~~As of September 30, 2020, vested outstanding stock options had no intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock.~~

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate stock-based compensation expense for the nine months ended September 30, 2020:

~~The following table sets forth stock-based compensation expense for the three months ended September 30, 2020, the remainder of 2020, and the four succeeding years:~~

On August 4, 2020, the Company issued ~~warrants~~an incentive stock option under the Plan to the Company’s Chief Executive Officer, Douglas T. Moore, for the purchase of ~~55,560~~ 263,158 shares of common stock, ~~to affiliates of the representative in the IPO. The warrants are exercisable~~ at ~~any time and from time to time, in whole or in part, beginning on January 26, 2021 until July 30, 2025, at a per share~~an exercise price ~~equal~~of $9.00 per share. The option vests with respect to $11.25. The warrants will result in a total compensation expense of $168,736 to be recognized over the vesting period. As of the period ended September 30, 2020, the Company had recognized compensation expense of $54,960. The remaining compensation expense of $113,774 will be recognized over the remaining vesting period.

On April 5, 2019, the Company issued to SBCC a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. SBCC exercised this warrant for the purchase of 250,000 shares of common stock on August 4, 2020.

~~The following table presents activity relating to the warrants for the nine months ended September 30, 2020:~~

The Company recognizes stock issuance expense for the warrants on a straight-line basis over the term of the warrants. The service period is generally the vesting period. The following assumptions were used to calculate stock issuance expense for the nine months ended September 30, 2020:

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2020 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements, except as set forth below.

On October 20, 2020, the Company entered into a securities purchase agreement with Appliances Connection Inc., a newly-formed wholly owned subsidiary of the Company (the “Buyer”), 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC and YF Logistics LLC (collectively, the “Companies”) and the other parties signatory thereto (the “Sellers”), pursuant to which the Buyer agreed to acquire all of the issued and outstanding capital stock or other equity securities of the Companies from the Sellers for an aggregate purchase price of $210,000,000, subject to adjustment as described below. The purchase price consists of (i) $168,000,000 in cash, (ii) 1,222,239 shares of the Company’s common stock, and 1,111,094 shares of the Company’s series A preferred stock, collectively having a stated value that is equal to $21,000,000, and (iii) a number of shares of the Company’s series A-1 preferred stock that is equal to (A) $21,000,000 divided by (B) the average of the closing price25% of the shares on August 15, 2020 and on each of the ~~Company’s common stock (as reported on NYSE American) for the 20 trading days immediately preceding the 3rd trading day prior to the closing date~~first, second and third anniversaries thereof, respectively.

Conversion of ~~the securities purchase agreement. The terms of the series A preferred stock and series A-1 preferred stock have not yet been determined.~~SBCC Warrant

~~The purchase price is subject to a closing net working capital adjustment provision. Under this provision, the Sellers shall deliver to the Buyer at least one day~~Immediately prior to the closing of the ~~securities purchase agreement a statement setting forth their good faith estimate~~IPO on August 4, 2020, SBCC converted its warrant (Note 15) into 250,000 shares of the net working capital of the Companies. If such estimated net working capital exceeds a target net working capital of -$15,476,941, then within five (5) days the Buyer shall make a cash payment to the Sellers that is equal to such excess. If such target net working capital exceeds such estimated net working capital, then either (i) if finally determined at the closing, the cash portion of the purchase price shall be decreased by such excess or (ii) within 5 days of the closing, the Sellers shall make a cash payment to the Buyer that is equal to such excess.common stock.

~~The purchase price is also subject to a post-closing net working capital adjustment provision. On or before the 75~~^th day following the closing of the securities purchase agreement, the Buyer shall deliver to the Sellers a statement setting forth its calculation of the net working capital. If such net working capital exceeds the estimated net working capital referred to above, then within five (5) days after the final determination of such net working capital the Buyer shall send payment by wire transfer of immediately available funds to the Sellers in an amount equal to such excess. If the estimated net working capital exceeds such net working capital, then within five (5) days the Sellers shall pay to the Buyer in cash an amount equal to such excess.

The cash portion of the purchase price will also be (i) decreased by (A) the amount of any outstanding unpaid indebtedness of the Companies (other than trade debt) existing as of the closing date and (B) any transaction expenses, and (ii) increased by the amount of cash or cash equivalents held by, or on the books of, the Companies as of the closing date, if any, that is in excess of $850,000.

~~Upon execution of the securities purchase agreement, the Buyer paid a deposit in the amount of $100,000, which will be credited towards the cash portion of the purchase price at closing.~~

The securities purchase agreement contains customary representations, warranties and covenants, including a covenant that the Sellers will not compete with the business of 1 Stop Electronics Center, Inc. as of the closing date for a period of two (2) years following closing, as well as customary closing conditions, including, without limitation, the expiration or termination of any waiting period applicable to the consummation of the transaction under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended; the receipt of all authorizations, consents and approvals of all governmental authorities or agencies; the release of any security interests; the Buyer obtaining the requisite acquisition financing; and delivery of all opinions and documents required for the transfer of the securities of the Companies to the Buyer.

~~Repayment of PPP Loan~~

~~On November 2, 2020, the Company repaid the balance of the PPP loan (see Note 10).~~

~~ITEM 2.~~

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

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.

All periods presented on or prior to April 5, 2019 represent the operations of Goedeker (as defined below), our predecessor. Unless otherwise specified, all results of operations information for the three and ~~nine~~six months ended ~~September~~June 30, 2019 reflects the full periods.

References to “Successor” refer to the financial position and results of operations of the Company subsequent to April 5, 2019. References to “Predecessor” refer to the financial position and results of operations of Goedeker on and before April 5, 2019.

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

	●	our goals and strategies;

	●	our future business development, financial condition and results of operations;

	●	expected changes in our revenue, costs or expenditures;

	●	growth of and competition trends in our industry;

	●	our expectations regarding demand for, and market acceptance of, our products;

	●	our expectations regarding our relationships with investors, institutional funding partners and other parties we collaborate with;

	●	fluctuations in general economic and business conditions in the markets in which we operate; and

●

relevant government policies and regulations relating to our industry.

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” included in our Registration Statement on Form S-1, originally filed with the Securities and Exchange Commission on ~~August 31,~~April 22, 2020, as amended, and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

Overview

1847 Goedeker Inc. (“we,” “us,” “our” or the “Company”) was incorporated in the State of Delaware on January 10, 2019 for the sole purpose of acquiring substantially all of the assets of Goedeker Television Co. (“Goedeker”). On April 5, 2019, we acquired substantially all of the assets of Goedeker. As a result of this transaction, we acquired the former business of Goedeker and continue to operate this business. All discussions in this report regarding our business prior to the acquisition reflect the business of Goedeker, our predecessor company. Prior to our acquisition of substantially all of the assets of Goedeker, we had no operations other than operations relating to our incorporation and organization.

The Company is a one-stop e-commerce destination for home furnishings, including appliances, furniture, home goods and related products. Since our founding in 1951, we have evolved from a local brick and mortar operation serving the St. Louis metro area to a large nationwide omnichannel retailer that offers one-stop shopping for the leading brands. While we still maintain our St. Louis showroom, over 90% of our sales are placed through our website at www.goedekers.com. We offer over 185,000 SKUs organized by category and product features, providing visitors to the site an easy to navigate shopping experience.

Through our e-commerce business model, we offer an online marketplace for consumers looking for variety, style, service and value when shopping for nearly any home product needed. We are focused on bringing our customers an experience that is at the forefront of shopping online for the home. We have built a large online selection of appliances, furniture, home goods and related products. We are able to offer this vast selection of products because our model requires minimal inventory. We specialize in the home category and this has enabled us to build a shopping experience and logistics infrastructure that is tailored to the unique characteristics of our market.

