coverage in the amount of $6,000.
The Company's inventory claim is subject to a paymentlitigation with the carrier as to Hercules Capital Inc. ("Hercules")the policy limits applicable to the loss; however, the insurer has, to date, advanced $8,750, $3,135 of $11,134,696, representingwhich was funded in 2021, against the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the "Loan Agreement") with Hercules dated April 30, 2018 (the "Hercules Indebtedness"). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement was terminated.final settlement. The Company used a portion of the net proceeds from the Note Offering (described below)insurer has agreed to pay the Hercules Indebtedness. In accordance withfull $2,778 limit, net of deductible, on the guidancebuilding and personal property loss and to date has advanced $2,270 to the landlord. The loss of business income claim is ongoing and remains in ASC 470-50, Debt, the Company accounted forprocess of negotiation, however, the extinguishment ofinsurer has advanced $250 against the Hercules Loan Agreement as an extinguishment and recognized a loss on early extinguishment of debt of $1,499,250 forfinal settlement during the year ended December 31, 20192020. The Company will continue to pursue the claims but can make no assurance that additional amounts will be recovered.
During the year ended December 31, 2020, the Company recorded an impairment loss on inventory of $11,738 comprised of $4,454 for vehicles that were a total loss and $7,284 in loss in value for vehicles partially damaged and subject to repair. The impairment loss is reported in cost of revenue in the consolidated statements of operations. Advances made against the final settlement of the inventory claim have been recorded as a separate component of operating loss in the Consolidated StatementsStatement of Operations. The loss on early extinguishment consisted primarily ofOperations in the prepayment penalty paid to Hercules and unamortized debt discounts including the remaining portion of warrant values and debt issuance costs.period in which received.
35



Derivative Liability
In connection with our various financings, we undertake an analysis of each financial instrument to determine the appropriate accounting treatment, including which, if any require bifurcation into liability and equity components; we have determined that the following financings have such components:
Convertible Senior Notes
In connection with the issuance of the Convertible Senior Notes, a derivative liability was recorded at issuance with an interest make-wholemake whole provision of $1,330,000$21 based on a Monte-Carlo Simulationlattice model using a stock price of $14.60, and estimated volatility of 85.0%55.0% and a risk-free rate of 2.3%. This amount was recorded as a debt discount and is amortized to interest expenserates over the term of the Notes using the effective interest rate. entire 10-year yield curve.
The derivative liability is remeasured at each reporting date with the change in value of $1,302,500 being recorded in the Statements of Operationsderivative liability for the year ended December 31, 2019.2021 and 2020 was approximately $49 and $11, respectively, and is included in change in derivative liability in the Consolidated Statement of Operations. The value of the derivative liability as of December 31, 2019 is $27,500.2021 and 2020 was approximately $66 and $17, respectively.
Oaktree Warrant
In connection with providing the debt financing for the RideNow Transaction, and pursuant to the commitment letter executed on March 15, 2021, the Company issued warrants to purchase $40,000 of shares of Class B common stock to Oaktree Capital Management, L.P. and its lender affiliates (the “Warrant”). The initial warrant liability and deferred financing charge recognized was $10,950. The warrant liability was subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of change in derivative liability in the Consolidated Statements of Operations. The fair value of the Warrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 2 inputs. Upon closing of the RideNow Transaction, the warrants were considered equity linked contracts indexed to the Company’s stock and therefore met the equity classification guidance. As a result, the $19,700 was reclassified to additional paid-in-capital. The $10,950 deferred financing charge was reclassified as part of the debt discount related to the Oaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.
Stock-Based Compensation
In connection with the closing of the RideNow Transaction and the execution of the certain Executive Employment Agreements, the Company accelerated the vesting of and waived certain market-based share price hurdles for all then outstanding restricted stock units (“RSUs”) for all participants, which resulted in excess of $23,943 of incremental stock-based compensation for the year ended December 31, 2021.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.
Adjusted EBITDA is defined as net lossincome (loss) adjusted to add back interest expense including(including debt extinguishment andextinguishment), depreciation and amortization, interest income and miscellaneous income, changes in derivative liabilities and certain chargesrecoveries, income tax benefits, and expenses, such as non-cash compensation costs, acquisition related costs, derivative income, financing activities, litigation expenses, severance, new business development costs, technology implementation costs and expenses, and facility closure and lease terminationother non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
For the years ended December 31, 2021 and 2020, adjustments to calculating Adjusted EBITDA are primarily comprised of:
Impairment loss on inventory and plant and equipment resulting from the Nashville Tornado and the related proceeds received from the Company’s insurance carriers,
36


Non-cash stock-based compensation expense recorded in the Consolidated Statement of Operations,
Acquisition costs associated with the RideNow Transaction, which primarily include professional fees and third-party costs,
Other non-reoccurring costs, which include one-time expenses incurred. For the year ended December 31, 2021, approximately $1,342 was incurred for compensation to the estate of Steven R. Berrard, the Company’s former Chief Financial Officer,
Paycheck Protection Program (“PPP”) loan forgiveness, which includes loan principal balances forgiven by the Small Business Administration (“SBA”), and
Purchase accounting adjustments, primarily comprised of the valuation adjustments for inventory acquired as part of the RideNow Transaction which increased the cost of revenue included in the Consolidated Statement of Operations.
The following tables reconcile Adjusted EBITDA to net loss for the periods presented:
December 31,
20212020
Net loss$(9,725)$(24,999)
Add back:
Interest expense (including debt extinguishment)16,405 6,450 
Depreciation and amortization6,103 2,143 
Change in derivative liabilities8,799 (11)
Income tax benefit(21,665)— 
EBITDA(83)(16,417)
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(5,615)
Stock based compensation29,219 2,978 
Acquisition costs associated with the RideNow Transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(2,682)— 
Purchase accounting related1,388 — 
Adjusted EBITDA$31,013 $(5,791)
 
 
2019
 
 
2018
 
Net loss
 $(45,177,053)
 $(25,181,817)
Add back:
    
    
Interest expense (including debt extinguishment)
  8,686,854 
  1,780,685 
Depreciation and amortization
  1,786,426 
  984,006 
EBITDA
  (34,703,773)
  (22,417,126)
Adjustments
    
    
Goodwill impairment
  1,850,000 
  - 
Non-cash-stock-based compensation
  3,836,518 
  1,657,680 
Derivative income
  (1,302,500)
  - 
Severance
  1,079,438 
  - 
New business development
  1,224,523 
  - 
Other non-recurring costs
  1,639,666 
  - 
Adjusted EBITDA
 $(26,376,128)
 $(20,759,446)





37


Pro Forma Adjusted EBITDA
The following supplemental pro forma information presents pro forma financial results as if the RideNow Transaction was completed at January 1, 2020.
Add backs and adjustments to calculating Pro Forma Adjusted EBITDA are consistent with the adjustments used to calculate Adjusted EBITDA. For the years ended December 31, 2021 and 2020, pro forma EBITDA adjustments primarily represent the amortization of debt fees and gross profit on intercompany transactions on a pro-forma basis.
December 31,
20212020
Net income$45,565 $18,914 
Add back:
Interest expense (including debt extinguishment)40,347 47,312 
Depreciation and amortization13,199 13,607 
Interest income and miscellaneous income(1,389)(1,967)
Change in derivative liabilities8,799 (10)
Income tax benefit(2,706)6,305 
EBITDA103,815 84,161 
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(4,810)
Stock based compensation29,219 3,175 
Acquisition costs associated with the RideNow transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(21,721)— 
Purchase accounting related1,388 — 
Adjusted EBITDA115,872 95,789 
Pro Forma Adjustments2,525 124 
Pro Forma Adjusted EBITDA118,397 95,913 


Liquidity and Capital Resources
We generateOur primary sources of liquidity are available cash, from the sale of used retail vehicles, the sale of wholesale vehicles, and providing vehicle logistics and transportation services for used vehicles. We generate additional cash flows throughamounts available under our financing activities including our short-term revolving inventory floor plan facilities,lines of credit, and monetization of our retail loan portfolio. During the issuanceyear ended December 31, 2021, we completed two public offerings that provided net proceeds of long-term notes,$191,000 and new issuancesobtained the Oaktree Credit Facility, which initially provided net proceeds of equity. Historically,$261,000 that was used to finance a portion of the cash generated fromconsideration for the RideNow Transaction. As of December 31, 2021, the Oaktree Credit Facility provides for up to $120,000 in additional financing activities has funded growththat may be used for acquisitions and expansionup to an additional $100,000 in incremental financing that may be used for acquisitions and strategic initiatives and we expect this to continue in the future.

Our ability to service our debt and fund working capital capital expenditures,purposes. On February 18, 2022, in conjunction the acquisition of Freedom Powersports, the Company drew down $83,400 against the Oaktree Credit Facility.
Our financial statements reflect estimates and business development efforts will dependassumptions made by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on our ability to generate cash from operating and financing activities, which is subject to our future operating performance, as well as to general economic, financial, competitive, legislative, regulatory,historical experience, management’s experience, and other conditions, somefactors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which may be beyond our control. Our future capital requirements will dependcould have a material impact on many factors, including our ratethe carrying values of revenue growth, our expansion of our various lines of businessthe Company’s assets and liabilities and the timingresults of operations. We will continue to evaluate the nature and extent of the impact to our spendingbusiness and our results of
38


operations and financial condition as conditions evolve as a result of the COVID-19 pandemic and the resulting Demand/Supply Imbalances.
The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Management believes that current working capital, results of operations, and existing financing arrangements are sufficient to support our technology and software development efforts.
fund operations for at least one year from the financial statement date.
We had the following liquidity resources available as of December 31, 20192021 and December 31, 2018:2020: 
December 31,
20212020
Cash$48,974 $1,467 
Restricted cash (1)
3,0002,049 
Total cash and restricted cash51,974 3,516 
Availability under short-term revolving facilities124,116 2,188 
Committed liquidity resources available$176,090 $5,704 
 
 
2019
 
 
2018
 
Cash and cash equivalents
 $49,660 
 $9,134,902 
Restricted cash (1)
  6,676,622 
  6,650,000 
Total cash, cash equivalents, and restricted cash
  6,726,282 
  15,784,902 
Availability under short-term revolving facilities
  35,839,030 
  16,133,106 
Committed liquidity resources available
 $42,565,652 
 $31,918,008 
(1)
Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities.
On January 14, 2020, the Company closed a public offering at a public price of $11.40 per share (the "2020 Public Offering"). On January 16, 2020, the Company received notice of the Underwriters' intent to exercise the over-allotment option in full (the "Over-allotment Exercise"). On January 17, 2020, the Company closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,898,070.
Also on January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering (as defined below), pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes (as defined below) would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the "New Notes"), and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering, after deducting for the payment of accrued interest and offering-related expenses, but exclusive of company costs were $8,272,375.
As of December 31, 2019,2021, and 2018,2020, excluding operating lease liabilities and the derivative liability, the outstanding principal amount of indebtedness was $82,585,522$384,585 and $67,347,925,$53,109, respectively, summarized in the table below. See Note 8 — Notes9-Notes Payable and Lines of Credit, Note 10-Convertible Notes, and Note 19 – Subsequent Events11-Stockholders Equity to our consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on2021 Form 10-K for further information on our debt.
December 31,
20212020
Asset-Based Financing:
Inventory$97,278 $17,812 
Total asset-based financing97,278 17,812 
Term loan facility279,300 — 
Secured notes payable— 2,391 
Unsecured senior convertible notes39,006 39,774 
PPP and other loans4,472 5,177 
Total debt420,056 65,154 
Less: unamortized discount and debt issuance costs(35,471)(12,045)
Total debt, net$384,585 $53,109 

 
 
December 31,
 
Asset-Based Financing:
 
2019
 
 
2018
 
Inventory
 $59,160,970 
 $56,372,501 
Total asset-based financing
  59,160,970 
  56,372,501 
Convertible senior notes
  31,333,334 
  12,190,834 
Senior unsecured notes
  2,568,843 
  667,000 
Total debt
  93,063,147 
  69,230,335 
Less: unamortized discount and debt issuance costs
  (10,477,625)
  (1,882,410)
Total debt, net
 $82,585,522 
 $67,347,925 
The following table sets forth a summary of our cash flows.
December 31,
20212020
Net cash (used in) provided by operating activities$(32,177)$17,143 
Net cash used in investing activities(378,831)(2,282)
Net cash provided by (used in) financing activities459,466 (18,071)
Net increase (decrease) in cash$48,458 $(3,210)
39


Operating Activities
Our primary sources of operating cash flows forresult from the sales of new and pre-owned vehicles and ancillary products. Our primary uses of cash from operating activities are purchases of inventory, parts and merchandise, cash used to acquire customers, technology development, and personnel-related expenses. For the year ended December 31, 2019 and 2018:
 
 
2019
 
 
2018
 
Net cash used in operating activities
 $(39,747,330)
 $(23,452,753)
Net cash used in investing activities
  (3,871,223)
  (17,564,367)
Net cash provided by financing activities
  34,559,933 
  47,631,370 
Net (decrease) increase in cash
 $(9,058,620)
 $6,614,250 
Operating Activities
Net2021, net cash used in operating activities increased $16,294,577 to $39,747,330 for the year ended December 31, 2019, asof $32,177 was an increase of $49,320 compared to the year ended December 31, 2018. The increase in net cash used is primarily due to a $19,995,236provided by operating activities of $17,143 in 2020. The increase in our net losscash used in operating activities was primarily due to: (i) an outflow of $45,732 in operating assets and liabilities, primarily in vehicle inventory, other assets, and accounts receivable and (ii) an adjustment in the valuation of the deferred taxes of $22,545; partially offset by a $3,700,659 increasedecrease in non-cash expense items. The increase in theour net loss forof $15,274 and the year ended December 31, 2019 was a resultrecognition of the continued expansion and progress made on our business plan, including a significant increase instock based compensation marketing and advertising spend, costs and expenses associated with the saleexpense of inventory, continued development of the Company's business and for working capital purposes.$29,219.
Investing Activities
NetOur primary use of cash for investing activities is for technology development and acquisitions to expand our operations. Cash used in investing activities decreased $13,693,144 to $3,871,223 for the year ended December 31, 2019 as2021 was $378,831, an increase of $376,549 compared to 2020.  The increase in cash used in investing activities results from (i) primarily the 2021 acquisition of RideNow, (ii) additional purchase of property and equipment of $5,646 to expand our operations, and (iii) an outflow of $1,871 in technology development during the year ended December 31, 2018. The decrease in cash used for investment activities was primarily due2021 as compared to a decrease of $14,560,251 for acquisitions, offset by an increase in costs incurred for technology development of $923,036. In 2019 the Company used $835,000 to acquire Autosport, while in 2018 the Company used cash of $15,395,251 to acquire Wholesale, Inc and Wholesale Express, LLC.
On February 3, 2019, the Company completed the Autosport Acquisition pursuant to the Stock Purchase Agreement, by and among the Buyer, the Seller and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) the Promissory Note in favor of the Seller, plus (iii) the Convertible Note in favor of the Seller, plus (iv) contingent Earn-Out Shares for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to the Second Convertible Note.The fair value of the contingent earn-out payment was considered immaterial at the date of acquisition and was excluded from the purchase price allocation. As of December 31, 2019, there have been no payments earned under the performance thresholds.
On October 26, 2018, we entered into the Merger Agreement with the Merger Sub, Holdings, Wholesale, the Stockholders, the Representative, and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the Wholesale Merger. Also, on October 26, 2018, we entered into the Purchase Agreement with the Express Sellers, and Steven Brewster as representative of the Express Sellers, pursuant to which the Company completed the Express Acquisition. On October 30, 2018, the Company completed the Wholesale Merger and Express Acquisition. As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders the Stock Consideration. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments.

2020.
Financing Activities
Year Ended December 31, 2019
Net cashCash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities decreased $13,071,437 to $34,559,933 was $459,466 for the year ended December 31, 20192021 compared to net cash used in financing activities of $18,071 for 2020. The $477,537 increase in cash provided by financing activities for the year ended December 31, 2021 as compared to the same period in 2018. This decrease is primarilyof 2020 was a result of a reductionof: (i) an increase in the finance offerings in 2019 compared to 2018, as discussed below. The proceeds from these transactions were used to: (i) acquire vehicle inventory; (ii) accelerate technology development; and (iii) continue development of the Company's business and for working capital purposes.
On February 11, 2019, the Company completed an underwritten public offering of 63,825 shares of its Class B Common Stock at a price of $111.00 per share for net proceeds to the Company of $6,543,655 (the "February 2019 Public Offering"). The completed offering included 8,325 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option. The Company used the net proceeds from the offering for working capital and general corporate purposes, which included purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business.
On May 9, 2019, the Company entered into a purchase agreement (the "Note Purchase Agreement") with JMP Securities LLC ("JMP Securities") to issue and sell $30,000,000 in aggregate principal amount of the Company's 6.75% Convertible Senior Notes due 2024 (the "Notes" or "Old Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the "2019 Note Offering"). Proceeds from the 2019 Note Offering, after deducting the initial purchaser's discounts, advisory fees, and related offering expenses, were $27,385,500.
The Notes were issued on May 14, 2019 pursuant to an Indenture (the "Indenture"), by and between the Company and Wilmington Trust, National Association, as trustee. The Notes bore interest at 6.75% per annum, payable semiannually on May 1 and November 1 of each year, beginning on November 1, 2019. The Notes could bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the Indenture or if the Notes were not freely tradeable as required by the Indenture. The Notes would have matured on May 1, 2024, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the Notes was 8.6956 shares of Class B Common Stock per $1,000 principal amount of the Notes, subject to adjustment (which is equivalent to an initial conversion price of approximately $115.00 per share, subject to adjustment). The conversion rate was subject to adjustment in some events but would not have be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture), the Company would, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change.
Before the close of business on October 31, 2023, the Notes were convertible only under certain circumstances specified in the Indenture. On or after November 1, 2023, to the close of business on the business day immediately preceding the maturity date, holders could have converted all or any portion of their notes at the applicable conversion rate at any time, in multiples of $1,000 principal amount, at the option of the holder regardless of such conditions. Upon conversion, the Company would pay or deliver cash, shares of Class B Common Stock, or a combination of cash and shares of Class B Common Stock, at the Company's election.
The Notes were not redeemable by the Company prior to the May 6, 2022. The Company could have redeemed for cash all or any portion of the Notes, at its option, on or after May 6, 2022 if the last reported sale price of the Class B Common Stock had been at least 150.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive). No sinking fund was provided for the Notes.
The Notes were the Company's senior unsecured obligations and rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).
The Notes were subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization occurs and is continuing, the Trustee or the holders of at least 25.0% in principal amount of the outstanding Notes, could have declared 100.0% of the principal of and accrued and unpaid interest on the Notes immediately due and payable.

On May 9, 2019, the Company also entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with certain accredited investors (the "Investors") pursuant to which the Company agreed to sell in a private placement (the "2019 Private Placement") an aggregate of 95,000 shares of the Class B Common Stock (the "Private Placement Shares"), at a purchase price of $100.00 per share. JMP Securities served as the placement agent for the 2019 Private Placement. The Company paid JMP Securities a commission of 7.0% of the gross proceeds in the 2019 Private Placement. Upon closing, the proceeds for the 2019 Private Placement, after deducting commissions and related offering expenses, were $8,665,000.
On May 14, 2019, the Company used a portion of net proceeds from the 2019 Note Offering to pay Hercules (as defined below) $11,134,695, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under the Loan Agreement (as defined below). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement was terminated.
Year Ended December 31, 2018
Net cash provided by financing activities increased $28,308,507 to $47,631,370for the year ended December 31, 2018 as compared to the same period in 2017. This increase is primarily a result of the: (i) 2018 public offering of 116,438 shares of Class B Common Stock with net proceeds of $13,015,825;$261,451 received from the senior secured debt; (ii) the private placement of an aggregate of 151,500 shares of our Class B Common Stock (the "2018 Private Placement") with net proceeds of $20,086,155;$191,241 received from sale of common stock in April 2021 and August 2021; and (iii) proceedsan increase in borrowings of $9,227,035 from Hercules loans; and (iv) Net advances of $5,302,355 under$17,187 on the floor plan lines of credit. The proceeds from these transactions were used to: (i) acquire vehicle inventory; (ii) accelerate technology development; (iii) fund the acquisition of Wholesale and Express; and (iv) continue development of the Company's business and for working capital purposes.
On February 16, 2018, the Company, through RMBL Missouri, entered into an Inventory Financing and Security Agreement (the "Credit Facility") with Ally Bank, a Utah chartered state bank ("Ally Bank") and Ally Financial, Inc., a Delaware corporation (together with Ally Bank "Ally"), pursuant to which Ally may provide up to $25,000,000 in financing, or such lesser sum which may be advanced to or on behalf of RMBL Missouri from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require RMBL Missouri to maintain 10.0% of the advanced amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by Ally and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, the Borrower's obligation to pay upon demand any outstanding liabilities of the Credit Facility), Ally may, at its option and without notice to RMBL Missouri, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Ally and its affiliates by RMBL Missouri and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL Missouri and payment is guaranteedcredit; partially offset by the Company pursuant to a guaranty in favorrepayment of Ally and secured by the Company pursuant to a General Security Agreement.notes payable.
On April 30, 2018 (the "Closing Date"), the Company, and it wholly owned subsidiaries, (collectively the "Initial Borrowers"), entered into a Loan and Security Agreement (the "Loan Agreement") with Hercules Capital, Inc. a Maryland Corporation ("Hercules") pursuant to which Hercules may provide one or more term loans in an aggregate principal amount of up to $15,000,000 (the "Hercules Loan"). Under the terms of the Loan Agreement, $5,000,000 was funded at closing with the balance available in two additional tranches over the term of the Loan Agreement, subject to certain operating targets and otherwise as set forth in the Loan Agreement. The Hercules Loan has an initial 36-month maturity and initial 10.5% interest rate. The Hercules Loan is subject to various covenants, including gross profit and EBITDA. As of December 31, 2018, the Company was in compliance with such covenants.
Under the Loan Agreement, on the Closing Date, the Company issued Hercules a warrant to purchase 4.091 (increasing to 5,455 if a fourth tranche in the principal amount of up to $5,000,000 is advanced at the party's agreement) shares of the Company's Class B Common Stock (the "Warrant') at an exercise price of $110.00 per share (the "Warrant Price"). The Warrant is immediately exercisable and expires on April 30, 2023.
Advances under the Hercules Loan ("Advances") will bear interest at a per annum rate equal to the greater of either (i) the prime rate plus 5.75%, or (ii) 10.25%, based on a year consisting of 360 days. Advances under the Loan Agreement are due and payable on May 1, 2021, unless the Initial Borrowers achieve certain performance milestones, in which case Advances will be due and payable on November 1, 2021.

Upon any event of default, Hercules may, at its option, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Hercules by the Initial Borrowers.
The Hercules Loan is secured by a grant of a security interest in substantially all assets (the "Collateral") of the Initial Borrowers, except the Collateral does not include (a) certain outstanding equity of the Initial Borrowers' foreign subsidiaries, if any, or (b) nonassignable licenses or contracts of the Initial Borrowers, if any.
On July 20, 2018, the Company completed an underwritten public offering of 116,438 shares of its Class B Common Stock at a price of $121.00 per share for aggregate net proceeds to the Company of $13,015,825. The completed offering included 15,188 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option. The Company intends to use the net proceeds from the offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business.
On October 26, 2018, we entered into the Merger Agreement by and among the Company, Merger Sub, Holdings, Wholesale, and the Stockholders), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the Wholesale Merger of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company. On October 29, 2018, we entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement.
Also, on October 26, 2018, we entered into the Purchase Agreement, by and among the Company, the Express Sellers, and Steven Brewster as representative of the Express Sellers, pursuant to which we acquired all of the membership interests (the "Express Acquisition") in Wholesale Express.
The Wholesale Merger and the Express Acquisition were both completed on October 30, 2018 (the "Wholesale Closing Date"). As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of our Series B Non-Voting Convertible Preferred Stock, par value $0.001. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments.
On October 30, 2018, the Company, NextGen Pro, LLC, ("NextGen Pro"), RMBL Missouri, LLC, ("RMBL Missouri"), RMBL Texas, LLC ("RMBL Texas", and together with the Company, NextGen Pro, and RMBL Missouri, each, an "Existing Borrower", and collectively, the "Existing Borrowers"), Merger Sub, Wholesale, Wholesale Express, RMBL Express, LLC, ("RMBL Express", and together with Merger Sub, Wholesale and Wholesale Express, the "New Borrowers"; together with the Existing Borrowers, the "Borrowers"), Hercules, in its capacity as lender (in such capacity, "Lender"), and Hercules, in its capacity as administrative agent and collateral agent for Lender (in such capacities, "Agent"), entered into the First Amendment and Waiver to Loan and Security Agreement (the "Amendment"), amending the Loan Agreement, (as amended by the Amendment, the "Amended Loan Agreement"), by and among the Existing Borrowers, Lender and Agent. Under the terms of the Amendment, $5,000,000 (less certain fees and expenses) was funded by Lender to the Borrowers in connection with the Wholesale Closing Date (the "Tranche II Advance"). The Tranche II Advance has a maturity date of October 1, 2021 and an initial interest rate of 11.00%. Pursuant to the Amendment, we issued to Hercules a warrant to purchase 1,048 shares of Class B Common Stock at an exercise price of $143.13 per share. In connection with the Company's public offering in February 2019, the exercise price of the warrant was adjusted to $110.94 and the number of shares of Class B Common Stock underlying the warrant was adjusted to 1,352. The warrant is immediately exercisable and expires on October 30, 2023.
Also, on October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the "NextGear Credit Line") with NextGear Capital, Inc. ("NextGear"). The available credit under the NextGear Credit Line is initially $63,000,000, it was increased to $70,000,000 after February 28, 2019. The NextGear Credit Line is due and payable on demand. Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.00%, until the outstanding liabilities to NextGear are paid in full. See Note 8 – Notes Payable and Lines of Credit to our consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information on this loan
On October 30, 2018, we completed the 2018 Private Placement at a price of $142.00 per share for non-affiliates of the Company, and, with respect to directors participating in the 2018 Private Placement, at a price of $162.00 per share. The gross proceeds for the 2018 Private Placement were $21,553,000. National Securities Corporation, a wholly owned subsidiary of National Holdings Corporation, and Craig-Hallum Capital Group (together the "Placement Agents") served as the placement agents for the 2018 Private Placement. We paid the Placement Agents a fee of 6.5% of the gross proceeds in the 2018 Private Placement. Net proceeds from the 2018 Private Placement and $5,000,000 funded under the Tranche II Advance were used to partially fund the cash consideration of the Wholesale Merger and the Express Acquisition and the balance will be used for working capital purposes.

Liquidity
We have incurred losses and negative cash flow from operations since inception through December 31, 2019 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit and Note 9 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans.  As of May 28, 2020, we had approximately $15,000,000 available under our NextGear Credit Line that we may draw against through December 31, 2020 to fund future vehicle inventory purchases, as described further in Note 8 — Notes Payable and Lines of Credit.

Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line, proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including temporarily laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of May 28, 2020, the Company has $9,000,000 of unrestricted cash and has approximately $15,000,000 of remaining availability under the NextGear Credit.
The Company’s consolidated financial statements have been prepared assuming that will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that we will be able to generate sufficient liquidity from the measures described above, our current circumstances including uncertainties due to Covid-19 pandemic raise substantial doubt about our ability to operate as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of December 31, 2019,2021, we did not have any 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, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Subsequent Events
Public Offering
Acquisition of Freedom Powersports
On January 10, 2020,February 18, 2022, the Company entered intoclosed on the Underwriting Agreement with the Underwriters relatingacquisition of Freedom Powersports, which included all business and real estate assets, subject to the Company's 2020 Public Offering of the 900,000 Firm Shares and the 135,000 Additional Shares.
The Underwriters agreed to purchase the Firm Shares at a price of $11.40 per share. The Firm Shares were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (Registration No. 333-234340) under the Securities Act.
On January 14, 2020, the Company issued the Firm Shares and closed the 2020 Public Offering at a public price of $11.40 per share. On January 16, 2020, the Company received notice of the Underwriters' intent to complete the Over-allotment Exercise. On January 17, 2020, the Company issued the Additional Shares and closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,898,070. Certain of the Company's officers and directors participated in the 2020 Public Offering.
The Company intends to use thecustomary net proceeds of the 2020 Public Offering for working capital and general corporate purposes, which may include further technology development, increased spending on marketing and advertising and capital expenditures necessary to grow the business. Pending these uses, the Company may invest the net proceeds in short-term interest-bearing investment grade instruments.

Convertible Note Exchange and Offer
Also on January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering, pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering, after deducting for payment of accrued interest on the Old Notes and offering-related expenses were approximately $8,272,375.
The New Notes were issued on January 14, 2020 pursuant to an Indenture (the "New Indenture"), by and between the Company and Wilmington Trust, National Association, as trustee (the "Trustee"). The Note Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The New Notes bear interest at 6.75% per annum, payable semiannually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Notes may bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradeable as required by the New Indenture. The New Notes will mature on January 1, 2025, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a "make-whole fundamental change" (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 61.6523 shares per $1,000 in principal amount.
The New Indenture contains a "blocker provision" which provides that no holder (other than the depositary with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B Common Stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B Common Stock.
The New Notes are not redeemable by the Company before the January 14, 2023. The Company may redeem for cash all or any portion of the New Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.
The New Notes rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).
The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25.0% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable.
In connection with the 2020 Note Offering, on January 14, 2020, the Company entered into a registration rights agreement with the Note Investors, pursuant to which the Company has agreed to file with the SEC a shelf registration statement registering the sale, on a continuous or delayed basis, of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than the day that is 120 days after January 14, 2020.

Investor Note Exchange
Also, in connection with the closing of the 2020 Public Offering and the 2020 Note Offering, the Company repaid $500,000 plus accrued interest related to the note payable to Halcyon, and certain of the Company's investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for the New Investor Notes, pursuant to the Investor Note Exchange Agreement, by and between the Company and each Investor, including Halcyon, an entity affiliated with Kartik Kakarala, a director of the Company, such New Investor Noteadjustments, for an aggregate principal amount of $833,333, Blue Flame, an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114 and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amountconsideration of approximately $1,502,352, will mature on January 31, 2021,$129,971. The aggregate consideration consisted of approximately $83,291 for the Freedom Powersports business and will be convertible at any time atapproximately $46,680 for acquired real estate properties, including the Investor's option at a pricepayoff of $60.00 per share. In connection with the issuance of the New Investor Notes, the Company also entered into a Security Agreement, dated as of January 14, 2020 with the Investors, pursuant to which the Company granted to the Investors a security interest in certain collateral to secure, on a pro rata basis basedoutstanding mortgage debt on the percentage equal to the amount of principal outstanding on each New Investor Note divided by the amount of principal outstanding on all of the New Investor Notes to each Investor.
The New Investor Notes and the New Notes were sold to the investors pursuant to the Investor Note Exchange Agreement and the Note Agreement, respectively, in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. To the extent that any shares of Class B Common Stock are issued upon conversion of the New Investor Notes and the New Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof, because no commission or other remuneration is expected to be paid in connection with conversion of the New Investor Notes and the New Notes, and any resulting issuance of shares of Class B Common Stock.
Nasdaq Notices
On January 17, 2020, the Company received a notice from the Listing Qualifications department of the Nasdaq Stock Market ("Nasdaq") indicating that the Company is not in compliance with the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rule 5450(a)(1) based upon the closing bid price for the 30 consecutive business days ended January 16, 2020. The Nasdaq notice does not impact the Company's listing at this time and the Company's stock will continue to trade on Nasdaq while the Company works to regain compliance with the Nasdaq.
As a result of the Reverse Stock Split, as defined below, the Company believes it has regained compliance with Rule 5450(a)(1).
Nashville Tornado
In the early morning hours of March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to our facilities in Nashville. We maintain insurance coverage for damage to our facilities and inventory, as well as business interruption insurance. We continue in the process of reviewing damages and coverages with our insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, currently assessed by the insurance carrier at $3,369,087; and (3) loss of business income, for which we have coverage in the amount of $6,000,000.
All three components of our loss claim have been submitted to its insurers. Our inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss. The building insurer has agreed to pay $3,369,087 on the building and personal property loss, reflecting a complete recovery, net of $5,000 reflecting our deductible. The insurer has made an interim payment on the building and personal property loss of $2,269,507 and has an outstanding balance of $1,094,580 which is expected to be paid during the second quarter of 2020. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. We believe there will be a full recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced significant disruption to our business, both in terms of disruption of our operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of our business. Our business is also dependent on the continued health and productivity of our associates throughout this crisis. Individually and collectively, we expect the consequences of the COVID-19 outbreak will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity.
The COVID-19 situation has created an unprecedented and challenging time. Our current focus is on positioning the Company for a strong recovery when this crisis is over. We have taken steps to reduce our inventory and align our operating expenses to the state of the business. We plan to continue to operate as permitted to support our customers’ needs for reliable vehicles and to provide as many jobs as possible for our associates. Effective April 9, 2020, 169 associates were temporarily laid-off effective, however our receipt of PPP funds, as discussed below will allow us to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation future government mandates, as well as future business conditions. We will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce our operating expenses as we are able, however, we expect the consequences of the COVID-19 outbreak will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity.