Recent Developments

Impact of Coronavirus Pandemic

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it. Effective April 6, 2020, the Governor of Missouri announced a stay at home order that was in effect until May 3, 2020. Pursuant to this order, non-essential businesses, such as our showroom, were forced to close. However, our call center and warehouse continued to operate. According to Missouri’s re-opening plan, retail stores, such as our showroom, may re-open effective May 4, 2020 but with limitations on the number of individuals allowed in the showroom. Since over 90% of our sales are completed online and our call center and warehouse and distribution operations continued to operate, the restrictions put in place have not yet had a negative impact on our operations. On June 16, 2020, our showroom re-opened to the public, with restrictions that masks be worn by customers and employees, in compliance with St. Louis County ~~mandates.~~mandates later issued on July 3, 2020 requiring face masks be worn in public places.

We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.

We are dependent upon suppliers to provide us with all of the products that we sell. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain of our products. As a result, we have faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such products, they may cost more, which could adversely impact our profitability and financial condition.

If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

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

~~Securities Purchase Agreement~~Closing of Initial Public Offering

On ~~October 20,~~July 30, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity, a ~~securities purchase agreement with Appliances Connection~~division of Fordham Financial Management, Inc., ~~a newly-formed wholly owned subsidiary~~(the “Representative”), as representative of the ~~Company (the “Buyer”),~~underwriters set forth on Schedule 1 ~~Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC and YF Logistics LLC~~thereto (collectively, the ~~“Companies”) and the other parties signatory thereto (the “Sellers”~~“Underwriters”), ~~pursuant~~relating to ~~which the Buyer agreed to acquire all of the issued and outstanding capital stock or other equity securities of the Companies from the Sellers for~~ an ~~aggregate purchase price of $210,000,000, subject to adjustment as described below. The purchase price consists of (i) $168,000,000 in cash, (ii) 1,222,239 shares~~initial public offering of the Company’s common stock ~~and 1,111,094~~(the “IPO”). Under the Underwriting Agreement, the Company agreed to sell 1,111,200 shares of common stock to the ~~Company’s series A preferred~~Underwriters, and also agreed to grant the Underwriters’ a 45-day over-allotment option to purchase an additional 166,577 shares of common stock, ~~collectively having~~at a ~~stated value that is equal~~purchase price per share of $8.325 (the offering price to ~~$21,000,000, and (iii)~~the public of $9.00 per share minus the underwriters’ discount).

Pursuant to the Underwriting Agreement, the Company also agreed to issue to the Representative and/or its affiliates warrants to purchase a number of shares of common stock equal in the ~~Company’s series A-1 preferred stock that is~~aggregate to 5% of the total shares sold. The warrants will be exercisable at any time and from time to time, in whole or in part, beginning on January 26, 2021 until July 30, 2025, at a per share exercise price equal to ~~(A) $21,000,000 divided by (B) the average~~$11.25 (125% of the ~~closing~~public offering price of the shares of the Company’s common stock (as reported on NYSE American) for the 20 trading days immediately preceding the 3rd trading day prior to the closing date of the securities purchase agreement.

The purchase price is subject to a closing net working capital adjustment provision. Under this provision, the Sellers shall deliver to the Buyer at least one day prior to the closing of the securities purchase agreement a statement setting forth their good faith estimate of the net working capital of the Companies. If such estimated net working capital exceeds a target net working capital of -$15,476,941, then within five (5) days the Buyer shall make a cash payment to the Sellers that is equal to such excess. If such target net working capital exceeds such estimated net working capital, then either (i) if finally determined at the closing, the cash portion of the purchase price shall be decreased by such excess or (ii) within 5 days of the closing, the Sellers shall make a cash payment to the Buyer that is equal to such excess.

~~Upon execution of the securities purchase agreement, the Buyer paid a deposit in the amount of $100,000, which will be credited towards the cash portion of the purchase price at closing.~~

~~Repayment of PPP Loan~~per share).

On ~~November 2,~~August 4, 2020, the Company ~~repaid~~sold 1,111,200 shares of its common stock to the ~~balance~~Underwriters for total gross proceeds of $10,000,800. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $8,602,166. The Company also issued warrants for the purchase of 55,560 shares of common stock to affiliates of the ~~Paycheck Protection Program loan described below.~~Representative.

Principal Factors Affecting Our Financial Performance

Our operating results are primarily affected by the following factors:

	●	our ability to acquire new customers or retain existing customers;

	●	our ability to offer competitive product pricing;

	●	our ability to broaden product offerings;

	●	industry demand and competition; and

●

market conditions and our market position.

Key Financial Operating Metrics

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Site Sessions (in millions)		2.7		1.5		7.3		4.8		3.1		1.5		4.5		3.3
Order History	$	36,963,583	$	15,236,006	$	82,095,491	$	44,989,811	$	29,861,000	$	15,552,000	$	45,017,000	$	29,484,000
Days from Order to Shipment (Average)		40		24		33		22		26.2		19.2		29.4		20.3

A site session occurs when a person visits our website. An order occurs when a customer has visited our website and ordered one or more items and has paid for them. The days from order to shipment is a measure, in the case of orders shipped from our warehouse, of the time from the order until the product ordered is loaded onto the shipper’s truck for delivery, and in the case of drop shipments, the time between the order and the date that we are invoiced (assuming that the vendor invoices us on the day that shipment to the customer is made).

Total revenues and total orders for any given month may not be equal for two primary reasons: (1) normal customer cancellations and (2) the time required to ship an order and recognize revenue. The time from order to shipping is between 20 and 25 days. Thus, an order made after the 10th of the current month will become revenue in the succeeding month, distorting the comparison between a months’ orders and its sales.

Our site sessions increased tofrom approximately ~~2.7~~1.4 million in the quarter ended ~~September 30,~~March 31, 2020 ~~as compared~~ to approximately ~~1.5~~3.1 million in the quarter ended ~~September~~June 30, 2019. In addition, our site sessions increased to approximately 7.3 million in the nine months ended September 30, 2020, as compared to approximately 4.8 million in the nine months ended September 30, 2019.2020. These increased site sessions were achieved at a lower cost per session beginning in February of 2020 and have continued through the date of this report.

These increased site sessions resulted in three-year highs for orders in the quarter ended ~~September~~June 30, 2020. An order is paid for by our customer when the order is placed and booked as revenue by us when the order is shipped.

Higher orders have positively impacted our working capital as orders yield cash in advance of shipment. Improvements in our working capital as a result of higher orders have positively impacted our delivery times thereby reducing the time from order to shipment. A reduction in days from order to shipment results in fewer cancelled orders and, as a result, higher revenues.

Given what we believe to be the linear relationship between advertising, site visits, orders, and days from order to shipment impacting cancellations, we believe that the increase in working capital provided by the IPO ~~(as defined below)~~ will have a dramatically positive impact on accelerating our growth rate and profitability.

Emerging Growth Company

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

	●	have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

	●	comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

	●	submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

●

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934 as amended, ~~(the “Exchange Act”),~~ which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Results of Operations

Comparison of Three Months Ended ~~September~~June 30, 2020 and 2019

The following table sets forth key components of our results of operations for the three months ended ~~September~~June 30, 2020 (Successor), the period from April 6, 2020 to June 30, 2019 (Successor), and the period from April 1, 2019 to April 5, 2019 (Predecessor), in dollars and as a percentage of our ~~net sales.~~revenue.