PPP Loan
On May 1, 2020, the Company, and its wholly owned subsidiaries Wholesale, Inc. and Wholesale Express, LLC (together, the "Subsidiaries," and with the Company, the "Borrowers"), each entered into loan agreements and related promissory notes (the "SBA Loan Documents") to receive U.S. Small Business Administration Loans (the "SBA Loans") pursuant to the Paycheck Protection Program (the "PPP") established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"),real estate assets in the aggregate amount of $5,176,845 (the "Loan Proceeds").approximately $27,025. The Borrowers received the Loan Proceedsaggregate consideration was paid using cash on May 1, 2020. Under the SBA Loan Documents, the SBA Loans have a fixed interest rate of 1.0%, repayment begins six monthshand, $84,500 drawn from the date of disbursement of each SBA Loan,Company’s delayed draw facility under the Oaktree Credit Facility, and the SBAissuance of 1,048,718 restricted shares of RumbleOn Class B common stock. The restricted shares are subject to a six-month lock-up and resale registration rights.
Funding of RumbleOn’s Consumer Finance Subsidiary
On February 4, 2022, ROF SPV I, LLC (“ROF SPV”), an indirect subsidiary of RumbleOn, entered into a secured loan facility primarily to provide up to $25,000. All loans under this agreement will be secured by certain collateral including the consumer finance loans purchased by ROF SPV.
ROF SPV and ROF provided customary representations and covenants under the agreements which include financial covenants and collateral performance covenants. Loans mature two years fromsold to or in the datefacility are subject to certain eligibility criteria, concentration limits and reserves.
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Related Party Software License
On January 19, 2022, the Audit Committee approved, and the Company entered into both a Perpetual Software License Purchase Agreement, and a Platform Service Agreement with Bidpath Incorporated, a Company owned by Adam Alexander, a member of first disbursement. There is no prepayment penalty.
Pursuantthe Company’s Board of Directors. The license agreement provides the Company with a perpetual, non-exclusive license to the terms of the SBA Loan Documents, the Borrowers may apply for forgiveness of the amount due on the SBA Loans in an amount equal to the sum of the following costs incurred by the Borrowers during the eight-week period (or any other period that may be authorized by the U.S. Small Business Administration) beginning on the date of first disbursement of the SBA Loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of SBA Loan forgiveness shall be calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, although no more than 25% of the amount forgiven can be attributable to non-payroll costs. No assurance is provided that forgiveness for any portion of the SBA Loans will be obtained.
The promissory notes evidencing the SBA Loans contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory notes. The occurrence of an event of default may result in the repayment ofthen-current source code as well as all amounts outstanding, collection of all amounts owing from the Borrowers, and/or filing suit and obtaining judgment against the Borrowers.
Reverse Stock Split
On May 18, 2020, the Company filed a Certificate of Changefuture source code. This code provides additional functionality to the Company’s Articlesinventory management platform, and the Company is paying in aggregate $3,600, of Incorporation with the Secretary of State of the State of Nevadawhich $1,080 has been paid to effectdate, The services agreement provides for support and maintenance services on a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the "Reverse Stock Split").monthly basis for $30 per month. The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were rounded upinitial terms is thirty-six (36) months but can be terminated by either party upon sixty (60) days notice to the nearest whole share. The authorized preferred stockother party.
Appointment of Chief Financial Officer
On February 1, 2022, the Company appointed Narinder Sahai as the Company’s Chief Financial Officer.
Change in Executive Officers
On February 11, 2022, William Coulter, a director and the Executive Vice Chairman of the Company, was not impacted byand Mark Tkach, a director and the Reverse Stock Split. Following the Reverse Stock Split,Chief Operating Officer of the Company, has outstanding 50,000 sharesresigned from all positions with the Company. The Company appointed Peter Levy, the President of Class A Common Stock and approximately 2,162,696 sharesthe Company, to also serve as Chief Operating Officer of Class B Common Stock. the Company.
Repayment of Convertible Note
On May 20, 2020,January 31, 2022, the Company made its final scheduled payment on the convertible note entered into on February 3, 2019 in connection of the acquisition of AutoSport. The carrying amount on the Company’s Class B Common Stock commenced trading on the Nasdaq Capital Market on a split-adjusted basis. The Company has retrospectively adjusted the 2018 and 2019 financial statements for loss per share and share amountsbalance sheet as a result of the reverse stock split.December 31, 2021 was $154.
Critical Accounting PoliciesStock-Based Compensation
In connection with the closing of the RideNow Transaction and Estimatesthe execution of the certain Executive Employment Agreements, the Company accelerated the vesting of and waived certain market-based share price hurdles for all then outstanding restricted stock units (“RSUs”) for all participants, which resulted in excess of $23,943 of incremental stock-based compensation for the year ended December 31, 2021.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.
Adjusted EBITDA is defined as net income (loss) adjusted to add back interest expense (including debt extinguishment), depreciation and amortization, interest income and miscellaneous income, changes in derivative liabilities and certain recoveries, income tax benefits, and other non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
For the years ended December 31, 2021 and 2020, adjustments to calculating Adjusted EBITDA are primarily comprised of:
Impairment loss on inventory and plant and equipment resulting from the Nashville Tornado and the related proceeds received from the Company’s insurance carriers,
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Non-cash stock-based compensation expense recorded in the Consolidated Statement of Operations,
Acquisition costs associated with the RideNow Transaction, which primarily include professional fees and third-party costs,
Other non-reoccurring costs, which include one-time expenses incurred. For the year ended December 31, 2021, approximately $1,342 was incurred for compensation to the estate of Steven R. Berrard, the Company’s former Chief Financial Officer,
Paycheck Protection Program (“PPP”) loan forgiveness, which includes loan principal balances forgiven by the Small Business Administration (“SBA”), and
Purchase accounting adjustments, primarily comprised of the valuation adjustments for inventory acquired as part of the RideNow Transaction which increased the cost of revenue included in the Consolidated Statement of Operations.
The preparationfollowing tables reconcile Adjusted EBITDA to net loss for the periods presented:
December 31,
20212020
Net loss$(9,725)$(24,999)
Add back:
Interest expense (including debt extinguishment)16,405 6,450 
Depreciation and amortization6,103 2,143 
Change in derivative liabilities8,799 (11)
Income tax benefit(21,665)— 
EBITDA(83)(16,417)
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(5,615)
Stock based compensation29,219 2,978 
Acquisition costs associated with the RideNow Transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(2,682)— 
Purchase accounting related1,388 — 
Adjusted EBITDA$31,013 $(5,791)





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Pro Forma Adjusted EBITDA
The following supplemental pro forma information presents pro forma financial results as if the RideNow Transaction was completed at January 1, 2020.
Add backs and adjustments to calculating Pro Forma Adjusted EBITDA are consistent with the adjustments used to calculate Adjusted EBITDA. For the years ended December 31, 2021 and 2020, pro forma EBITDA adjustments primarily represent the amortization of debt fees and gross profit on intercompany transactions on a pro-forma basis.
December 31,
20212020
Net income$45,565 $18,914 
Add back:
Interest expense (including debt extinguishment)40,347 47,312 
Depreciation and amortization13,199 13,607 
Interest income and miscellaneous income(1,389)(1,967)
Change in derivative liabilities8,799 (10)
Income tax benefit(2,706)6,305 
EBITDA103,815 84,161 
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(4,810)
Stock based compensation29,219 3,175 
Acquisition costs associated with the RideNow transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(21,721)— 
Purchase accounting related1,388 — 
Adjusted EBITDA115,872 95,789 
Pro Forma Adjustments2,525 124 
Pro Forma Adjusted EBITDA118,397 95,913 


Liquidity and Capital Resources
Our primary sources of liquidity are available cash, amounts available under our floor plan lines of credit, and monetization of our retail loan portfolio. During the year ended December 31, 2021, we completed two public offerings that provided net proceeds of $191,000 and obtained the Oaktree Credit Facility, which initially provided net proceeds of $261,000 that was used to finance a portion of the cash consideration for the RideNow Transaction. As of December 31, 2021, the Oaktree Credit Facility provides for up to $120,000 in additional financing that may be used for acquisitions and up to an additional $100,000 in incremental financing that may be used for acquisitions and working capital purposes. On February 18, 2022, in conjunction the acquisition of Freedom Powersports, the Company drew down $83,400 against the Oaktree Credit Facility.
Our financial statements in conformity with generally accepted accounting principles of the United States ("GAAP") requiresreflect estimates and assumptions made by management that affect the reported amountscarrying values of the Company’s assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities, inand the consolidated financial statementsreported amounts of revenue and accompanying notes.expenses during the reporting period. The Securitiesjudgments, assumptions and Exchange Commission (the "SEC") has defined a company's critical accounting policies asestimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the ones that are most important to the portrayalcircumstances. Because of the company's financial condition and resultsnature of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results. For additional information, see Item 8 of Part II, Financial Statements and Supplementary Data Note 1 — "Description of Business and Significant Accounting Policies. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actualmade by management, actual results maycould differ significantlymaterially from these judgments and estimates, under different assumptions, judgments, or conditions.
Revenue Recognition
We adopted ASC 606, Revenue from Contracts with Customers on January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which we historically recognized revenue, the adoption of ASC 606 did notcould have a material impact on the amount or timing of our revenue recognition, and we recognized no cumulative effect adjustment upon adoption.

For vehicles sold at wholesale to dealers we satisfy our performance obligation for vehicles sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the pre-owned vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle.
For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for pre-owned vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for pre-owned vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the pre-owned vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers.
Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as risks and rewards of transportation of the vehicle is transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross.
Valuation of Inventory
Pre-owned vehicle inventory is accounted for pursuant to ASC 330, Inventory and consists of pre-owned vehicles primarily acquired from consumers and includes the cost to acquire and recondition a pre-owned vehicle. Reconditioning costs are billed by third-party providers and includes parts, labor, and other repair expenses directly attributable to a specific vehicle. Transportation costs are expensed as incurred. Pre-owned inventory is stated at the lower of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value is based on the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn data of similar vehicles, as well as independent market resources. Each reporting period, the Company recognizes any necessary adjustments to reflect pre-owned vehicle inventory at the lower of cost or net realizable value, which is recognized in cost of revenue in our Consolidated Statements of Operations.
Purchase Accounting for Business Combinations
On February 3, 2019, the Company completed the Autosport Acquisition pursuant to the Stock Purchase Agreement, by and among the Buyer, the Seller and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) the Promissory Note in favor of the Seller, plus (iii) the Convertible Note in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to the Second Convertible Note.
On October 26, 2018, we entered into the Merger Agreement with the Merger Sub, Holdings, Wholesale, the Stockholders, the Representative, and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the Wholesale Merger. On October 29, 2018, we entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement.

Also, on October 26, 2018, we entered into the Purchase Agreement with the Express Sellers, and Steven Brewster as representative of the Express Sellers, pursuant to which the Company completed the Express Acquisition. On October 30, 2018, the Company completed the Wholesale Merger and Express Acquisition. As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders the Stock Consideration. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments.
The Wholesale, Express and Autosport acquisitions were accounted under the acquisition method of accounting for business combinations. Under the acquisition method of accounting, the cost, including transaction costs was preliminarily allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated faircarrying values of the netCompany’s assets acquired was recordedand liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business and our results of
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operations and financial condition as goodwill. Consistent with accounting principles generally accepted inconditions evolve as a result of the U.S. atCOVID-19 pandemic and the time the acquisition was consummated,resulting Demand/Supply Imbalances.
The Company's consolidated financial statements have been prepared assuming that the Company valuedwill continue as a going concern, which assumes the purchase price to acquire Wholesale, Wholesale Express and Autosport based uponcontinuity of operations, the fair value of the consideration paid.
The judgments made in determining the estimated fair value and expected useful lives assigned to each classrealization of assets and the satisfaction of liabilities acquired can significantly impact net income (loss). For example, different classesas they come due in the normal course of assets will have useful livesbusiness. Management believes that differ. Consequently,current working capital, results of operations, and existing financing arrangements are sufficient to fund operations for at least one year from the extent a longer-lived asset is ascribed greater valuefinancial statement date.
We had the following liquidity resources available as of December 31, 2021 and December 31, 2020: 
December 31,
20212020
Cash$48,974 $1,467 
Restricted cash (1)
3,0002,049 
Total cash and restricted cash51,974 3,516 
Availability under short-term revolving facilities124,116 2,188 
Committed liquidity resources available$176,090 $5,704 
(1) Amounts included in restricted cash represent the deposits required under the acquisition method than a shorter-lived asset there may be less amortization recorded in a given period.Company's short-term revolving facilities.
DeterminingAs of December 31, 2021, and 2020, excluding operating lease liabilities and the fair valuederivative liability, the outstanding principal amount of certain assetsindebtedness was $384,585 and liabilities acquired requires significant judgment and often involves the use of significant estimates and assumptions. As provided by the accounting rules, the Company used the one-year period following the consummation of the acquisition to finalize the estimates of the fair value of assets and liabilities acquired. One of the areas that requires more judgment in determining fair values and useful lives is intangible assets. To assist in this process, the Company obtained an appraisal from an independent valuation firm for certain intangible assets. While there are a number of different methods used in estimating the value of the intangibles acquired, there are two approaches primarily used: discounted cash flow and market multiple approaches. Some of the more significant estimates and assumptions inherent$53,109, respectively, summarized in the two approaches include: projected future cash flows (including timing); discount rate reflecting the risk inherenttable below. See Note 9-Notes Payable and Lines of Credit, Note 10-Convertible Notes, and Note 11-Stockholders Equity to our consolidated financial statements included in the future cash flows; perpetual growth rate; determination of appropriate market comparables; and the determination of whether a premium or a discount should be applied to comparables.
SeePart II, Item 8, of Part II, Financial Statements and Supplementary Data Note 1 – Description of Business and Significant Accounting Policies and Note 4 — "Acquisitions"this 2021 Form 10-K for additional discussion.further information on our debt.
December 31,
20212020
Asset-Based Financing:
Inventory$97,278 $17,812 
Total asset-based financing97,278 17,812 
Term loan facility279,300 — 
Secured notes payable— 2,391 
Unsecured senior convertible notes39,006 39,774 
PPP and other loans4,472 5,177 
Total debt420,056 65,154 
Less: unamortized discount and debt issuance costs(35,471)(12,045)
Total debt, net$384,585 $53,109 
Goodwill
Goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, customer relationships, and trade names are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged.
Goodwill is not amortized but tested for impairment at the reporting unit level annually on December 31 and upon the occurrence of an indicator of impairment. We have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill usingThe following table sets forth a quantitative assessment process. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution of principally motorcycles, while the automotive segment distributes cars and trucks. Each of these segments are considered separate reporting units for purposes of goodwill testing. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services between dealerships and auctions. Our vehicle logistics and transportation service reportable segment has been determined to represent one operating segment and reporting unit.

We have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill using a quantitative assessment process. During 2019, for the three reporting units we performed quantitative impairment testing of the fair valuesummary of our reporting units using an income and market valuation approach. The income valuation approach estimates our enterprise value using a net present value model, which discounts projected freecash flows.
December 31,
20212020
Net cash (used in) provided by operating activities$(32,177)$17,143 
Net cash used in investing activities(378,831)(2,282)
Net cash provided by (used in) financing activities459,466 (18,071)
Net increase (decrease) in cash$48,458 $(3,210)
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Operating Activities
Our primary sources of operating cash flows result from the sales of our business using the weighted average costnew and pre-owned vehicles and ancillary products. Our primary uses of capital as the discount rate. We also validated the fair value for each reporting unit using the income approach by calculating a cash earnings multiplefrom operating activities are purchases of inventory, parts and determining whether the multiple was reasonable comparedmerchandise, cash used to recent market transactions completed in the industry. As part of that assessment, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization. We believe this reconciliation process is consistent with a market participant perspective. This consideration would also include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest,acquire customers, technology development, and other significant assumptions including revenue and profitability growth, profit margins, residual values and the cost of capital.
personnel-related expenses. For the year ended December 31, 2019, we recognized2021, net cash used in operating activities of $32,177 was an impairment loss on goodwillincrease of $1,850,000 related$49,320 compared to powersports, which is recordednet cash provided by operating activities of $17,143 in selling, general2020. The increase in our net cash used in operating activities was primarily due to: (i) an outflow of $45,732 in operating assets and administrative expensesliabilities, primarily in vehicle inventory, other assets, and accounts receivable and (ii) an adjustment in the Consolidated Statementvaluation of Operations. No goodwill impairment resultedthe deferred taxes of $22,545; partially offset by a decrease in our net loss of $15,274 and the recognition of the stock based compensation expense of $29,219.
Investing Activities
Our primary use of cash for investing activities is for technology development and acquisitions to expand our operations. Cash used in investing activities for the year ended December 31, 2021 was $378,831, an increase of $376,549 compared to 2020.  The increase in cash used in investing activities results from (i) primarily the 2021 acquisition of RideNow, (ii) additional purchase of property and equipment of $5,646 to expand our operations, and (iii) an outflow of $1,871 in technology development during the year ended December 31, 2021 as compared to 2020.
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities was $459,466 for the year ended December 31, 2021 compared to net cash used in financing activities of $18,071 for 2020. The $477,537 increase in cash provided by financing activities for the year ended December 31, 2021 as compared to the same period of 2020 was a result of: (i) an increase in net proceeds of $261,451 received from the quantitative impairments testssenior secured debt; (ii) proceeds of $191,241 received from sale of common stock in April 2021 and August 2021; and (iii) an increase in borrowings of $17,187 on the floor plan lines of credit; partially offset by the repayment of notes payable.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any 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, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Subsequent Events
Acquisition of Freedom Powersports
On February 18, 2022, the Company closed on the acquisition of Freedom Powersports, which included all business and real estate assets, subject to customary net working capital and indebtedness adjustments, for an aggregate consideration of approximately $129,971. The aggregate consideration consisted of approximately $83,291 for the Freedom Powersports business and approximately $46,680 for acquired real estate properties, including the payoff of outstanding mortgage debt on the real estate assets in the aggregate amount of approximately $27,025. The aggregate consideration was paid using cash on hand, $84,500 drawn from the Company’s delayed draw facility under the Oaktree Credit Facility, and the issuance of 1,048,718 restricted shares of RumbleOn Class B common stock. The restricted shares are subject to a six-month lock-up and resale registration rights.
Funding of RumbleOn’s Consumer Finance Subsidiary
On February 4, 2022, ROF SPV I, LLC (“ROF SPV”), an indirect subsidiary of RumbleOn, entered into a secured loan facility primarily to provide up to $25,000. All loans under this agreement will be secured by certain collateral including the consumer finance loans purchased by ROF SPV.
ROF SPV and ROF provided customary representations and covenants under the agreements which include financial covenants and collateral performance covenants. Loans sold to or in the facility are subject to certain eligibility criteria, concentration limits and reserves.
40


Related Party Software License
On January 19, 2022, the Audit Committee approved, and the Company entered into both a Perpetual Software License Purchase Agreement, and a Platform Service Agreement with Bidpath Incorporated, a Company owned by Adam Alexander, a member of the remaining reporting unitsCompany’s Board of Directors. The license agreement provides the Company with a perpetual, non-exclusive license to the then-current source code as well as all future source code. This code provides additional functionality to the Company’s inventory management platform, and the Company is paying in aggregate $3,600, of which $1,080 has been paid to date, The services agreement provides for support and maintenance services on a monthly basis for $30 per month. The initial terms is thirty-six (36) months but can be terminated by either party upon sixty (60) days notice to the other party.
Appointment of Chief Financial Officer
On February 1, 2022, the Company appointed Narinder Sahai as the Company’s Chief Financial Officer.
Change in Executive Officers
On February 11, 2022, William Coulter, a director and the Executive Vice Chairman of the Company, and Mark Tkach, a director and the Chief Operating Officer of the Company, resigned from all positions with the Company. The Company appointed Peter Levy, the President of the Company, to also serve as Chief Operating Officer of the Company.
Repayment of Convertible Note
On January 31, 2022, the Company made its final scheduled payment on the convertible note entered into on February 3, 2019 in connection of the acquisition of AutoSport. The carrying amount on the Company’s balance sheet as of December 31, 2019 and 2018. The remaining reporting units had sufficient excess fair value over the respective carrying values. No other impairment charges related to intangible assets were recognized in 2018.2021 was $154.
Stock-Based Compensation
In connection with the closing of the RideNow Transaction and the execution of the certain Executive Employment Agreements, the Company accelerated the vesting of and waived certain market-based share price hurdles for all then outstanding restricted stock units (“RSUs”) for all participants, which resulted in excess of $23,943 of incremental stock-based compensation for the year ended December 31, 2021.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.
Adjusted EBITDA is defined as net income (loss) adjusted to add back interest expense (including debt extinguishment), depreciation and amortization, interest income and miscellaneous income, changes in derivative liabilities and certain recoveries, income tax benefits, and other non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
For the years ended December 31, 2021 and 2020, adjustments to calculating Adjusted EBITDA are primarily comprised of:
Impairment loss on inventory and plant and equipment resulting from the Nashville Tornado and the related proceeds received from the Company’s insurance carriers,
36


Non-cash stock-based compensation expense recorded in the Consolidated Statement of Operations,
Acquisition costs associated with the RideNow Transaction, which primarily include professional fees and third-party costs,
Other non-reoccurring costs, which include one-time expenses incurred. For the year ended December 31, 2021, approximately $1,342 was incurred for compensation to the estate of Steven R. Berrard, the Company’s former Chief Financial Officer,
Paycheck Protection Program (“PPP”) loan forgiveness, which includes loan principal balances forgiven by the Small Business Administration (“SBA”), and
Purchase accounting adjustments, primarily comprised of the valuation adjustments for inventory acquired as part of the RideNow Transaction which increased the cost of revenue included in the Consolidated Statement of Operations.
The following tables reconcile Adjusted EBITDA to net loss for the periods presented:
December 31,
20212020
Net loss$(9,725)$(24,999)
Add back:
Interest expense (including debt extinguishment)16,405 6,450 
Depreciation and amortization6,103 2,143 
Change in derivative liabilities8,799 (11)
Income tax benefit(21,665)— 
EBITDA(83)(16,417)
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(5,615)
Stock based compensation29,219 2,978 
Acquisition costs associated with the RideNow Transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(2,682)— 
Purchase accounting related1,388 — 
Adjusted EBITDA$31,013 $(5,791)





37


Pro Forma Adjusted EBITDA
The following supplemental pro forma information presents pro forma financial results as if the RideNow Transaction was completed at January 1, 2020.
Add backs and adjustments to calculating Pro Forma Adjusted EBITDA are consistent with the adjustments used to calculate Adjusted EBITDA. For the years ended December 31, 2021 and 2020, pro forma EBITDA adjustments primarily represent the amortization of debt fees and gross profit on intercompany transactions on a pro-forma basis.
December 31,
20212020
Net income$45,565 $18,914 
Add back:
Interest expense (including debt extinguishment)40,347 47,312 
Depreciation and amortization13,199 13,607 
Interest income and miscellaneous income(1,389)(1,967)
Change in derivative liabilities8,799 (10)
Income tax benefit(2,706)6,305 
EBITDA103,815 84,161 
Adjustments:
Impairment loss on automotive inventory— 11,738 
Impairment loss on plant & equipment— 178 
Insurance proceeds(3,135)(4,810)
Stock based compensation29,219 3,175 
Acquisition costs associated with the RideNow transaction4,281 — 
Other non-reoccurring costs2,025 1,347 
PPP loan forgiveness(21,721)— 
Purchase accounting related1,388 — 
Adjusted EBITDA115,872 95,789 
Pro Forma Adjustments2,525 124 
Pro Forma Adjusted EBITDA118,397 95,913 


Liquidity and Capital Resources
Our primary sources of liquidity are available cash, amounts available under our floor plan lines of credit, and monetization of our retail loan portfolio. During the year ended December 31, 2021, we completed two public offerings that provided net proceeds of $191,000 and obtained the Oaktree Credit Facility, which initially provided net proceeds of $261,000 that was used to finance a portion of the cash consideration for the RideNow Transaction. As of December 31, 2021, the Oaktree Credit Facility provides for up to $120,000 in additional financing that may be used for acquisitions and up to an additional $100,000 in incremental financing that may be used for acquisitions and working capital purposes. On February 18, 2022, in conjunction the acquisition of Freedom Powersports, the Company is required to makedrew down $83,400 against the Oaktree Credit Facility.
Our financial statements reflect estimates and assumptions relatedmade by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our valuationbusiness and recordingour results of stock-based compensation expense under current accounting standards. These standards require all stock-based compensation to employees to be recognized
38


operations and financial condition as conditions evolve as a result of the COVID-19 pandemic and the resulting Demand/Supply Imbalances.
The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the statementnormal course of business. Management believes that current working capital, results of operations, based on their respective grant date fair values overand existing financing arrangements are sufficient to fund operations for at least one year from the requisite service periodsfinancial statement date.
We had the following liquidity resources available as of December 31, 2021 and also requires an estimation of forfeitures when calculating compensation expense.December 31, 2020: 
December 31,
20212020
Cash$48,974 $1,467 
Restricted cash (1)
3,0002,049 
Total cash and restricted cash51,974 3,516 
Availability under short-term revolving facilities124,116 2,188 
Committed liquidity resources available$176,090 $5,704 
On June 30, 2017
(1) Amounts included in restricted cash represent the Company's shareholders approved a Stock Incentive Plan (the "Plan") reserving for issuancedeposits required under the PlanCompany's short-term revolving facilities.
As of December 31, 2021, and 2020, excluding operating lease liabilities and the derivative liability, the outstanding principal amount of indebtedness was $384,585 and $53,109, respectively, summarized in the formtable below. See Note 9-Notes Payable and Lines of restricted stock units ("RSUs"), stock options ("Options"), Performance Units,Credit, Note 10-Convertible Notes, and other equity awards (collectively "Awards") forNote 11-Stockholders Equity to our employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual") of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstanding shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment"). To date, the vesting of RSU and Option awards for most employees is service / time based, however some senior level employees have been granted awards that include a mix of service based, performance based and market condition-based vesting. Substantially all service/time based RSU and Option awards issued typically vest over a three-year period approximating the following vesting schedule: (i)20.0% vesting anywhere from eight-months to thirteen month after grant date, (ii) an additional 30.0% during the subsequent twelve months of the initial vesting,and (iii) the final 50.0% during the following twelve months. All currently outstanding performance-based awards and market condition-based awards granted to date have vesting schedules dependent on achieving a particular objective within sixteen (16) months. More specifically, the Company granted to certain members of management an aggregate of (i) 12,213 performance-based awards that vest after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue of $900,000,000 at any time through September 30, 2020, and (ii) 36,938 market-based awards. The Company estimates the fair value of awards granted under the Plan on the date of grant. Fair value of all awards is based on the share price of the Class B Common Stock on the date of the award, andconsolidated financial statements included in the case of options, calculated using the Black-Scholes option valuation model. SeePart II, Item 8, of Part II, Financial Statements and Supplementary Data of this 2021 Form 10-K for further information on our debt.
December 31,
20212020
Asset-Based Financing:
Inventory$97,278 $17,812 
Total asset-based financing97,278 17,812 
Term loan facility279,300 — 
Secured notes payable— 2,391 
Unsecured senior convertible notes39,006 39,774 
PPP and other loans4,472 5,177 
Total debt420,056 65,154 
Less: unamortized discount and debt issuance costs(35,471)(12,045)
Total debt, net$384,585 $53,109 
The following table sets forth a summary of our cash flows.
December 31,
20212020
Net cash (used in) provided by operating activities$(32,177)$17,143 
Net cash used in investing activities(378,831)(2,282)
Net cash provided by (used in) financing activities459,466 (18,071)
Net increase (decrease) in cash$48,458 $(3,210)
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Operating Activities
Our primary sources of operating cash flows result from the sales of new and pre-owned vehicles and ancillary products. Our primary uses of cash from operating activities are purchases of inventory, parts and merchandise, cash used to acquire customers, technology development, and personnel-related expenses. For the year ended December 31, 2021, net cash used in operating activities of $32,177 was an increase of $49,320 compared to net cash provided by operating activities of $17,143 in 2020. The increase in our net cash used in operating activities was primarily due to: (i) an outflow of $45,732 in operating assets and liabilities, primarily in vehicle inventory, other assets, and accounts receivable and (ii) an adjustment in the valuation of the deferred taxes of $22,545; partially offset by a decrease in our net loss of $15,274 and the recognition of the stock based compensation expense of $29,219.
Investing Activities
Our primary use of cash for investing activities is for technology development and acquisitions to expand our operations. Cash used in investing activities for the year ended December 31, 2021 was $378,831, an increase of $376,549 compared to 2020.  The increase in cash used in investing activities results from (i) primarily the 2021 acquisition of RideNow, (ii) additional purchase of property and equipment of $5,646 to expand our operations, and (iii) an outflow of $1,871 in technology development during the year ended December 31, 2021 as compared to 2020.
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities was $459,466 for the year ended December 31, 2021 compared to net cash used in financing activities of $18,071 for 2020. The $477,537 increase in cash provided by financing activities for the year ended December 31, 2021 as compared to the same period of 2020 was a result of: (i) an increase in net proceeds of $261,451 received from the senior secured debt; (ii) proceeds of $191,241 received from sale of common stock in April 2021 and August 2021; and (iii) an increase in borrowings of $17,187 on the floor plan lines of credit; partially offset by the repayment of notes payable.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any 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, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Subsequent Events
Acquisition of Freedom Powersports
On February 18, 2022, the Company closed on the acquisition of Freedom Powersports, which included all business and real estate assets, subject to customary net working capital and indebtedness adjustments, for an aggregate consideration of approximately $129,971. The aggregate consideration consisted of approximately $83,291 for the Freedom Powersports business and approximately $46,680 for acquired real estate properties, including the payoff of outstanding mortgage debt on the real estate assets in the aggregate amount of approximately $27,025. The aggregate consideration was paid using cash on hand, $84,500 drawn from the Company’s delayed draw facility under the Oaktree Credit Facility, and the issuance of 1,048,718 restricted shares of RumbleOn Class B common stock. The restricted shares are subject to a six-month lock-up and resale registration rights.
Funding of RumbleOn’s Consumer Finance Subsidiary
On February 4, 2022, ROF SPV I, LLC (“ROF SPV”), an indirect subsidiary of RumbleOn, entered into a secured loan facility primarily to provide up to $25,000. All loans under this agreement will be secured by certain collateral including the consumer finance loans purchased by ROF SPV.
ROF SPV and ROF provided customary representations and covenants under the agreements which include financial covenants and collateral performance covenants. Loans sold to or in the facility are subject to certain eligibility criteria, concentration limits and reserves.
40


Related Party Software License
On January 19, 2022, the Audit Committee approved, and the Company entered into both a Perpetual Software License Purchase Agreement, and a Platform Service Agreement with Bidpath Incorporated, a Company owned by Adam Alexander, a member of the Company’s Board of Directors. The license agreement provides the Company with a perpetual, non-exclusive license to the then-current source code as well as all future source code. This code provides additional functionality to the Company’s inventory management platform, and the Company is paying in aggregate $3,600, of which $1,080 has been paid to date, The services agreement provides for support and maintenance services on a monthly basis for $30 per month. The initial terms is thirty-six (36) months but can be terminated by either party upon sixty (60) days notice to the other party.
Appointment of Chief Financial Officer
On February 1, 2022, the Company appointed Narinder Sahai as the Company’s Chief Financial Officer.
Change in Executive Officers
On February 11, 2022, William Coulter, a director and the Executive Vice Chairman of the Company, and Mark Tkach, a director and the Chief Operating Officer of the Company, resigned from all positions with the Company. The Company appointed Peter Levy, the President of the Company, to also serve as Chief Operating Officer of the Company.
Repayment of Convertible Note
On January 31, 2022, the Company made its final scheduled payment on the convertible note entered into on February 3, 2019 in connection of the acquisition of AutoSport. The carrying amount on the Company’s balance sheet as of December 31, 2021 was $154.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.
Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. Refer to Note 1 "Description of Business and Summary of Significant Accounting PoliciesStock-Based Compensation."
Newly Issued Accounting Pronouncements
In February 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-02) related to the accounting for leases. This pronouncement requires lessees to record most leases on their balance sheet while also disclosing key information about those lease arrangements. Under the new guidance, lease classification as either a finance lease or an operating lease will affect the pattern and classification of expense recognition in the income statement. The classification criteria to distinguish between finance and operating leases are generally consistent with the classification criteria to distinguish between capital and operating leases under existing lease accounting guidance. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. We adopted the new standard for our fiscal year beginning January 1, 2019.

In May 2014, the Financial Accounting Standards Board ("FASB") issued a new accounting standard (ASC Topic 606) that amends the accounting guidance on revenue recognition. The new accounting standard is intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing,consolidated financial statements included in Part II, Item 8, Financial Statements and uncertaintySupplementary Data, of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirementsthis 2021 Form 10-K, for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard's guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract.more detailed information regarding our critical accounting policies.
Revenue Recognition
The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). The CompanyWe adopted ASC 606,Revenue from Contracts with Customerson January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which the Companywe historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of itsour revenue recognition, and the Companywe recognized no cumulative effect adjustment upon adoption.
For vehicles sold at wholesale to dealers we satisfy our performance obligation for vehicles sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the pre-owned vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.41


For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for pre-owned vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for pre-owned vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the pre-owned vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers.
Vehicle logistics revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as risks and rewards of transportation of the vehicle is transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross.
Valuation of Inventory
Pre-owned vehicle inventory is accounted for pursuant to ASC 330, Inventory and consists of pre-owned vehicles primarily acquired from consumers and includes the cost to acquire and recondition a pre-owned vehicle. Reconditioning costs are billed by third-party providers and includes parts, labor, and other repair expenses directly attributable to a specific vehicle. Transportation costs are expensed as incurred. Pre-owned inventory is stated at the lower of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value is based on the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn data of similar vehicles, as well as independent market resources. Each reporting period, the Company recognizes any necessary adjustments to reflect pre-owned vehicle inventory at the lower of cost or net realizable value, which is recognized in cost of revenue in our Consolidated Statements of Operations.
Goodwill
Goodwill represents the excess of the consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed in business combinations. Goodwill is tested for impairment annually as of December 31st, or whenever events or changes in circumstances indicate that an impairment may exist.
We have three reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive and (3) vehicle logistics, each of which is separately evaluated for purposes of goodwill testing. We first review qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount; if we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then our goodwill is not considered to be impaired. However, if based on the qualitative assessment we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if we elect to bypass the optional qualitative assessment as provided for under GAAP, we proceed with performing the quantitative impairment test.
In connection with its annual goodwill impairment test as of December 31, 2021, the Company performed impairment assessments by reviewing qualitative factors for each of its reporting units. The results of the assessments indicated that it was not more likely than not that the fair value of the reporting units were greater than the carrying values and no goodwill impairment was determined to exist for the year ended December 31, 2021.
42


Newly Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases(Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies will still have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. Under the current SEC definitions, the Company meets the definition of an SRC as of the ASU 2019-10 issuance date and is adopting the deferral period for ASU 2016-13.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 for its fiscal year beginning January 1, 2021 and it did not have a material effect on its consolidated financial statements.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item in not applicable as we are currently considered a smaller reporting company.
ItemITEM 8.
Financial Statements and Supplementary Data.
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements and Financial Statement Schedules beginning on page F-1 of this 2021 Form 10-K.
ItemITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9A.
Controls and Procedures.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of ourWe maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act)Act of 1934, as of December 31, 2019. We maintain disclosure controls and proceduresamended (the “Exchange Act”), that are designed to provide reasonable assurancereasonably ensure that information required to be disclosed by us in ourthe reports filedwe file or submittedsubmit under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC'sSEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officerprincipal executive and Chief Financial Officer,principal financial officer, or persons performing similar functions, as appropriate to allow for timely decisions regarding required disclosure. Our management recognizes that any controlsevaluated, with the participation of our Chief Executive Officer (“CEO”) and procedures, no matter how well designed and operated, can provide only reasonable assuranceInterim Chief Financial Officer (“CFO”), the effectiveness of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation ofour disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), the Company's Chief Executive Officer and Chief Financial Officeras of December 31, 2021.Based on that evaluation, our management concluded that the Company'sour disclosure controls and procedures were not effective as of December 31, 2019.
that date due to material weaknesses in our internal control over financial reporting as described below.
Management's Report on Internal Control Over Financial Reporting
Our management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting as is defined in RulesRule 13a-15(f) and 15d-15(f) ofunder the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

Our internal control over financial reporting includes policies and procedures that: (i) pertainis a process designed to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary forregarding the reliability of financial reporting and the preparation of our financial statements in accordance with generally accepted accounting principles andin the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.United States.
Management has undertaken an assessment ofevaluated the effectiveness of our internal control over financial reporting based onas of December 31, 2021, using the framework and criteria established in the Internal“Internal Control Integrated FrameworkFramework” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").(COSO) in 2013. Based uponon this evaluation, our management determined that material weaknesses existed in our internal control over financial reporting related to:
43


Information technology general controls particularly as such controls related to user access, program change management, and ineffective complementary user-organization controls, which limited management’s ability to rely on technology dependent controls relevant to the preparation of our financial statements.
Controls over the period end close process, including the review and approval process of journal entries, balance sheet account reconciliations, segregation of duties conflicts, and consolidation of intercompany entries.
Documentation and design of controls over the recording and reconciliation of inventory.
Review of key assumptions and estimates related to purchase accounting for significant acquisitions.
The control environment, risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated in a timely manner.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.We believe the material weaknesses identified were caused by an insufficient complement of resources and personnel to facilitate an effective control environment, and a lack of supporting tools necessary to implement and maintain policies and procedures or to identify and remediate deficiencies in the Company’s financial reporting and information technology processes.As a result, segregation of duties, transaction compilation, review and authorization, and general information technology components could not be relied upon to effectively achieve the Company’s internal control objectives. Based on the material weakness described, we have concluded that as of December 31, 2021, our internal control over financial reporting was effectivenot effective.
As set forth below, management has taken and will continue to take steps to remediate the identified material weaknesses identified. Notwithstanding these material weaknesses, we have performed additional analyses and procedures to enable management to conclude that our consolidated financial statements included in this 2021 Form 10-K fairly present in all material respects our financial condition and results of operations as of and for the year ended December 31, 2021.
You should also consider that we have excluded from our assessment of internal control over financial reporting the acquired RideNow entities in accordance with appropriate guidance from the SEC. These acquired entities comprise total assets of $879,035 (or 85.5% of total assets of the Company) and total revenue of $369,329 (or 39.2% of total revenue of the Company) included in our Consolidated Financial Statements as of and for the year ended December 31, 2021. For additional information about the RideNow Transaction, see Note 2—Acquisitions, in Item 8.Financial Statements and Supplementary Data of this 2021 Form 10-K.