	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019						Successor												Predecessor
	Amount			% of Net Sales			Amount			% of Net Sales			Three Months Ended June 30, 2020 (As Restated)						Period April 6 to June 30, 2019 (As Restated)						Period April 1 to April 5, 2019
Products sales, net	$	13,435,095			100.0	%	$	12,202,271			100.0	%
													Amount			% of Net Sales			Amount			% of Net Sales			Amount		% of Net Sales
Product sales, net													$	15,285,031			100.0	%	$	10,545,880			100.0	%	$	999,855		100.0	%
Cost of goods sold		11,264,569			83.8	%		10,183,711			83.5	%		12,685,158			83.0	%		8,702,406			82.5	%		735,186		73.5	%
Gross profit		2,170,526			16.2	%		2,018,560			16.5	%		2,599,873			17.0	%		1,843,474			17.5	%		264,669		26.5	%
Operating expenses
Personnel		2,161,929			13.4	%		989,318			8.1	%		1,040,189			6.8	%		886,225			8.4	%		31,198		3.1	%
Advertising		1,432,834			10.5	%		696,771			5.7	%		891,907			5.8	%		525,222			5.0	%		113,477		11.3	%
Bank and credit card fees		574,808			4.2	%		279,412			2.3	%		454,569			3.0	%		232,273			2.2	%		72,130		7.2	%
Depreciation and amortization		93,283			0.7	%		11,044			0.1	%		91,790			0.6	%		87,437			0.8	%		-		-
General and administrative		957,703			7.0	%		594,916			4.9	%		1,509,417			9.9	%		1,952,241			18.5	%		34,767		3.5	%
Total operating expenses		5,220,557			38.3	%		2,571,461			21.1	%		3,987,872			26.1	%		3,683,398			34.9	%		251,572		25.2	%
Net loss from operations		(3,050,031	)		(22.4	)%		(552,901	)		(4.5	)%
Income (loss) from operations														(1,387,999	)		(9.1	)%		(1,839,924	)		(17.4	)%		13,097		1.3	%
Other income (expense)
Interest income		1,418			0.0	%		-			-			1,062			-			-			-			-		-
Financing costs		(488,460	)		(3.6	)%		(165,097	)		(1.4	)%		(74,504	)		(0.5	)%		(159,255	)		(1.5	)%		-		-
Interest expense		(157,312	)		(1.2	)%		(182,772	)		(1.5	)%		(296,708	)		(1.9	)%		(233,722	)		(2.2	)%		-		-
Loss on extinguishment of debt		(807,239	)		(5.9	)%		-			-			(948,856	)		(6.2	)%		-			-			-		-
Write-off of acquisition receivable														(809,000	)		(5.3	)%		-			-			-		-
Change in fair value of warrant liability		-			-			54,500			0.4	%		(2,127,656	)		(13.9	)%		2,600			-			-		-
Other income (expense)		1,657			0.0	%		(35,388	)		(0.3	)%		2,880			-			45,218			(0.4	)%		160		-
Total other income (expense)		(1,449,936	)		(10.6	)%		(328,757	)		(2.7	)%		(4,252,782	)		(27.8	)%		(345,159	)		(3.3	)%		160		-
Net loss before income taxes		(4,499,967	)		(33.0	)%		(881,658	)		(7.2	)%
Net income (loss) before income taxes														(5,640,781	)		(36.9	)%		(2,185,083	)		(20.7	)%		13,257		1.3	%
Income tax benefit		838,176			6.1	%		-			-			688,953			4.5	%		-			-			-		-
Net loss	$	(3,661,791	)		(26.8	)%	$	(881,658	)		(7.2	)%
Net income (loss)													$	(4,951,828	)		(32.4	)%	$	(2,185,083	)		(20.7	)%	$	13,257		1.3	%

We believe that reviewing our operating results for the three months ended June 30, 2019 by combining the results of the 2019 successor period (April 6, 2019 through June 30, 2019) and 2019 predecessor period (April 1, 2019 through April 5, 2019) with the pro forma adjustments related to the acquisition is more useful in discussing our overall operating performance compared to the results of the three months ended June 30, 2020 (successor). We do not see any potential risks associated with utilizing this pro forma presentation.

Following are the combined periods for 2020 and 2019:

	Three Months Ended June 30, 2020 Successor (As Restated)			Period April 6 to June 30, 2019 Successor (As Restated)			Period April 1 to April 5, 2019 Predecessor			Pro Forma Adjustments			Pro Forma Combined Three Months Ended June 30, 2019			Increase (Decrease)
Product sales, net	$	15,285,031		$	10,545,880		$	999,855		$	-		$	11,545,735		$	3,739,296
Cost of goods sold		12,685,158			8,702,406			735,186			-			9,437,592			3,247,566
Gross profit		2,599,873			1,843,474			264,669			-			2,108,143			491,730
Operating expenses
Personnel		1,040,189			886,225			31,198			-			917,423			122,766
Advertising		891,907			525,222			113,477			-			638,699			253,208
Bank and credit card fees		454,569		��	232,273			72,130			-			304,403			150,166
Depreciation and amortization		91,790			87,437			-			-			87,438			4,352
General and administrative		1,509,417			1,952,241			34,767			-			1,987,008			(477,591	)
Total operating expenses		3,987,872			3,683,398			251,572			-			3,934,970			52,902
Income (loss) from operations		(1,387,999	)		(1,839,924	)		13,097			-			(1,826,827	)		438,828
Other income (expense)
Interest income		1,062			-			-			-			-			1,062
Financing costs		(74,504	)		(159,255	)		-	(a)		(116,639	)		(275,894	)		201,390
Interest expense		(296,708	)		(233,722	)		-	(b)		(15,403	)		(249,125	)		47,583
Loss on extinguishment of debt		(948,856	)		-			-			-			-			(948,856	)
Write-off of acquisition receivable		(809,000	)		-			-			-			-			(809,000	)
Change in fair value of warrant		(2,127,656	)		2,600			-						2,600			(2,130,256	)
Other income		2,880			45,218			160			-			45,378			(42,498	)
Total other income (expense)		(4,252,782	)		(345,159	)		160			(132,042	)		(477,041	)		(3,775,741	)
Net income (loss) before income taxes		(5,640,781	)		(2,185,083	)		13,257			(132,042	)		(2,303,868	)		(3,336,913	)
Income tax benefit		688,953			-			-			-			-			688,953
Net income (loss)	$	(4,951,828	)	$	(2,185,083	)	$	13,257		$	(132,042	)	$	(2,303,868	)	$	(2,647,960	)

Notes

(a)	Reflects amortization of costs associated with acquisition debt as follows:
	Amortization of the cost of shares issued in acquisition	$	34,375
	Amortization of the cost of warrants issued in acquisition		82,264
	Total	$	116,639

(b)	Amortization of discount on note to seller	$	15,403

Product sales, net. We generate revenue from the retail sale of home furnishings, including appliances, furniture, home goods and related products. Our product sales were ~~$13,435,095~~$15,285,031 for the three months ended ~~September~~June 30, 2020, as compared to ~~$12,202,271~~$11,545,735 for the three months ended ~~September~~June 30, 2019, an increase of ~~$1,232,271,~~$3,739,296, or ~~10.1%.~~32%, which included $10,545,881 for our successor from April 6, 2019 to June 30, 2019 and $999,855 for our predecessor from April 1, 2019 to April 5, 2019. The increase is due to increased sales volume to meet appliance and furniture demand resulting from increased advertising, which has a direct impact on customer orders and shipped sales.

~~During~~Late in the three months ended ~~September~~June 30, 2020, we ~~experienced~~suffered delays in getting products from manufacturers whose production facilities were closed ~~or operating at reduced capacity~~ because of the coronavirus ~~pandemic, which~~pandemic. The lack of available products resulted in some cancellations of customer orders. For the three months ended ~~September~~June 30, 2020, we estimate that cancellations caused by shipping delays approximated ~~$15.9~~$9 million based on the historical ratio of customer orders to shipped sales ~~to customer orders~~ of approximately ~~79%~~80% to the actual ratio of approximately ~~37%~~50% in the three months ended ~~September~~June 30, 2020.

Our past performance is generally indicative of future performance to the extent that there are seasonal factors such as Black Friday, Cyber Monday, and other shopping days when sales spike.