Our independent auditors, Dixon Hughes Goodman LLP (“DHG”), a registered public accounting firm, is appointed by the Audit Committee of our Board of Directors. As a result of the material weaknesses described above, DHG has issued an adverse opinion on the effectiveness of our internal control over financial reporting as of December 31, 2019.2021, which appears in Item 8.Financial Statements and Supplementary Data of this 2021 Form 10-K.
Management’s Remediation Plan
This annual report does notIn response to the material weaknesses discussed above, we plan to continue efforts already underway to remediate internal control over financial reporting, which include an attestation reportthe following:
In February 2022, we hired a new Chief Financial Officer.
We have engaged third-party resources to support our internal control testing and remediation efforts and act as subject matter experts, and we intend to bring in additional resources to oversee remediation efforts.
We are in the process of hiring a Head of Internal Audit, a senior level position reporting directly to the Audit Committee, to implement and oversee a newly established Internal Audit department.
44


We are in the process of hiring other key accounting and financial reporting positions, including a Director of Financial Reporting, to augment our registered public accounting firmstaff as needed. We believe these additional accounting personnel will enhance our compliance and oversight regarding internal control over financial reporting. Management's report was not subject to attestation by
We are in the process of conducting a risk assessment over our registered public accounting firm pursuantinternal control environment, and we are reviewing and prioritizing individual control deficiencies for remediation, including those which aggregated to the temporary rulesabove material weaknesses.
We are in the process of documenting and executing remediation action items, including expansion of mitigating controls where appropriate.
We are exploring tools to enhance and centralize general information technology components.
Management and our Audit Committee will monitor these specific remedial measures and the Securitieseffectiveness of our overall control environment. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and Exchange Commissionmanagement has concluded, through testing, that permitthese controls are operating effectively. We can provide no assurance as to when the companyremediation of these material weaknesses will be completed to provide only the management's report in this Annual Report on Form 10-K.
for an effective control environment.
Changes in Internal Control Overover Financial Reporting
ThereOther than described above in Item 9A, Controls and Procedures, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our most recent fiscalthe quarter ended December 31, 2021, that havehas materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. 
Other Information.
On May 27, 2020, the Compensation Committee terminated the Executive RSUs (defined below) previously granted to Messrs. Chesrown, Berrard and Levy. For additional information regarding the Executive RSUs, see Part III, Item 11 – Executive Compensation.
ITEM 9B.    OTHER INFORMATION.
On April 9, 2020,4, 2022, the Company reportedreceived a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”) because it had not timely filed this 2021 Form 10-K with the SEC. The Rule requires listed companies to timely file all required periodic financial reports with the SEC. The Company believes that it would implement temporary salary reductions for those employees whose annual salaries exceed $75,000, including, in consultationhas regained compliance with the Compensation Committee of the Company's Board of Directors, the salaries of our Chief Executive Officer and Chief Financial Officer. AsRule as a result of the Company’s approvalfiling this 2021 Form 10-K and will not need to submit a plan of Paycheck Protection Program funds on May 1, 2020, the Company has determined that these salary reductions are not needed at this time and such reductions were not implemented.compliance to Nasdaq.
PART IIIITEM 9C.    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.

Item 10. 
Directors, Executive Officers and Corporate Governance.45


Directors and Executive OfficersPART III
Below are the names of and certainITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information regarding our executive officers and directors:
NameAgePosition
Marshall Chesrown62Chief Executive Officer and Chairman
Steven R. Berrard65Chief Financial Officer and Director
Denmar Dixon58Director
Richard A. Gray, Jr.72Director
Kartik Kakarala42Director
Peter Levy50Chief Operating Officer
Michael Marchlik47Director
Kevin Westfall64Director
Marshall Chesrown has served as our Chief Executive Officer and Chairman since October 24, 2016. Mr. Chesrown has over 35 years of leadership experience in the automotive retail sector. From December 2014required by this item is incorporated by reference to September 2016, Mr. Chesrown served as Chief Operating Officer and as a director of Vroom.com, an online direct car retailer ("Vroom"). Mr. Chesrown served as Chief Operating Officer of AutoAmerica, an automotive retail company, from May 2013 to November 2014. Previously, Mr. Chesrown served as the President of Chesrown Automotive Group from January 1985 to May 2013, which was acquired by AutoNation, Inc., a leading automotive retail company, in 1997. Mr. Chesrown served as Senior Vice President of Retail Operations for AutoNation from 1997 to 1999. From 1999 to 2013, Mr. Chesrown served as the Chairman and Chief Executive Officer of Blackrock Development, a real estate development company widely known for development of the nationally recognized Golf Club at Black Rock. Mr. Chesrown filed for personal bankruptcy in May 2013, which petition was discharged in January 2017.

We believe that Mr. Chesrown possesses attributes that qualify him to serve as a member of our Board, including his extensive experience in the automotive retail sector.
Steven R. Berrard has served as our Chief Financial Officer since January 9, 2017 and served as Interim Chief Financial Officer from July 13, 2016 through January 9, 2017 and as Chief Executive Officer from July 13, 2016 through October 24, 2016. Mr. Berrard served as Secretary from July 13, 2016 through June 30, 2017 and has served on our Board since July 13, 2016. Mr. Berrard served as a director of Walter Investment Management Corp. ("Walter Investment") from 2010 until May 2017. Mr. Berrard served on the Board of Directors of Swisher Hygiene Inc., a publicly traded industry leader in hygiene solutions and products, from 2004 until May 2014. Mr. Berrard is the Managing Partner of New River Capital Partners, a private equity fund he co-founded in 1997. Mr. Berrard was the co-founder and Co-Chief Executive Officer of AutoNation from 1996 to 1999. Prior to joining AutoNation, Mr. Berrard served as President and Chief Executive Officer of the Blockbuster Entertainment Group, at the time the world's largest video store operator. Mr. Berrard served as President of Huizenga Holdings, Inc., a real estate management and development company, and served in various positions with subsidiaries of Huizenga Holdings, Inc. from 1981 to 1987. Mr. Berrard was employed by Coopers & Lybrand (now PricewaterhouseCoopers LLP ("PwC")) from 1976 to 1981. Mr. Berrard currently serves on the Board of Directors of Pivotal Fitness, Inc., a chain of fitness centers operating in a number of markets in the United States. He has previously served on the Boards of Directors of Jamba, Inc., (2005 – 2009), Viacom, Inc., (1987 – 1996), Birmingham Steel (1999 – 2002), HealthSouth (2004 – 2006), and Boca Resorts, Inc. (1996 – 2004). Mr. Berrard earned his B.S. in Accounting from Florida Atlantic University.
We believe that Mr. Berrard's management experience and financial expertise is beneficial in guiding our strategic direction. He has served in senior management and on the Board of several prominent, publicly traded companies. In several instances, he has led significant growth of the businesses he has managed. In addition, Mr. Berrard has served as the Chairman of the audit committee of several boards of directors.
Denmar Dixon has served on our Board since January 9, 2017. Mr. Dixon served as a director of Walter Investment from April 2009 (andRumbleOn’s Proxy Statement for its predecessor since December 2008) until June 2016. Effective October 2015, Mr. Dixon was appointed Chief Executive Officer and President2022 Annual Meeting of Walter Investment and served until his resignation effective June 2016. Mr. Dixon previously served as Vice Chairman ofStockholders to be filed with the Board of Directors and Executive Vice President of Walter Investment since January 2010 and Chief Investment Officer of Walter Investment since August 2013. Before becoming an executive officer of Walter Investment, Mr. Dixon also served as a member of Walter Investment's Audit Committee and Nominating and Corporate Governance Committee and as Chairman of the Compensation and Human Resources Committee. Before serving on the Board of Walter Investment, Mr. Dixon was elected to the board of managers of JWH Holding Company, LLC, a wholly-owned subsidiary of Walter Industries, Inc., in anticipation of the spin-off of Walter Investment Management, LLC from Walter Industries, Inc. (now known as Walter Energy, Inc.). In 2008, Mr. Dixon founded Blue Flame Capital, LLC, a consulting, financial advisory and investment firm. Before forming Blue Flame, Mr. Dixon spent 23 years with Banc of America Securities, LLC and its predecessors. At the time of his retirement, Mr. Dixon was a Managing Director in the Corporate and Investment Banking group and held the position of Global Head of the Basic Industries Group of Banc of America Securities.
We believe that Mr. Dixon possesses attributes that qualify him to serve as a member of our Board, including his extensive business development, mergers and acquisitions and capital markets/investment banking experienceSEC within the financial services industry. As a director, he provides significant input into, and is actively involved in, leading our business activities and strategic planning efforts. Mr. Dixon has significant experience in the general industrial, consumer and business services industries.
Richard A. Gray, Jr., has served on our Board since October 1, 2017. Mr. Gray has served as President of Gray & Co. Realtors, Inc., a licensed real estate service provider he founded, since 1987. Gray & Co. Realtors has been involved in the development, liquidation, the joint venture, and management of commercial real estate, representing both U.S. investors and foreign investors, and since 1998, has also been involved in raising venture capital for startup and additional round funding for public companies in the technology sector. Before Gray & Co. Realtors, he served as a broker at Wiggins Gray Interests, a company focused on development of retail and office properties in Dallas Fort Worth Metroplex, as well as office, industrial, land and retail brokerage from 1985 to 1987. Before Wiggins Gray Interests, he served at Hudson & Hudson Realtors from 1973 to 1985, Murray Investment Company from 1971 to 1973, and Borden Chemical Company from 1969 to 1971. Mr. Gray has also served as a director of the Cystic Fibrosis Foundation, Migra Tech, and Equitable Bank. Mr. Gray received his BBA from Texas Tech University.
We believe that Mr. Gray possesses attributes that qualify him to serve as a member of our Board, including his extensive experience in funding technology sector public companies.

Kartik Kakarala was appointed to our Board immediately following the completion of the Company's acquisition of substantially all of the assets of the NextGen Dealer Solutions, LLC ("NextGen") in February 2017. Mr. Kakarala is the Chief Executive Officer of Halcyon Technologies, a global software solutions company. He is responsible for sales, business development and innovation, as well as the creation of technology assets. He has been responsible for the growth of a number of strategic, horizontal competencies, and vertical business units like automotive, utilities, finance and healthcare practices. Mr. Kakarala served as the Chief Executive Officer and President of NextGen from January 2016 to February 2017, which was acquired by us in February 2017, providing inventory management solutions to the power sports, recreational vehicle and marine sectors in North America. He served as Chief Executive Officer and President of NextGenAuto from July 2013 to December 2015. Mr. Kakarala served as Co-Founder and Managing Partner of Red Bumper from July 2010 to August 2014, a company which provided pre-owned car inventory management solutions used by thousands of automotive dealers across North America and which was later acquired by ADP in 2014. Mr. Kakarala served as Director/Co-Founder of GridFirst solutions since 2012, a company providing home automation solutions to energy customers. Mr. Kakarala holds a master’s degree in Computer Science from University of Houston.
We believe that Mr. Kakarala possesses attributes that qualify him to serve as a member of our Board, as he is regarded as a pioneer in developing several systems in the automotive industry including CRM, ERP, inventory management and financial applications.
Peter Levy has served as our Chief Operating Officer since May 20, 2019. From November 2017 to present, Mr. Levy served as our Senior Vice President of Operations overseeing the day-to-day inventory logistics, auctions, dealer networks, and managing the teams responsible for driving sales within the Company. Mr. Levy is a seasoned and highly respected operating executive who has been involved in the automotive industry for over 25 years. Mr. Levy previously served as a Business Development Partner of AWG Remarketing Whann Technology/Integrated Auction Solutions, LLC from January 2011 to November 2017. Also, Mr. Levy's distinguished career includes multiple executive and management level positions within the industry at companies such as AutoNation and Automotive Remarketing Services, all focusing on business development and creative uses of technology to gain market share. Mr. Levy graduated from Indiana University with a B.S. in Marketing and Finance.
Michael Marchlik has served on our Board since May 6, 2020. Mr. Marchlik has served as the Chief Executive Officer of the Advisory & Valuations division of Great American Group ("GA") since April 2017 and is responsible for overseeing the operations and client service efforts for lenders, sponsors and borrowers. Prior to that, he served as a Partner and National Sales and Marketing Director of GA from January 2010 to April 2017, as Executive Vice President, Western Region of GA from January 2004 to December 2009, as Senior Vice President of Sales, Western Region of GA from June 2001 to December 2003, and as Director of Operations at GA from July 1996 to May 2001. With nearly two and a half decades of experience in all segments of the asset disposition and valuation industries, he has extensive understanding of corporate transactional services, credit structure and asset-based valuation, lending solutions and business operations. Mr. Marchlik attended Northeastern University in Boston where he received a Bachelor of Science in Finance.
We believe that Mr. Marchlik possesses attributes that qualify him to serve as a member of our Board, including his extensive understanding of corporate transactional services, credit structure and asset-based valuation, lending solutions and business operations.
Kevin Westfall has served on our Board since January 9, 2017. Mr. Westfall was a co-founder and served as Chief Executive Officer of Vroom from January 2012 through November 2015. Previously, from March 1997 through November 2011, Mr. Westfall served as Senior Vice President of Sales and Senior Vice President of Automotive Finance at AutoNation. Mr. Westfall was a founder of BMW Financial Services in 1990 and served as its President until March 1997. Mr. Westfall also served as Retail Lease Manager of Chrysler Credit Corporation from 1987 until 1990 and as President of World Automotive Imports and Leasing from 1980 until 1987.
We believe that Mr. Westfall possesses attributes that qualify him to serve as a member of our Board, including his more than 30 years of executive experience in automotive retail and finance operations.
Corporate Governance Principles and Code of Ethics
Our Board is committed to sound corporate governance principles and practices. Our Board's core principles of corporate governance are set forth in our Corporate Governance Principles. In order to clearly set forth our commitment to conduct our operations in accordance with our high standards of business ethics and applicable laws and regulations, our Board also adopted a Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees. A copy of the Code of Business Conduct and Ethics and the Corporate Governance Principles are available on our corporate website at www.rumbleon.com. You also may obtain without charge a printed copy of the Code of Ethics and Corporate Governance Principles by sending a written request to: Investor Relations, RumbleOn, Inc., 901 W Walnut Hill Lane, Irving, Texas 75038. Amendments or waivers of the Code of Business Conduct and Ethics will be provided on our website within four business120 days following the date of the amendment or waiver.

Board of Directors
The business and affairs of our company are managed by or under the direction of the Board. The Board is currently composed of seven members. The Board has not appointed a lead independent director; instead the presiding director for each executive session is rotated among the Chairs of the committees of our Board.
The Board held five meetings and took one action by unanimous written consent duringafter the year ended December 31, 2019. In 2019, each person serving as a director attended at least 75% of the total number of meetings of our Board and any Board committee on which he served.2021.
Our directors are expectedITEM 11.    EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to attend our Annual Meeting of Stockholders. Any director who is unable to attend our Annual Meeting is expected to notify the Chairman of the Board in advance of the Annual Meeting. All of our directors serving at the time of the 2019RumbleOn’s Proxy Statement for its 2022 Annual Meeting of Stockholders were in attendance.
Board Committees
Pursuant to our bylaws, our Board may establish one or more committees ofbe filed with the Board however designated, and delegate to any such committee the full power of the Board, to the fullest extent permitted by law.
Our Board has established three separately designated standing committees to assist the Board in discharging its responsibilities: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The charters for our Board committees set forth the scope of the responsibilities of that committee. The Board will assess the effectiveness and contribution of each committee on an annual basis. The charters for our Board committees were adopted by the Board in May 2017. These charters are available at www.rumbleon.com, and you may obtain a printed copy of any of these charters by sending a written request to: Investor Relations, RumbleOn, Inc., 901 W Walnut Hill Lane, Irving, Texas 75038.
Audit Committee. The current members of the Audit Committee are Messrs. Dixon (chair), Marchlik, Gray, and Westfall. The Board has determined that Mr. Dixon is an "audit committee financial expert," as defined in Item 407 of Regulation S-K and is the Chairman of the Audit Committee.
The primary function of the Audit Committee is to assist the Board in fulfilling its responsibilities by overseeing our accounting and financial processes and the audits of our financial statements. The independent auditor is ultimately accountable to the Audit Committee, as representatives of the stockholders. The Audit Committee has the ultimate authority and direct responsibility for the selection, appointment, compensation, retention and oversight of the work of our independent auditor that is engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us (including the resolution of disagreements between management and the independent auditors regarding financial reporting), and the independent auditor must report directly to the Audit Committee. The Audit Committee also is responsible for the review of proposed transactions between us and related parties. For a complete description of the Audit Committee's responsibilities, you should refer to the Audit Committee Charter. The Audit Committees held seven meetings and took two actions by unanimous written consent duringSEC within 120 days after the year ended December 31, 2019.2021.
Compensation Committee. ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The current membersinformation required by this item is incorporated by reference to RumbleOn’s Proxy Statement for its 2022 Annual Meeting of Stockholders to be filed with the Compensation Committee are Messrs. Westfall (chair), Marchlik, and Dixon. The Compensation Committee was established to, among other things, administer and approve all elements of compensation and awards for our executive officers. The Compensation Committee has the responsibility to review and approve the business goals and objectives relevant to each executive officer's compensation, evaluate individual performance of each executive in light of those goals and objectives, and determine and approve each executive's compensation based on this evaluation. For a complete description of the Compensation Committee's responsibilities, you should refer to the Compensation Committee Charter. The Compensation Committee held three meetings and took one actions by unanimous written consent duringSEC within 120 days after the year ended December 31, 2019.2021.
Nominating and Corporate Governance Committee. ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The current membersinformation required by this item is incorporated by reference to RumbleOn’s Proxy Statement for its 2022 Annual Meeting of Stockholders to be filed with the Nominating and Corporate Governance Committee are Messrs. Dixon (chair) and Gray. The Nominating Committee is responsible for identifying individuals qualified to become members of the Board or any committee thereof; recommending nominees for election as directors at each annual stockholder meeting; recommending candidates to fill any vacancies on the Board or any committee thereof; and overseeing the evaluation of the Board. For a complete description of the Nominating and Corporate Governance Committee's responsibilities, you should refer to the Nominating and Corporate Governance Committee Charter. The Nominating and Corporate Governance Committees took one action by unanimous written consent duringSEC within 120 days after the year ended December 31, 2019.2021.
Item 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES.
The Nominating and Corporate Governance Committee will consider all qualified director candidates identifiedinformation required by various sources, including membersthis item is incorporated by reference to RumbleOn’s Proxy Statement for its 2022 Annual Meeting of the Board, management and stockholders. Candidates for directors recommended by stockholders willStockholders to be given the same consideration as those identified from other sources. The Nominating and Corporate Governance Committee is responsible for reviewing each candidate's biographical information, meeting with each candidate and assessing each candidate's independence, skills and expertise based on a number of factors. While we do not have a formal policy on diversity, when considering the selection of director nominees, the Nominating and Corporate Governance Committee considers individuals with diverse backgrounds, viewpoints, accomplishments, cultural background and professional expertise, among other factors.

Item 11. 
Executive Compensation.
Executive and Director Compensation
Summary Compensation Table
The following table provides the compensation paid to our principal executive officer and other executive officers whose total compensation exceeded $100,000 for the years ended December 31, 2019 and December 31, 2018.
Name and Principal Position Fiscal Year  Salary   Bonus   Stock Awards(1)   Total 
Marshall Chesrown
Chief Executive Officer
 2019 $360,000  $200,000   -   560,000 
  2018  240,000   150,000(2)  -  $390,000 
Steven R. Berrard
Chief Financial Officer
 2019 $360,000  $200,000   -   560,000 
  2018  240,000   150,000(2)  -  $390,000 
Peter Levy(3)
Chief Operating Officer
 2019 $280,273  $50,500   204,000(4)
 $534,773 
(1) 
Does not include the grant date fair value of performance and market based restricted stock units granted to each of Mr. Chesrown and Mr. Berrard in the amount of $838,000 and to Mr. Levy in the amount of $204,250, each as determined pursuant to FASB ASC Topic 718, which restricted stocks unit were terminated as described below under the section titled Executive Employment Arrangement.
(2) 
Represents a discretionary bonus approved by the Company's Compensation Committee for service provided to the Company in connectionfiled with the acquisitions of Wholesale, Inc. and Wholesale Express, LLC in October 2018.
(3) 
On May 20, 2019, Peter Levy was promoted to Chief Operating Officer of the Company. As a result, compensation for only 2019 is presented above.
(4)
Does not reflect compensation paid to Mr. Levy.  Instead, the amount shown reflects the grant date fair value of restricted stock units granted to Mr. Levy determined pursuant to FASB ASC Topic 718.
Executive Employment Arrangement
Marshall Chesrown and Steven Berrard
On May 25, 2019, the Compensation Committee approved an increase in the annual base salary for Marshall Chesrown and Steven Berrard from $240,000 to $360,000, retroactive to January 1, 2019. The Compensation Committee also approved a discretionary bonus of up to $500,000 for each of Messrs. Chesrown and Berrard payable as follows: (i) $100,000 payable immediately in connection with the Company's performance for the quarter ended March 31, 2019 and the launch of the Company's finance business, (ii) $100,000 upon reaching the revenue target approved by the Committee for the year ending December 31, 2019 and payable upon completion of the Company's audited financial statements for the year ending December 31, 2019, (iii) $100,000 payable upon achieving powersports and automotive unit sales with a target average gross margin per unit approved by the Committee at any time through December 31, 2019, and (iv) $100,000 payable in two equal installments upon achieving a certain percentage of revenue and gross margin targets approved by the Committee for the quarters ended June 30, 2019 and September 30, 2019. Messrs. Chesrown and Berrard each achieved and were paid $200,000 under the bonus plan.
The Committee also approved grants of up to 20,000 restricted stock units ("RSUs") for each of Messrs. Chesrown and Berrard, which vest as follows: (i) 5,000 RSUs vestSEC within 120 days after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue targets approved by the Committee at any time through September 30, 2020, (ii) 5,000 RSUs vest at such time as the shares of Class B Common Stock trade at a minimum closing price of $200.00 per share for 30 consecutive trading days at any time through September 30, 2020, and (iii) 10,000 RSUs vest at such time as the shares of Class B Common Stock trade at a minimum closing price of $300.00 per share for thirty consecutive trading days at any time through September 30, 2020. Messrs. Chesrown and Berrard received these RSUs on June 3, 2019 (the "CEO and CFO RSUs").
On May 27, 2020, the Committee terminated the CEO and CFO RSUs.
The Company has not entered into employment agreements or arrangements with Messrs. Chesrown or Berrard. Accordingly, Messrs. Chesrown and Berrard are employed as the Company's Chief Executive Officer and Chief Financial Officer, respectively, on an at-will basis.

Peter Levy
We have not entered into an employment agreement or arrangement with Mr. Levy. Accordingly, he is employed as our Chief Operating Officer on an at-will basis. Mr. Levy currently receives an annual salary of $300,000, which is paid weekly, in accordance with our standard payroll practice. Mr. Levy is eligible for equity compensation under our equity compensation plans, as determined from time to time by the Compensation Committee of the Board.
On August 22, 2019, the Compensation Committee approved a grant of 2,500 RSUs to Mr. Levy, which vest (1) 20% on the last day of the ninth month following the grant date, (2) 7.5% every three months on the last day of each three month period beginning on the last day of the twelfth month following the grant date through the last of the twenty-first month following the grant date and (3) 12.5% every three months on the last day of each three month period beginning on the last day of the twenty-fourth month following the grant date through the last day of the thirty-first month following the grant date.
Also, on August 22, 2019, the Committee approved a grant of up to 5,000 RSUs to Mr. Levy, which vest as follows: (i) 1,250 RSUs vest after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue of $900,000,000 at any time through June 30, 2020, (ii) 1,250 RSUs vest at such time as the shares of Class B Common Stock trade at a minimum closing price of $200.00 per share for 30 consecutive trading days at any time through June 30, 2020, and (iii) 2,500 RSUs vest at such time as the shares of Class B Common Stock trade at a minimum closing price of $300.00 per share for 30 consecutive trading days at any time through June 30, 2020 (the “COO RSUs, collectively with the CEO and CFO RSUs, the "Executive RSUs").
On May 27, 2020, the Committee terminated the COO RSUs.
Non-Employee Director Compensation
We have not yet established a policy for non-employee director compensation. During the year ended December 31, 2019, no compensation was paid to our non-employee directors, except an award of 1,750 RSUs under the Incentive Plan to Messrs. Dixon, Gray, Kakarala, Westfall and Reece for their service to the Board.2021.
The following table summarizes the compensation paid to our non-employee directors for the year ended December 31, 2019.
Name
 
Stock
Awards (1)(2)
 
 
Total
 
Denmar Dixon
 160,300 
 160,300 
Richard A. Gray, Jr.
 160,300 
 160,300 
Kartik Kakarala
 160,300 
 160,300 
Kevin Westfall
 160,300 
 160,300 
Joseph Reece (3)
 160,300 
 160,300 

(1) 
Represents RSUs granted under the Incentive Plan. Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. In determining the grant date fair value, we used $91.60 per share. The RSUs vest one year from the grant date and are subject to pro rata vesting if a director leaves the Board of Directors before the one-year period.46

(2) 
As of December 31, 2019, each of Messrs. Dixon, Gray, Kakarala, and Westfall held RSUs as follows: Mr. Dixon – 6,025; Mr. Gray – 4,550; Mr. Kakarala – 3,150; and Mr. Westfall – 4,025.
(3) 
Mr. Reece resigned from the board on October 21, 2019, and forfeited all vested and unvested RSUs.

Item 12. 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock that may be acquired upon exercise or vesting of equity awards within 60 days of the date of the table below are deemed beneficially owned by the holders of such options and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.
As of May 26, 2020, 50,000 shares of Class A Common Stock and 2,162,716 shares of Class B Common Stock were issued and outstanding. The following table sets forth information with respect to the beneficial ownership of our common stock as of May 26, 2020, by (i) each of our directors and executive officers, (ii) all of our directors and executive officers as a group, and (iii) each stockholder known by us to be the beneficial owner of more than 5% of our common stock. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of common stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge by any person of our securities or any of our parents, the operation of which may at a subsequent date result in a change in control of our company.
Unless otherwise noted below, the address of each person listed on the table is c/o RumbleOn, Inc., 901 W Walnut Hill Lane, Irving, Texas 75038.
Beneficial Owner Executive Officers and Directors
 
Class A Common Stock Beneficially Owned
 
 
Percentage of Class A Common
Stock Beneficially Owned (%)(1)
 
 
Class B Common Stock Beneficially Owned
 
 
 
 
 
Percentage of Class B Common Stock Beneficially Owned (%)(2)
 
Marshall Chesrown(3)
  43,750 
  87.5%
  93,750 
 
 
 
  4.33%
Steven Berrard(4)
  6,250 
  12.5%
  108,500 
 
 
 
  5.02%
Denmar Dixon(5)
  - 
  - 
  78,874 
  (8)
  3.65%
Kevin Westfall
  - 
  - 
  4,851 
  (9)
  * 
Kartik Kakarala(6)
  - 
  - 
  78,772 
  (10)
  3.64%
Peter Levy
  - 
  - 
  6,944 
  (11)
  * 
Richard Gray
  - 
  - 
  5,071 
  (12)
  * 
Michael Marchlik
  - 
  - 
  - 
    
  - 
All executive officers and directors as a group (8 persons) (7)
  - 
  - 
  376,762 
  (13)
  17.42%
*Represents beneficial ownership of less than 1%.
(1) 
Based on 50,000 shares of Class A Common Stock issued and outstanding as of May 26, 2020. The Class A Common Stock has ten votes for each share outstanding compared to one vote for each share of Class B Common Stock outstanding
(2) 
Based on 2,162,716 shares of Class B Common Stock issued and outstanding as of May 26, 2020.
(3) 
As of May 26, 2020, Mr. Chesrown has voting power representing approximately 19.95% of our outstanding common stock.
(4) 
Shares are owned directly through Berrard Holdings, a limited partnership controlled by Steven R. Berrard. Mr. Berrard has the sole power to vote and the sole power to dispose of each of the shares of common stock which he may be deemed to beneficially own. As of May 26, 2020, Mr. Berrard has voting power representing approximately 6.42% of our outstanding common stock.
(5) 
62,642 shares are owned directly through Blue Flame Capital, LLC, an entity controlled by Mr. Dixon, 638 shares are held by Mr. Dixon's spouse, 75 shares are held by Mr. Dixon's son and 12,600 shares are directly held by Mr. Dixon. Mr. Dixon has the sole power to vote and the sole power to dispose of each of the shares of common stock which he may be deemed to beneficially own. As of May 26, 2020, Mr. Dixon has voting power representing 2.85% of our outstanding common stock.


(6) 
Shares are owned indirectly through Halcyon Consulting, LLC, a limited liability company owned by Kartik Kakarala and his brother, Srinivas Kakarala. Kartik Kakarala has shared power to vote and shared power to dispose of such shares of common stock with his brother. As of May 26, 2020, Mr. Kakarala has voting power representing 2.87% of our outstanding common stock.
(7) 
As of May 26, 2020, all directors and executive officers as a group have voting power representing approximately 32.46% of our outstanding common stock.
(8) 
Includes 2,919 restricted stock units that have vested and are pending delivery or will vest within 60 days.
(9) 
Includes 2,231 restricted stock units that have vested and are pending delivery or will vest within 60 days.
(10) 
Includes 2,231 restricted stock units that have vested and are pending delivery or will vest within 60 days.
(11) 
Includes 2,501 restricted stock units that have vested and are pending delivery or will vest within 60 days.
(12) 
Includes 2,596 restricted stock units that have vested and are pending delivery or will vest within 60 days.
(13) 
Includes 12,478 restricted stock units that have vested and are pending delivery or will vest within 60 days.
Securities Authorized for Issuance Under Equity Compensation Plans
On January 9, 2017, our Board approved the adoption of the Incentive Plan subject to stockholder approval at our 2017 Annual Meeting of Stockholders. On June 30, 2017, the Incentive Plan was approved by our stockholders at the 2017 Annual Meeting of Stockholders. The purposes of the Incentive Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers, or the Eligible Individuals, by providing them with an opportunity to acquire or increase a proprietary interest in our company and to incentivize them to expend maximum effort for the growth and success of our company, so as to strengthen the mutuality of the interests between such persons and our stockholders. The Incentive Plan allows us to grant a variety of stock-based and cash-based awards to Eligible Individuals. On May 10, 2018, the Board approved, subject to stockholder approval, an amendment to the Incentive Plan to increase the number of shares of Class B Common Stock authorized for issuance under the Incentive Plan from twelve percent (12%) of all issued and outstanding Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "Plan Increase"). On June 25, 2018, the Plan Increase was approved by our stockholders at the 2018 Annual Meeting of Stockholders. On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock. We have not maintained any other equity compensation plans since our inception.
The following table provides information as of December 31, 2019, with respect to all of our compensation plans under which equity securities are authorized for issuance:
Plan Category 
Number of securities
to be issued upon exercise of outstanding options, warrants and rights
  Number of securities remaining available for future issuance 
Equity compensation plans approved by stockholders  136,076(1)  41,299(2)
Equity compensation plans not approved by stockholders  -   - 
(1) 
Represents restricted stock units outstanding under the Incentive Plan.
(2) 
Represents securities remaining available for future issuance under the Incentive Plan.

Item 13. 
Certain Relationships and Related Transactions, and Director Independence.
We have been a party to the following transactions since January 1, 2018, in which the amount involved exceeds $120,000 and in which any director, executive officer, or holder of more than 5% of any class of our voting stock, or any member of the immediate family of or entities affiliated with any of them, had or will have a material interest.
November 2016 Private Placement
On November 28, 2016, we completed a private placement with certain purchasers, with respect to the sale of an aggregate of 45,000 shares of common stock of the Company at a purchase price of $30.00 per share for total consideration of $1,350,000 (the "2016 Private Placement"). In connection with the 2016 Private Placement, the Company also entered into loan agreements with the investors pursuant to which the investors would loan the Company their pro rata share of up to $1,350,000 in the aggregate upon our request any time on or after January 31, 2017 and before November 1, 2020, pursuant to the terms of a convertible promissory note attached to the loan agreements.
In connection with the 2016 Private Placement, Blue Flame, an entity controlled by Denmar Dixon, one of the Company's directors, paid $250,000 for 45,000 shares of the Company's Class B Common Stock.
On March 31, 2017, we completed funding of the second tranche of the 2016 Private Placement, pursuant to which the investors each received their pro rata share of (1) 58,096 shares of common stock and (2) the Private Placement Notes, in the amount of $667,000, and cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. The Private Placement Notes were not convertible. As a result, Blue Flame received 32,276 shares of Class B Common Stock and a promissory note in the principal amount of $370,556. As of December 31, 2019 and 2018, the amount outstanding on the promissory notes due to Blue Flame, including accrued interest was $394,287 and $378,495, respectively. Interest expense on the promissory notes due to Blue Flame for the year ended December 31, 2019 and 2018 was $183,286 and $143,987, respectively, which included debt discount amortization of $144,109 and $114,404, respectively. The interest was charged to interest expense in the Consolidated Statements of Operations.
Test Dealer
In connection with the development of the regional partner program, the Company tested various aspects of the program by utilizing a dealership to which Mr. Chesrown, the Company's Chief Executive Officer has provided financing in the form of a $400,000 convertible promissory note (the "Dealer"). The note, which could be converted into a 25.0% ownership interest in the Dealer at any time, was to mature on May 1, 2019, with interest payable monthly at 5.0% per annum This financing arrangement was terminated in April 2018. Revenue recognized by the Company from the Dealer for the year ended December 31, 2018 was $619,193 or .04% of 2018 total revenue.
In addition, the Company previously subleased warehouse space from the Dealer that is separate and distinct from the location of the dealership, on the same terms as paid by the Dealer. This subleased facility serves as the northwestern regional distribution center for the Company. The lease was terminated onJune30, 2018. For the year ended December 31, 2018, the Company paid $90,000 in rent under the sublease. Included in accounts receivable at December 31, 2018 was $40,176 owed to the Company by the Dealer.
Services Agreement
In connection with the NextGen Acquisition, on February 8, 2017, we entered into a Services Agreement with Halcyon, to provide development and support services to us. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, we paid Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees could increase on an annual basis, provided that the rates were not higher than 110.0% of the immediately preceding year's rates. We also reimbursed Halcyon for any reasonable travel and pre-approved out-of-pocket expenses incurred in connection with its services to us. The Services Agreement was terminated on March 31, 2018. During the year ended December 31, 2018, we paid a total of $54,159 under the Services Agreement.
October 2018 PIPE Transaction
On October 25, 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors (the "Investors") pursuant to which the Company agreed to sell in a private placement (the "PIPE Transaction") an aggregate of 151,500 shares of its Class B Common Stock, at a purchase price of $142.00 per share for non-affiliates of the Company.