Our revenue by sales type is as follows:

	Three Months Ended September 30, 2020					Three Months Ended September 30, 2019					Three Months Ended June 30,
	Amount		%			Amount		%			2020 Successor		2019 Successor		2019 Predecessor		2019 Total
Appliance sales	$	8,991,853		66.9	%	$	10,086,490		82.7	%	$	11,533,006	$	8,395,603	$	765,293	$	9,160,896
Furniture sales		3,554,704		26.5	%		1,398,843		11.5	%		2,768,327		1,557,813		176,325		1,734,138
Other sales		888,538		6.6	%		716,938		5.9	%		983,698		592,464		58,237		650,701
Total	$	13,435,095		100.0	%	$	12,202,271		100.0	%	$	15,285,031	$	10,545,880	$	999,855	$	11,545,735

Cost of goods sold. Our cost of goods sold consists of the cost of purchased merchandise plus the cost of delivering merchandise and, where applicable, installation, net of promotional rebates and other incentives received from vendors. Our cost of goods sold was ~~$11,264,569~~$12,685,158 for the three months ended ~~September~~June 30, 2020, as compared to ~~$10,183,711~~$9,437,592 for the three months ended ~~September~~June 30, 2019, an increase of ~~$1,080,858,~~$3,247,566, or ~~10.6%.~~34%, which included $8,702,406 for our successor from April 6, 2019 to June 30, 2019 and $735,186 for our predecessor from April 1, 2019 to April 5, 2019. Such increase was due to the increase in sales volume. As a percentage of net sales, cost of sales ~~increased~~declined slightly from ~~83.5%~~81.7% in the 2019 period to ~~83.8%~~83.0% in the 2020 period. ~~The increase is attributable to product mix and other normal variables.~~

Personnel expenses. Personnel expenses include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and training ~~costs and in 2020 stock compensation expense.~~costs. Our personnel expenses were ~~$2,161,929~~$1,040,189 for the three months ended ~~September~~June 30, 2020, as compared to ~~$989,318~~$917,423 for the three months ended ~~September~~June 30, 2019, an increase of ~~$1,172,611,~~$122,766, or ~~118.5%.~~13%, which included $886,225 for our successor from April 6, 2019 to June 30, 2019 and $31,198 for our predecessor from April 1, 2019 to April 5, 2019. The increase is the result of hiring additional senior management and support staff needed because of increased customer demand for our products. During the quarter, we also incurred stock compensation expenses of $281,194. Beginning in the second quarter of 2020, we had a dramatic increase in cancellations of customer orders, which were primarily related to the lack of product availability. We hired a number of temporary employees to process cancellations and address the related customer service issues. We are reducing the number of temporary employees but expect we will have a number of them through the fourth quarter.

Advertising expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were ~~$1,432,834~~$891,907 for the three months ended ~~September~~June 30, 2020, as compared to ~~$696,771~~$638,699 for the three months ended ~~September~~June 30, 2019, an increase of ~~$736,062,~~$253,208, or ~~105.6%.~~40%, which included $525,222 for our successor from April 6, 2019 to June 30, 2019 and $113,477 for our predecessor from April 1, 2019 to April 5, 2019. The increase relates to an increase in advertising spending to drive traffic to our website.

Bank and credit card fees. Bank and credit card fees are primarily the fees we pay credit card processors for processing credit card payments made by customers. Our bank and credit card fees were ~~$574,808~~$454,569 for the three months ended ~~September~~June 30, 2020, as compared to ~~$279,412~~$304,403 for the three months ended ~~September~~June 30, 2019, an increase of ~~$295,396~~$150,166, or ~~105.7%.~~49%, which included $232,273 for our successor from April 6, 2019 to June 30, 2019 and $72,130, for our predecessor from April 1, 2019 to April 5, 2019. These fees are based on ~~customer orders that are paid with a credit card (substantially all orders)~~sales, so the increase was due to the increase in ~~customer orders.~~revenue.

General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, bad debts, rent expense, insurance, unremitted sales tax and other expenses incurred in connection with general operations. Our general and administrative expenses were ~~$957,703~~$1,509,417 for the three months ended ~~September~~June 30, 2020, as compared to ~~$594,916~~$1,987,008 for the three months ended ~~September~~June 30, 2019, ~~an increase~~a decrease of ~~$362,787,~~$477,591, or ~~61.0%.~~24%, which included $1,952,241 for our successor from April 6, 2019 to June 30, 2019 and $34,766 for our predecessor from April 1, 2019 to April 5, 2019. The primary ~~increases~~decreases are ~~professional fees~~The accrual for ~~audits,~~2019 sales taxes was greater than the 2020 accrual and audit, consulting, ~~fees~~and search firm expense related to ~~upgrade our online shopping cart, fees for our Electronic Data Interchange initiative, and other consulting fees.~~the acquisition.

Total other income (expense). We had ~~$1,449,936~~$4,252,782 in total other expense, net, for the three months ended ~~September~~June 30, 2020, as compared to total other expense, net, of ~~$328,757~~$477,041 for the three months ended ~~September~~June 30, ~~2019.~~2019, which included expenses of 345,159 for our successor from April 6, 2019 to June 30, 2019, income of $160 for our predecessor from April 1, 2019 to April 5, 2019 and adjustments of $(132,042). Total other expense, net, for the three months ended ~~September~~June 30, 2020 consisted of interest expense of $296,708, financing costs of ~~$488,460, interest expense of $157,312 and~~$74,504, loss on debt modification and extinguishment of ~~debt~~$948,856, loss on acquisition working capital receivable of ~~$807,239,~~$809,000, and change in the warrant liability of $2,127,656, offset by interest income of ~~$1,418~~$1,062 and other income of ~~$1,657,~~$2,880, while other expense ~~net,~~ for the three months ended ~~September~~June 30, 2019 consisted of financing costs of ~~$165,097,~~$275,894 and interest expense, net, of ~~$182,772 and other expense of $35,388,~~$249,125, offset by a change in warrant liability of ~~$54,500.~~$2,600 and other income of $45,378.

Net ~~loss~~loss.. As a result of the cumulative effect of the factors described above, we had a net loss of ~~$3,661,791~~$4,951,828 for the three months ended ~~September~~June 30, 2020, as compared to ~~$881,658~~$2,303,868 for the three months ended ~~September~~June 30, 2019, an increase of ~~$2,780,133~~$2,647,960, or ~~315.3%~~115%, which included a loss of $2,185,083 for our successor from April 6, 2019 to June 30, 2019, net income of $13,257 for our predecessor from April 1, 2019 to April 5, 2019 and adjustments of $(132,042). The net loss for the three months ended June 30, 2020 was affected three non-cash charges equal to $3,885,512 in the aggregate.

3137

Comparison of ~~Nine~~Six Months ~~September~~June 30, 2020 and 2019

The following table sets forth key components of our results of operations for the ~~nine~~six months ended ~~September~~June 30, 2020 (Successor), the period from April 6, 2020 to ~~September~~June 30, 2019 (Successor), and the period from April 1, 2019 to April 5, 2019 (Predecessor), in dollars and as a percentage of our ~~net sales.~~revenue.