Mr. Dixon, who invested through Blue Flame, purchased 1,500 shares of Class B Common Stock in the PIPE Transaction at a price of $162.00 per share (the per share price to affiliates of the Company) for an aggregate purchase price of $243,000. Also, Mr. Reece, a Director at the time, individually purchased 500 shares of Class B Common Stock for an aggregate purchase price of $81,000. The Board of Directors approved these purchases in accordance with Rule 16b-3(d)(1) of the Exchange Act. Messrs. Dixon and Reece abstained from the Board of Directors' vote approving the PIPE Transaction.
Nashville Leases
In connection with the acquisition of Wholesale, we entered into leases for two facilities in the greater Nashville area owned by Mr. Brewster, a former 5% or greater holder of our Class B Common Stock. Each location has a lease term expiring on October 30, 2021, and for each property we have two (2) renewal options, each of which provides for five (5) additional years with a ten percent (10.0%) increase in the base rent. The aggregate rent for the two locations is approximately $55,000 per month.
Related Party Transaction Policy
In May 2017, our Board adopted a formal policy that our executive officers, directors, holders of more than 5.0% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the prior consent of the Audit Committee, or other independent members of our Board if it is inappropriate for the Audit Committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to the Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, the Audit Committee is to consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party's interest in the transaction.
Director Independence
Our Board has determined that all of our directors, other than Messrs. Chesrown, Berrard, and Kakarala, qualify as "independent" directors in accordance with the listing requirements of The NASDAQ Stock Market. The NASDAQ independence definition includes a series of objective tests regarding a director's independence and requires that the Board make an affirmative determination that a director has no relationship with us that would interfere with such director's exercise of independent judgment in carrying out the responsibilities of a director. There are no family relationships among any of our directors or executive officers.
Item 14.
Principal Accounting Fees and Services.
On November 19, 2019, the Audit Committee of the Company engaged Grant Thornton LLP ("Grant Thornton") as the Company's independent registered public accounting firm, effective November 19, 2019. Also, effective November 19, 2019, the Audit Committee of the Company dismissed Scharf Pera & Co., PLLC ("Scharf Pera") as the Company's independent registered public accounting firm.
Scharf Pera audited the Company's financial statements as of and for the years ended December 31, 2017 and December 31, 2018. Scharf Pera's reports on the Company's financial statements as of and for the years ended December 31, 2017 and December 31, 2018 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles.
In connection with Scharf Pera's audits of the Company's financial statements as of and for the years ended December 31, 2017 and December 31, 2018 and the subsequent interim period through November 19, 2019, there were (i) no "disagreements" (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Scharf Pera on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Scharf Pera, would have caused Scharf Pera to make a reference to the subject matter thereof in connection with its reports on the Company's financial statements for such years and (ii) no "reportable events" (as that term is defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions).
During the years ended December 31, 2017 and December 31, 2018, and through the subsequent interim period as of November 19, 2019, neither the Company, nor any party on its behalf, consulted with Grant Thornton regarding either (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company's financial statements, and no written reports or oral advice was provided to the Company by Grant Thornton that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) or a reportable event (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

The following table sets forth Grant Thornton's and Scharf Pera’s fees for the years ended December 31, 2019 and 2018.
 
 
2019
 
 
2018
 
 
 
 
Audit Fees (1)
 $340,000 
 $80,294 
   
Tax Fees
  - 
  12,415 
  (2)
All Other Fees
  - 
  17,717 
  (3)
Total
 $340,000 
 $110,426 
    
(1) 
These audit fees include the fees billed by Grant Thornton of $340,000 for the audit of the Company for the year ended December 31, 2019. The fees for 2018 are for amounts billed by Scharf Pera for (i) the audits of the Company for the years ended December 31, 2018 and 2017 and (ii) their review of the Company's unaudited 2018 Quarterly financial statements.
(2) 
These tax fees consist of tax fees billed by Scharf Pera in 2018.
(3) 
These other fees consist of fees billed by Scharf Pera in 2018 for review of Registration Statements.
Policy for Approval of Audit and Permitted Non-Audit Services
The Audit Committee has adopted a policy and related procedures requiring its pre-approval of all audit and non-audit services to be rendered by its independent registered public accounting firm. These policies and procedures are intended to ensure that the provision of such services do not impair the independent registered public accounting firm's independence. These services may include audit services, audit related services, tax services and other services. The policy provides for the annual establishment of fee limits for various types of audit services, audit related services, tax services and other services, within which the services are deemed to be pre-approved by the Audit Committee. The independent registered public accounting firm is required to provide to the Audit Committee back up information with respect to the performance of such services.
All services provided by Grant Thornton and Scharf Pera during the fiscal year ended December 31, 2019 and 2018 were approved by the Audit Committee. The Audit Committee has delegated to its Chair the authority to pre-approve services, up to a specified fee limit, to be rendered by the independent registered public accounting firm and requires that the Chair report to the Audit Committee any pre-approved decisions made by the Chair at the next scheduled meeting of the Audit Committee.

PART IV
ItemITEM 15.    EXHIBITS and FINANCIAL STATEMENT SCHEDULES.
Exhibits, Financial Statement Schedules.
(a)
We have filed the following documents as part of this Annual Report on2021 Form 10-K:
1.
The financial statements listed in the "Index to Financial Statements" on page F-1 are filed as part of this report.
2.
Financial statement schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.
3.
Exhibits included or incorporated herein: See below.
Exhibit NumberDescription
Agreement and Plan of Merger, dated October 26, 2018, by and among RumbleOn, Inc., RMBL Tennessee, LLC, Wholesale Holdings, Inc., Steven Brewster and Janet Brewster, Wholesale, LLC, and Steven Brewster as representative, and for limited purposes, Marshall Chesrown and Steven R. Berrard.
(Incorporated (Incorporated by reference to Exhibit 2.1 in the Company'sCompany's Current Report on Form 8-K, filed on October 31, 2018).
Amendment to the Agreement and Plan of Merger, dated October 29, 2018, by and among RumbleOn, Inc., RMBL Tennessee, LLC, Wholesale Holdings, Inc., Steven Brewster and Janet Brewster, Wholesale, LLC, and Steven Brewster as representative (Incorporated by reference to Exhibit 2.2 in the Company'sCompany's Current Report on Form 8-K, filed on October 31, 2018).
Membership Interest Purchase Agreement, dated October 26, 2018, by and among RumbleOn, Inc. Steven Brewster, Justin Becker, and Steven Brewster as representative. (Incorporated by reference to Exhibit 2.3 in the Company'sCompany's Current Report on Form 8-K, filed on October 31, 2018).
Plan of Merger and Equity Purchase Agreement, dated March 12, 2021 (Incorporated by reference to Exhibit 2.1 in the Company's Current Report on Form 8-K, filed on March 15, 2021).
Joinder and First Amendment to Plan of Merger and Equity Purchase Agreement, dated June 17, 2021 (Incorporated by reference to Exhibit 2.2 in the Company’s Current Report on Form 8-K, filed on June 21, 2021).
Second Amendment to Plan of Merger and Equity Purchase Agreement, dated July 20, 2021 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on July 27, 2021).
Membership Interest Purchase Agreement, dated November 8, 2021 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on November 9, 2021).
Articles of Incorporation filed on October 24, 2013 (Incorporated by reference to Exhibit 3(i)(a) in the Company'sCompany's Registration Statement on Form S-1/A, filed on March 20, 2014).
By-Laws, as Amended (Incorporated by reference to Exhibit 3.2 in the Company'sCompany's Annual Report on Form 10-K, filed on February 14, 2017).
Amendment to the Amended Bylaws of RumbleOn, Inc., dated August 31, 2021 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on September 7, 2021).
Amended and Restated Bylaws of RumbleOn, Inc., dated October 8, 2021 (Incorporated by reference to Exhibit 3.1 in the Company’s Current Report on Form 8-K, filed on October 8, 2021).
Certificate of Amendment to Articles of Incorporation, filed on February 13, 2017 (Incorporated by reference to Exhibit 3.3 in the Company'sCompany's Annual Report on Form 10-K, filed on February 14, 2017).
Certificate of Amendment to Articles of Incorporation, filed on June 25, 2018 (Incorporated by reference to Exhibit 3.1 in the Company'sCompany's Current Report on Form 8-K, filed on June 28, 2018).
Certificate of Designation for the Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 in the Company'sCompany's Current Report on Form 8-K, filed on October 31, 2018).
Amended and Restated Stockholders Agreement, dated February 8, 2017Certificate of Change (Incorporated by reference to Exhibit 10.13.1 in the Company's AnnualCompany's Current Report on Form 10-K,8-K, filed on February 14, 2017)May 19, 2020).
Certificate of Amendment. (Incorporated by reference to Exhibit 3.1 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on August 4, 2021).
Registration Rights Agreement, dated February 8, 2017 (Incorporated by reference to Exhibit 10.2 in the Company'sCompany's Annual Report on Form 10-K, filed on February 14, 2017).
Stockholder's Agreement, dated October 24, 2016 (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on October 28, 2016).
Sample Stock Certificate Class B Common Stock (Incorporated by reference to Exhibit 4.4 in the Company'sCompany's Registration Statement on Form S-1/A filed on September 27, 2017).
Form of Warrant to Purchase Class B Common Stock, dated October 18, 2017 (Incorporated by reference to Exhibit 4.1 in the Company'sCompany's Current Report on Form 8-K, filed October 24, 2017).
47


Warrant, dated April 30, 2018 (Incorporated by reference to Exhibit 4.1 in the Company's Current Report on Form 8-K, filed on May 1, 2018).
Warrant to Purchase Class B Common Stock, dated October 30, 2018 (Incorporated by reference to Exhibit 4.1 in the Company'sCompany's Current Report on Form 8-K, filed on October 31, 2018).
Indenture, dated MayJanuary 14, 2019,2020, between RumbleOn, Inc. and Wilmington Trust National Association (Incorporated by reference to Exhibit 4.1 in the Company'sCompany's Current Report on Form 8-K, filed on January 16, 2020).
Form of 6.75% Convertible Senior Note due 2025 (included as Exhibit A to the Indenture filed as Exhibit 4.8) (Incorporated by reference to Exhibit 4.2 in the Company's Current Report on Form 8-K, filed on May 15, 2019).
Form of 6.75% Convertible Senior Note due 2024 (included as Exhibit A to the Indenture filed as Exhibit 4.8)Registration Rights Agreement, dated May 14, 2019 (Incorporated by reference to Exhibit 4.24.3 in the Company'sCompany's Current Report on Form 8-K, filed on May 15, 2019).
Registration Rights Agreement, dated May 14, 2019, between the Company and JMPDescription of Registrant's Securities LLC (Incorporated by reference to Exhibit 4.34.11 in the Company'sCompany's Annual Report on Form 10-K, filed on May 29, 2020).
Warrant, dated March 12, 2021 (Incorporated by reference to Exhibit 4.1 in the Company's Current Report on Form 8-K, filed on MayMarch 15, 2019)2021).
DescriptionForm of Registrant's Securities.Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
2017 RumbleOn, Inc.First Amendment to Warrant to Purchase Class B Common Stock, Incentive Plan +dated July 15, 2021 (Incorporated by reference to Exhibit 10.1 into the Company'sCompany’s Current Report on Form 8-K filed with the SEC on January 9, 2017)July 16, 2021).
#
Unconditional Guaranty Agreement (Incorporated by reference to Exhibit 10.12 in the Company's Annual Report on Form 10-K, filed on February 14, 2017).
Security Agreement (Incorporated by reference to Exhibit 10.13 the Company's Annual Report on Form 10-K, filed on February 14, 2017).

NextGen Promissory Note, dated February 8, 2017 (Incorporated by reference to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q, filed on May 15, 2017).
RumbleOn, Inc. Form of Promissory Note (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on April 5, 2017).
Amendment to Amended and Restated Stockholders' Agreement of RumbleOn, Inc., dated September 29, 2017 (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on October 5, 2017).
Inventory Financing and Security Agreement, by and among RMBL Missouri, LLC, Ally Bank and Ally Financial, Inc., dated February 16, 2018 (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on February 23, 2018).
Addendum to Inventory Financing and Security Agreement, by and among RMBL Missouri, LLC, Ally Bank and Ally Financial, Inc., dated February 16, 2018 (Incorporated by reference to Exhibit 10.2 in the Company's Current Report on Form 8-K, filed on February 23, 2018).
Cross Collateral, Cross Default and Guaranty Agreement, by and among Ally Bank, Ally Financial, Inc., RumbleOn, Inc., and RMBL Missouri, LLC, dated February 16, 2018 (Incorporated by reference to Exhibit 10.3 in the Company's Current Report on Form 8-K, filed on February 23, 2018).
General Security Agreement, by and among RumbleOn, Inc., Ally Bank and Ally Financial, Inc., dated February 16, 2018 (Incorporated by reference to Exhibit 10.4 in the Company's Current Report on Form 8-K, filed on February 23, 2018).
10.11
Amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan. + (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on June 28, 2018).
10.12
Registration Rights Agreement, dated October 30, 2018, by and among RumbleOn, Inc., Steven Brewster and Janet Brewster, and Steven Brewster as representative (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on October 31, 2018).
Escrow Agreement, dated October 30, 2018, by and among RumbleOn, Inc., Steven Brewster as representative, and Continental Stock Transfer and Trust Company (Incorporated by reference to Exhibit 10.2 in the Company's Current Report on Form 8-K, filed on October 31, 2018).
10.14
Demand Promissory Note and Loan and Security Agreement, dated October 30, 2018, by and between NextGear Capital, Inc. and Wholesale, LLC (Incorporated by reference to Exhibit 10.4 in the Company's Current Report on Form 8-K, filed on October 31, 2018).
Corporate Guaranty, in favor of NextGear Capital, Inc., dated October 30, 2018 (Incorporated by reference to Exhibit 10.5 in the Company's Current Report on Form 8-K, filed on October 31, 2018).
10.16
Form of Securities Purchase Agreement, dated October 25, 2018(Incorporated by reference to Exhibit 10.6 in the Company's Current Report on Form 8-K, filed on October 31, 2018).
Purchase Agreement, dated May 9, 2019, between the Company and JMP Securities LLCPlan (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on May 15, 2019)January 9, 2017).
#Form of Securities Purchase Agreement, dated May 9, 2019 (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on May 15, 2019).
Amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan. + (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on May 22, 2019).
SubsidiariesForm of Note Exchange & Subscription Agreement, dated January 10, 2020 (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on January 16, 2020).
Form of Joinder & Amendment, dated January 10, 2020 (Incorporated by reference to Exhibit 10.2 in the Company's Current Report on Form 8-K, filed on January 16, 2020).
Form of Investor Note Exchange Agreement, dated January 10, 2020 (Incorporated by reference to Exhibit 10.3 in the Company's Current Report on Form 8-K, filed on January 16, 2020).
Form of New Investor Note, dated January 10, 2020 (Incorporated by reference to Exhibit 10.4 in the Company's Current Report on Form 8-K, filed on January 16, 2020).
Form of Security Agreement, dated January 14, 2020 (Incorporated by reference to Exhibit 10.5 in the Company's Current Report on Form 8-K, filed on January 16, 2020).
COVID-19 Stimulus Customer Agreement, dated May 1, 2020, by and between Wood & Huston Bank and RumbleOn, Inc. (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
COVID-19 Stimulus Customer Agreement, dated May 1, 2020, by and between Wood & Huston Bank and Wholesale, Inc. (Incorporated by reference to Exhibit 10.2 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
COVID-19 Stimulus Customer Agreement, dated May 1, 2020, by and between Wood & Huston Bank and Wholesale Express, LLC. (Incorporated by reference to Exhibit 10.3 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
Paycheck Protection Program Note, dated May 1, 2020, executed by RumbleOn, Inc. (Incorporated by reference to Exhibit 10.4 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
Paycheck Protection Program Note, dated May 1, 2020, executed by Wholesale, Inc. (Incorporated by reference to Exhibit 10.5 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
Paycheck Protection Program Note, dated May 1, 2020, executed by Wholesale Express, LLC (Incorporated by reference to Exhibit 10.6 in the Company's Current Report on Form 8-K, filed on May 7, 2020).
#Amendment to the RumbleOn, Inc. 2017 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K, filed on August 26, 2020).
Secured Promissory Note, dated March 12, 2021 (Incorporated by reference to Exhibit 10.2 in the Company's Current Report on Form 8-K, filed on March 15, 2021).
Registration Rights and Lock-Up Agreement, dated March 12, 2021 (Incorporated by reference to Exhibit 10.3 in the Company's Current Report on Form 8-K, filed on March 15, 2021).
Amended and Restated Secured Promissory Note, dated April 8, 2021 (Incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K, filed on April 8, 2021).
48


#Fourth Amendment to RumbleOn, Inc. 2017 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.2 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on August 4, 2021).
Credit Agreement, dated August 31, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
First Supplemental Indenture, dated August 31, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
#Executive Employment Agreement, dated August 31, 2021, between Marshall Chesrown and RumbleOn, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
#Executive Employment Agreement, dated August 31, 2021, between William Coulter and RumbleOn, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
#Executive Employment Agreement, dated August 31, 2021, between Mark Tkach and RumbleOn, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
#Executive Employment Agreement, dated August 31, 2021, between Peter Levy and RumbleOn, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
#Executive Employment Agreement, dated August 31, 2021, between Beverley Rath and RumbleOn, Inc. (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021).
Registration Rights and Lock-Up Agreement, dated November 8, 2021 (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 9, 2021).
Subsidiaries*
Consent of Dixon Hughes Goodman LLP*
Consent of Grant Thornton LLPLLP*
ConsentCertification of Scharf Pera & Co.Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), PLLC
Certificationas adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
CertificationCertifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
CertificationCertifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INSXBRL Instance Document.*
101.SCGXBRL Taxonomy Extension Schema.*
101.CALXBRL Taxonomy Extension Calculation Linkbase.*
101.DEFXBRL Taxonomy Extension Definition Linkbase.*
101.LABXBRL Taxonomy Extension Label Linkbase.*
101.PREXBRL Taxonomy Extension Presentation Linkbase.*
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)*
*Filed herewith.
**Furnished herewith.
#Management Compensatory Plan

*            
Furnished herewith
+            
Management Compensatory Plan
ItemITEM 16.    
FormFORM 10-K Summary.
SUMMARY.
Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has elected not to include such summary information.

49



SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RumbleOn, Inc.
RumbleOn, Inc.
Date: May 29, 2020By:
/s/ Marshall Chesrown
Date: April 8, 2022By:
/s/ Marshall Chesrown
Marshall Chesrown
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureTitleDate
SignatureTitleDate
/s/ Marshall Chesrown
Chairman of the Board of Directors andMay 29, 2020April 8, 2022
Marshall Chesrown
Chief Executive Officer

(Principal Executive Officer)
/s/ Steven R. Berrard
Beverley Rath
Director andInterim Chief Financial Officer and Corporate ControllerMay 29, 2020April 8, 2022
Steven R. BerrardBeverley Rath
(Principal Financial Officer and Principal Accounting Officer)
/s/ Denmar Dixon
Adam Alexander
DirectorMay 29, 2020April 8, 2022
Denmar DixonAdam Alexander
/s/ Richard A. Gray, Jr.
Denmar Dixon
DirectorMay 29, 2020April 8, 2022
Richard A. Gray, Jr.Denmar Dixon
/s/ Kartik Kakarala
Peter Levy
DirectorMay 29, 2020April 8, 2022
Kartik KakaralaPeter Levy
/s/ Michael Marchlik
DirectorMay 29, 2020April 8, 2022
Michael Marchlik
/s/ Kevin Westfall
DirectorMay 29, 2020April 8, 2022
Kevin Westfall

50



Index to Financial Statements




F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and StockholdersShareholders
RumbleOn, Inc.
Opinion on the financial statementsConsolidated Financial Statements
We have audited the accompanying consolidated balance sheetsheets of RumbleOn, Inc. (a Nevada corporation) and subsidiaries (the “Company”"Company") as of December 31, 2019,2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year in the periodthen ended, December 31, 2019, and the related notes (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019,2021, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 8, 2022, expressed an adverse opinion thereon.
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 audit. We are a public accounting firm registered with the 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 audit 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.
Our audit 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 audit 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) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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 audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisition of RideNow - Fair Value of Intangible Assets Acquired
As described in Note 1 and Note 2 to the consolidated financial statements, the Company completed the acquisition of RideNow on August 31, 2021. The Company accounted for this acquisition by recognizing and measuring assets acquired and liabilities assumed at their estimated fair values (including certain provisional amounts for which the assessment has not yet been completed), and recognizing goodwill for the excess of the fair value of consideration transferred over the fair value of the net assets acquired. As part of the acquisition, the Company acquired franchise rights and other identifiable intangible assets with estimated fair values of $304.1 million as of the acquisition date. The determination of the fair value of the intangible assets required management to make significant estimates and assumptions related to future projected cash flows, revenue growth and discount rates.
We identified the estimates of the fair value of franchise rights and other identifiable intangible assets as a critical audit matter. The principal considerations for our determination of the estimate of the fair value of the acquired franchise rights and other identifiable intangible assets as a critical audit matter are that there were significant estimates and assumptions made by management, including assumptions regarding future projected cash flows, revenue growth and discount rates; and as disclosed by management, a material weakness was identified in the Company’s controls over the accounting for the RideNow acquisition. Auditing these amounts required a high degree of auditor judgment and an increased extent of effort, including the
F-2


extent of specialized skill or knowledge needed, when performing audit procedures to evaluate the reasonableness of assumptions and estimates used in these valuations.
The primary procedures we performed to address this critical audit matter included:
With the assistance of personnel with specialized skill and knowledge in valuation, we evaluated the significant valuation assumptions used by management to develop the franchise rights and other identifiable intangible assets’ fair value by assessing the reasonableness of inputs and assumptions used in the valuation.
Our evaluation also included reconciling information to source documents and testing the calculations for mathematical accuracy.
Our evaluation also considered whether the assumptions for revenue growth and development of discount rates used in the valuation were reasonable, including performing a sensitivity analysis on the assumptions, and analysis of discount rates based on company projections.
Income taxes – Valuation Allowance
As described in Note 1 and Note 16 to the consolidated financial statements, the Company records a valuation allowance if it determines that it is not more likely than not that a deferred tax asset will be realized. During the year ended December 31, 2019,2021, the Company determined that it was more likely than not that its deferred tax assets will be realized due to the acquisition of RideNow and therefore reversed its previously recorded valuation allowance in the amount of $23.7 million. In determining that it was more likely than not that the deferred tax assets would be realized, the Company relied upon assumptions and estimates about future activities, including the amount of future taxable income that the Company will generate, and the future reversal of temporary differences.
We identified the Company’s assessment of the realizability of deferred tax assets as a critical audit matter. The principal consideration for this determination included the significant estimates and assumptions relied upon by management, including the amount of future taxable income that the Company will generate, and the future reversal of temporary differences. Auditing these estimates and assumptions required a high degree of auditor judgment and increased audit effort, including the involvement of individuals with specialized knowledge of income tax accounting matters and federal and state tax laws.
The primary procedures we performed to address this critical audit matter included:
We tested the design and operating effectiveness of management’s controls over determining the realizability of deferred tax assets.
We obtained management’s projections of the reversal of deferred tax items and utilization of available loss amounts in future years and considered the reasonableness of those projections. We compared the projections to recent actual taxable income of both the legacy RumbleOn and RideNow entities.
We involved individuals with specialized tax knowledge and skill to assist in evaluating the reasonableness of positive and negative evidence regarding the utilization of deferred tax assets.
Classification of Warrants Issued
As described in Note 1 and 11 to the consolidated financial statements the Company issued warrants to lenders in the debt facility used to finance the RideNow acquisition. The warrants were initially classified as liabilities, with the initial value treated as a deferred financing charge on the related debt. Subsequently, the warrants were remeasured at fair value with changes recorded in the consolidated statement of operations at each reporting date. Upon closing the RideNow acquisition, the warrants were considered to be equity classified and the recorded liability of $19.7 million was reclassified to additional paid-in capital. The determination of the classification of the warrants required management to make judgments as to whether the terms of the agreement required the warrants to be classified in equity or liabilities. The valuation of the warrant at both the issuance date and the date of the closing of the RideNow transaction involved valuation estimates performed by a Company specialist.
We identified the classification of warrants as a critical audit matter. The principal considerations for this determination were the judgments involved in management’s determination of whether or not the terms of the warrant resulted in a contract that was indexed to the Company’s own stock, and the significant estimates and assumptions used in valuing the warrant by the Company.
F-3


The primary procedures we performed to address this critical audit matter included:
We read the terms of the warrants and related debt agreements and compared them to management’s technical accounting memo.
We consulted with internal resources with specialized knowledge and skill of complex debt and equity instruments to assess whether management’s application of the relevant accounting literature to the terms of the warrants was reasonable and appropriate.
With the assistance of personnel with specialized skill and knowledge in valuation, we evaluated the significant inputs and assumptions used by management to estimate the warrant fair values.
/s/ Dixon Hughes Goodman LLP
We have served as the Company’s auditor since 2021.

Charlotte, North Carolina
April 8, 2022

F-4


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
RumbleOn, Inc.
Opinion on the financial statements
We have audited the consolidated balance sheet of RumbleOn, Inc. (the “Company”) as of December 31, 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Change in accounting principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases on January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02: Leases (Topic 842).
Going concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred recurring losses from operations and negative cash flows from operations. These conditions, along with the uncertainty arising from the impact of COVID-19 and other matters as set forth in Note 1, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 audit. 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 audit 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 audit 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 audit 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 supportingregarding the amounts and disclosures in the financial statements. Our audit 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 audit provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2019.
from 2019 to 2021.
Dallas, Texas
May 29, 2020March 31, 2021



F-5


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Stockholders of RumbleOn, Inc.
Opinion on Internal Control Over Financial Reporting
Opinion on the Financial Statements
We have audited the accompanyinginternal control overfinancial reporting of RumbleOn, Inc. (“the Company”) as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company did not maintain effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of RumbleOn, Inc. (the “Company”)as of December 31, 2018, and2021, the related consolidated statements of income,operations, stockholders’ equity, and cash flows for the year then ended, December 31, 2018, and the related notes, (collectively referred to asand our report dated April 8, 2022, expressed an unqualified opinion on those consolidated financial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, the “consolidatedCompany acquired the RideNow entities on August 31, 2021, and management excluded from its assessment the internal control over financial statements”). In our opinion,reporting of The RideNow entities, which comprise 85.5% of total assets and 39.2% of total revenue of the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in2021. Accordingly, our audit of internal control over financial reporting of the United StatesCompany did not include the internal control over financial reporting of America.
the RideNow entities.
Basis for Opinion
TheseThe Company's management is responsible for maintaining effective internal control over financial statements are the responsibilityreporting, and for its assessment of the Company’s management.effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’sCompany's internal control over financial statementsreporting based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)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 auditsaudit 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 itseffective internal control over financial reporting. As part of our audits we are required to obtainreporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, but not forassessing the purposerisk that a material weakness exists, testing and evaluating the design and operating effectiveness of expressing an opinioninternal control based 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,assessed risk, and performing such other procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresas we considered necessary 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.circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinion.
Material Weaknesses in Internal Control Over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and described in management’s assessment:
Information technology general controls particularly as such controls related to user access, program change management, and ineffective complementary user-organization controls, which limited management’s ability to rely on technology dependent controls relevant to the preparation of the Company’s financial statements.
Controls over the period end close process, including the review and approval process of journal entries, balance sheet account reconciliations, segregation of duties conflicts, and consolidation of intercompany entries.
Documentation and design of controls over the recording and reconciliation of inventory.
Review of key assumptions and estimates related to purchase accounting for significant acquisitions.
F-6


The control environment, risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated in a timely manner.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2021 of the Company, and this report does not affect our report dated April 8, 2022 on those such consolidated financial statements.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Scharf Pera & Co., PLLCDixon Hughes Goodman LLP
We have served as the Company’s auditor since 2016
Charlotte, North Carolina
April 8, 2022
April 1, 2019
F-7



RumbleOn, Inc.
Consolidated Balance Sheets
Consolidated Balance Sheets(Dollars in thousands, except per share amounts)
December 31, 2019 and 2018
December 31,
 
2019
 
 
2018
 
20212020
ASSETS
 
 
 
ASSETS
Current assets:
 
 
 
Current assets:
Cash
 $49,660 
 $9,134,902 
Cash$48,974 $1,467 
Restricted cash
  6,676,622 
  6,650,000 
Restricted cash3,000 2,049 
Accounts receivable, net
  8,482,707 
  8,465,810 
Accounts receivable, net40,166 9,408 
Inventory
  57,381,281 
  52,191,523 
Inventory201,666 21,360 
Prepaid expense and other current assets
  1,210,474 
  1,096,945 
Prepaid expense and other current assets6,335 3,446 
Total current assets
  73,800,744 
  77,539,180 
Total current assets300,141 37,730 
    
Property and equipment, net
  6,427,674 
  5,177,877 
Property and equipment, net21,417 6,521 
Right-of-use assets
  6,040,287 
  - 
Right-of-use assets133,112 5,690 
Goodwill
  26,886,563 
  26,107,146 
Goodwill260,922 26,887 
Intangible assets, netIntangible assets, net302,066 46 
Other assets
  237,823 
  102,178 
Other assets10,091 105 
Total assets
 $113,393,091 
 $108,926,381 
Total assets1,027,749 76,979 
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    
Current liabilities:
Accounts payable and accrued liabilities
 $12,421,094 
 $10,554,913 
Accounts payable and accrued liabilities57,068 12,563 
Accrued interest payable
  749,305 
  206,037 
Current portion of convertible debt, net
  1,363,590 
  - 
Current portion of long-term debt
  59,160,970 
  58,555,006 
Vehicle floor plan note payableVehicle floor plan note payable97,278 17,812 
Current portion lease liabilitiesCurrent portion lease liabilities20,249 1,630 
Current portion of long-term, convertible debts, and notes payableCurrent portion of long-term, convertible debts, and notes payable4,476 3,440 
Total current liabilities
  73,694,959 
  69,315,956 
Total current liabilities179,071 35,445 
    
Long -term liabilities:
    
Long -term liabilities:
Senior secured noteSenior secured note253,438 — 
Convertible debt, netConvertible debt, net29,242 27,166 
Notes payable
  1,924,733 
  8,792,919 
Notes payable150 4,691 
Convertible debt, net
  20,136,229 
  - 
Derivative liabilities
  27,500 
  - 
Derivative liabilities66 17 
Operating lease liability, long-term portion
  4,722,101 
  - 
Operating lease liabilitiesOperating lease liabilities114,687 4,370 
Financing lease liabilitiesFinancing lease liabilities2,869 — 
Deferred tax liabilitiesDeferred tax liabilities7,586 — 
Other long-term liabilitiesOther long-term liabilities8,995 720 
Total long-term liabilities
  26,810,563 
  8,792,919 
Total long-term liabilities417,033 36,964 
Total liabilities
  100,505,522 
  78,108,875 
Total liabilities596,104 72,409 
    
Commitments and contingencies (Notes 4, 7, 8, 9, 13, 16)
    
Commitments and contingencies (Notes 2, 8, 9, 10, 11, 12, 14, 19, 21)Commitments and contingencies (Notes 2, 8, 9, 10, 11, 12, 14, 19, 21)00
    
Stockholders' equity:
    
Class B Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 1,317,329 shares issued and outstanding as of December 31, 2019 and 2018, respectively
  - 
  1,317 
Common A stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of December 31, 2019 and 2018, respectively
  50 
Common B stock, $0.001 par value, 4,950,000 shares authorized, 1,111,681 and 874,315 shares issued and outstanding as of December 31, 2019 and 2018, respectively
  1,112 
  874 
Stockholders' equity:Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued or outstanding as of December 31, 2021 and 2020Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued or outstanding as of December 31, 2021 and 2020
Class A common stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of December 31, 2021 and 2020, respectivelyClass A common stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of December 31, 2021 and 2020, respectively
Class B common stock, $0.001 par value, 100,000,000 shares authorized, 14,882,022 and 2,191,633 shares issued and outstanding as of December 31, 2021 and 2020, respectivelyClass B common stock, $0.001 par value, 100,000,000 shares authorized, 14,882,022 and 2,191,633 shares issued and outstanding as of December 31, 2021 and 2020, respectively152
Additional paid in capital
  92,268,213 
  65,016,379 
Additional paid in capital550,055108,949
Accumulated deficit
  (79,381,806)
  (34,201,114)
Accumulated deficit(114,106)(104,381)
Total stockholders' equity
  12,887,569 
  30,817,506 
    
Total liabilities and stockholders' equity
 $113,393,091 
 $108,926,381 
Class B stock in treasury, at cost 123,089 shares as of December 31, 2021Class B stock in treasury, at cost 123,089 shares as of December 31, 2021(4,319)
Total stockholders' equityTotal stockholders' equity431,6454,570
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$1,027,749 $76,979 
See Accompanying Notes to Financial Statements.
F-8



RumbleOn, Inc.
Consolidated Statements of OperationsOperations
(Dollars in thousands, except per share amounts)
For the Years Ended December 31,
20212020
Revenue:
Vehicles sales
     Powersports$323,303 $46,654 
     Automotive460,888 337,085 
Parts, service and accessories66,969 — 
Vehicle logistics43,878 31,816 
Finance and insurance43,402 872 
Total revenue938,440 416,427 
Cost of revenue:
Powersports264,87240,061
Automotive430,142308,801
Parts, service and accessories36,702
Vehicle logistics34,27824,200
Finance and insurance14,269
Cost of revenue before impairment loss780,263373,062
Impairment loss on automotive inventory11,738
Total cost of revenue780,263384,800
Gross profit158,17731,627
Selling, general and administrative164,07753,659
Insurance recovery(3,135)(5,615)
Depreciation and amortization6,1032,143
Operating loss(8,868)(18,560)
Interest expense(16,405)(6,450)
Change in derivative liability(8,799)11 
Forgiveness of PPP Loan2,682 — 
Loss before provision for income taxes(31,390)(24,999)
Income tax benefits(21,665)— 
Net loss$(9,725)$(24,999)
Weighted average number of common shares outstanding - basic and fully diluted6,920,3182,184,441
Net loss per share - basic and fully diluted$(1.41)$(11.44)
See Accompanying Notes to Financial Statements.
F-9


RumbleOn, Inc.
Consolidated Statement of Stockholders' Equity
For the Two Years Ended December 31, 20192021 and 20182020
(Dollars in thousands, except per share amounts)
 
 
2019
 
 
2018
 
Revenue:
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
Powersports
 $101,008,976 
 $61,204,416 
Automotive
  717,042,511 
  91,369,996 
Transportation and Vehicle Logistics
  22,577,860 
  3,823,819 
Total revenue
  840,629,347 
  156,398,231 
 