	Successor												Predecessor						Successor												Predecessor
	Nine Months Ended September 30, 2020						Period April 6 to September 30, 2019						Period January 1 to April 5, 2019						Six Months Ended June 30, 2020 (As Restated)						Period April 6 to June 30, 2019 (As Restated)						Period January 1 to April 5, 2019
	Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales
Product sales, net	$	38,397,304			100.0	%	$	22,748,151			100.0	%	$	12,946,901			100.0	%	$	24,962,209			100.0	%	$	10,545,880			100.0	%	$	12,946,901			100.0	%
Cost of goods sold		32,060,897			83.5	%		18,886,117			83.0	%		11,004,842			85.0	%		20,796,328			84.0	%		8,702,406			82.5	%		11,004,842			85.0	%
Gross profit		6,336,407			16.5	%		3,862,034			17.0	%		1,942,059			15.0	%		4,165,881			16.7	%		1,843,474			17.5	%		1,942,059			15.0	%
Operating expenses
Personnel		4,513,602			11.7	%		1,875,543			8.2	%		913,919			7.1	%		2,351,673			9.4	%		886,225			8.4	%		913,919			7.1	%
Advertising		2,991,177			7.7	%		1,221,993			5.4	%		714,276			5.5	%		1,558,343			6.2	%		525,222			5.0	%		714,276			5.5	%
Bank and credit card fees		1,274,117			3.3	%		511,685			2.2	%		329,247			2.5	%		699,309			2.8	%		232,273			2.2	%		329,247			2.5	%
Depreciation and amortization		276,914			0.7	%		98,481			0.4	%		9,675			0.1	%		183,631			0.7	%		87,437			0.8	%		9,675			0.1	%
General and administrative		2,160,560			5.6	%		1,134,036			5.0	%		451,214			3.5	%		2,949,257			11.8	%		1,952,241			18.5	%		451,214			3.5	%
Total operating expenses		11,216,370			29.1	%		4,841,738			21.3	%		2,418,331			18.7	%		7,742,213			31.0	%		3,683,398			34.9	%		2,418,331			18.7	%
Loss from operations		(4,879,963	)		(12.6	)%		(979,704	)		(4.3	)%		(476,272	)		(3.7	)%		(3,576,332	)		(14.3	)%		(1,839,924	)		(17.4	)%		(476,272	)		(3.7	)%
Other income (expense)
Interest income		2,480			0.0	%					-			23,807			0.2	%		1,062			-			-			-			23,807			0.2	%
Financing costs		(757,646	)		(2.0	)%		(324,352	)		(1.4	)%		-			-			(269,186	)		(1.1	)%		(159,255	)		(1.5	)%		-			-
Interest expense		(604,908	)		(1.6	)%		(387,794	)		(1.7	)%		-			-			(557,996	)		(2.2	)%		(233,722	)		(2.2	)%		-			-
Loss on extinguishment of debt		(1,756,095	)		(4.5	)%		-			-			-			-			(948,856	)		(3.8	)%		-			-			-			-
Write-off of acquisition receivable		(809,000	)		(2.1	)%		-			-			-			-			(809,000	)		(3.2	)%		-			-			-			-
Change in fair value of warrant liability		(2,127,656	)		(5.5	)%		57,100			0.3	%		-			-			(2,127,656	)		(8.5	)%		2,600			-			-			-
Other income (expense)		6,920			0.0	%		9,830			0.0	%		7,200			0.1	%		5,263			-			45,218			0.4	%		7,200			-
Total other income (expense)		(6,045,905	)		(15.7	)%		(645,216	)		(2.8	)%		31,007			0.2	%		(4,706,369	)		(18.9	)%		(345,159	)		(3.3	)%		31,007			0.2	%
Net loss before income taxes		(10,925,868	)		(28.3	)%		(1,624,920	)		(7.1	)%		(445,265	)		(3.4	)%		(8,282,701	)		(33.2	)%		(2,185,083	)		(20.7	)%		(445,265	)		(3.4	)%
Income tax benefit		1,962,129			5.1	%		-			-			-			-			1,123,953			4.5	%		-			-			-			-
Net loss	$	(8,963,739	)		(23.2	)%	$	(1,624,920	)		(7.1	)%	$	(445,265	)		(3.4	)%	$	(7,158,748	)		(28.7	)%	$	(2,185,083	)		(20.7	)%	$	(445,265	)		(3.4	)%

We believe that reviewing our operating results for the ~~nine~~six months ended ~~September~~June 30, 2019 by combining the results of the 2019 successor period (April 6, 2019 through ~~September~~June 30, 2019) and 2019 predecessor period (January 1, 2019 through April 5, 2019) with the pro forma adjustments related to the acquisition is more useful in discussing our overall operating performance compared to the results of the ~~nine~~six months ended ~~September~~June 30, 2020 (successor). We do not see any potential risks associated with utilizing this pro forma presentation.

Following are the combined periods ~~for~~ 2020 and for 2019:

	Nine Months Ended September 30, 2020 Successor			Period April 6 to September 30, 2019 Successor			Period January 1 to April 5, 2019 Predecessor			Pro Forma Adjustments			Pro Forma Combined Nine Months Ended September 30, 2019			Increase (Decrease)			Six Months Ended June 30, 2020 Successor (As Restated)			Period April 6 to June 30, 2019 Successor (As Restated)			Period January 1 to April 5, 2019 Predecessor				Pro Forma Adjustments			Pro Forma Combined Six Months Ended June 30, 2019			Increase (Decrease)
Product sales, net	$	38,397,304		$	22,748,151		$	12,946,901			-		$	35,695,052		$	2,853,126		$	24,962,209		$	10,545,880		$	12,946,901			$	-		$	23,492,781		$	1,469,428
Cost of goods sold		32,060,897			18,886,117			11,004,842			-			29,890,959			2,320,926			20,796,328			8,702,406			11,004,842				-			19,707,248			1,269,080
Gross profit		6,336,407			3,862,034			1,942,059			-			5,804,093			532,200			4,165,881			1,843,474			1,942,059				-			3,785,533			380,348
Operating expenses
Personnel		4,513,602			1,875,543			913,919			-			2,789,462			1,748,526			2,351,673			886,225			913,919				-			1,800,144			551,529
Advertising		2,991,177			1,221,993			714,276			-			1,936,269			1,054,907			1,558,343			525,222			714,276				-			1,239,498			318,845
Bank and credit card fees		1,274,117			511,685			329,247			-			840,932			442,700			699,309			232,273			329,247				-			561,520			137,789
Depreciation and amortization		276,914			98,481			9,675	(a)		157,273			265,429			87,874			183,631			87,437			9,675				-			97,112			86,249
General and administrative		2,160,560			1,134,3036			451,214			-			1,585,250			541,549			2,949,257			1,952,241			451,214				-			2,403,455			545,802
Total operating expenses		11,216,370			4,841,738			2,418,331			157,273			7,417,342			3,875,556			7,742,213			3,683,398			2,418,331				-			6,101,729			1,640,484
Loss from operations		(4,879,963	)		(979,704	)		(476,272	)		(157,273	)		(1,613,249	)		(3,343,356	)		(3,576,332	)		(1,839,924	)		(476,272	)			-			(2,316,196	)		1,260,136
Other income (expense)
Interest income		2,480						23,807			-			23,807			(21,327	)		1,062			-			23,807				-			23,807			(22,745	)
Financing costs		(757,646	)		(324,352	)		-	(b)		(239,018	)		(563,370	)		(433,295	)		(269,186	)		(159,255	)		-		(a)		(116,639	)		(275,894	)		6,708
Interest expense		(604,908	)		(387,794	)		-	(c)		(38,509	)		(426,303	)		(178,607	)		(557,996	)		(233,722	)		-		(b)		(15,403	)		(249,125	)		308,871
Loss on extinguishment of debt		(1,756,095	)		-			-			-			-			(1,756,095	)		(948,856	)		-			-				-			-			(948,856	)
Write-off of acquisition receivable		(809,000	)		-			-			-			-			(809,000	)		(809,000	)		-			-				-			-			(809,000	)
Change in fair value of warrant		(2,127,656	)		57,100			-			-			57,100			(2,184,756	)		(2,127,656	)		2,600			-				-			2,600			(2,130,256	)
Other income		6,920			9,830			7,200			-			17,030			(19,784	)		5,263			45,218			7,200				-			52,418			(47,155	)
Total other income (expense)		(6,045,905	)		(645,216	)		31,007			(277,527	)		(891,736	)		(5,402,864	)		(4,706,369	)		(345,159	)		31,007				(132,042	)		(446,194	)		(4,260,175	)
Net loss before income taxes		(10,925,868	)		(1,624,920	)		(445,265	)		(434,800	)		(2,504,985	)		(8,746,220	)		(8,282,701	)		(2,185,083	)		(445,265	)			(132,042	)		(2,762,390	)		5,520,311
Income tax benefit		1,962,129			-			-			-			-			1962,129			1,123,953			-			-				-						1,123,953
Net loss	$	(8,963,739	)	$	(1,624,290	)	$	(445,265	)	$	(434,800	)	$	(2,504,985	)	$	(6,784,091	)	$	(7,158,748	)	$	(2,185,083	)	$	(445,265	)		$	(132,042	)	$	(2,762,390	)	$	4,396,358

Notes

(a) Amortization of intangible assets acquired in acquisition $ 157,273

(b) Reflects amortization of costs associated with acquisition debt as follows:
Amortization of the cost of shares issued in acquisition $ 68,750
Amortization of the cost of warrants issued in acquisition 170,268
Total $ 239,018

(c) Amortization of discount on note to seller $ 38,509

(a)	Reflects amortization of costs associated with acquisition debt as follows:
	Amortization of the cost of shares issued in acquisition	$	34,375
	Amortization of the cost of warrants issued in acquisition		82,264
	Total	$	116,639

(b)	Amortization of discount on note to seller	$	15,403

Product sales, net. Our product sales were ~~$38,397,304~~$24,962,209 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$35,695,052~~$23,492,781 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$2,702,252,~~$1,469,428, or ~~7.6%~~6.3%, which included ~~$22,748,151~~$10,545,880 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $12,946,901 for our predecessor from January 1, 2019 to April 5, 2019. The increase is due to increased sales volume to meet appliance and furniture demand resulting from increased advertising, which has a direct impact on customer orders and shipped sales. In the first three months, sales were affected by working capital issues, which delayed the timing of ordering product to fulfill customer orders resulting in increased order cancellations. Late in the second quarter ~~and into the third quarter~~ of 2020, we ~~experienced~~suffered delays in getting products from manufacturers whose production facilities were closed ~~or operating at reduced capacity~~ because of the coronavirus ~~pandemic, which~~pandemic. The lack of available products resulted in some cancellations of customer orders. We estimate that cancellations caused by shipping delays approximated $26.4 million in the nine months ended September 30, 2020, based on the historical ratio of shipped sales to customer orders of approximately 79% to the actual ratio of approximately 47% in the nine months ended September 30, 2020.

Our revenue by sales type is as follows:

	Nine Months Ended September 30,								Six Months Ended June 30,
	2020 Successor		2019 Successor		2019 Predecessor		2019 Total		2020 Successor		2019 Successor		2019 Predecessor		2019 Total
Appliance sales	$	28,326,963	$	18,535,800	$	9,784,525	$	28,320,325	$	19,335,110	$	8,395,603	$	9,838,232	$	18,233,835
Furniture sales		7,604,867		2,969,389		2,456,085		5,425,474		4,050,163		1,557,813		2,468,818		4,026,631
Other sales		2,465,474		1,242,962		706,291		1,949,253		1,576,936		592,464		639,851		1,232,315
Total	$	38,603,267	$	22,748,151	$	12,946,901	$	35,695,052	$	24,962,209	$	10,545,880	$	12,946,901	$	23,492,781

Cost of goods sold. Our cost of goods sold was ~~$32,060,897~~$20,796,328 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$29,890,959~~$19,707,248 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$2,169,938,~~$1,089,080, or ~~7.3%~~5.5%, which included ~~$18,886,117~~$8,702,406 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $11,004,842 for our predecessor from January 1, 2019 to April 5, 2019. As a percentage of net sales, cost of sales declined from ~~83.7%~~83.9% in the 2019 period to ~~83.5%~~83.3% in the 2020 period. Prior to the acquisition in April 2019, we made adjustments to cost of sales in March 2019 that related to 2018. Had the adjustments been made in 2018, cost of sales would have been ~~82.8%~~82.6% in the 2019 period. The remaining difference is attributable to product mix and other normal variables.

Personnel expenses. Our personnel expenses were ~~$4,513,602~~$2,351,673 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$2,789,462~~$1,800,144 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$1,724,140,~~$551,529, or ~~61.8%~~31%, which included ~~$1,875,543~~$886,225 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $913,919 for our predecessor from January 1, 2019 to April 5, 2019. The increase is the result of hiring additional senior management and other staff needed for increased customer demand for our products, and the accrual of $359,216 as the present value of a severance contract payable to our former president, and $281,194 in stock compensation expense. During the second and third quarters, there was a dramatic increase in cancellations of customer orders, which were primarily related to the lack of product availability. We hired a number of temporary employees to process cancellations and address the related customer service issues. We are reducing the number of temporary employees but expect we will have a number of them through the fourth quarter.president.

Advertising expenses. Our advertising expenses were ~~$2,991,177~~$1,558,343 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$1,936,269~~$1,239,498 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$1,054,908,~~$318,845, or ~~54.5%~~26%, which included ~~$1,221,993~~$525,222 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $714,276 for our predecessor from January 1, 2019 to April 5, 2019. The increase relates to an increase in advertising spending to drive traffic to our website.

Bank and credit card fees. Our bank and credit card fees were ~~$1,274,177~~$699,309 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$840,932~~$561,520 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$433,185,~~$137,789, or ~~54.5%~~25%, which included ~~$511,685~~$232,273 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $329,247 for our predecessor from January 1, 2019 to April 5, 2019. These fees are based on ~~customer orders that are paid with a credit card (substantially all orders)~~sales, so the increase was due to the increase in ~~customer orders.~~revenue.

General and administrative ~~expenses~~expenses. . Our general and administrative expenses were ~~$2,160,560~~$2,949,257 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$1,585,250~~$2,403,455 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$575,310,~~545,802, or ~~36.3%~~23%, which included ~~$1,134,036~~$1,952,241 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $451,214 for our predecessor from January 1, 2019 to April 5, 2019. The primary increases are professional fees for audits, consulting fees to upgrade our online shopping cart, fees to the Manager under the offsetting management services agreement described below, ~~fees for our Electronic Data Interchange initiative,~~ and other consulting fees.

Total other income (expense). We had ~~$6,045,905~~$4,706,369 in total other expense, net, for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to total other expense, net, of ~~$614,209~~$446,194 for the ~~nine~~six months ended ~~September~~June 30, 2019, which included expenses of ~~$645,216~~$345,159 for our successor from April 6, 2019 to ~~September~~June 30, 2019, ~~and~~ income of $31,007 for our predecessor from January 1, 2019 to April 5, ~~2019.~~2019 and adjustments of $(132,042). Total other expense, net, for the ~~nine~~six months ended ~~September~~June 30, 2020 consisted of interest expense of $557,996, financing costs of ~~$757,646, interest expense of $604,908,~~$269,186, loss on debt modification and extinguishment of ~~$1,756,095,~~$948,856, loss on acquisition working capital receivable of $809,000, and change in the warrant liability of $2,127,656, offset by interest income of ~~$2,480~~$1,062 and other income of ~~$6,920,~~$5,263, while other expense for the ~~nine~~six months ended ~~September~~June 30, 2019 consisted of financing costs of ~~$324,352~~$275,894 and interest expense, net, of ~~$387,794,~~$249,125, offset by a change in warrant liability of ~~$57,100~~$2,600, interest income of $23,807 and other income of ~~$40,837.~~$52,418.

Net loss. As a result of the cumulative effect of the factors described above, we had a net loss of ~~$8,963,739, which is net of a $1,962,129 income tax benefit~~$7,158,748 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to ~~$2,070,185~~$2,762,390 for the ~~nine~~six months ended ~~September~~June 30, 2019, an increase of ~~$6,893,554~~$4,396,358, or ~~333.0%~~159%, which included ~~$1,624,920~~$2,185,083 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and $445,265 for our predecessor from January 1, 2019 to April 5, ~~2019.~~2019 and adjustments of $(132,042). The net loss for the ~~nine~~six months ended ~~September~~June 30, 2020 was affected by (i) a loss on early extinguishment of debt of $1,756,095, (ii) a write-off of acquisition receivable of $809,000 and (iii) a non-cash charge to change in warrant liability expense of $2,127,656. These three non-cash charges equal ~~$4,692,751~~to $3,885,512 in the aggregate. Excluding these three non-cash charges, the non-GAAP net loss before income taxes for the nine months ended September 30, 2020 was $6,233,117, as compared to the reported net loss before income taxes of $10,925,868.