    
    
Cost of revenue:
    
    
Powersports
  88,673,515 
  54,334,066 
Automotive
  685,313,894 
  85,761,505 
Transportation
  16,023,962 
  2,755,856 
Total cost of revenue
  790,011,371 
  142,851,427 
 
    
    
Gross profit
  50,617,976 
  13,546,804 
 
    
    
Selling, general and administrative
  86,624,249 
  35,963,930 
 
    
    
Depreciation and amortization
  1,786,426 
  984,006 
 
    
    
Operating loss
  (37,792,699)
  (23,401,132)
 
    
    
Interest expense
  (7,187,604)
  (1,780,685)
Decrease in derivative liability
  1,302,500 
  - 
Loss on early extinguishment of debt
  (1,499,250)
  - 
Net loss before provision for income taxes
  (45,177,053)
  (25,181,817)
 
    
    
Benefit for income taxes
  - 
  - 
 
    
    
Net loss
 $(45,177,053)
 $(25,181,817)
 
    
    
Weighted average number of common shares outstanding - basic and fully diluted
  1,114,714 
  741,659 
 
    
    
Net loss per share - basic and fully diluted
 $(40.53)
 $(33.95)
Class A Common SharesClass B Common SharesAdditional Paid in
Capital
Accumulated
Deficit
Common B SharesTotal
Stockholders'
Equity
(Deficit)
SharesAmountSharesAmountSharesAmount
Balance, December 31, 201950,000 $— 1,111,681 $$92,268 $(79,382)— $— $12,887 
Issuance of common stock, net of issuance cost— — 1,035,000 10,779 — — — 10,780 
Issuance of common stock for restricted stock units— — 37,821 — — — — — — 
Adjustment for fractional shares in reverse stock split— — 7,131 — — — — — — 
Convertible note exchange— — — — 2,924 — — — 2,924 
Stock-based compensation— — — — 2,978 — — — 2,978 
Net loss— — — — — (24,999)— — (24,999)
Balance, December 31, 202050,000 — 2,191,633 108,949 (104,381)— — 4,570 
Issuance of common stock, net of issuance cost— — 6,102,027 191,235 — — — 191,241 
Issuance of common stock for restricted stock units— — 878,118 (1)— — — — 
Issuance of common stock in acquisition— — 5,833,333 200,953 — — — 200,959 
Treasury stock purchases— — (123,089)— — — 123,089 (4,319)(4,319)
Issuance of warrant— — — — 19,700 — — — 19,700 
Stock-based compensation— — — — 29,219 — — — 29,219 
Net loss— — — — — (9,725)— — (9,725)
Balance, December 31, 202150,000 $— 14,882,022 $15 $550,055 $(114,106)123,089 $(4,319)$431,645 
See Accompanying Notes to Financial Statements.
F-10



RumbleOn, Inc.
Consolidated StatementStatements of Stockholders' Equity
Cash Flows
For the Two Years Ended December 31, 20192021 and 20182020
(Dollars in thousands, except per share amounts)
 
 
Preferred Shares
 
 
Common A Shares
 
 
Common B Shares
 
 
Additional Paid in
 
 
Accumulated
 
 
Total Stockholders' Equity
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
(Deficit)
 
Balance, December 31, 2017
  - 
  - 
  50,000 
  50 
  596,427 
  596 
  23,384,643 
  (9,019,297)
  14,365,992 
 
    
    
    
    
    
    
    
    
    
Issuance of common stock
  - 
  - 
  - 
  - 
  267,938 
  268 
  33,101,711 
  - 
  33,101,979 
 
    
    
    
    
    
    
    
    
    
Issuance of common stock for restricted stock units exercise
  - 
  - 
  - 
  - 
  9,950 
  10 
  (10)
  - 
  - 
 
    
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  - 
  - 
  1,657,680 
  - 
  1,657,680 
 
    
    
    
    
    
    
    
    
    
Issuance of warrants in connection with loan agreement
  - 
  - 
  - 
  - 
  - 
  - 
  221,160 
  - 
  221,160 
 
    
    
    
    
    
    
    
    
    
Issuance of preferred stock in connection with acquisition
  1,317,329 
  1,317 
  - 
  - 
  - 
  - 
  6,651,195 
  - 
  6,652,512 
 
    
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (25,181,817)
  (25,181,817)
 
    
    
    
    
    
    
    
    
    
Balance, December 31, 2018
  1,317,329 
 $1,317 
  50,000 
 $50 
  874,315 
 $874 
 $65,016,379 
 $(34,201,114)
 $30,817,506 
 
    
    
    
    
    
    
    
    
    
Cumulative effect of accounting change (see Note 1)
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (3,639)
  (3,639)
 
    
    
    
    
    
    
    
    
    
Equity component of convertible senior notes, net of issuance costs
  - 
  - 
  - 
  - 
  - 
  - 
  7,745,625 
  - 
  7,745,625 
 
    
    
    
    
    
    
    
    
    
Issuance of common stock for restricted stock units
  - 
  - 
  - 
  - 
  12,675 
  13 
  (13)
  - 
  - 
 
    
    
    
    
    
    
    
    
    
Beneficial conversion feature on convertible notes
  - 
  - 
  - 
  - 
  - 
  - 
  495,185 
  - 
  495,185 
 
    
    
    
    
    
    
    
    
    
Conversion of preferred shares to common stock
  (1,317,329)
  (1,317)
  - 
  - 
  65,866 
  66 
  1,251 
  - 
  - 
 
    
    
    
    
    
    
    
    
    
Issuance of common stock
  - 
  - 
  - 
  - 
  158,825 
  159 
  15,173,268 
  - 
  15,173,427 
 
    
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  - 
  - 
  3,836,518 
  - 
  3,836,518 
 
    
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (45,177,053)
  (45,177,053)
 
    
    
    
    
    
    
    
    
    
Balance, December 31, 2019
  - 
 $- 
  50,000 
 $50 
  1,111,681 
 $1,112 
 $92,268,213 
 $(79,381,806)
 $12,887,569 
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(9,725)$(24,999)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization6,103 2,143 
Amortization of debt discount4,386 2,027 
Forgiveness of PPP Loan(2,682)— 
Bad debt expense— 311 
Stock based compensation expense29,219 2,978 
Impairment loss on inventory— 11,738 
Impairment loss on property and equipment— 178 
Loss (gain) from change in value of derivatives8,799 (11)
Gain from extinguishment of debt— (188)
Deferred taxes(22,545)— 
Changes in operating assets and liabilities:
Increase (decrease) in accounts receivable(9,756)(1,236)
(Increase) decrease in inventory(53,226)24,282 
Increase in prepaid expenses and other current assets(1,102)(2,236)
(Increase) decrease in other assets(4,528)87 
Increase in other liabilities4,748 720 
Increase (decrease) in accounts payable and accrued liabilities3,013 1,349 
Increase in floor plan trade note borrowings15,119 — 
Net cash (used in) provided by operating activities(32,177)17,143 
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used for acquisitions; net of cash received(371,314)— 
Proceeds from sales of property and equipment— 38 
Technology development(1,871)(2,145)
Purchase of property and equipment(5,646)(175)
Net cash used in investing activities(378,831)(2,282)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible note— 8,272 
Proceeds from senior secured debt261,451 — 
Repayments of notes payable(10,413)(1,768)
Increase (decrease) in borrowings from non-trade floor plans17,187 (40,533)
Proceeds from PPP Loan— 5,178 
Proceeds from sale of common stock191,241 10,780 
Net cash provided by (used in) financing activities459,466 (18,071)
NET CHANGE IN CASH48,458 (3,210)
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD3,516 6,726 
CASH AND RESTRICTED CASH AT END OF PERIOD$51,974 $3,516 
See Accompanying Notes to Financial Statements.
F-11



RumbleOn, Inc.
Consolidated Statements of Cash Flows
For the Two Years Ended December 31, 2019 and 2018
 
 
2019
 
 
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss
 $(45,177,053)
 $(25,181,817)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation and amortization
  1,786,426 
  984,006 
Amortization of debt discount
  1,664,000 
  510,139 
Bad debt expense
  1,123,739 
  33,326 
Stock based compensation expense
  3,836,518 
  1,657,680 
Loss from extinguishment of debt
  1,499,250 
  - 
Goodwill impairment
  1,850,000 
  - 
Gain from change in value of derivatives
  (1,302,500)
  - 
Changes in operating assets and liabilities:
    
    
Decrease (increase) in accounts receivable
  2,037,023 
  (319,335)
(Increase) in inventory
  (2,327,754)
  (1,717,504)
(Increase) Decrease in prepaid expenses and other current assets
  (113,529)
  340,483 
(Increase) in other assets
  (135,645)
  (51,485)
(Decrease) increase in accounts payable and accrued liabilities
  (5,031,073)
  152,336 
Increase in accrued interest payable
  543,268 
  172,083 
Decrease in other liabilities
  - 
  (32,665)
Net cash used in operating activities
  (39,747,330)
  (23,452,753)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Net cash used for acquisitions
  (835,000)
  (15,395,251)
Proceeds from sales of property and equipment
  169,268 
  - 
Technology development
  (3,085,743)
  (2,162,707)
Purchase of property and equipment
  (119,748)
  (6,409)
Net cash used in investing activities
  (3,871,223)
  (17,564,367)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Proceeds from notes payable and convertible debt
  27,455,537 
  9,227,035 
Repayments for notes payable
  (10,857,500)
  - 
Net proceeds from lines of credit
  2,788,469 
  5,302,355 
Proceeds from sale of common stock
  15,173,427 
  33,101,980 
Net cash provided by financing activities
  34,559,933 
  47,631,370 
 
    
    
NET CHANGE IN CASH
  (9,058,620)
  6,614,250 
 
    
    
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD
  15,784,902 
  9,170,652 
 
    
    
CASH AND RESTRICTED CASH AT END OF PERIOD
 $6,726,282 
 $15,784,902 
See Accompanying Notes to Financial Statements.

Notes tothe Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 1 –DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
RumbleOn, Inc. (the "Company") was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. ("Smart Server"). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc.
Description of Business
In July 2016, Berrard Holdings Limited Partnership ("Berrard Holdings") acquired 99.5%RumbleOn, Inc. was incorporated in October 2013 under the laws of the common stockState of Nevada. We are the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commercenation’s first Omnichannel marketplace platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company's goal ispowersports, leveraging proprietary technology to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. While the Company's initial customer facing emphasis through most of 2018 was on motorcycles and other powersports the Company continues to enhance its platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks, and via itssupply chain from acquisition of Wholesale,supply through distribution of retail and wholesale. RumbleOn, Inc. in October 2018,provides an unparalleled technology suite, national footprint of physical locations, and full line manufacturer representation to transform the Company is making a concerted effort to grow its carsentire customer journey and light truck categories.
On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder," and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving the merger as a wholly-owned subsidiary of the Company (the "Wholesale Transaction").  On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" containedexperience worldwide through technology. Headquartered in the Merger Agreement.
Also, on October 26, 2018, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the "Express Transaction," and together with the Wholesale Transaction, the "Transactions") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express"). The Transactions were both completed on October 30, 2018 (the "Acquisition Date"). As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of the Company's Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the "Series B Preferred"). As consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. WholesaleDallas Metroplex, RumbleOn, Inc. is one ofrevolutionizing the largest independent distributors of pre-ownedcustomer experience for outdoor enthusiasts across the country and making powersport vehicles accessible to more people, in the United States and Wholesale Express, LLC is a related logistics company.
more places than ever before. On February 3, 2019, the Company completed the acquisitionAugust 31, 2021 (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"“Closing Date”), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) a fifteen-month $500,000 promissory note (the "Promissory Note") in favor of the Seller, plus (iii) a three-year $1,536,000 convertible promissory note (the "Convertible Note") in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock (the "Earn-Out Shares") for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to a promissory note payable to Seller (the "Second Convertible Note").
Serving both consumers and dealers, through its online marketplace platform, the Company makes cash offers for the purchase of pre-owned vehicles. In addition, the Company offers a large inventory of pre-owned vehicles for sale along with third-party financing and associated products. The Company's operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with its regional partners, which are primarily auctions. The Company utilizes regional partners in the acquisition of pre-owned vehicles to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs.

Our business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC ("NextGen"). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn, Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure.
The COVID-19 situation has created an unprecedented and challenging time. The Company’s current focus is on positioning the Company for a strong recovery when this crisis is over. The Company has taken steps to reduce its inventory and align its operating expenses to the state of the business. The Company plans to continue to operate as permitted to support its customers’ needs for reliable vehicles and to provide as many jobs as possible for its associates. Effective April 9, 2020, 169 associates were temporarily laid-off, however the Company’s receipt of PPP funds, as discussed in Note 19 - Subsequent Events will allow the Company to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation, future government mandates, as well as future business conditions. The Company will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce its operating expenses as the Company is able. However, the Company expects that the consequences of the COVID-19 outbreak will likely have a significant negative impact onInc. completed its business revenue, results of operations, financial condition, and liquidity.
combination with RideNow Powersports, the nation's largest powersports retailer group (“RideNow”) (refer to Note 2 - Acquisition).
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All of the Company’s subsidiaries are wholly owned.The consolidated financial statements include the accounts of RumbleOn Inc.the Company and its wholly owned subsidiaries (the Company). subsidiaries. All significant intercompany accountsbalances and material intercompany transactions have been eliminated.
Liquidity
We have incurred losses and negative cash flow from operations since inception through December 31, 2019 and expect to incur additional losses and negative cash floweliminated in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit and Note 9 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans.  As of May 28, 2020, we had approximately $15,000,000 available under our NextGear Credit Line that we may draw against through December 31, 2020 to fund future vehicle inventory purchases, as described further in Note 8 — Notes Payable and Lines of Credit.
Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line, proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including temporarily laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of May 28, 2020, the Company has $9,000,000 of unrestricted cash and has approximately $15,000,000 of remaining availability under the NextGear Credit.
The Company’s consolidated financial statements have been prepared assuming that will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that we will be able to generate sufficient liquidity from the measures described above, our current circumstances including uncertainties due to Covid-19 pandemic raise substantial doubt about our ability to operate as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates
consolidation. The preparation of these consolidated financial statements in conformity with U.S. GAAPgenerally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions that affect the reported amounts of assets, liabilities, revenues and estimates by management that have a material impact onexpenses and the carrying value of certain assets and liabilities, disclosuresdisclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management's experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actualliabilities. Actual results could differ materially from these judgments andthose estimates. In particular, the novel COVID-19coronavirus (“COVID-19”) pandemic and the resulting adverse impacts to global economic conditions, as well as ourthe Company’s operations, may impact future estimates including, but not limited to, the allowance for doubtful accounts, inventory valuations, fair value measurements, asset impairment charges, the effectiveness of the company’s hedging instruments, deferred tax valuation allowances, and discount rate assumptions. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Amounts and percentages may not total due to rounding.
Cash and Cash Equivalents
Earnings (Loss) Per Share
The Company followsconsiders all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of December 31, 2021, and 2020, the FASB Accounting Standards Codification ("ASC") Topic 260-Earnings per share. Basic earnings per common share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Common share and dilutive common share equivalents include: (i) Class A common: (ii) Class B common; (iii) Class B participating preferred shares; (iv) restrictive stock units; (v) stock options; (vi) warrants to acquire Class B common stock; and (vii) shares issued in connection with convertible debt.
Revenue Recognition
Revenue for our powersports and automotive segments is derived from our online marketplace and auctions and primarily includes the sale of pre-owned vehicles to consumer and dealers.
Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States.
We adopted ASC 606, Revenue from Contracts with Customers on January 1, 2018 using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which we historically recognized revenue, the adoption of ASC 606Company did not have a material impactany investments with maturities greater than three months. At times, the Company has cash balances in domestic bank accounts that exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses related to these cash concentrations. The Company only uses highly rated financial institutions to hold its cash deposits.
Restricted Cash
Amounts included in restricted cash primarily represent the deposits required under the Company's short-term revolving facilities and any undistributed amounts collected on the amount or timingfinance receivables pledged under the Company's finance receivable facilities as explained in Note 9- Notes Payable and Lines of our revenue recognition,Credit.
Accounts Receivable, Net
Accounts receivable, net of an allowance for doubtful accounts, includes certain amounts due from third-party finance providers and we recognized no cumulative effect adjustment upon adoption.
For vehicles sold at wholesale to dealers we satisfy our performance obligation whencustomers, and other miscellaneous receivables.The allowance for doubtful accounts is estimated based on historical experience and trends. Accounts receivable, net of an allowance for doubtful accounts, includes certain amounts due from customers. The Company estimates the wholesale purchaser obtains controlallowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the underlying vehicle, whichoutstanding balances. Ultimately, actual results could differ from these assumptions.
Inventory
Vehicle inventory is upon delivery when the transferaccounted for pursuant to ASC 330, Inventory and consists of title, risksvehicles held for sale or currently undergoing reconditioning and rewards of ownership and control pass to the dealer. We recognize revenueis stated at the amount we expectlower of cost or net realizable value (“NRV”). Vehicle inventory cost is determined by specific identification. Parts, labor and overhead costs associated with reconditioning vehicles, as well as other incremental expenses associated with acquiring and reconditioning vehicles, are included in inventory. Each reporting period,
F-12


the Company recognizes any necessary adjustments to receive for the usedreflect vehicle which is the fixed price determinedinventory at the auction. The purchase pricelower of the wholesale vehicle is typically due and collected within 30 dayscost or NRV through cost of delivery of the wholesale vehicle.
For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. Theaccompanying Consolidated Statements of Operations.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the shorter of the asset’s estimated useful life or the lease term, if applicable.
Estimated Useful LivesLife
Buildings25 years
Leasehold Improvements15 years
Furniture, fixtures and equipment3-15 years
Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of consideration received for used vehicle salesan asset or asset group may not be recoverable. Impairments are recognized when the sum of undiscounted estimated cash flows expected to consumers includes noncash consideration representingresult from the use of the asset is less than the carrying value of trade-in vehicles, if applicable,the asset. Costs of significant additions, renewals, and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. See Note 6 — Property and Equipment, Net for additional information on property and equipment.
Technology Development Costs
Technology development costs are accounted for pursuant to ASC 350, Intangibles - Goodwill and Other. Technology development costs include internally developed software and website applications that are used by the Company for its own internal use and to provide services to its customers, which include consumers, dealer partners and ancillary service providers. Technology and content costs for design, maintenance and post-implementation stages of internal-use software and general website development are expensed as stated inincurred. For costs incurred to develop new website functionality as well as new software products and significant upgrades to existing internally used platforms or modules, capitalization begins during the contract. Priorapplication development stage and ends when the software is available for general use. Capitalized technology development is amortized on a straight-line basis over periods ranging from three to the deliveryfive years. The Company will perform periodic assessment of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. In future periods additional provisions may be necessary dueuseful lives assigned to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers.capitalized software applications.
Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as risks and rewards of transportation of the vehicle are transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross.

Purchase Accounting for Business Combinations
Business acquisitions are accounted for under the acquisition method of accounting, whereby the Company measures and recognizes the fair value of assets acquired and liabilities assumed at the date of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets. The Company accounts for acquisitionsfair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by allocatingmanagement. Any excess of purchase price over the fair value of the consideration transferrednet tangible and intangible assets acquired is allocated to goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the fair value ofacquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed onwith the datecorresponding offset to goodwill.Upon conclusion of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the datemeasurement period or final determination of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the datevalues of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition andassets acquired or liabilities assumed, whichever comes first, any subsequent changes in the fair valueadjustments are recorded through earnings each reporting period.to our consolidated statements of comprehensive income. During the year ended December 31, 2019,2021, the Company finalizedcontinued its assessment of the preliminary purchase price allocation recorded at the acquisition date for Wholesale ExpressRideNow and made a measurement period adjustment to the preliminary purchase price allocation which resulted in an increase to inventory of $1,768.
We use the income approach to determine the fair value of certain identifiable intangible assets including franchise rights. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a decrease in goodwillpresent value. We base our assumptions on estimates of $334,861. The Company made this measurement period adjustmentfuture cash flows, expected growth rates, expected retention rates, etc. We base the discount rates used to reflect facts and circumstances related to accounts receivable and accounts payable that existedarrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors. We believe the estimated purchased franchise rights, non-competition agreements and other intangible asset amounts so determined represent the fair value at the date of acquisition and diddo not result from intervening events subsequent to such date.exceed the amount a third-party would pay for the assets.
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Goodwill
and Intangible Assets
Goodwill represents the excess purchase priceof the consideration transferred over the fair value of netthe identifiable assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged.
and liabilities assumed in business combinations. Goodwill is not amortized but tested for impairment at the reporting unit level annually onas of December 31, and upon the occurrence ofor whenever events or changes in circumstances indicate that an indicator of impairment.impairment may exist. We have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill using a quantitative assessment process. Our operations are organized by management into operating segments by line of business. We have determined that we have three3 reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution principally of motorcycles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services between dealerships and auctions.Each oflogistics. Management analyzes goodwill associated with these segments are considered separate reporting units for purposes of goodwill testing.Our vehicle logistics and transportation service reportable segment has been determinedpotential impairment. The Company first assesses qualitative factors to represent one operating segment and reporting unit.
During 2019, for the three reporting units we performed quantitative impairment testing ofdetermine if it is more likely than not that the fair value of oura reporting units using an income and market valuation approach. The income valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows of our business usingunit is less than its carrying amount. No impairment charges related to goodwill were recognized during the weighted average cost of capital as the discount rate. The market valuation approach estimates our enterprise value by applying a cash earnings multiple and selecting a multiple that is reasonable compared to recent market transactions completed in the industry. As part of that assessment, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization. We believe this reconciliation process is consistent with a market participant perspective. This consideration would also include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest, and other significant assumptions including revenue and profitability growth, profit margins, residual values and the cost of capital. For the yearyears ended December 31, 2019, we2021 or 2020.
Intangible assets are recognized an impairment lossand recorded at their acquisition date fair values. Indefinite-lived intangible assets consist primarily of franchise rights, and definite-lived intangible assets consist primarily of non-compete agreements, which are amortized on goodwill of $1,850,000, which is recorded in selling, general and administrative expenses ina straight-line basis over the Consolidated Statement of Operations.relevant contractual terms. No impairment charges related to intangible assets were recognized in 2018.
during the years ended December 31, 2021 or 2020.
Leases
Effective January 1, 2019, theThe Company adopted ASC 842, Leases. In accordance with ASC 842, the Company first determines if an arrangement containsis a lease at inception by evaluating if the asset is explicitly or implicitly identified or distinct, if the Company will receive substantially all of the economic benefit or if the lessor has an economic benefit and the classification of that lease, if applicable, at inception. This standard requiresability to substitute the recognition of right-of-use ("ROU") assets and lease liabilities for the Company's operating leases. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component. The Company has also elected not to recognize a lease liability or ROU asset for leases with a term of 12 months or less and recognize lease payments for those short-term leases on a straight-line basis over the lease term in the Consolidated Statements of Operations. Operating leases are included inasset. Right-of-use assets, Accounts payable and accrued liabilities and Operating lease liabilities, long-term portion in the Consolidated Balance Sheets.

ROU(“ROU”) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments underarising from the lease. ROU assets andThe Company assesses whether the lease is an operating or finance lease at its inception. Operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. TheTo calculate the present value, the Company uses the implicit rate withinin the Company's leases is generally not determinable and therefore thelease when readily determinable. The incremental borrowing rate atis based on collateralized borrowings of similar assets with terms that approximate the lease commencement date is utilized to determine the present value of lease payments. The determination of the incremental borrowing rate requires judgment. Management determines the incremental borrowing rate for each lease using the Company's estimated borrowing rate,term when available and when collateralized rates are not available, it uses uncollateralized rates with similar terms adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease.fact that it is an unsecured rate. The operating lease ROU asset also includesis the initial lease liability adjusted for any lease prepayments, offsetinitial indirect costs incurred by the Company, and lease incentives. Certain ofThe Company's operating leases are included in right-of-use assets, current portion lease liabilities, and operating lease liabilities on the accompanying consolidated balance sheets. The Company's finance leases include options to extend or terminateare included in property and equipment and financing lease liabilities on the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when the Company is reasonably certain that the option will be exercised. An option to terminate is considered unless the Company is reasonably certain the option will not be exercised.accompanying consolidated balance sheets.
Other Assets
Other assets consist of various items, including, among other items debt issuance with an debt instruments.
Included in "Other assets" on the Company's Consolidated Balance Sheets are amounts related to acquired internet domain names which are considered to be an indefinite lived intangible assets. Indefinite lived intangible assets are testedAccrued Liabilities
Accrued liabilities consist of various items payable within one year, including, among other items, accruals for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. There was no impairmentcapital expenditures, sales tax, compensation and benefits, vehicle licenses and fees, interest expense, reserves for returns and cancellations, and advertising expenses.
Revenue Recognition
The Company’s revenue consists primarily of indefinite lived assetspre-owned and wholesale vehicle sales as of December 31, 2019well as vehicle logistics and 2018.
Long-Lived Assets
Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. The Company recorded no impairment charges on property and equipment during the years ended December 31, 2019 and 2018.transportation services. See Note 5 — Property and Equipment, Net3 – Revenue for additional information on property and equipment.our significant accounting policies related to revenue recognition.
Cost of Revenue
Technology Development Costs
Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. Technology development costs include internally developed software and website applications that are used by the Company for its own internal use and to provide services to its customers, which include consumers, dealer partners and ancillary service providers. Under the termsCost of these customer arrangements the Company retains the revenue generating technology and hosts the applications on its servers and mobile applications. The customer does not have a contractual right to take possession of the software during the term of the arrangement and are not permitted to run the software itself or contract with another party unrelated to the entity to host the software. Technology development costs consist principally of (i) development activities including payroll and related expenses billed by a third-party contractor involved in application, content, production, maintenance, operation, and platform development for new and existing products and services, (ii) technology infrastructure expenses, and (iii) costs of Company employees devoted to the development and maintenance of software products. Technology and content costs for design, maintenance and post-implementation stages of internal-use software and general website development are expensed as incurred. For costs incurred to develop new website functionality as well as new software products and significant upgrades to existing internally used platforms or modules, capitalization begins during the application development stage and ends when the software is available for general use. Capitalized technology development is amortized on a straight-line basis over periods ranging from 3 to 7 years. The Company will perform periodic assessment of the useful lives assigned to capitalized software applications. Additionally, the Company from time-to-time may abandon additional development activities relating to specific software projects or applications and charge accumulated costs to technology development expense in the period such determination is made.
Vehicle Inventory
Vehicle inventory is accounted for pursuant to ASC 330, Inventory and consists ofvehicle sales includes the cost to acquire vehicles and recondition a pre-owned vehicle.the reconditioning and transportation costs associated with preparing the vehicles for resale. Reconditioning costs are billed by third-party providers and includesinclude parts, labor, overhead costs, and other vehicle repair expenses directly attributable to a specific vehicle. Pre-owned inventory is stated at the lowervehicles. Transportation costs consist of cost or net realizable value. Pre-owned vehicle inventory cost is determined by specific identification. Net realizable value is the estimated selling price less costs incurred to complete, dispose and transport the vehicles. Selling prices are derivedvehicles from historical data and trends, such as sales price and inventory turn timesthe point of similar vehicles, as well as independent market resources. Each reporting period, the Company recognizesacquisition. Cost of revenue also includes any necessary adjustments to reflect pre-owned vehicle inventory at the lower of cost or net realizable value throughvalue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, transportation cost of revenueassociated with selling vehicles, establishing our dealer partner arrangements, and other corporate
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overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development.
Advertising and Marketing Expenses
Advertising and marketing costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Advertising and marketing expenses were $14,425 and $5,287 for the years ended December 31, 2021 and 2020, respectively.
Stock-Based Compensation

Accounts Receivable, Net
Accounts receivable,Stock-based compensation represents the cost related to stock-based awards granted to employees and non-employee directors. The Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award, and recognizes the cost on a straight-line basis, net of an allowance for doubtful accounts, includes certain amounts due from customers.estimated forfeitures, over the grantee’s requisite service period, which is generally the vesting period of the award. The Company estimates the allowancefair value of stock options using the Black-Scholes option valuation model while market-condition based awards are estimated using a Monte Carlo simulation model as these awards are tied to a market condition. Key assumptions used in estimating the fair value of options are dividend yield, expected volatility, risk-free interest rate and expected term.
We record deferred tax assets for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysisawards that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from these assumptions. The allowance for doubtful accounts was approximately $1,034,919 and $176,190 as of December 31, 2019 and 2018, respectively.
Cash and Cash Equivalents
The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of December 31, 2019, and 2018, the Company did not have any investments with maturities greater than three months. At times, the Company has cash balancesresult in domestic bank accounts that exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses related to these cash concentrations.
Restricted Cash
In connection with the execution of the Inventory Financing and Security Agreement (the "Credit Facility") by and among the Company's subsidiary, RMBL Missouri, LLC ("RMBL MO"), Ally Bank ("Ally") and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10.0% ofdeductions on our income tax returns, based on the amount of compensation expense recognized and the Company's approvedstatutory tax rate in the jurisdiction in which we will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and available credit line under the Credit Facilityactual tax deduction reported on the income tax return are recorded in income tax expense. See Note 11 – Stockholders’ Equity for additional information on stock-based compensation.
Defined Contribution Plan
The Company sponsors the RumbleOn, Inc. 401(k) Plan and 2) no greater than 25.0% of the total principal amount owed to Ally for inventory financed under the Credit Facility.
In connection with the inventory financing contractRumbleOn 401(k) Plan (the "NextGear Facility""Retirement Savings Plans"), entered into byfor eligible employees. Employees electing to participate in the Company, its wholly owned subsidiary RMBL Tennessee, Inc, Wholesale, Inc. and NextGear Capital, Inc. ("NextGear"), dated October 30, 2018, Wholesale, Inc and NextGear entered into a Reserve Agreement requiring Wholesale, IncRetirement Savings Plans may contribute up to pay to NextGear $5,500,000 (the "Reserve") to be collateral and security for Wholesale Inc.'s liability under the NextGear Facility as well as any amounts owed by Wholesale, Inc. to NextGear and its Affiliates, and each75% of their respective directors, officers, principals, trustees, partners, shareholders or other holdersannual eligible compensation. The Company provides matching contributions of any ownership interest, as25% match for employee contributions, up to a maximum matching contribution of $2 thousand per employee annually. Employer contributions to the case may be, employees, representatives, attorneysplan, net of forfeitures, were approximately $722 for the year ended December 31, 2021. There was no employer matching in the year-ended December 31, 2020. Employer contributions are included in selling, general, and agents.  NextGear is not required to pay Wholesale Inc. interest onadministrative expenses in the Reserve balance.  Upon the satisfactionaccompanying consolidated statements of all obligations and the termination by NextGear of the NextGear Facility, NextGear will return to Wholesale, Inc., upon its written request to NextGear no earlier than ten (10 business days from the date the obligations were indefeasibly paid and satisfied in full and the NextGear Facility and terminated by Lender.
Property and Equipment, Net
Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred.
operations.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 20192021 and December 31, 2018.2020. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
ASC Topic 820-10-30-2,-FairFair Value Measurement establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are from sources independent of the Company, whereas unobservable inputs reflect the Company'sCompany's assumptions about the inputs market participants would use in pricing the asset or liability developed on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1: The preferred inputs to valuation efforts are "Unadjusted quoted prices in active markets for identical assets or liabilities," with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
liabilities.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs otherOther than quoted market prices included in Level 1, that are observable in the market for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are Level 2 inputs.not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: If inputs from levels 1Inputs are unobservable and 2 are not available, FASB acknowledgesreflect management’s estimates of assumptions that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as "unobservable," and limits theirmarket participants would use by saying they "shall be used to measure fair value to the extent that observable inputs are not available." This category allows "for situations in which there is little, if any, market activity forpricing the asset or liability at the measurement date". Earlier in the standard, FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.liability.
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Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging(“ASC 815”) to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20; 470-20, Debt with Conversion and Other Options.Options (“ASC 470-20”). Under the ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost. The effect of ASC 470-20 on the accounting for our convertible debt instruments is that the equity component is required to be included in the additional paid-in capital section of stockholders' equity on the consolidated balance sheets and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the convertible debt to their face amount over the term of the convertible debt.
From time to time, the Company has issued convertible notes that have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20. The Beneficial Conversion Feature ("BCF"(“BCF”) of a convertible security is normally characterized as the convertible portion or feature of certain securities that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible security when issued and also records the estimated fair value of any conversion feature issued with those securities. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a)an open-form binomial option pricing model (“lattice model”) that simulates, in a non-linear, risk-neutral framework, the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation.
stock price of the Company’s common stock.
Common Stock Warrants
The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in Accounting Standards Codification (ASC) 815, Derivatives and Hedging – Contracts in Entity's Own Equity(“ASC 815”), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. Any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) provided that such warrants are indexed to the Company'sCompany's own stock is classified as equity. The Company classifies as assets or liabilities any warrants that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company'sCompany's control), (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify for the scope exception. The Company assesses classification of its common stock warrants at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company'sCompany's freestanding derivatives financing satisfy the criteria for classification as equity instruments as these warrants do not contain cash settlement features or variable settlement provision that cause them to not be indexed to the Company'sCompany's own stock. There are 16,530 warrants to purchase common stock outstanding at December 31, 20192021 consisting of: (i) 10,913 warrants issued to underwriters in connection with the October 23, 2017 public offering of Class B common stock; (ii) 5,617 warrants issued to Hercules in connection with the 2018 financings.
During the year ended December 31, 2021, the Company issued warrants (the “Oaktree Warrants”) to purchase $40,000 of shares of Class B common stock to Oaktree Capital Management, L.P. and its lender affiliates connection with providing the debt financing for the RideNow transaction. In July 2017,August 2021, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivativesexercise price of the warrants was set at $33.00 per share and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features. The amendmentsthe aggregate number of this ASU updateshares of Class B common stock underlying the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity's own stock. The guidance in this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2017-11 during 2018. The adoption of this standard did not have a material effect on the Company's Consolidated Financial Statements.

Oaktree Warrants was 1,212,121.
Debt Issuance Costs
Debt issuance costs are accounted for pursuant to FASB ASU 2015-032015-3, "SimplifyingSimplifying the Presentation of Debt Issuance Costs" ("Costs (“ASU 2015-03"2015-3”). ASU 2015-032015-3 requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liability, consistent with the presentation of debt discounts.
Cost of Revenue
Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of revenue also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, transportation cost associated with selling vehicles, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Advertising and marketing expenses was $18,228,262 and $11,457,572 for the years ended December 31, 2019 and 2018, respectively.
Stock-Based Compensation
On June 30, 2017 the Company's shareholders approved a Stock Incentive Plan (the "Plan") reserving for issuance under the Plan in the form of restricted stock units ("RSUs"), stock options ("Options"), Performance Unites, and other equity awards (collectively "Awards") for our employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual") of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstanding shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment"). To date, the vesting of RSU and Option awards for most employees is service / time based, however some senior level employees have been granted awards that include a mix of service based, performance based and market condition-based vesting. Substantially all service/time based RSU and Option awards issued typically vest over a three-year period approximating the following vesting schedule: (i)20.0% vesting anywhere from eight-months to thirteen month after grant date, (ii) an additional 30.0% during the subsequent twelve months of the initial vesting,and (iii) the final 50.0% during the following twelve months. All performance-based awards and market condition-based awards granted to date have vesting schedules dependent on achieving a particular objective within sixteen (16) months. The Company estimates the fair value of awards granted under the Plan on the date of grant. Fair value of all awards is based on the share price of the Class B Common Stock on the date of the award, and in the case of options, calculated using the Black-Scholes option valuation model. During the year ended December 31, 2019, the Company granted 80,050 RSUs under the Plan to members of the Board of Directors, officers and employees. More specifically, the Company granted to certain members of management an aggregate of (i) 12,213 performance-based awards that vest after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue of $900,000,000 at any time through September 30, 2020, and (ii) 36,938 market-based awards. These awards were terminated on May 27, 2020. Compensation expense for the year ended December 31, 2019 was $3,836,518 and is included in selling, general and administrative expenses in the consolidated statements of operations. Compensation expense for the year ended December 31, 2018 was $1,657,680 and is included in selling, general and administrative expenses in the consolidated statements of operations. At December 31, 2019, total unrecognized compensation cost related to RSUs was $5,450,009 and the weighted average period over which this cost is expected to be recognized is approximately 0.8 years.

Income Taxes
The Company follows ASC Topic 740, Income Taxes(“ASC 740”), for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized,
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a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent50% likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2019,2021, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a fifty percent50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax positions within the next 12 months.
Loss Per Share
The Company follows the FASB Accounting Standards Codification (“ASC”) Topic 260, Earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Common share and dilutive common share equivalents include: (i) Class A common: (ii) Class B common; (iii) Class B participating preferred shares; (iv) restrictive stock units; (v) stock options; (vi) warrants to acquire Class B common stock; and (vii) shares issued in connection with convertible debt.
Recent Pronouncements
Adoption of New Accounting Standards.Standards.
In January 2017,December 2019, the FASB issued new guidance, ASU No. 2017-4, Intangibles–Goodwill and Other2019-12, Income Taxes (Topic 350)740): Simplifying the testAccounting for Goodwill ImpairmentIncome Taxes (“ASU 2019-12”). ThisASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance simplifies subsequent goodwill measurement by eliminating Step 2 from the goodwill impairment test. Under this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019 with early adoption permitted for annual goodwill impairment tests performed after January 1, 2017. The standard must be applied prospectively. Upon adoption, the standard will impact how the Company assesses goodwill for impairment. improve consistent application. The Company adopted ASU 2017-04 on2019-12 for its fiscal year beginning January 1, 20182021 and it did not have a material effect on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires that the rights and obligations created by leases with a duration greater than 12 months be recorded as assets and liabilities on the balance sheet of the lessee. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has adopted this standard as of January 1, 2019 using the modified retrospective approach for all leases entered into before the effective date. The Company has also elected the option, as permitted in ASU 2018-11, Leases (Topic 842): Targeted Improvements , whereby initial application of the new lease standard would occur at the adoption date and a cumulative-effect adjustment, if any, would be recognized to the opening balance of retained earnings in the period of adoption. For comparability purposes, the Company will continue to comply with previous disclosure requirements in accordance with existing lease guidance for all periods presented in the year of adoption. The Company has elected the practical expedients permitted under the transition guidance which enabled the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and, (3) not to reassess the treatment of initial direct costs for existing leases. In addition, the Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption of this standard on January 1, 2019, the Company recognized a total operating lease liability in the amount of $3,118,038, representing the present value of the minimum rental payments remaining as of the adoption date and a right-of-use asset in the amount of $3,114,399. The cumulative effect of this accounting change of $3,639 is included in the accumulated deficit for the year ended December 31, 2019. The standard did not have a material impact on the Company's consolidated statements of operations or statements of cash flows.

In August 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-15) related to the classification of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, settlement of zero-coupon debt, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We adopted this pronouncement for our fiscal year beginning January 1, 2018, and it did not have a material effect on its consolidated financial statements.
In May 2014, the Financial Accounting Standards Board ("FASB") issued a new accounting standard (ASC Topic 606) that amends the accounting guidance on revenue recognition. The new accounting standard is intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard's guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract.
The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). The Company adopted ASC 606,Revenue from Contracts with Customerson January 1, 2018 using the modified retrospective method. Based on the manner in which the Company historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of its revenue recognition and the Company recognized no cumulative effect adjustment upon adoption.
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact on its consolidated financial statements and plans to adopt this ASU for its fiscal year beginning January 1, 2020. Finance receivables originated in connection with the Company's vehicle sales are held for sale and are subsequently sold. At December 31, 2019 and 2018, finance receivables were $147,893 and $148,378, respectively.
NOTE 2 –ACCOUNTS RECEIVABLE, NET– ACQUISITIONS
RideNow Transaction
Accounts receivable consistsOn the Closing Date, RumbleOn completed its business combination with RideNow (“RideNow Transaction”). Pursuant to the Plan of Merger and Equity Purchase Agreement as amended (the “RideNow Agreement”), on the Closing Date, there were both mergers and transfers of ownership interest comprising in aggregate the RideNow Transaction. For the mergers, 5 newly-created RumbleOn subsidiaries were merged with and into 5 RideNow entities (“Merged RideNow Entities”) with the Merged RideNow Entities continuing as the surviving corporations and with the Company obtaining ownership of these entities through these mergers and the transfers noted below.Merged RideNow Entities owned powersports retail locations approximately 30% of RideNow retail location. For the transfers of ownership interest, the Company acquired all the outstanding equity interests of 21 entities comprising the remaining 70% of the following as of December 31:RideNow’s retail locations (“Acquired RideNow Entities”, and together with the Merged RideNow Entities, the “RideNow Entities”) that directly or indirectly operate the remaining RideNow powersports retail locations.
 
 
2019
 
 
2018
 
Trade
 $9,369,733 
 $8,264,045 
Finance
  147,893 
  148,378 
Other
  - 
  229,577 
 
  9,517,626 
  8,642,000 
Less: allowance for doubtful accounts
  1,034,919 
  176,190 
 
 $8,482,707 
 $8,465,810 

NOTE 3 – INVENTORY
Inventory consists of the following as of December 31,
 
 
2019
 
 
2018
 
Pre-owned vehicles:
 
 
 
 
 
 
Powersport vehicles
 $10,365,050 
 $9,783,093 
Automobiles and trucks
  47,599,433 
  43,081,136 
 
  57,964,483 
  52,864,229 
Less: Reserve
  583,202 
  672,706 
 
 $57,381,281 
 $52,191,523 
NOTE 4 – ACQUISITIONS
On February 3, 2019, the Company completed the Autosport Acquisition pursuantPursuant to the Stock PurchaseRideNow Agreement, byon the Closing Date, the RideNow equity holders received cash consideration of $400,400 and among the Buyer, the Seller and Autosport. Aggregate consideration for the Autosport Acquisition consisted5,833,333 shares of (i) a closing cash payment of $600,000, plus (ii) the Promissory Note in favor of the Seller, plus (iii) the Convertible Note in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company'sRumbleOn’s Class B Common Stock, valued at $200,958 based on the close price of the Company’s Class B Common Stock on the Closing Date. The cash consideration of $400,400 includes funds against which the Company may make claims for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection withindemnification; this amount is included in consideration transferred. The cash consideration for the Autosport Acquisition,RideNow Transaction was funded from (i) the Buyer also paid outstanding debtCompany’s underwritten public offering of Autosport5,053,029 shares of $235,000Class B common stock, which resulted in net proceeds of approximately $154,443 (the “August 2021 Offering”), and assumed debt(ii) net proceeds of $257,933approximately $261,000 pursuant to the Second Convertible Note. The fair value of the contingent earn-out payment was considered immaterial at the date of acquisition and was excluded from the purchase price allocation. As of December 31, 2019, there have been no payments earned under the performance threshold. See Note 1 – Description of Business and Significant Accounting Policies for additional informationOaktree Credit Facility entered into on the Autosport Acquisition.Closing Date (as further described in Note 9 - Notes Payable and Lines of Credit, the (“Oaktree Credit Agreement”). The remaining funds received from these financing transactions were used for working capital purposes.

The allocation of the purchase price is based on the best information available to management. This allocation is provisional, as the Company is required to recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of February 3, 2019 that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The Company may adjust the preliminary purchase price allocation after obtaining additional information regarding asset valuation, liabilities assumed and revisions of previous estimates.
F-17


The following table summarizes the provisional consideration for the acquisitions:
Cash$400,400 
Class B Common Stock200,958 
Total provisional purchase price consideration$601,358 
The final purchase price allocation will be completed upon payment of final consideration for working capital and other adjustments. RideNow is included in the Powersports reporting segment, including goodwill, as the RideNow business is entirely within the Company’s Powersports segment. As of December 31, 2021, we have performed an initial valuation of the amounts below; however, our assessment of these amounts remains open for completion. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The final purchase price based onallocation may include changes to: (1) property and equipment; (2) right-of-use assets and lease liabilities; (3) deferred tax liabilities, net; (4) allocations to intangible assets as well as goodwill; (5) final consideration paid related to working capital and other adjustments; and (6) other assets and liabilities. We are required to finalize our purchase price allocations within one year after the estimatedClosing Date.
The following amounts represent the preliminary determination of the fair value of the acquired assets and assumed liabilities of Autosport as of December 31, 2019:
Purchase price consideration:
Cash
$835,000
$1,536,000 convertible note
1,536,000
$500,000 promissory note
500,000
$257,933 Promissory note
257,933
Total purchase price consideration
$3,128,933
Estimated fair value of assets:
Accounts receivable
3,177,660
Inventory
2,862,004
6,039,664
Estimated fair value of accounts payable and other
5,875,009
Excess of assets over liabilities
164,655
Goodwill
2,964,278
Total net assets acquired
$3,128,933

On October 26, 2018, we entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder", and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the merger (the "Wholesale Merger") of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company.  Also on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), with Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express").  On October 30, 2018, the Company completed the Wholesale Merger and Express Acquisition. Also, on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which we acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express. The Wholesale Merger and the Express Acquisition were both completed on October 30, 2018 (the "Wholesale Closing Date"). As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of our Series B Non-Voting Convertible Preferred Stock, par value $0.001. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments.
The following tables summarize the consideration paid in cash and equity securities for the acquisitions and the amount of identifiedidentifiable assets acquired and liabilities assumed from RideNow. Any potential adjustments made could be material in relation to the preliminary values presented below.
F-18


Estimated fair value of assets acquired:
Cash$34,454 
Contracts in transit10,878 
Accounts receivable10,124 
Inventory127,080 
Prepaid expenses1,785 
Right-of-use assets126,886 
Property & equipment15,509 
Franchise rights282,000 
Other intangible assets, net22,129 
Other assets119 
Total assets acquired630,964 
Estimated fair value of liabilities assumed:
Accounts payable, accrued expenses and other current liabilities43,409 
Notes payable - floor plan47,161 
Lease liabilities130,181 
Notes payable6,549 
Deferred tax liabilities30,548 
Other long-term liabilities6,210 
Total liabilities assumed264,058 
Total net assets acquired366,906 
Goodwill234,452 
Total consideration$601,358 
The Company assumed two promissory notes liabilities with aggregate principal and accrued interest of $2,200 as of the acquisition date:
 
 
Wholesale
 
 
Express
 
Issuance of shares
 $6,652,512 
 $- 
Cash paid
  12,353,941 
  4,000,000 
Total purchase price
 $19,006,453 
 $4,000,000 
 
    
    
Estimated fair value of assets:
    
    
Cash
  183,846 
  774,844 
Accounts receivable
  5,130,788 
  2,663,077 
Inventory
  47,639,354 
  - 
Prepaid expenses
  186,659 
  59,377 
Property & equipment
  617,422 
  14,702 
Due from Related party
  - 
  720,000 
Other Assets
  1,026,203 
  - 
 
  54,784,272 
  4,232,000 
 
    
    
Estimated fair value of liabilities assumed:
    
    
Accounts payable and other
  8,144,040 
  1,079,509 
Floor plan liability
  49,988,553 
  - 
Due to related party
  720,000 
  - 
 
  58,852,593 
  1,079,509 
 
    
    
Excess of (liabilities over assets) assets over liabilities
  (4,068,321)
  3,152,491 
 
    
    
Goodwill
  23,074,774 
  847,509 
Total net assets acquired
 $19,006,453 
 $4,000,000 
The Company finalized the purchase price allocationClosing Date due to entities controlled by William Coulter and/or Mark Tkach. See Footnote 18 for Express which resulted in a decrease in goodwillfurther details of $334,861 during the year ended December 31, 2019. The Company made this measurement period adjustment to reflect facts and circumstances thatthese 2 related to accounts receivable and accounts payable that existed at the acquisition date and did not result from intervening events subsequent to such date.
Supplemental pro forma unaudited information (unaudited)
party promissory notes.
The results of operations of Wholesale and Express sinceRideNow from the acquisition dateClosing Date are included in the accompanying Consolidated Financial Statements. Acquisition related costs of $4,281 were incurred for the year ended December 31, 2021 and are included in Selling, General and Administrative expenses in the Consolidated Statement of Operations. In addition, the Company elected to accelerate the vesting of restricted stock units (“RSUs”) and grant other stock awards in connection with the RideNow Transaction. The total value of these awards of $23,943 is reported within selling, general and administrative expense in the Consolidated Statement of Operations.
Supplemental pro forma information (Unaudited)
The following unaudited supplemental pro forma information presents the financial results as if the acquisitions of Wholesale, Express and Autosport were made as ofRideNow Transaction was completed at January 1, 20192020. Pro forma net income for the year ended December 31, 2019 and as2021 includes income tax benefit of January 1, 2018 for$2,706 reported in the year ended December 31, 2018.Consolidated Statements of Operations.
F-19


December 31,
20212020
Pro forma revenue$1,650,625 $1,348,211 
Pro forma net income$45,565 $18,854 
Net income per share-basic$6.58 $8.63 
Weighted average number of shares-basic6,920,318 2,184,441 
Net income per share-fully diluted$6.42 $5.75 
Weighted average number of shares-fully diluted7,099,041 3,279,699 

Pro forma adjustments for the year ended December 31, 20192021 and 2020, primarily include adjustmentsinclude:
December 31,
20212020
Stock compensation and other administrative costs$29,219 $3,175 
Depreciation and amortization$13,199 $13,607 
Interest expense$40,347 $47,312 
Income tax provision (benefit)$(2,706)$6,305 

NOTE 3 –REVENUE
Our revenue consists of new vehicles sales, retail and wholesale used vehicle sales, sales of finance and insurance products and sales of parts, service, accessories and apparel.
New and Used Powersports Vehicles
The Company sells new and used powersports vehicles. The transaction price for a powersports vehicle sale is determined with the customer at the time of sale. Customers often trade in their own powersports vehicle to reflect the: (i) amortizationapply toward the purchase of stock compensation expensea retail new or used powersports vehicle. The “trade-in” powersports vehicle is a type of $34,859;noncash consideration measured at fair value, based on external and (ii) interest expenseinternal market data for a specific powersports vehicle, and applied as payment of $8,906. Pro forma adjustmentsthe contract price for the purchased powersports vehicle.
When the Company sells a new or used powersports vehicle, transfer of control typically occurs at a point in time upon delivery of the vehicle to the customer, which is generally at the time of sale, as the customer is able to direct the use of and obtain substantially all benefits from the powersports vehicle at such time. Except for limited circumstances, the Company does not directly finance its customer’s purchases or provide leasing. In many cases, the Company arranges third- party financing for the retail sale or lease of powersports vehicles to customers in exchange for a fee paid to the Company by a third-party financial institution. The Company receives payment directly from the customer at the time of sale or from a third-party financial institution (referred to as contracts-intransit) within a short period of time following the sale. The Company establishes provisions, which are not significant, for estimated returns and warranties on the basis of both historical information and current trends.
Parts and Service
The Company sells parts and vehicle services related to customer-paid repairs and maintenance, repairs and maintenance under manufacturer warranties and extended service contracts, and collision-related repairs. The Company also sells parts through wholesale and retail counter channels.
Each repair and maintenance service is a single performance obligation that includes both the parts and labor associated with the vehicle service. Payment for each vehicle service work is typically due upon completion of the service, which is generally completed within a short period from contract inception. The transaction price for repair and maintenance services is based on the parts used, the number of labor hours applied, and standardized hourly labor rates. The performance obligation for repair and maintenance service are satisfied over time and create an asset with no alternative use and with an enforceable right to payment for performance completed to date. Revenue is recognized over time based on a direct
F-20


measurement of labor hours, parts and accessories that are allocated to open service and repair orders at the end of each reporting period. As a practical expedient, the time value of money is not considered since repair and maintenance service contracts have a duration of one year or less. The transaction price for wholesale and retail counter parts sales is determined at the time of sale based on the quantity and price of each product purchased. Payment is typically due at time of sale, or within a short period following the sale. The Company establishes provisions, which are not significant, for estimated parts returns based on historical information and current trends. Delivery method of wholesale and retail counter parts vary.
The Company generally considers control of wholesale and retail counter parts to transfer when the products are shipped, which typically occurs the same day as or within a few days of sale. The Company also offers customer loyalty points for parts and services for select franchises. The Company satisfies its performance obligations and recognizes revenue when the loyalty points are redeemed. Amounts deferred related to the customer loyalty programs are insignificant.
Finance and Insurance
The Company sells and receives commissions on the following types of finance and insurance products: extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, among others. The Company offers products that are sold and administered by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries.
Pursuant to the arrangements with these third-party providers, the Company sells the products on a commission basis. For the majority of finance and insurance product sales, the Company’s performance obligation is to arrange for the provision of goods and services by another party. The Company’s performance obligation is satisfied when this arrangement is made, which is when the finance and insurance product is delivered to the end customer, generally at the time of the vehicle sale. As agent, the Company recognizes revenue in the amount of any fee or commission to which it expects to be entitled, which is the net amount of consideration that it retains after paying the third-party provider the consideration received in exchange for the goods or services to be fulfilled by that party.
The Company’s customers are concentrated in the Sunbelt region. There are no significant judgements or estimates required in determining the satisfaction of the performance obligations or the transaction price allocated to the performance obligations. As revenue are recognized at a point-in-time, costs to obtain the customer (i.e. commissions) do not require capitalization.
Vehicle Logistics
Vehicle logistics revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The Company’s subsidiary, Wholesale Express, provides these services. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as risks and rewards of transportation of the vehicle are transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross.
Disaggregation of Revenue
The significant majority of the Company’s revenue is from contracts with customers. In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.

F-21


Revenue from contracts with customers consists of the following:

December 31,
20212020
Revenue
New vehicles$169,632 $— 
Used vehicles
Powersports153,671 46,654 
Automotive460,888 337,085 
Total used vehicles614,559 383,739 
Total new and used vehicles784,191 383,739 
Parts, service and accessories66,969 — 
Vehicle logistics43,878 31,816 
Finance and insurance43,402 872 
Total revenue938,440 416,427 
Timing of revenue recognition
Goods and services transferred at a point in time897,019 416,427 
Good and services transferred over time41,421 — 
Total revenue$938,440 $416,427 

NOTE 4 –ACCOUNTS RECEIVABLE, NET
Accounts receivable consists of the following as of December 31,
20212020
Contracts in transit$9,141 $— 
Trade receivables20,061 8,859 
Factory receivables (1)
4,003 — 
Finance receivables (2)
7,622 2,118 
40,827 10,977 
Less: allowance for doubtful accounts661 1,569 
$40,166 $9,408 

(1) Factory receivables represents amounts due primarily from manufacturer for holdbacks, rebates, co-op advertising, warranty and supplies returns.
(2) Finance receivables originated in connection with the Company’s vehicle sales.

The allowance for doubtful accounts was approximately $661 and $1,569 as of December 31, 2021 and 2020, respectively.

Finance receivables are stated net of allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible finance receivables. The allowance for doubtful accounts is increased by charges to bad debt expense and decreased by actual write-offs (net of recoveries). A receivables is written off when the Company determines it is uncollectible. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past collection experience, knowledge of the customer, and aging of the receivables. During the years ended December 31, 2018 primarily include adjustments2021 and 2020, management wrote of $76 and $296, respectively, of finance receivables considered to reflect the: (i) amortizationbe uncollectible.


F-22


NOTE 5 – INVENTORY
Inventory, net of stock compensation expensereserves, consists of $833,333; (ii) eliminationthe following as of intercompany salesDecember 31,
20212020
New powersport vehicles$68,244 $— 
Pre-owned vehicles:
Powersport vehicles77,418 1,870 
Automobiles32,512 19,490 
Parts, accessories and other23,492 — 
$201,666$21,360
Floor plan notes payable as of December 31,
20212020
Floor plans notes payable - trade$15,119 $— 
Floor plans notes payable - non-trade82,15917,812
Floor plan notes payable$97,278 $17,812 
Floor plan notes payable - trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventory with corresponding manufacturers' captive finance subsidiaries (“trade lenders”). Floor plan notes payable-non-trade represents amounts borrowed to finance the purchase of specific new and used vehicle inventories with non-trade lenders. Changes in vehicle floor plan notes payable- trade are reported as operating cash flows and changes in floor plan notes payable-non-trade are reported as financing cash flows in the accompanying Consolidated Statements of Cash Flows.
New inventory costs are generally reduced by manufacturer holdbacks, incentives, floor plan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floor plan payables are reflective of the gross cost of revenuethe vehicle. The vehicle floor plan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of $3,744,911; (iii) income taxesthe sale of $158,742.a vehicle and payment of the related liability. Vehicle floor plan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Vehicle floor plan facilities are primarily collateralized by vehicle inventories and related receivables.
New vehicle floor plan facilities generally utilize LIBOR or ADB (Average Daily Balance)-based interest rates, which generally ranged between 5% and 7% as of December 31, 2021. Used vehicle floor plan facilities generally utilize prime, LIBOR or ADB-based interest rates, which ranged between 4.75% and 8% as of December 31, 2021. The aggregate capacity to finance our inventory under the new and used vehicle floor plan facilities was $274,468 as of December 31, 2021. The Company cannot predict the effect of the discontinuance of LIBOR or the establishment and use of alternative rates or benchmarks on interest expense as of December 31, 2021. The Company is evaluating alternative benchmarks, which may include the Secured Overnight Financing Rate (“SOFR”).
Inventory serves as collateral under floor plan notes payable borrowings. The inventory balance in its entirety also serves as collateral under the Oaktree Credit Facility. Refer to Note 9 - Notes Payable and Lines of Credit for further detail.


F-23


 
 
Year Ended December 31,
 
Unaudited
 
2019
 
 
2018
 
Pro forma revenue
 $846,947,956 
 $788,428,970 
Pro forma net loss
 $(45,296,568)
 $(24,062,816)
Loss per share - basic and fully diluted
 $(40.37)
 $(24.42)
Weighted-average common shares and common stock equivalents outstanding basic and fully diluted
  1,122,058 
  985,332 
NOTE 56 – PROPERTY AND EQUIPMENT, NET
The following table summarizes property and equipment, net of accumulated depreciation and amortization as of December 31, 2019
 20212020
Buildings and improvements$3,240 $— 
Leasehold improvements7,097 321
Equipment4,367 
Furniture and fixtures312 191
Technology development12,879 11,008
Vehicles1,525 241
Total property and equipment29,420 11,761
Less: accumulated depreciation and amortization8,003 5,240
Total$21,417 $6,521
Depreciation expense was $6,103 in 2021 and 2018:$2,143 in 2020.
 
 
2019
 
 
2018
 
Vehicles
 $158,327 
 $417,666 
Furniture and equipment
  448,074 
  474,546 
Technology development and software
  8,863,247 
  5,777,504 
Leasehold improvements
  246,135 
  136,386 
Total property and equipment
  9,715,783 
  6,806,102 
Less: accumulated depreciation and amortization
  3,288,109 
  1,628,225 
Total
 $6,427,674 
 $5,177,877 
Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from 3 to 5 years.
At December 31, 2019, capitalized technology development costs were $8,655,236 which includes $2,900,000 of software acquired in the NextGen transaction. Total technology development costs incurred was $5,494,081$2,707 and $3,530 for the year ended December 31, 2019 of which $3,085,7432021 and 2020, respectively. Of the total development costs incurred, approximately $1,266 and $2,145, was capitalized and $2,408,338 was charged to expense in the accompanying Consolidated statements of operations. Depreciation expense for the year ended December 31, 20192021 and 2020, respectively. Approximately $1,441 and $1,385, was $1,786,426, which included therecorded as amortization ofexpense related to capitalized technology costs of $1,436,088. Total technology development costs incurred was $3,314,815 forin the yearyears ended December 31, 2018 of which $2,162,707 was capitalized2021 and $1,152,108 was charged to expense in the accompanying Consolidated statements of operations. Depreciation expense for the year ended December 31, 2018 was $984,006, which included the amortization of capitalized technology costs of $825,782.2020, respectively.
NOTE 67 – INTANGIBLE ASSETS AND GOODWILL
FollowingThe following is a summary of the changes in the carrying amount of goodwill, franchise rights and other indefinite-lived asset during the years endedand other intangible assets as of December 31, 2019, 2018 and 2017, net of a $334,861 measurement period adjustment recorded during the year ended December 31, 2019.
20212020
Goodwill$260,922 $26,887 
Other intangible assets
Franchise rights - indefinite life$282,350 $— 
Other intangibles22,175 46 
304,525 46 
Less: accumulated amortization2,459 — 
Intangible assets, net$302,066 $46 
    
 
 
Goodwill
 
 
Indefinite Lived Intangible Assets
 
Balance at December 31, 2017
 $1,850,000 
 $45,515 
Acquisitions
  24,257,146 
  - 
Balance at December 31, 2018
  26,107,146 
  45,515 
Acquisitions
  2,964,278 
  - 
Impairment
  (1,850,000)
  - 
Measurement period adjustment
  (334,861)
  - 
Balance at December 31, 2019
 $26,886,563 
 $45,515 
Other intangibles of $22,175 is primarily comprised of assets related to non-compete agreements as of December 31, 2021. The Company evaluates intangible assets for impairment at least annually,or when triggering events occur. No triggering events or impairment was noted as of December 31, 2021.
F-24



The following is a summary of the changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 20192021 and 2018.2020.
PowersportsAutomotiveVehicle LogisticsTotal
Balance at December 31, 2019$— $26,039 $848 $26,887 
Acquisitions
Impairment
Measurement period adjustment
Balance at December 31, 202026,03984826,887
RideNow acquisition234,035234,035
Impairment
Measurement period adjustment— — — 
Balance at December 31, 2021$234,035 $26,039 $848 $260,922 
 
 
Powersports
 
Automotive
 
Vehicle Logistics
 
 
Total
 
Balance at December 31, 2018
 1,850,000 
 23,074,775 
 1,182,371 
 $26,107,146 
Acquisitions
  - 
  2,964,278 
  - 
  2,964,278 
Impairment
  (1,850,000)
  - 
  - 
  (1,850,000)
Measurement period adjustment
  - 
  - 
  (334,861)
  (334,861)
Balance at December 31, 2019
 - 
 26,039,053 
 847,510 
 $26,886,563 

We test for impairmentGoodwill associated with the RideNow acquisition of our intangible assets at least annually. During$234,035 represents the year endedpreliminary determination of fair value as of December 31, 2019, we recognized an impairment loss on goodwill of $1,850,000 related2021. We expect to powersports, which is recorded in selling, general and administrative expenses infinalize the Consolidated Statement of Operations. There were no impairment charges in 2018. During the quarter ended September 30, 2019, the Company finalized the preliminary purchase price allocation recordedprocess for the RideNow acquisition in 2022 as we complete our review of fair values. We are required to finalize our purchase price allocations within one year after the Closing Date.

A total of $148,500 of Goodwill at December 31, 2021 is non-deductible for tax purposes, which is comprised of goodwill associated with the RideNow acquisition date forof $125,400 and Wholesale Express and made a measurement period adjustment to the preliminary purchase price allocation which resulted in a decrease in goodwill of $334,861. The Company made this measurement period adjustment to reflect facts and circumstances$23,100.

Estimated annual amortization expense related to accounts receivable and accounts payable that existed as of the acquisition date and did not result from intervening events subsequent to such date.other intangibles:
2022$9,422 
20237,376 
20242,918 
2025— 
2026— 
Thereafter— 
$19,716 

NOTE 78 – ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
The following table summarizes accounts payable and other accrued liabilities as of December 31, 20192021 and 2018:2020:
20212020
Accounts payable$10,028 $8,168 
Accrued interest3,649 1,486 
Accrued payroll9,449 1,080 
Customer deposits5,732 — 
State and local taxes8,287 856 
Professional fees5,637 112 
Other accrued expenses14,286 861 
Total$57,068 $12,563 
 
 
2019
 
 
2018
 
Accounts payable
 $8,730,624 
 $7,528,003 
Operating lease liability-current portion
  1,423,610 
  - 
Accrued payroll
  715,658 
  877,180 
State and local taxes
  912,062 
  1,073,649 
Other accrued expenses
  639,140 
  1,076,081 
Total
 $12,421,094 
 $10,554,913 

F-25



NOTE 89 – NOTES PAYABLE AND LINES OF CREDIT
Notes payable consisted of the following as of December 31, 2019 and 2018:
20212020
Term loan credit agreement with Oaktree dated August 31, 2021. Amortization payments are required quarterly commencing in the quarter ending December 31, 2021. The Initial Loan Term Facility matures on August 31, 2026. The interest rate as of December 31, 2021 was 9.25%.$253,438 $— 
Notes Payable-PPP Loans dated May 1, 2020 with maturity of April 1, 2025. Payments of principal and interest were deferred as of December 31, 2021 while the outstanding principal balance is under Small Business Administration (“SBA”) review.2,534 5,177 
Unsecured note payable to P&D Motorcycles in the original amount of $1,724 with interest rate of 4% through maturity which is July 1, 2022.1,031 — 
Secured notes payable-NextGen dated February 8, 2017. Matured on January 31, 2021.— 833 
Notes payable-private placement dated March 31, 2017. Matured on June 30, 2021.— 669 
Line of Credit-RumbleOn Finance. Line of credit secured by the loans and other assets of RumbleOn Finance, LLC. Interest rate at December 31, 2021 was 7.25%.— 889 
Unsecured notes payable to RideNow Management, LLLP, a related party through equal
ownership by two directors; monthly principal payments ranging from $7 to $13; interest
accruing at rates ranging from LIBOR+0.6% to LIBOR+1.3%.
907 — 
Total notes payable and lines of credit257,910 7,568 
Less: Current portion of notes payable4,322 2,877 
Long-term debt, net of current portion$253,588 $4,691 
 
 
2019
 
 
2018
 
Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is January 31, 2021.
 $1,333,334 
 $1,333,334 
 
    
    
Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through September 30, 2019 and 8.5% through maturity which is January 31, 2021. Unamortized debt discount of $75,601 and $334,998 as of December 31, 2019 and December 31, 2018, respectively.
  667,000 
  667,000 
 
    
    
Line of credit-floor plan Ally dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 7.05 %. Principal and interest are payable on demand.
  8,419,897 
  8,866,894 
 
    
    
Loan Agreement with Hercules Capital Inc. dated April 30, 2018 and as amended for tranche II on October 30, 2018. Tranche I- Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on June 1, 2019 through maturity which is May 1, 2021. Trance II-Interest payable monthly at 11.0%. Principal payable at maturity on October 1, 2021. Unamortized debt issuance costs as of December 31, 2018 of $1,547,412.
  - 
  10,857,500 
 
    
    
Line of credit-floor plan NextGear dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 4.25%. Principal and interest is payable on demand.
  50,741,073 
  47,505,607 
 
    
    
Less: Debt discount
  (75,601)
  (1,882,410)
Total notes payable and lines of credit
  61,085,703 
  67,347,925 
Less: Current portion
  59,160,970 
  58,555,006 
 
    
    
Long-term portion
 $1,924,733 
 $8,792,919 

As of December 31, 2019,2021, future principal debt payments are due as follows: 2020
2022$4,322 
2023150 
2024— 
2025— 
2026253,438 
Total debt payments$257,910 

Floor plan notes payable as of December 31,
20212020
Floor plans notes payable - trade$15,119 $— 
Floor plans notes payable - non-trade82,15917,812
Floor plan notes payable$97,278 $17,812 
Floor plan notes payable-trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventory with corresponding manufacturers' captive finance subsidiaries (“trade lenders”). Floor plan notes payable-non-trade represents amounts borrowed to finance the purchase of specific new andused vehicle inventories with non-trade lenders. Changes in vehicle floor plan notes payable- trade are reported as operating cash flows and changes in floor plan notes payable-non-trade are reported as financing cash flows in the accompanying Consolidated Statements of Cash Flows.
New inventory costs are generally reduced by manufacturer holdbacks, incentives, floor plan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floor plan payables are reflective of the gross cost of the vehicle. The vehicle floor plan payables, as shown in the above table, will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability. Vehicle floor plan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Vehicle floor plan facilities are primarily collateralized by vehicle inventories and related receivables.
F-26


New vehicle floor plan facilities generally utilize LIBOR or ADB (Average Daily Balance)-based interest rates, which generally ranged between 5% and 7% as of December 31, 2021. Used vehicle floor plan facilities generally utilize prime, LIBOR or ADB-based interest rates, which ranged between 4.75% and 8% as of December 31, 2021. The aggregate capacity to finance our inventory under the new and used vehicle floor plan facilities was $274,468 as of December 31, 2021.
Term Loan Credit Agreement - $59,085,369;Oaktree
On August 31, 2021, - $2,000,334.the Company entered into the Oaktree Credit Agreement, which provides for secured credit facilities in the form of a $280,000 principal amount of initial term loans (the “Initial Term Loan Facility”) and a $120,000 in aggregate principal amount of delayed draw term loans (the “Delayed Draw Term Loans Facility”). The proceeds from the Initial Term Loan Facility was used to consummate the RideNow Transaction and to provide for working capital. The proceeds from the Delayed Draw Term Loans Facility, if drawn, will be used to finance acquisitions permitted by the Oaktree Credit Agreement and similar investments or “earn-outs” entered into in connection with acquisitions and to pay fees and expenses relating thereto. Loans under the Delayed Draw Term Loans Facility are subject to customary conditions precedent for facilities of this type including the need to meet certain financial tests and become available six (6) months after the Closing Date and are unavailable to be drawn after the eighteen (18) month anniversary of the Closing Date. The Oaktree Credit Facility also provides for incremental draws for up to an additional $100,000 in accordance with the terms set forth in the Oaktree Credit Agreement, which may be used for acquisitions or working capital. The loan is reported on the balance sheet as senior secured debt net of debt discount and debt issuance costs of $25,862, including the fair value of stock warrant of $10,950. Borrowings under the Oaktree Credit Facility bear interest at a rate per annum equal, at the Company’s option, to either (a) LIBOR (with a floor of 1.00%), plus an applicable margin of 8.25% or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of 7.25%. At the Company’s option, one percent (1.00%) of such interest may be payable in kind. The interest rate on December 31, 2021, was 9.25%. Interest expense for the year December 31, 2021 was $10,580, which included amortization of $1,870 related to the discount and debt issuance costs. While the Oaktree Credit Agreement notes that SOFR may be selected as the alternative benchmark rate, this has not been determined as of December 31, 2021. As such, the Company cannot predict the effect of the discontinuance of LIBOR or the establishment and use of alternative rates or benchmarks on interest expense as of December 31, 2021.
Obligations under the Oaktree Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its domestic wholly owned subsidiaries (the “Subsidiary Guarantors”) although certain assets of the Company and Subsidiary Guarantors are subject to a first-priority lien in favor of floor plan lenders, and such liens and priority are subject to certain other exceptions. The Subsidiary Guarantors also guarantee the obligations of the Company under the Oaktree Credit Agreement.
In connection with Oaktree Credit Agreement, the Company issued warrants to purchase $40,000 of shares of Class B common stock to Oaktree Capital Management, L.P. and its lender affiliates (the “ Warrant”). The initial warrant liability and deferred financing charge recognized was $10,950. The warrant liability is subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of the change in derivative liability in the Consolidated Statements of Operations. The fair value of the Warrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 2 inputs. Upon closing of the RideNow Transaction, the warrants were considered equity linked contracts indexed to the Company’s stock and therefore met the equity classification guidance. As a result, the $19,700 was reclassified to additional paid-in-capital. The $10,950 deferred financing charge was reclassified as part of the debt discount related to the Oaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.
Line of Credit-Floor Plan-NextGear
On October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the "NextGear“NextGear Credit Line"Line”) with NextGear. As of the date of this filing, based on on-going discussions with NextGear, we will limit our advancesWe ended borrowings under the NextGear Credit Line foron August 31, 2021, at which point Wholesale and Autosportentered into a floorplan vehicle financing credit line with AFC (the “AFC Credit Line”). Advances under the AFC Credit Line are limited to $55,000,000. Advances under$29,000 as of December 31, 2021. Interest expense on the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full. Interest expense on the line of credit-floor planAFC Credit Line for the years ended December 31, 20192021 and 2018,2020, was $2,697,591$1,849 and $513,306,$1,635, respectively.
Line of Credit-Floor Plan-Ally
PPP Loans
On February 16, 2018,May 1, 2020, the Company, throughand its wholly-owned subsidiary RMBL MOwholly owned subsidiaries Wholesale and Wholesale Express (together, the “Subsidiaries”, and with the Company, the “Borrowers”), each entered into an Inventory Financingloan agreements and Security Agreementrelated promissory notes (the "Credit Facility"“SBA Loan Documents”) with Ally and Ally Financial, Inc., a Delaware corporation ("Ally" together with Ally Bank, the "Lender"to receive U.S. Small Business Administration Loans (the “SBA Loans”), pursuant to which the Lender may provide up to $25,000,000 in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. AdvancesPaycheck Protection Program (the “PPP”) established under the Credit Facility require that the Company maintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, RMBL MO's obligation to pay upon demand any outstanding liabilities of the Credit Facility), the Lender may, at its option and without notice to the RMBL MO, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interestCARES Act, in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the Lender and secured by the Company pursuant to a General Security Agreement. Interest expense on the Credit Facility for the years ended December 31, 2019 and 2018 was $541,702 and $149,776, respectively. The Ally Line of Credit ended in February 2020.