Non-GAAP to GAAP Reconciliation

This report contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The non-GAAP financial measures are net loss before taxes excluding the following non-cash charges (i) a loss on extinguishment of debt of ~~$1,756,095,~~$948,856, (ii) a write-off of acquisition receivable of $809,000 and (iii) a non-cash charge to change in warrant liability expense of $2,127,656.

The non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management, however, believes that these non-GAAP financial measures, when used in conjunction with the results presented in accordance with GAAP, may provide a more complete understanding of our results and may facilitate a fuller analysis of our results, particularly in evaluating performance from one period to another. Management has chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of results and to illustrate the results giving effect to the non-GAAP adjustments shown in the reconciliation described in the next paragraph. Furthermore, the economic substance behind our decision to use such non-GAAP measures is that such measures approximate our controllable operating performance more closely than the most directly comparable GAAP financial measures. Management strongly encourages investors to review our financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP measures used by us may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

The following tables provide a reconciliation of the non-GAAP measures disclosed above to the comparable GAAP measure.

Nine Months Ended September 30, 2020
GAAP Elimination of Non-Cash Charges Non-GAAP
Loss from operations $ (4,879,963 ) $ - $ (4,879,963 )
Other income (expense)
Interest income 2,480 - 2,480
Financing costs (757,646 ) - (757,646 )
Interest expense (604,908 ) - (604,908 )
Loss on extinguishment of debt (1,756,095 ) (1,756,095 ) -
Write-off of acquisition receivable (809,000 ) (809,000 ) -
Change in fair value of warrant liability (2,127,656 ) (2,127,656 ) -
Other income (expense) 6,920 - 6,920
Total other income (expense) (6,045,905 ) (4,692,751 ) (1,353,154 )
Net loss before income taxes $ (10,925,868 ) $ (6,233,117 )

	Three Months Ended June 30, 2020 (As Restated)
	GAAP			Elimination of Non-Cash Charges			Non-GAAP
Loss from operations	$	(1,387,999	)	$	-		$	(1,387,999	)
Other income (expense)
Interest income		1,062			-			1,062
Financing costs		(74,504	)		-			(74,504	)
Interest expense		(296,708	)		-			(296,708	)
Loss on extinguishment of debt		(948,856	)		(948,856	)		-
Write-off of acquisition receivable		(809,000	)		(809,000	)		-
Change in fair value of warrant liability		(2,127,656	)		(2,127,656	)		-
Other income (expense)		2,880			-			2,880
Total other income (expense)		(4,252,782	)		(3,885,512	)		(367,270	)
Net loss before income taxes	$	(5,640,781	)	$			$	(1,755,269	)

	Six Months Ended June 30, 2020 (As Restated)
	GAAP			Elimination of Non-Cash Charges			Non-GAAP
Loss from operations	$	(3,576,332	)	$	-		$	(3,576,332	)
Other income (expense)
Interest income		1,062			-			1,062
Financing costs		(269,186	)		-			(269,186	)
Interest expense		(557,996	)		-			(557,996	)
Loss on extinguishment of debt		(948,856	)		(948,856	)		-
Write-off of acquisition receivable		(809,000	)		(809,000	)		-
Change in fair value of warrant liability		(2,127,656	)		(2,127,656	)		-
Other income (expense)		5,263			-			5,263
Total other income (expense)		(4,706,369	)		(3,885,512	)		(820,857	)
Net loss before income taxes	$	(8,282,701	)	$			$	(4,397,189	)

Liquidity and Capital Resources

As of ~~September~~June 30, 2020, we had cash and cash equivalents of ~~$3,466,981 and restricted cash of $8,912,367.~~$3,555,946. To date, we have financed our operations primarily through revenue generated from operations, bank borrowings and ~~proceeds from~~equity contributions by our ~~initial public offering.~~stockholders.

We believe that our current levels of cash will be sufficient to meet our anticipated cash needs for our operations for at least the next 12 months. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

At June 30, 2020, we did not meet certain loan covenants under the loan and security agreements with Burnley and SBCC described below. The agreements require compliance with the following ratios of earnings before interest, taxes, depreciation, and amortization to outstanding debt amounts for the twelve-month period ended June 30, 2020. The table below shows the required ratio and actual ratio for such period.

Covenant	Actual Ratio	Required Ratio
Total debt ratio	(2.9)x	4.0x
Senior debt ratio	(0.7)x	1.5x
Interest coverage ratio	(1.2)x	1.0x

In addition, we were not in compliance with a requirement with respect to the liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At June 30, 2020, the actual ratio was 0.36x compared to a requirement of 1.0x.

Accordingly, at June 30, 2020, we were in default on these loan and security agreements (though we remained current in our payments) and have classified such debt as a current liability.

There are no cross-default provisions that would require any other long-term liabilities to be classified as current. Although we have defaulted under the 9% subordinated promissory note described below as the result of our failure to make payments thereunder from and after August 27, 2019, the date that Burnley notified us that we are in technical default under its loan and security agreement, Burnley’s notice also stated that pursuant to the subordination agreement, dated April 5, 2019, between Burnley and Goedeker, no payment can be made under the note so long as our default relating to Burnley’s loan continues. Therefore, notwithstanding the default, Goedeker has no right to accelerate the note because, in addition to the subordination agreement which otherwise would have permitted acceleration, the note itself also has specific subordination provisions that prohibit such acceleration. Since Goedeker does not currently have the right to accelerate the note, we have classified all amounts other than the currently due portion of the note as long-term liabilities.

Upon closing of the IPO on August 4, 2020, we repaid the loans from Burnley and SBCC in full.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

	Nine Months Ended September 30,			Nine Months Ended September 30, 2019								Six Months Ended June 30,			Six Months Ended June 30, 2019 (As Restated)
	2020 Successor			2019 Successor			2019 Predecessor		2019 Total			2020 Successor (As Restated)			2019 Successor			2019 Predecessor		2019 Total
Net cash provided by (used in) operating activities	$	7,383,978		$	(1,294,681	)	$	611,268	$	(683,413	)	$	3,852,042		$	(2,117,345	)	$	611,268	$	(1,506,077	)
Net cash used in investing activities		(51,059	)		(1,244,006	)		-		(1,244,006	)		(7,000	)		-			-		-
Net cash provided by financing activities		4,981,959			2,723,625			-		2,723,625
Net cash provided by (used in) financing activities													(353,566	)		2,288,065			-		2,288,065
Net change in cash	$	12,314,878		$	184,938		$	611,268	$	796,206		$	3,491,476		$	170,712		$	611,268	$	781,980

Our net cash provided by operating activities was ~~$7,383,978~~$3,852,042 for the ~~nine~~six months ended ~~September~~June 30, 2020, as compared to net cash used in operating activities of ~~$683,413 for~~$ 1,506,077for the ~~nine~~six months ended ~~September~~June 30, 2019, which included net cash used in operating activities of ~~$1,294,681~~$2,117,345 for our successor from April 6, 2019 to ~~September~~June 30, 2019 and net cash provided by operating activities of $611,268 for our predecessor from January 1, 2019 to April 5, 2019. The increase in net cash ~~provided by~~used in operating activities is primarily due the increase in our net loss and ~~an increase~~a decrease in ~~customer deposits.~~prepaid expenses and other assets.

Our net cash used in investing activities was ~~$51,059 and $1,2444,006~~$7,000 for the ~~nine~~six months ended ~~September~~June 30, 2020, ~~and 2019, respectively. For the nine months ended September 30, 2020, our net cash used in investing activities~~which consisted entirely of purchases of property and ~~equipment, while our net cash used in~~equipment. We had no investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019 consisted of purchases of property and equipment of $11,874 and $1,232,132 related to our acquisition of Goedeker.~~2019.