Loan Agreement-Hercules Capital Inc.
On May 14, 2019, the Company made a payment to Hercules Capital Inc. ("Hercules") of $11,134,695, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the "Loan Agreement") with Hercules dated April 30, 2018 (the "Hercules Indebtedness"). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement has been terminated. The Company used a portion of the net proceeds from the Note Offering (described below) to pay the Hercules Indebtedness. In accordance with the guidance in ASC 470-50, Debt, the Company accounted for the extinguishment of the Hercules Loan Agreement as an extinguishment and recognized a loss on early extinguishment of debt of $1,499,250 for the year ended December 31, 2019 in the Consolidated Statements of Operations. The loss on early extinguishment consisted primarily of the prepayment penalty paid to Hercules and unamortized debt discounts including the remaining portion of warrant values and debt issuance costs.
Notes Payable
NextGen
On February 8, 2017, in connection with the acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen (which note was subsequently assigned to Halcyon in February 2018) in theaggregate amount of $1,333,334. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date. Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable upon election of the holder. The Company's obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro, pursuant$5,177 (the “Loan Proceeds”). Pursuant to an Unconditional Guaranty Agreement (the "Guaranty Agreement"), by and among NextGen and NextGen Pro, and a related Security Agreement between the parties, each dated as of February 8, 2017. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guaranteeSBA Loan Documents, the performanceBorrowers can apply for and receive forgiveness for all, or a portion of all
F-27


the Company's obligationsloans granted under the NextGen Note. Interest expensePPP. Such forgiveness will be determined, subject to limitations, based on the Credit Facilityuse of loan proceeds for certain permissible purposes as set forth in the years ended December 31, 2019PPP, including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and 2018 was $110,484on the maintenance of employee and $87,617, respectively. For additional information see Note 19 – Subsequent Events – Investor Note Exchange.
Private Placement
On March 31, 2017,compensation levels during a certain time period following the Company completed funding of the second tranchePPP Loans. In July, 2021, the Company applied to obtain forgiveness of the 2016 Private Placement (as defined below). The investors were issued 58,096 shares of Class B Common StockPPP Loans and approximately $2,643 of the Company and promissory notes (the "Private Placement Notes") inloan forgiveness was approved as of December 31, 2021. The balance of the amountPPP loans of $667,000, in consideration of cancellation of loan agreements having an aggregate principal amount committed$2,534 is still under review by the purchasersSBA and the Company can provide no assurance that it will obtain forgiveness of $1,350,000. Underthis remaining balance in whole or in part. Payments on this remaining loan balance commenced on September 1, 2021, and the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amounts until paid in full. The Private Placement Notesloans mature on January 31, 2021. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. Based on the relative fair values attributed to the Class B Common Stock and promissory notes issued in the 2016 Private Placement, the Company recorded a debt discount on the promissory notes of $667,000 with the corresponding amounts recorded as an addition to paid-in capital. The debt discount is amortized to interest expense until the scheduled maturity of the Private Placement Notes in January 2021 using the effective interest method. The effective interest rate at December 31, 2019 was 26.0%. Interest expense on the Private Placement Notes was $316,091 and $259,177, respectively for the years ended December 31, 2019 and 2018, which included debt discount amortization of $70,565 and $205,926, respectively for the years ended December 31, 2019 and 2018.April 1, 2025.
Exchange of Notes Payable
Certain of the Company's investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for new notes (the "New Investor Notes"), pursuant to that certain Note Exchange Agreement, dated January 14, 2020 (the "Investor Note Exchange Agreement"), by and between the Company and each investor thereto (the "Investors"), including Halcyon, an entity affiliated with Kartik Kakarala, a director of the Company, such New Investor Note for an aggregate principal amount of $833,333 (after taking account of a $500,000 pay down of the previously outstanding Halcyon note), Blue Flame Capital, LLC ("Blue Flame"), an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114, and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amount of approximately $1,500,000, will mature on January 31, 2021, and will be convertible at any time at the Investor's option at a price of $60.00 per share. For additional information see Note 19NOTE 10Subsequent Events – Investor Note Exchange.

Convertible Notes
CONVERTIBLE NOTES
As of December 31, 2019,2021, the outstanding convertible promissory notes net of debt discount and issue costs are summarized as follows:
 
 
Face
Amount
 
 
Debt
Discount
 
 
Carrying
Amount
 
Convertible senior notes
 $30,000,000 
 $10,402,024 
 $19,597,976 
Convertible notes-Autosport
    
    
    
$1,536,000 unsecured note
  1,536,000 
  379,616 
  1,156,384 
$500,000 unsecured note
  500,000 
  6,092 
  493,908 
$257,933 unsecured note
  257,933 
  6,382 
  251,551 
 
  32,293,933 
  10,794,114 
  21,499,819 
Less: Current portion
  (1,461,933)
  (98,343)
  (1,363,590)
Long-term portion
 $30,832,000 
 $10,695,771 
 $20,136,229 
December 31, 2021December 31, 2020
Face
Amount
Debt
Discount
Carrying
Amount
Face
Amount
Debt
Discount
Carrying
Amount
Convertible senior notes$38,750 $9,508 $29,242 $38,750 $11,737 $27,013 
Convertible notes-Autosport:
 $1,536 unsecured note1541541,024308716
38,9049,50829,39639,77412,04527,729
Less: Current portion154154768205563
Long-term portion$38,750 $9,508 $29,242 $39,006 $11,840 $27,166 
Convertible Senior Notes
On May 9, 2019, the Company entered into a purchase agreement (the "Purchase Agreement") with JMP Securities LLC ("JMP Securities") to issue and sell $30,000,000$30,000 in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the "Notes""Old Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Note"Securities Act") (the "2019 Note Offering"). The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the 2019 Note Offering. The proceeds for the 2019 Note Offering after deducting the initial purchaser's discounts, advisory fees, and related offering expenses, were $27,385,500.
approximately $27,386.
The Old Notes were issued on May 14, 2019 pursuant to an Indenture (the "Indenture""Old Indenture") by and between the Company and Wilmington Trust, National Association, as trustee.trustee (the "Trustee"). The Purchase Agreement included customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company agreed to indemnify JMP Securities against certain liabilities. The Old Notes bore interest at 6.75% per annum, payable semiannually on May 1 and November 1 of each year, beginning on November 1, 2019. The Old Notes could bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the Old Indenture or if the Old Notes were not freely tradeable as required by the Old Indenture. The Old Notes would have matured on May 1, 2024, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the Old Notes was 8.6956 shares of Class B Common Stock, per $1,000$1 principal amount of the Old Notes, subject to adjustment (which is equivalent to an initial conversion price of approximately $115.00 per share, subject to adjustment). The conversion rate was subject to adjustment in some events but would not have been adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Old Indenture), the Company would, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elected to convert its Old Notes in connection with such make-whole fundamental change.
The Old Notes were not redeemable by the Company prior to the May 6, 2022. The Company could have redeemed for cash all or any portion of the Old Notes, at its option, on or after May 6, 2022 if the last reported sale price of the Company's Class B Common Stock had been at least 150.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund was provided for the Old Notes. If redeemed, the Company would have made an interest make-whole payment to the converting holder equal to the sum of the present values of the scheduled payments of interest that would have been made on the Old Notes to be
F-28


converted had such Old Notes remained outstanding from the conversion date through the earlier of the date that is two years after the conversion date and June 15, 2022.

In connection with the 2019 Note Offering, the Company entered into a registration rights agreement with JMP Securities, pursuant to which the Company has agreed to file with the SEC an automatica resale shelf registration statement ifproviding for the Company is eligible to do soresale of the Old Notes and has not already done so, and, if the Company is not eligible for an automatic shelfshares of Class B Common Stock issuable upon conversion of the Old Notes. This resale registration statement then in lieu of the foregoing the Company shall file a shelf registration statement for the registration of,was filed on August 22, 2019 and the sale on a continuous or delayed basis by the holders of, all of the Notes pursuant to Rule 415 or any similar rule that may be adopted by the Commission, and use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act on the day that is 120 days after May 9, 2019. The Company filed a Registration Statement on Form S-3, which was declared effective on August 30, 2019.
As of December 31, 2019, the conditions allowing holders of the Notes to convert have not been met and therefore the Notes are not yet convertible.
We account for the Notes in accordance with FASB ASC 470, Debt and ASC 815, Derivatives and Hedging, which required bifurcation of the liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows using an implied discount rate of 20.5%. The carrying amount of the equity component representing the conversion option was $8,500,000 and was calculated by deducting the carrying value of the liability component from the principal amount of the Notes as a whole. This difference represents a debt discount that is amortized to interest expense over the term of the Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. We further valued a derivative liability in connection with the interest make-whole provision at $1,330,000 at issuance based on a Monte-Carlo Simulation using a volatility of 85.0% and a risk-free rate of 2.3%. This amount was recorded as a debt discount and is amortized to interest expense over the term of the Notes using the effective interest rate. The derivative liability is remeasured at each reporting date with the change in value of $1,302,000 being recorded in other income for the year ended December 31, 2019. The value of the derivative liability as of December 31, 2019 was $27,500.
We allocate transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the debt component were $1,790,088 and are being amortized to interest expense using the effective interest method over the term of the Notes. Transaction costs attributable to the equity component were $754,375 and are netted with the equity component of the Notes in stockholders' equity. Transactions costs attributable to the derivative liability were $118,038 and were expensed during the year ended December 31, 2019.
The interest expense recognized related to the Notes for the year ended December 31, 2019 was as follows:
2019
Contractual interest expense
$1,305,000
Amortization of debt discounts
1,218,064
Total
$2,523,064
On January 10, 2020, the Company entered into a note exchangeNote Exchange and subscription agreement (the "Note Exchange & Subscription Agreement"),Agreement, as amended by that certaina Joinder and Amendment effective January 13, 2020 (the "Joinder Agreement" and together with (together, the "New Note Exchange & Subscription Agreement, the "Note Agreement"), with the investors in the 2019 Note Offering, (the "Note Investors"), pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000$30,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the "New Notes"Notes," and together with the Old Notes, the "Notes") and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering (the "2020 Note Offering"). On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering after deducting for payment of accrued interest on the Old Notes and offering-related expenses were $8,272,375. Forapproximately $8,272.
The New Notes were issued on January 14, 2020 pursuant to an Indenture (the "New Indenture"), by and between the Company and the Trustee. The New Note Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The New Notes bear interest at 6.75% per annum, payable semiannually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Notes may bear additional information seeinterest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradeable as required by the New Indenture. The New Notes mature on January 1, 2025, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a "make-whole fundamental change" (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 62.0 shares per $1,000 in principal amount.
The New Indenture contains a "blocker provision" which provides that no holder (other than the depository with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B Common Stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B Common Stock.
The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable. The New Notes also contain conversion features related to certain events, which include liquidation or dissolution, as well as fundamental changes to the structure or ownership of the Company.
In connection with the 2020 Note Offering, on January 14, 2020, the Company entered into a registration rights agreement with the Note Investors, pursuant to which the Company has agreed to file with the SEC a shelf registration statement registering the sale, on a continuous or delayed basis, of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than May 29, 2020 (which date was adjusted for certain intervening events, including the COVID-19 pandemic). The registration statement was filed on June 19, 2020 and declared effective on June 30, 2020. In connection with the filing of the registration statement, the Company deregistered the Old Notes previously registered for resale.
The Company accounted for the exchange of the Old Notes and the issuance of the New Notes in accordance with the conversion guidance in ASC 470-20 "Debt Subsequent Events –Debt with Conversion and Other Option" (ASC 470-20) and determined that the exchange of the Old Notes for the New Notes required derecognition of the Old Notes given that the difference in the fair value of the embedded the conversion feature of the New Notes relative to the Old Notes was in excess of 10 percent of the Old Notes conversion feature fair value. In derecognizing the Old Notes, the Company recognized a gain of $188 equal to difference
F-29


between the fair value of the Old Notes liability immediately prior to extinguishment and the carry amount of the liability component of the Old Notes, including any all-unamortized debt issuance costs during the year ended December 31, 2020. The remaining consideration of $2,593 was allocated to the reacquisition of the equity component and recognized as a reduction of stockholder's equity during the year ended December 31, 2020.
The New Notes are not redeemable by the Company before January 14, 2023. The Company may redeem for cash all or any portion of the Convertible Note ExchangeSenior Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and Offer.including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Senior Notes.
The Convertible Senior Notes rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Senior Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables). The Convertible Senior Notes were accounted for in accordance with FASB ASC 470, Debt and ASC 815, Derivatives and Hedging, which required bifurcation of the liability and equity components. The Company determined the carrying amount of the liability component was $25,280 and represents the present value of the Convertible Senior Notes cash flows using an implied discount rate of 18.7% which is a yield applicable to similar debt instruments that do not have the conversion feature. After allocation of the initial proceeds to the liability components, the remaining amount was allocated to the equity component and recorded as additional paid in capital. The Company recorded $13,529 in total debt discount related to the Convertible Senior Notes which included $60 of debt issuance costs. The Company allocates costs related to the issuance of the Convertible Senior Notes to the liability and equity components using the same proportions as the initial carrying value of the Convertible Senior Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification The Company further valued a derivative liability in connection with the interest make-whole provision at $21 on the issuance date based on a lattice model. This amount was recorded as a debt discount and is amortized to interest expense over the term of the Convertible Senior Notes using the effective interest rate. The derivative liability is remeasured at each reporting date, and the change in fair value of $45 is included in change in derivative liability in the accompanying Consolidated Statements of Operations for the year ended December 31, 2021. The value of the derivative liability as of December 31, 2021 was $66.
The interest expense recognized with respect to the Convertible Senior Notes for the years ended December 31, 2021 and 2020 were as follows:
20212020
Contractual interest expense$2,616 $2,566 
Amortization of debt discounts2,229 1,867 
Total$4,845 $4,433 
Convertible Notes-Autosport USA
On February 3, 2019, in connection with the Autosport Acquisition, the Company issued a (i) the$500 Promissory Note and (ii) thea $1,536 Convertible Note in favor of the Seller. In connection with the Autosport Acquisition, the Buyer also assumed additional debt of $257,933 pursuant to the Second Convertible Note.
seller. The $500 Promissory Note has a term of fifteen months and will accrue interest at a simple rate of 5.0% per annum. Interest under the Promissory Note is payable upon maturity. Any interest and principal due under the Promissory Note is convertible, at the Buyer's option into shares of the Company's Class B Common Stock at a conversion price equal to the weighted average trading price of the Company's Class B Common Stock on the Nasdaq Stock Exchange for the twenty (20) consecutive trading days preceding the conversion date.was repaid in full in 2020. The number of shares of the Company's Class B Common Stock issuable pursuant to the Promissory Note is indeterminate at this time.

The$1,536 Convertible Note has a term of three yearsmatures on January 31, 2022 and will accrueaccrues interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company'sCompany’s Class B Common Stockcommon stock at a conversion price of $115.00 per share, (i) at the Seller'sSeller’s option, or (ii) at the Buyer'sBuyer’s option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company'sCompany’s Class B Common Stockcommon stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $140.00 per share. The maximum number of shares issuable pursuant to the Convertible Note is 15,9622,449 shares of the Company'sCompany’s Class B Common Stock.
The Secondcommon stock. Interest expense on the Convertible Note has a termfor years ended December 31, 2021 was $51 which included $37 of one year and will accruedebt discount amortization as compared to interest at a simple rateexpense of 5.0% per annum. Monthly payments$188 which included $84 of amortized principal and interest will be due under the Second Convertible Note. Any interest and principal due under the Second Convertible Note is convertible into shares of the Company's Class B Common Stock at a conversion price of $115.00 per share, (i) at the Seller's option, or (ii) at the Buyer's option, on any day that (a) any portion of the principal of the Second Convertible Note remains unpaid and (b) the weighted average trading price of the Company's Class B Common Stock on Nasdaqdebt discount amortization for the twenty (20) consecutive trading days preceding such day has exceeded $140.00 per share. The maximum numbersame periods of shares issuable pursuant to the Second Convertible Note is 2,336 shares of the Company's Class B Common Stock.2020.
F-30


NOTE 911 – STOCKHOLDERS' EQUITY
Share-BasedStock-Based Compensation
On June 30, 2017, the Company'sCompany’s shareholders approved a Stock Incentive Plan (the "Plan"( the “Plan”) reservingallowing for the issuance under the Plan in the form of restricted stock units ("RSUs"),RSUs, stock options ("Options"(“Options”), Performance Units, and other equity awards (collectively "Awards"“Awards”) for our employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual"). As of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increaseDecember 31, 2021, the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstandingwas 2,700,000 shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment").common stock. To date, the vesting ofmost RSU and Option awards for most employees is service / are service/time based however some senior level employees have beenvested over a period of up to three years. The Company has also granted performance-based awards that include a mix of service based, performance based and market condition-based vesting. Substantiallyawards with vesting schedules that are typically dependent on achieving a particular objective within thirty-six months. In connection with the closing of the RideNow Transaction, the Company accelerated all service/time basedthe outstanding RSU awards for all participants and Optionwaived certain market-based share price hurdles for all market-based awards issued typically vest overon the Closing Date. This waiver was accounted for as a three-year period approximatingmodification of the following vesting schedule: (i)20.0% vesting anywhere from eight-months to thirteen month after grantawards. The fair value of the awards was remeasured as of effective date (ii) an additional 30.0%of the waiver, and the change in fair value was fully expensed during the subsequent twelve monthsyear ended December 31, 2021 given the concurrent delivery of the initial vesting,and (iii) the final 50.0% during the following twelve months. More specifically, the Company granted to certain members of management an aggregate of (i) 12,213 performance-based awards that vest after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue of $900,000,000 at any time through September 30, 2020, and (ii) 36,938 market-based awards. These awards were terminated on May 27, 2020. such shares.
The Company estimates the fair value of all awards granted under the Plan on the date of grant. Stock-based compensationIn the case of time or service based RSU awards, the fair value based on the share price of the Class B Common Stock on the date of the award. Performance Awards use the share prices of the Class B Common Stock but the Company, both at grant and each subsequent quarter, considers whether to a apply discount to the fair in situations where the Company believes there is risk that the relevant performance metrics may not be met. Options are calculated using the Black-Scholes option valuation model while market-condition based awards are estimated using a Monte Carlo simulation model as these awards are tied to a market condition. Both the Black-Sholes and Monte-Carlo simulations utilize multiple input variables to determine the probability of the Company’s Class B stock price being at certain prices over certain time periods, resulting in an implied value to the holder. In connection with the closing of the RideNow Transaction, the Company accelerated all the outstanding RSU awards for all participants and waived certain market-based share price hurdles for all market-based awards. On September 30, 2021, the Audit Committee approved the issuance of 154,731 shares of the Company’s Class B common stock as a gift of a death benefit to the estate of Mr. Steven R. Berrard, the Company’s former Chief Financial Officer and a director. Mr. Berrard was one of the Company’s founders.
We generally expense is recognized as an expensethe grant-date fair value of all awards on a straight-line basis over the vesting periodsperiod. However, the acceleration of awards as described above.above resulted in the awards being expensed in the three-months ended September 30, 2021. The total expense recognized in Selling, General and Administrative expense was $3,836,518 and $1,657,680, respectively, forfollowing table reflects the years ended December 31, 2019 and 2018, with 2019.

 
 
For the Years Ended December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Restricted Stock Units
 $3,812,993 
 1,657,680 
 
    
    
Options
  23,525 
  - 
 
    
    
Total stock-based compensation
 $3,836,518 
 $1,657,680 
stock-based compensation:
For the Years Ended December 31,
20212020
Restricted stock units$29,188 $2,957 
Options3121
Total stock-based compensation$29,219 $2,978 
As of December 31, 2019,2021, there are 2,551 Options and 912,128 RSUs outstanding. The total unrecognized compensation expense related to outstanding equity awards was approximately $16,431 which the Company expects to recognize over a weighted-average period of approximately 17 months.
As of December 31, 2021, unrecognized stock-based compensationamortization related to outstanding RSU and stock awards and the related weighted-average period over which it is expected to be recognized subsequent to December 31, 20192021 is presented in the table below. Total unrecognized equity will be adjusted for actual forfeitures.
F-31


 
 
Unrecognized Stock Based Compensations Related to Outstanding Awards
 
 
Remaining Weighted-Average Amortization Period (in years)
 
 
 
 
 
 
 
 
Restricted Stock Units
 $5,300,737 
  0.8 
 
    
    
Options
  149,272 
  1.2 
 
    
    
Total Unrecognized stock-based Compensation
 $5,450,009 
  0.8 
Unrecognized
Stock Based
Compensations
Related to
Outstanding
Awards
Remaining
Weighted-Average
Amortization
Period (in years)
Restricted stock units$16,418 1.45
Options130.32
Total unrecognized stock-based amortization$16,431 1.45
Restricted Stock Units
RSU activity during the years ending December 31, 20192021 and December 31, 20182020 was as follows:
 
Number of RSUs
 
 
Weighted -Average Grant Date Fair Value
 
Outstanding at December 31, 2017
  35,800 
 $82.82 
Number of
RSUs
Weighted
-Average Grant
Date Fair Value
Outstanding at December 31, 2019Outstanding at December 31, 2019129,938$99.00 
Granted
  51,414 
  116.63 
Granted416,4356.60 
Vested
  (9,950)
  81.20 
Vested(35,274)87.91 
Forfeited
  (1,875)
  124.05 
Forfeited(67,256)98.53 
Outstanding at December 31, 2018
  75,389 
  104.63 
Outstanding at December 31, 2020Outstanding at December 31, 2020443,84313.26 
Granted
  80,050 
  60.81 
Granted1,320,78237.03 
Vested
  (9,000)
  86.54 
Vested(723,334)32.52 
Forfeited
  (16,501)
  61.45 
Forfeited(129,163)15.86 
Outstanding at December 31, 2019
  129,938 
 $99.00 
Outstanding at December 31, 2021Outstanding at December 31, 2021912,128$37.48 
Expected to vestExpected to vest912,128$37.48 
Non-qualified Stock Options
Non-qualified stock options allow recipients to purchase shares of Class B common stock at a fixed exercise price. The fixed exercise price is equal to the price of a share of Class B common stock at the time of grant. The options expire ten years after the grant date and typically vest 20.0%20% between nine-months and one-year after the grant date and thereafter in quarterly installments of 7.5% and 12.5% during the 2nd and 3rd vesting years, respectively.
Number of
Options
Weighted
Average
Exercise Price
Weighted-Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic Value
Outstanding at December 31, 20195,087$78.10 9.6
Options granted25061.40 
Options exercised— 
Options forfeited or expires(2,586)74.72 
Outstanding at December 31, 20202,75179.76 9.6
Options granted— 
Options exercised— 
Options forfeited or expires(200)81.60 
Outstanding at December 31, 20212,551$79.62 8.7
Vested / exercisable at December 31, 20211,875$79.92 7.7
Expected to vest as of December 31, 2021676$78.79 7.7
F-32



 
 
Number of Options
 
 
Weighted Average Exercise Price
 
 
Weighted-Average Remaining Contractual Life (in years)
 
 
Aggregate Intrinsic Value
 
Outstanding at December 31, 2017
  - 
  n/a 
 
 
 
  n/a 
Options Granted
  - 
  n/a 
 
 
 
  n/a 
Options exercised
  - 
  n/a 
 
 
 
  n/a 
Options forfeited or expires
  - 
  n/a 
 
 
 
  n/a 
Outstanding at December 31, 2018
  - 
  n/a 
  n/a 
  n/a 
 
    
    
    
    
Options Granted
  5,608 
 $34.20 
    
 $- 
Options exercised
  - 
  n/a 
    
  n/a 
Options forfeited or expires
  (521)
  34.20 
    
 $- 
Outstanding at December 31, 2019
  5,087 
 $34.20 
  9.6 
 $- 
 
    
    
    
    
Vested / exercisable at December 31, 2019
  - 
  - 
  n/a 
 $- 
Expected to vest as of December 31, 2019
  3,944 
 $34.20 
  9.6 
 $- 
Fair value of all option awards is based on the share price of the Class B Common Stock on the date of the award and in the case of options, which were only issued in 2019, is calculated using the Black-Scholes option valuation model using the assumptions in the following table:
 
2019
 
 
2018
 
20212020
Risk-free rate
  1.5%
  -%
Risk-free rate0.3%
Expected volatility
  85.0%
  -%
Expected volatility194.8%
Expected life (in years)
  5.75 
  - 
Expected life (in years)5.48
Expected dividend yield
  - 
Expected dividend yield
Weighted average grant date fair value per option
 $34.20 
  - 
Weighted average grant date fair value per option$29.66 
Security Offerings
On July 20, 2018,In January 2020, the Company completed an underwrittenrealized approximately $10,780 in net proceeds from public offering of 116,4381,170,000 shares of its Class B Common Stock at a public price of $121.00$11.40 per share for net proceeds to(the “2020 Public Offering”).
On May 18, 2020, the Company effected a one-for-twenty reverse stock split of $13,015,825. The completed offering included 15,188 shares ofits issued and outstanding Class BA Common Stock issued upon the underwriter's exercise in full of its over-allotment option. The Company will use the net proceeds from the offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business.
On October 25, 2018, the Company filed the Certificate of Designation, Preferences, and Rights of Series B Non-Voting Convertible Preferred Stock ("Certificate of Designation") with the Secretary of State for the State of Nevada, designating 2,500,000 shares of the Company's preferred stock, par value $0.001 per share, as Series B Preferred. Shares of Series B Preferred rank pari passu with the Company's Class B Common Stock, except that holders of Series B Preferred shall not be entitled to vote on any matters presented to the stockholders of the Company. The Certificate of Designation became effective on October 25, 2018. Each share of Series B Preferred is convertible on a one-for-one basis into shares of the Company's Class B Common Stock. The Series B Preferred will automatically convert into Class B Common Stock 21 days after the mailing of a definitive information statement of the type contemplated by and in accordance with Regulation 14C of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the Company's stockholders, without any further action on the part of the Company or any holder.
On October 30, 2018, the Company completed the private placement of an aggregate of 151,500 shares of its Class B Common Stock (the "Private Placement"“Reverse Stock Split”), at a price of $142.00.The Company has retrospectively adjusted the per share and share amounts included in this 2021 Form 10-K for non-affiliates ofthe Reverse Stock Split.
On April 8, 2021, the Company and, with respect to directors participatingrealized approximately $36,797 in the Private Placement, at a price of $162.00 per share. The gross proceeds for the Private Placement were $21,553,000. National Securities Corporation, a wholly owned subsidiary of National Holdings Corporation, and Craig-Hallum Capital Group (together the "Placement Agents") served as the placement agents for the Private Placement. The Company paid the Placement Agents a fee of 6.5% of the gross proceeds in the Private Placement. Netnet proceeds from the Private Placement and $5,000,000 funded under the Tranche II Advance were used to partially fund the cash considerationpublic offering of the Wholesale Merger and the Express Acquisition and the balance will be used for working capital purposes.

Denmar Dixon, a member of the Company's Board of Directors, invested through Blue Flame Capital, LLC (an entity controlled by Mr. Dixon) $243,000 in the Private Placement for 1,5001,048,998 shares of Class B Common Stock.  Also, Joseph Reece,common stock at a memberprice to the public of $38.00 per share (the “April 2021 Offering”). In conjunction with the Company's BoardRideNow Transaction, on August 31, 2021, the Company raised approximately $154,443 in net proceeds from the sale of Directors at the time, individually invested $81,000 in the Private Placement for 5005,053,029 shares of Class B Common Stock. These purchases were approved by the Company's Board of Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act. Messrs. Dixon and Reece abstained from the Company's Board of Directors' vote in favor of the Private Placement.
On February 11, 2019, the Company completed an underwritten public offering of 63,825 shares of its Class B Common Stockcommon stock at a price of $111.00 per share for net proceeds to the public of $33.00 per share.
Warrant
In connection with providing the debt financing for the RideNow Transaction, and pursuant to the commitment letter executed on March 15, 2021, the Company issued warrants to purchase $40,000 of $6,543,655. The completed offering included 8,325 shares of Class B Common Stock issued uponcommon stock to Oaktree Capital Management, L.P. and its lender affiliates (the “Warrant”). The initial warrant liability and deferred financing charge recognized was $10,950. The warrant liability was subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of change in derivative liability in the underwriter's exercise in fullConsolidated Statements of its over-allotment option.
On May 9, 2019, the Company entered into a Securities Purchase Agreement with certain accredited investors (the "Investors") pursuant to which the Company agreed to sell in a private placement (the "Private Placement") an aggregate of 95,000 shares of its Class B Common Stock, at a purchase price of $100.00 per share. JMP Securities served as the placement agent for the Private Placement.Operations. The Company paid JMP Securities a fee of 7.0%fair value of the gross proceedsWarrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 2 inputs. There was no gain or loss recorded related to the Warrant liability during the three-months ended March 31, 2021 as there was no significant changes in the Private Placement. The Private Placement closed on May 17, 2019. The proceeds forfair value between March 12, 2021 and March 31, 2021. For the Private Placement,after deducting commissions and related offering expenses,were $8,665,000.
2020 Public Offering
three months ended June 30, 2021, the fair value of the warrant liability was increased $2,224 to $13,174. On January 10, 2020,August 31, 2021, the Company entered into an underwriting agreement (the "Underwriting Agreement") with National Securities Corporation, as representativefair value of the warrant liability was increased $6,526 to the several underwriters named on Schedule 1-A to the Underwriting Agreement (the "Underwriters"), relating to the Company's public offering (the "2020 Public Offering") of 900,000 shares of Class B Common Stock (the "Firm Shares") and an additional 135,000 shares of Class B Common Stock (the "Additional Shares"). The Underwriters agreed to purchase the Firm Shares at a price of $11.40 per share. The issuance and$19,700. Upon closing of the Firm Shares took place on January 14, 2020,RideNow transaction, the Oaktree warrants were considered equity linked contracts indexed to RumbleOn’s stock and therefore met the equity classification guidance under ASC 815-40,. As a result, the $19,700 was reclassified to additional paid-in-capital. The $10,950 deferred financing charge was reclassified as part of the Additional Shares on January 17, 2020. Fordebt discount related to the Oaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional information see Note 19 – Subsequent Events – Public Offering.paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.
NOTE 1012 – COMMON STOCK WARRANTS
In connection with the October 23, 2017 public offering of 145,500 shares of Class B common stock the Company issued to underwriters warrants to purchase 10,913 shares of Class B common stock, which was equal to 7.5% of the aggregate number of shares of Class B common stock sold in the Offering. The Warrants are exercisable at a per share price of $126.50, which was equal to 115.0% of the Offering price per share of the shares sold in the Offering and mature on April 20, 2023. In April, 2018, pursuant to the Loan Agreement by and among Hercules Capital, the Company, and its wholly owned subsidiaries, the Company issued Hercules a warrant to purchase 4,091 (increasing to 5,455 if a fourth tranche in the principal amount of up to $5,000,000$5,000 is advanced at the parties agreement) shares of the Company's Class B Common Stock (the "Hercules“Hercules April Warrant"Warrant”) at an exercise price of $110.00 per share (the "Hercules“Hercules April Warrant Price"Price”). The Hercules April Warrant is immediately exercisable and expires on April 30, 2023. In October, 2018, under an amendment to the Loan Agreement, the company issued Hercules a warrant to purchase 1,048 shares of the Company's Class B Common Stock (the "Hercules“Hercules October Warrant"Warrant”) at an exercise price of $143.13 per share (the "Hercules“Hercules October Warrant Price"Price”). The Hercules October Warrant is immediately exercisable and expires on October 30, 2023. The Hercules warrants contain anti-dilutive provisions that increase the number of shares covered by the warrants in the event the Company makes a New Issuance (as defined in the Loan Agreement) for no consideration or consideration that is less than the Warrant Prices. The following table summarizes the warrants outstanding as of December 31, 20192021 and 2018:2020:
F-33


 
 
2019
 
 
2018
 
Warrants outstanding at the beginning of the year
  16,051 
  10,913 
New warrant issuances to Hercules
  - 
  5,138 
Adjustment to the Hercules warrants due to the anti-dilutive provisions
  479 
  - 
Warrants outstanding at the end of the year
  16,530 
  16,051 

20212020
Warrants outstanding at the beginning of the year16,53016,530
New warrant issuances to Hercules
Adjustment to the Hercules warrants due to the anti-dilutive provisions
Warrants outstanding at the end of the year16,53016,530
The Company has classified the warrants as equity in accordance with ASC 815. The fair value of the warrants were valued at issuance using the Black-Scholes option pricing model with the following assumptions:
Underwriter
Warrants
Hercules April
Warrants
Hercules October
Warrants
Warrants exercise price$126.50 $110.00 $143.20 
Fair value price per share of common stock$110.00 $101.40 $114.60 
Volatility62.0%70.0%70.0%
Expected term remaining (years)4.04.04.0
Risk-free interest rate1.31%2.79%2.94%
Discount for lack of marketability20.0%20.0%20.0%
Dividend yield
Fair value at initial valuation date$505,273 $208,369 $59,292 
 
 
Underwriter Warrants
 
 
Hercules April Warrants
 
 
Hercules October Warrants
 
Warrants exercise price
 $126.50 
 $110.00 
 $143.20 
Fair value price per share of common stock
 $110.00 
 $101.40 
 $114.60 
Volatility
  62.0%
  70.0%
  70.0%
Expected term remaining (years)
  5.0 
  5.0 
  5.0 
Risk-free interest rate
  1.31%
  2.79%
  2.94%
Discount for Lack of Marketability
  20.0%
  20.0%
  20.0%
Dividend yield
  - 
  - 
  - 
Fair value at initial valuation date
 $505,273 
 $208,369 
 $59,292 

NOTE 1113 – SELLING, GENERAL AND ADMINISTRATIVE
The following table summarizes the detail of selling, general and administrative expenseexpenses for the years ended December 31, 2019 and 2018:
20212020
Compensation and related costs$63,473 $22,756 
Stock based compensation29,219 2,978 
Advertising and marketing14,425 5,287 
Professional fees4,714 3,148 
Technology development and software1,992 1,421 
Facilities9,568 2,837 
General and administrative40,686 15,232 
$164,077 $53,659 
 
 
2019
 
 
2018
 
Compensation and related costs
 $33,502,020 
 $10,656,107 
Advertising and marketing
  18,228,262 
  11,457,572 
Professional fees
  2,542,357 
  1,788,425 
Technology development
  2,408,338 
  1,152,108 
General and administrative
  29,943,272 
  10,909,718 
 
 $86,624,249 
 $35,963,930 

NOTE 1214 – LOSS CONTINGENCIES AND INSURANCE RECOVERIES
On March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities including contents and inventory held for sale. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The loss was comprised of three components: (1) inventory loss, assessed by the insurance carrier at approximately $13,000; (2) building and personal property loss, primarily impacting our leased facilities, assessed by the insurance carrier at $2,783; and (3) loss of business income, for which the company has coverage in the amount of $6,000.
All three components of the Company's loss claim have been submitted to its insurers. The Company's inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss; however, the insurer has advanced $5,615 against the final settlement. The insurer has agreed to pay $2,778 on the building and personal property loss, reflecting limits of $2,783 net of a $5,000 deductible. The insurer has made an interim payment on the building and personal property loss of $2,270 to the landlord. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250 against the final settlement during the year ended December 31, 2020. The insurer made an additional interim payment on the inventory loss of $3,135 to the Company during the year ended December 31, 2021. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
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As a result of the damage caused by the tornado the Company concluded that the utility of the inventory damaged by the storm was impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or market and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss of the current period. During the year ended December 31, 2020, the Company recorded an impairment loss on inventory of $11,738 comprised of $4,454 for vehicles that were a total loss and $7,284 in loss in value for vehicles partially damaged and subject to repair. The impairment loss is reported in cost of revenue in the consolidated statements of operations. On July 23, 2020, the insurer made an advance against the final settlement of the damage claim on inventory of $5,615. This recovery has been recorded as a separate component of operating loss for the year ended December 31, 2020.
NOTE 15 – SUPPLEMENTAL CASH FLOW INFORMATION
The following table includes supplemental cash flow information, including noncash investing and financing activity for the years ended December 31, 20192021 and 2018:2020:
 
 
2019
 
 
2018
 
Cash paid for interest
 $4,888,070 
 $1,226,292 
 
    
    
Convertible notes payable issued in acquisition
 $2,293,933 
 $- 
 
    
    
Issuance of shares for acquisition
 $- 
 $6,652,512 
20212020
Cash paid for interest$12,075 $3,835 
The following table provides a reconciliation of cash and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of the same amounts shown in the accompanying consolidated statements of cash flows as of December 31:31, 2021 and 2020:
20212020
Cash and cash equivalents$48,974 $1,467 
Restricted cash (1)
3,000 2,049 
Total cash, cash equivalents, and restricted cash$51,974 $3,516 
 
 
December 31,
 
 
 
2019
 
 
2018
 
Cash and cash equivalents
 $49,660 
 $9,134,902 
Restricted cash (1)
  6,676,622 
  6,650,000 
Total cash, cash equivalents, and restricted cash
 $6,726,282 
 $15,784,902 
(1)
Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities.

NOTE 1316 – INCOME TAXES
U.S. Tax Reform
On December 22, 2017, legislation commonly known asThe components of the Tax Cuts and Jobs Act, orincome tax provision (benefit) from continuing operations for the Act, was signed in to law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35.0% to 21.0%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. Onyear ended December 31, 2019, the Company did not have any foreign subsidiaries2021 and the international aspects of the Tax Act2020 are not applicable.as follows:
20212020
Current
Federal$— $— 
State880 — 
Total current income tax expense880 — 
Deferred
Federal(21,028)— 
State(1,517)— 
Total deferred income tax benefit(22,545)— 
Income tax benefit$(21,665)$— 
In connection with the initial analysis of the impact of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 26.1% including state income taxes. The remeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted in response to the novel coronavirus (COVID-19)pandemic.The CARES Act includes numerous provisions relating to, among other things, refundable payroll tax credits, deferment of employer portion of certain payroll taxes, net operating loss amounts and carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Due to the recent enactment of the CARES Act, the Company is currently analyzing the potential impacts of this legislation on its financial position and results of operations.
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Deferred income taxes reflect the net tax effect of temporary difference between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows:
20212020
Deferred tax assets:
Net operating loss carryforward$20,316 $21,495 
Business interest carryforward2,992 1,651 
Stock-based compensation796 518 
Accounts receivable allowance209 362 
Lease liabilities33,008 1,569 
Inventory reserve290 26 
Basis difference in goodwill— 352 
Transaction costs1,027 — 
Accrued liabilities57 123 
Property and equipment— 373 
Total deferred income tax assets58,695 26,469 
Deferred tax liabilities:
Intangibles and goodwill30,614 — 
Right-of-use assets32,740 1,478 
Debt issuance costs amortization1,173 1,249 
Property and equipment1,754 — 
Total deferred tax liabilities66,281 2,727 
Net deferred tax (liabilities) assets before valuation allowance(7,586)23,742 
Valuation allowance— (23,742)
Net deferred taxes$(7,586)$— 
 
 
2019
 
 
2018
 
Deferred tax assets:
 
 
 
 
 
 
Net operating loss and interest limitation carryforward
 18,025,898 
 $8,091,718 
Stock-based compensation
  1,287,424 
  564,700 
Accounts receivable allowance
  269,403 
  - 
Operating lease liabilities
  1,599,651 
  - 
Goodwill
  385,570 
  - 
Inventory reserve
  151,815 
  - 
Property and equipment
  191,259 
  - 
Total deferred income taxes
  21,911,020 
  8,656,418 
 
    
    
Deferred tax liabilities:
    
    
Property and equipment
  - 
  15,045 
Right-of-use assets
  1,572,368 
  - 
Goodwill
  - 
  64,423 
Debt discounts
  28,818 
  464,324 
Total deferred tax liabilities
  1,601,186 
  543,792 
 
    
    
Net deferred tax asset
  20,309,834 
  8,112,626 
 
    
    
Valuation allowance
  (20,309,834)
  (8,112,626)
Net deferred taxes
 $- 
 $- 
A reconciliation of the statutory U.S. Federal income tax rate of 21% to the Company'sCompany's effective income tax rate on income tax rate on continuing operations for the years ended December 31, 20192021 and 2018.2020 is as follows:
20212020
U.S. Federal statutory rate21.0%21.0%
State and local, net of federal benefit(13.0)%5.0%
Derivative expense(5.9)%—%
Executive compensation(8.5)%—%
Other permanent difference(0.7)%(1.4)%
Stock-based compensation0.5%—%
Valuation allowance75.6%(24.6)%
Effective tax rate69.0%—%
 
 
2019
 
 
2018
 
U.S. Federal statutory rate
  21.0%
  21.0%
State and local, net of Federal benefit
  5.0%
  5.1%
Permanent difference
  (1.1)%
  (0.2)%
Valuation allowance
  (24.9)%
  (25.9)%
Effective tax rate
  -%
  -%

No current provision for Federal income taxes was recordedIncome tax expense/(benefit) for the years ended December 31, 20192021 and 2018 due to the Company's operating losses. At December 31, 20192020 was $(21,665) and 2018, the Company has operating loss carryforwards$0, respectively, representing effective tax rates of $66,717,01369.0% and $30,961,231, respectively, a portion of which begin to expire in 2033. We have provided a valuation allowance on the deferred tax assets of $20,309,834 and $8,112,626 for the periods ended December 31, 2019 and 2018,0%, respectively.
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In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. In estimating future taxable income, the Company relies upon assumptions and estimates about future activities, including the amount of future federal and state pretax operating income that the Company will generate; the reversal of temporary differences; and the implementation of feasible and prudent tax planning strategies. Based on this analysis, and as a result of the future taxable income generated by the RideNow acquisition, the Company has determined that it is more likely than not that its deferred tax assets will be realized, and accordingly has released its full valuation allowance of $23,742 during 2021.
As of December 31, 2021 and 2020, the Company has federal net operating loss carryforwards of $91,246 and $82,733, respectively, a portion of which begins to expire in 2033. The Company’s state net operating loss carryforwards as of December 31, 2021 and 2020 are $17,878 and $16,291, respectively, a portion of which begin to expire in 2029. As a result of various ownership changes, the Company’s federal and state net operating losses are subject to limitations under Internal Revenue Code (“IRC”) Section 382. However, due to the Company’s projected income in future years and the indefinite-lived nature of the majority of its net operating losses available, none of these attributes are expected to expire unutilized as a result of the IRC Section 382 limitation analysis.
Based on the statutes of limitations in the applicable jurisdiction in which the Company operates, the Company is generally no longer subject to examinations by U.S. tax authorities in years prior to 2017.
U.S. Tax Reform
In March 2020, then President Trump signed into U.S. federal law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. Economy. The Company does not expect the provisions of the legislation to have a significant impact on the effective tax rate or income tax payable and deferred income tax positions of the Company.
NOTE 1417 – LOSS PER SHARE
The Company computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighed-average number of shares of common stock outstanding during the period. The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the period.
For purposes of this calculation 129,938for the year ended December 31, 2021, 912,128 of RSUs, 5,0872,551 of stock options, 16,5301,212,121 of Oaktree Warrants to purchase shares of Class B common stock, 16,531 of other warrants to purchase shares of Class B Common Stock, and 279,182982,107 shares of Class B Common Stock issuable in connection with convertible debt are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive.
In connection with the Company's acquisitionFor purposes of Wholesale, the Company issued 1,317,329 shares of Series B Non-Voting Convertible Preferred Stock. The rights of the holder of the Series B Preferred and Class A and Class B Common Stock are identical, except with respect to voting. The Series B Preferred automatically converts to Class B Common Stock 21 days after the mailing of a definitive information statement prepared in accordance with Regulation 14C of the Exchange Act, without further action on the part of the Company, to the holders of Series B Preferred and has no expiration date. The conversion of Series B Preferred to Class B Common was effected on March 4, 2019. The Company applies the two-class method of calculating earnings per share, but as the rights of the Series B Non-Voting Convertible Preferred Stock and Class A and Class B Common Stock are identical, except in respect of voting, basic and diluted earnings per share are the same for all classes. Weighted average number of shares outstanding of Class A Common Stock, Class B Common Stock, and Series B Preferred Stock at December 31, 2019 were 50,000, 1,114,714, and 0, respectively.
NOTE 15 – RELATED PARTY TRANSACTIONS
A key component of the Company's business model is to use regional partners in the acquisition of pre-owned vehicles as well as utilize these regional partners to provide inspection, reconditioning and distribution services. Correspondingly, the Company will earn fees and transaction income, and the regional partner may earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. In connection with the development of the regional partner program, the Company tested various aspects of the program by utilizing a dealership to which Mr. Chesrown, the Company's Chief Executive Officer has provided financing in the form of a $400,000 convertible promissory note. The note, which could be converted into a 25.0% ownership interest in the Dealer at any time, was to mature on May 1, 2019, with interest payable monthly at 5.0% per annum. This financing arrangement was terminated in April 2018. Revenue recognized by the Company from the Dealerthis calculation for the year ended December 31, 2018 was $619,193 or .04%2020, 443,843 of total revenue. CostRSUs, 2,751 of revenue for the Company at December 31, 2018 includes $549,813 or .04%stock options, 16,530 of total costwarrants to purchase shares of revenue. Included in accounts receivable at December 31, 2018 was $40,176 owed to the Company by the Dealer.
In addition, the Company previously subleased warehouse space from the Dealer that is separateClass B Common Stock and distinct from the location982,107 shares of the dealership, on the same terms as paid by the Dealer. This subleased facility serves as the northwestern regional distribution center for the Company.  The lease wasterminated on June 30, 2018.For the year ended December 31, 2018, the Company paid $90,000 in rent under the sublease.
In connection with the NextGen acquisition, the Company entered into a Services Agreement (the "Services Agreement") with Halcyon Consulting, LLC ("Halcyon"), to provide development and support services to the Company. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company paid Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees may increase on an annual basis, provided that the rates were not higher than 110.0% of the immediately preceding year's rates. The Company reimbursed Halcyon for any reasonable travel and pre-approved out-of-pocket expensesClass B Common Stock issuable in connection with its servicesconvertible debt are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the Company. The Services Agreement was terminated on March 31, 2018. For the year ended December 31, 2018 the Company paid $54,159 under the Services Agreement.effect is antidilutive.
NOTE 18 – RELATED PARTY TRANSACTIONS

Promissory Notes
As of December 31, 2019 and 2018,2020, the Company had promissory notes of $370,556$371 and accrued interest of $23,731 and $7,939, respectively,$9 due to Blue Flame Capital, LLC (“Blue Flame”), an entity controlled by a Denmar Dixon, a director of the Company. The promissory notesBlue Flame Notes plus accrued interest were issuedpaid in connection with the completion of the 2016 Private Placementfull on MarchJanuary 31, 2017. Interest2021, and interest expense on the promissory notes due to Blue Flame, for the yearsyear ended December 31, 20192021 and 20182020 was $183,286$3 and $143,987, respectively, which included debt discount amortization of $144,409 and $114,404, respectively.$78. The interest was charged to interest expense in the Consolidated Statements of Operations. OnThe Blue Flame Notes plus accrued interest were paid in full on January 31, 2021.
In connection with the acquisition of RideNow, the Company assumed 2 promissory notes totaling principal and accrued interest of $2,200 as of August 31, 2021 due to entities controlled by William Coulter and/or Mark Tkach, each a
F-37


former director and executive officer of the Company. Amounts due under these 2 promissory notes totaled $907 as of December 31, 2021.
Nashville Leases
In connection with the acquisition of Wholesale, (vehicle logistics and transportation) the Company entered into leases for 2 facilities in the greater Nashville area owned by Mr. Brewster, a former 5% or greater holder of our Class B Common Stock. One of the leases was terminated in 2019. The other location has a lease term expiring on October 30, 2018,2021, for which the Company has two (2) renewal options, each of which provides for five (5) additional years with a ten percent (10.0%) increase in the base rent. The rent for the current location is approximately $25 per month.
August 2021 Offering
In connection with the RideNow Transaction, on March 12, 2021, the Company and its subsidiary, NextGen Pro, LLC (“NextGen Pro”), executed a secured promissory note with BRF Finance Co., LLC (“BRF Finance”), an affiliate of B. Riley Securities, Inc., one of the underwriters in this offering, pursuant to which BRF Finance loaned the Company $2,500 (the “Bridge Loan”). The Bridge Loan matures on the earlier of September 30, 2021 or, after May 1, 2021, upon the issuance of debt or equity above $2,650. The Bridge Loan was secured by certain intellectual property assets held by NextGen Pro and interest on the loan was at a rate of 12% annually. The Bridge Loan, and all accrued interest was paid upon the closing of the RideNow Transaction.
Denmar Dixon, purchased 13,636 shares of Class B common stock in the August 2021 Offering at the public price of $33.00 per share.
RideNow Leases
In connection with the RideNow Transaction, the Company entered into related party leases for 24 properties consisting of dealerships and offices. Each related party lease is with a wholly owned subsidiary of the Company as the tenant and an entity controlled by Mr. Dixon invested $243,000either William Coulter or Mark Tkach, each former director and executive officer of the Company, as the landlord. The initial aggregate base rent payment for all 24 leases is approximately $1,229 per month, and each lease commenced a new 20-year term on September 1, 2021, with each lease containing annual 2% increases on base rent. The Company is still in the Private Placement for 1,500 sharesprocess of Class B Common Stock. Joseph Reece, a memberfinalizing its purchase price allocation and related fair values of assets and liabilities, including the RideNow leases.
RideNow Reinsurance Products
Each of the Company'soperating entities owned by the Company that own retail powersport stores which sell motorcycles and various off-road vehicles also sell extended service contracts, prepaid maintenance, “GAP insurance,” theft protection and tire and wheel products on their vehicles. These products sold to customers of these stores are offered by RPM One (“RPM”), which is an after-market third-party provider of these products commonly used in the industry. Affiliate reinsurance companies controlled by and owned primarily by William Coulter and/or Mark Tkach participate in the underwriting profits of these RPM products. The sales representatives employed by these operating companies are incentivized to offer the products sold by RPM. The total amount paid by the Company to these affiliated companies totaled approximately $139 during the year ended December 31, 2021. The Audit Committee of the Board of Directors at(the “Board”) of the time, individually invested $81,000Company (the “Audit Committee”) is in the Private Placement for 500 sharesprocess of Class B Common Stock. These purchasesreviewing the terms and rates of these entities.
Payments to RideNow Management, LLLP
The Company made $479 in payments to RideNow Management, LLLP, an entity owned equally by two directors during the year ended December 31, 2021.
Beach Agreement
On December 31, 2021, the Company acquired all the business assets of RNBeach, LLC (“Beach”), a company that sells and services new and used powersports products. The sellers of Beach were approved by the Company's Board of Directors in accordance with Rule 16b-3(d)(1)William Coulter and Mark Tkach, each a former director and executive officer of the Exchange Act. Messrs. DixonCompany. The total purchase price to acquire all the business assets of Beach was approximately $5,528, and Reece abstained from the Company's Board of Directors' vote in favor of the Private Placement.cash paid was approximately $5,368.
NOTE 1619COMMITMENTS AND CONTINGENCIESLEASES
Lease Commitments
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We determine whether an arrangement is a lease at inception and whether such leases are operating or financing leases. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. We use these options in determining our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determine the present value of the lease payments.
The following table reflects the balance sheet presentation of our lease assets and liabilities:
LeasesClassification20212020
Assets:
OperatingRight of use assets$133,112 $5,690 
FinanceProperty and equipment, net3,240 — 
Total right-of-use assets$136,352 $5,690 
Liabilities:
Current
OperatingCurrent portion of lease liabilities$19,155 $1,630 
FinanceCurrent portion of lease liabilities1,094 — 
Non-Current
OperatingLong-term portion of operating lease liabilities114,687 4,370 
FinanceLong-term portion of financing lease liabilities2,869 — 
Total lease liabilities$137,805 $6,000 
Operating lease expense is recognized on a straight-line basis over the lease term. Total operating lease expenses for the year ended December 31, 20192021 and 20182020 was $1,661,649$7,431 and $414,238,$2,200, respectively. The current portion of our operating lease liabilities as of December 31, 2019 is $1,423,610 and is included in accounts payable and accrued liabilities. The long-term portion of our operating lease liabilities as of December 31, 2019 is $4,722,101.
The weighted-average remaining lease term and discount rate for our operating leases are as follows:
20212020
Weighted average lease term - operating leases14.93.7
Weighted average lease term - finance leases19.70.0
Weighted average discount rate - operating leases14.0 %6.2 %
Weighted average discount rate - finance leases15.0 %— %
2019
Weighted-average remaining lease term
4 Years
Weighted-average discount rate
7.0%
The following table provides information related to the lease costs of finance and operating leases for the year ended December 31, 2021 and 2020:
20212020
Total operating lease expenses$7,431 $2,200 
Finance lease costs:
Amortization of ROU assets55 — 
Interest on lease liabilities165 — 
$7,651 $2,200 

F-39


Supplemental cash flow information related to operating leases for the year ended December 31, 20192021 and 2020 was as follows:
2019
Cash payments for operating leases
$1,019,027
New operating lease assets obtained in exchange for operating lease liabilities
$6,040,287
20212020
Cash payments for operating leases$6,644 $1,692 
New operating lease assets obtained in exchange for operating lease liabilities$94,544 $2,901 
The following table summarizes the future minimum payments for operating leases at December 31, 2019 due2021:
Year ending December 31,Amount
2022$18,040 
202317,466 
202416,673 
202514,892 
202613,680 
Thereafter176,205 
Total lease payments256,956 
Less imputed interest(173,187)
Present value of operating lease liabilities$83,769 

NOTE 20 - SEGMENT REPORTING
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have 3 reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive, and (3) vehicle logistics. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution principally of motorcycles and other powersports vehicles, while the automotive segment distributes cars and trucks. Our vehicle logistics segment provides nationwide automotive transportation services between dealerships and auctions. Our vehicle logistics reportable segment has been determined to represent 1 operating segment and reporting unit. The accounting policies of the segments are the same and are described in Note 1.
The following table summarizes revenue, operating income (loss), depreciation and amortization, and interest expense which are the measure by which management allocates resources to its segments to each year ending December 31,of our reportable segments.
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2020
 $1,805,899 
2021
  1,785,519 
2022
  1,920,543 
2023
  744,370 
2024
  310,200 
thereafter
  568,700 
Total lease payments
  7,135,231 
Less imputed interest
  (989,520)
Present value of lease liabilities
 $6,145,711 
PowersportsAutomotiveVehicle Logistics
Eliminations(1)
Total
Year Ended December 31, 2021
Total assets$1,200,253 $453,752 $14,913 $(641,169)1,027,749
Revenue$433,712 $460,888 $48,804 $(4,964)938,440
Operating income (loss)$(22,519)$9,905 $3,746 $— (8,868)
Depreciation and amortization$5,981 $95 $27 $— 6,103
Interest expense$(14,288)$(2,111)$(6)$— (16,405)
Increase in derivative liability$(8,799)$— $— $— (8,799)
Year Ended December 31, 2020
Total assets$45,694 $47,841 $10,535 $(27,091)76,979
Revenue$47,526 $337,085 $35,887 $(4,071)416,427
Operating income (loss)$(19,866)$(1,365)$2,671 $— (18,560)
Depreciation and amortization$1,997 $140 $$— 2,143
Interest expense$(4,605)$(1,840)$(5)$— (6,450)
(1)Intercompany investment balances related to the acquisitions of Wholesale, Inc. and Wholesale Express, and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Consolidated Statements of Operations.
NOTE 21 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of December 31, 20192021 and 2018,2020, the Company does not believe that the ultimate resolution of any legal actions, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, and capital resources.

Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third-party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
NOTE 17 – CONCENTRATIONS
The Company is dependent on third-party providers of wholesale vehicle auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of these principal providers or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationships with these providers are satisfactory.
NOTE 18 - SEGMENT REPORTING
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting:(1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution principally of motorcycles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services between dealerships and auctions. Our vehicle logistics and transportation service reportable segment has been determined to represent one operating segment and reporting unit. The accounting policies of the segments are the same and are described in Note 1.
The following table summarizes revenue, operating income (loss), Depreciation and Amortization and interest expense which are the measure by which management allocates resources to its segments to each of our reportable segments.
 
 
 
 Powersports
 
 
 
Automotive
 
 
Vehicle Logistics and Transportation
 
 
Eliminations(1)
 
 
Total
 
Year Ended
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 55,992,165 
 77,033,326 
 $7,921,578 
 $(27,553,978)
 $113,393,091 
Revenue
 101,008,976 
 717,042,511 
  31,931,488 
 $(9,353,628)
 $840,629,347 
Operating income (loss)
 (34,402,724)
 (5,318,549
 $1,928,574 
 $- 
 $(37,792,699)
Depreciation and amortization
 1,543,023 
 235,998 
 $7,405 
 $- 
 $1,786,426 
Interest expense
 4,453,549 
 2,732,869 
 $1,186 
 $- 
 $7,187,604 
Loss on early extinguishment of debt
 (1,499,250)
 - 
 - 
 - 
 $(1,499,250)

    
    
    
    
    
Year Ended
December 31, 2018
    
    
    
    
    
Total assets
 55,825,600 
 73,642,034 
 $5,555,397 
 (26,096,650)
 $108,926,381 
Revenue
 61,204,416 
 91,369,996 
 $4,931,558 
 $(1,107,739)
 $156,398,231 
Operating income (loss)
 (22,546,622)
 (892,306)
 $37,796 
 $- 
 $(23,401,132)
Depreciation and amortization
 958,282 
 24,490 
 $1,234 
 $- 
 $984,006 
Interest expense
 1,267,379 
 513,306 
 $- 
 $- 
 $1,780,685 
(1)            
Intercompany investment balances related to the acquisitions of Wholesale, Inc. and Wholesale Express, and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Consolidated Statements of Operations.

NOTE 1922 – SUBSEQUENT EVENTS
Related Party Software License
Public Offering
On January 10, 2020,19, 2022 the Audit Committee approved, and the Company entered into the Underwritingboth a Perpetual Software License Purchase Agreement, and a Platform Service Agreement with Bidpath Incorporated, a Company owned by Adam Alexander, a member of the Underwriters relatingCompany’s Board of Directors. The license agreement provides the Company with a perpetual, non-exclusive license to the Company's 2020 Public Offering ofthen-current source code as well as all future source code.This code provides additional functionality to the 900,000 Firm SharesCompany’s inventory management platform, and the 135,000 Additional Shares.Company is paying in aggregate $3,600, of which $1,080 has been paid to date.The services agreement provides for support and maintenance services on monthly basis for $30 thousand per month.The initial terms is thirty-six (36) months but can be terminated by either party at any time by providing sixty (60) days notice to the other party.
The Underwriters agreed to purchase the Firm Shares at a priceAcquisition of $11.40 per share. The Firm Shares were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (Registration No. 333-234340) under the Securities Act.
Freedom Powersports
On January 14, 2020,Friday, February 18, 2022 the Company issuedclosed on the Firm Sharesacquisition of Freedom Powersports, which included all business and closed the 2020 Public Offering at a public price of $11.40 per share. On January 16, 2020, the Company received notice of the Underwriters' intentreal estate assets, subject to exercise the over-allotment option in full (the "Over-allotment Exercise"). On January 17, 2020, the Company issued the Additional Shares and closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise,customary net proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,898,070. Certain of the Company's officers and directors participated in the 2020 Public Offering.
The Company intends to use the net proceeds of the 2020 Public Offering for working capital and general corporate purposes, which may include further technology development, increased spending on marketing and advertising and capital expenditures necessary to grow the business. Pending these uses, the Company may invest the net proceeds in short-term interest-bearing investment grade instruments.
Convertible Note Exchange and Offer
Also on January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering, pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering after deducting for payment of accrued interest on the Old Notes and offering-related expenses were approximately $8,272,375.
The New Notes were issued on January 14, 2020 pursuant to an Indenture (the "New Indenture"), by and between the Company and Wilmington Trust, National Association, as trustee (the "Trustee"). The Note Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The New Notes bear interest at 6.75% per annum, payable semiannually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Notes may bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradeable as required by the New Indenture. The New Notes will mature on January 1, 2025, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a "make-whole fundamental change" (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 62.0 shares per $1,000 in principal amount.
The New Indenture contains a "blocker provision" which provides that no holder (other than the depositary with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B Common Stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B Common Stock.
The New Notes are not redeemable by the Company before the January 14, 2023. The Company may redeem for cash all or any portion of the New Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.

The New Notes rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).
The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable.
In connection with the 2020 Note Offering, on January 14, 2020, the Company entered into a registration rights agreement with the Note Investors, pursuant to which the Company has agreed to file with the SEC a shelf registration statement registering the sale, on a continuous or delayed basis, of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than the day that is 120 days after January 14, 2020.
Investor Note Exchange
Also, in connection with the closing of the 2020 Public Offering and the 2020 Note Offering, the Company repaid $500,000 plus accrued interest related to the note payable to Halcyon, and certain of the Company's investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for the New Investor Notes, pursuant to the Investor Note Exchange Agreement, by and between the Company and each Investor, including Halcyon, an entity affiliated with Kartik Kakarala, a director of the Company, such New Investor Noteadjustments, for an aggregate principal amount of $833,333, Blue Flame, an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114 and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amountconsideration of approximately $1,502,352, will mature on January 31, 2021,$129,971. The aggregate consideration consisted of approximately $83,291 for the Freedom business and will be convertible at any time atapproximately $46,680 for acquired real estate properties, including the Investor's option at a pricepayoff of $60.00 per share. In connection with the issuance of the New Investor Notes, the Company also entered into a Security Agreement, dated as of January 14, 2020 with the Investors, pursuant to which the Company granted to the Investors a security interest in certain collateral to secure, on a pro rata basis basedoutstanding mortgage debt on the percentage equal to the amount of principal outstanding on each New Investor Note divided by the amount of principal outstanding on all of the New Investor Notes to each Investor.
The New Investor Notes and the New Notes were sold to the investors pursuant to the Investor Note Exchange Agreement and the Note Agreement, respectively, in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. To the extent that any shares of Class B Common Stock are issued upon conversion of the New Investor Notes and the New Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof, because no commission or other remuneration is expected to be paid in connection with conversion of the New Investor Notes and the New Notes, and any resulting issuance of shares of Class B Common Stock.
Nasdaq Notices
On January 17, 2020, the Company received a notice from the Listing Qualifications department of the Nasdaq Stock Market ("Nasdaq") indicating that the Company is not in compliance with the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rule 5450(a)(1) based upon the closing bid price for the 30 consecutive business days ended January 16, 2020. The Nasdaq notice does not impact the Company's listing at this time and the Company's stock will continue to trade on Nasdaq while the Company works to regain compliance with the Nasdaq.
As a result of the Reverse Stock Split, as defined below, the Company believes it has regained compliance with Rule 5450(a)(1).

Nashville Tornado
In the early morning hours of March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities in Nashville. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The Company continues in the process of reviewing damages and coverages with its insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, currently assessed by the insurance carrier at $3,369,087; and (3) loss of business income, for which the company has coverage in the amount of $6,000,000.
All three components of the Company's loss claim have been submitted to its insurers. The Company's inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss. The building insurer has agreed to pay $3,369,087 on the building and personal property loss, reflecting a complete recovery, net of $5,000 reflecting the Company's deductible. The insurer has made an interim payment on the building and personal property loss of $2,269,507 and has an outstanding balance of $1,094,580 which is expected to be paid during the second quarter of 2020. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a full recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. The Company has experienced significant disruption to its business, both in terms of disruption of its operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of the Company’s business. The Company’s business is also dependent on the continued health and productivity of its associates throughout this crisis. Individually and collectively, the Company expects the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, sales, results of operations, financial condition, and liquidity.
The COVID-19 situation has created an unprecedented and challenging time. The Company’s current focus is on positioning the Company for a strong recovery when this crisis is over. The Company has taken steps to reduce its inventory and align its operating expenses to the state of the business. The Company plans to continue to operate as permitted to support its customers’ needs for reliable vehicles and to provide as many jobs as possible for its associates. Effective April 9, 2020, 169 associates were temporarily laid-off, however the Company’s receipt of PPP funds, as discussed below will allow it to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation future government mandates, as well as future business conditions. The Company will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce its operating expenses as the Company is able, however, the Company expects the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, sales, results of operations, financial condition, and liquidity.
PPP Loan
On May 1, 2020, the Company, and its wholly-owned subsidiaries Wholesale, Inc. and Wholesale Express, LLC (together, the “Subsidiaries,” and with the Company, the “Borrowers”), each entered into loan agreements and related promissory notes (the “SBA Loan Documents”) to receive U.S. Small Business Administration Loans (the “SBA Loans”) pursuant to the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”),real estate assets in the aggregate amount of $5,176,845 (the “Loan Proceeds”).approximately $27,025. The Borrowers received the Loan Proceedsaggregate consideration was paid using cash on May 1, 2020. Under the SBA Loan Documents, the SBA Loans have a fixed interest rate of 1%, repayment begins six months
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hand, $84,500 drawn from the date of disbursement of each SBA Loan,Company’s delayed draw term loan facility, and the SBA Loans mature two years from the dateissuance of first disbursement. There is no prepayment penalty.
Pursuant1,048,718 restricted shares of RumbleOn Class B common stock. The restricted shares are subject to a six-month lock-up and resale registration rights. The Company has not completed its initial accounting assessment with respect to the termsFreedom Agreement at this time.
Funding of the SBA Loan Documents, the Borrowers may apply for forgivenessRumbleOn’s consumer finance subsidiary
On February 4, 2022, ROF SPV I, LLC (“ROF SPV”), an indirect subsidiary of the amount due on the SBA Loans in an amount equalRumbleOn, entered into a secured loan facility primarily to the sum of the following costs incurredprovide up to $25,000. All loans under this agreement will be secured by the Borrowers during the eight-week period (or any other period that may be authorized by the U.S. Small Business Administration) beginning on the date of first disbursement of the SBA Loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of SBA Loan forgiveness shall be calculated in accordance with the requirements of the PPP,certain collateral including the provisions of Section 1106 of the CARES Act, although no more than 25% of the amount forgiven can be attributable to non-payroll costs. No assurance isconsumer finance loans purchased by ROF SPV.
ROF SPV and ROF provided that forgiveness for any portion of the SBA Loans will be obtained.
The promissory notes evidencing the SBA Loans contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties,covenants under the agreements which include financial covenants and collateral performance covenants. Loans sold to or provisions of the promissory notes. The occurrence of an event of default may result in the repaymentfacility are subject to certain eligibility criteria, concentration limits and reserves.
Appointment of all amounts outstanding, collection of all amounts owing from the Borrowers, and/or filing suit and obtaining judgment against the Borrowers.
Reverse Stock Split
Chief Financial Officer
On May 18, 2020,February 1, 2022, the Company filed a Certificate of Change toappointed Narinder Sahai as the Company’s Articles of Incorporation withChief Financial Officer.
Change in Executive Officers
On February 11, 2022, William Coulter, a director and the Secretary of State of the State of Nevada to effect a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the nearest whole share. The authorized preferred stockExecutive Vice Chairman of the Company, was not impacted byand Mark Tkach, a director and the Reverse Stock Split. Following the Reverse Stock Split,Chief Operating Officer of the Company, has outstanding 50,000 sharesresigned from all positions with the Company. The Company appointed Peter Levy, the President of Class A Common Stock and approximately 2,162,696 sharesthe Company, to also serve as Chief Operating Officer of Class B Common Stock. the Company.
Repayment of Convertible Note
On May 20, 2020,January 31, 2022, the Company made its final scheduled payment on the convertible note entered into on February 3, 2019 in connection of the Acquisition of AutoSport. The carrying amount on the Company’s Class B Common Stock commenced trading on the Nasdaq Capital Market on a split-adjusted basis. The Company has retrospectively adjusted the 2018 and 2019 financial statements for loss per share and share amountsbalance sheet as a result of the reverse stock split.
December 31, 2021 was $154.
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