Our net cash ~~provided~~used in financing activities was $353,566 for the six months ended June 30, 2020, as compared to net cash used by financing activities ~~was $4,981,959 and $2,939,125~~of $2,288,065 for the ~~nine~~six months ended ~~September~~June 30, ~~2020 and~~ 2019, ~~respectively,~~ all of which was during the period from April 6, 2019 to ~~September~~June 30, 2019. Net cash ~~provided by~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, 2020 consisted of net ~~proceeds of $8,602,166 from our initial public offering and $642,600 in proceeds from our PPP loan, offset by~~ payments ~~of $6,318,098~~ on ~~our notes payable and~~ lines of credit of $814,492 and ~~payment~~repayment on notes payable of ~~$105,279 in~~$181,674, offset by proceeds from the PPP loan ~~financing costs. Net~~described below of $642,600, while net cash provided financing activities for the ~~nine~~six months ended ~~September~~June 30, 2019 consisted of net borrowings from lines of credit of ~~$1,339,430,~~$591,315, proceeds from notes payable of ~~$4,037,321,~~$1,500,000, and proceeds from convertible notes payable of $650,000, offset by repayments on notes payable of ~~$5,546,667~~$93,750 and cash paid for financing costs of $359,500.

~~Initial Public Offering~~

On August 4, 2020, we sold 1,111,200 shares of common stock in connection with our initial public offering (the “IPO”) to the underwriters at a purchase price per share of $8.325 (the offering price to the public of $9.00 per share minus the underwriters’ discount) for total gross proceeds of $10,000,800. After deducting the underwriting commission and expenses, we received net proceeds of approximately $8,602,166. We also issued warrants for the purchase of 55,560 shares of common stock to affiliates of the representative of the underwriters. ~~The warrants are exercisable at any time and from time to time, in whole or in part,~~ ~~beginning on~~ ~~January 26, 2021~~ ~~until July 30, 2025,~~ ~~at a per share exercise price equal to $11.25 (125% of the public offering price per share).~~

~~Term Loan - Arvest Bank~~

On August 25, 2020, the Company entered into a promissory note and security agreement with Arvest Bank for a loan in the principal amount of $3,500,000. As of September 30, 2020, the outstanding balance of this loan is $3,342,602, comprised of principal of $3,446,126, net of unamortized loan costs of $103,524.

The loan matures on August 25, 2025 and bears interest at 3.250% per annum; provided that, upon an event of default, the interest rate shall increase by 6% until paid in full. Pursuant to the terms of the loan agreement, the Company is required to make monthly payments of $63,352.85 beginning on September 25, 2020 and until the maturity date, at which time all unpaid principal and interest will be due. The Company may prepay the loan in full or in part at any time without penalty. The loan agreement contains customary events of default and affirmative and negative covenants for a loan of this type. The loan is secured by all financial assets credited to the Company’s securities account held by Arvest Investments, Inc.

~~Paycheck Protection Program Loan~~

On April 8, 2020, the Company received a $642,600 Paycheck Protection Program (the “PPP”) loan from the United States Small Business Administration under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP loan has an 18-month term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. The PPP provides that the loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability in the accompanying balance sheet. On November 2, 2020, the Company repaid the PPP loan.

Revolving Loan - Burnley ~~Capital LLC~~

On April 5, 2019, the Company, as borrower, and the Company’s parent company at such time, 1847 Goedeker Holdco Inc. (“Holdco”), entered into a loan and security agreement with Burnley Capital LLC (“Burnley”) for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 (provided that such amount may be increased to $3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker on April 5, 2019, the Company borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of ~~December 31, 2019,~~June 30, 2020, there was $232,000 available for borrowing and the balance of the line of credit was ~~$571,997.~~$456,104, comprised of principal of $524,938 and net of unamortized debt issuance costs of $68,834.

As noted above, as of June 30, 2020, the Company was in technical, not payment default, on this loan and security agreement and classified such debt as a current liability.

On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the ~~revolving note~~loan in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350 interest of $42 and prepayment, legal, and other fees of $85,802.

Revolving Loan - Northpoint ~~Commercial Finance LLC~~

On June 24, 2019, the Company, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by the Company of inventory at an interest rate of LIBOR plus 7.99%. ~~As of December 31, 2019, the balance of the line of credit was $678,993.~~ The Company terminated the loan and security agreement on May 18, 2020 and there is no outstanding balance as of ~~September~~June 30, 2020.

Term Loan - ~~Small Business Community Capital II, L.P.~~SBCC

On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan in the principal amount of $1,500,000, pursuant to which the Company issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. AsThe Company classified the warrant as a derivative liability on the balance sheet of ~~December~~$2,250,000 based on the estimated value of the warrants in the IPO. The increase in the value of the warrant from the estimated value of $122,344 at March 31, ~~2019, the~~2020 resulted in a charge of $2,127,656. The balance of the note amounts to $877,603 as of June 30, 2020, comprised of principal of $1,130,826, capitalized PIK interest of $27,476 and net of unamortized warrant feature of $158,321 and unamortized debt discount of $122,375.

As noted above, as of June 30, 2020, the Company was ~~$999,201.~~in technical, not payment default, on this loan and security agreement and classified such debt as a current liability.

On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the ~~term note~~loan in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999.

The Company classified the warrant as a derivative liability on the balance sheet at June 30, 2020 of $2,250,000 based on the estimated value of the warrant in the IPO. The increase in the value of the warrant from the estimated value of $122,344 at March 31, 2020 resulted in a charge of $2,127,656 during the nine months ended September 30, 2020. Immediately prior to the closing of the IPO on August 4, 2020, In addition, SBCC converted the warrant into 250,000 shares of our common stock.

Secured Convertible Promissory Note ~~- Leonite Capital LLC~~

On April 5, 2019, the Company’s parent company, 1847 Holdings LLC (“1847 Holdings”), Holdco and the Company (collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco. ~~As of December 31, 2019, the balance of the note was~~ ~~$584,943.~~

On May 11, 2020, 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the note to October 5, 2020, (ii) that 1847’s failure to repay the note on the original maturity date of April 5, 2020 shall not constitute and event of default under the note and (iii) to increase the principal amount of the note by $207,145, as a forbearance fee. ~~The Company accounted for this transaction as a loss on extinguishment of debt.~~

In connection with the amendment, (i) 1847 Holdings issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings’ acquisition of Asien’s Appliance, Inc., 1847 Holdings’ wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien Inc.

The ~~Company accounted for~~note carries an original issue discount of $64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the ~~issuance~~purchase of the 200,000 additional warrants as a $566,711 loss on debt restructuring and an increase in additional paid-in-capital, representing the estimated fair value of the 200,000 additional warrants for a five-year period.

note. Furthermore, 1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the ~~nine~~six months ended ~~September~~June 30, 2020.

Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of 1847 Holdings into which such common shares may be changed or reclassified.

On May 4, 2020, Leonite converted $100,000 of the outstanding balance of the note into 100,000 common shares of 1847 Holdings. The Company accounted for this transaction as a $100,000 reduction in the principal amount of the debt, a $175,000 loss on extinguishment of debt, and a $275,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date.

On July 24, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares of 1847 Holdings.

The ~~Company accounted for this transaction as a $50,000 reduction in the principal amount~~remaining net balance of the ~~debt,~~note at June 30, 2020 is $821,431. As a ~~$50,000~~result of the activity on this note, $948,856 was recorded as loss on extinguishment of ~~debt, and a $100,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date.~~debt.

On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.

On September 2, 2020, 1847 Holdings and Leonite entered into an amendment to the warrant issued on April 5, 2019, pursuant to which the warrant was amended to allow for the exercise of the warrant for 180,000 common shares of 1847 Holdings in exchange for Leonite’s surrender of the remaining 20,000 common shares underlying that warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September 18, 2020, Leonite exercised the warrant in accordance with the foregoing for 180,000 common shares of 1847 Holdings. As a result, both warrants have terminated.

9% Subordinated Promissory Note ~~- Goedeker~~

A portion of the purchase price for the acquisition of the assets of Goedeker was paid by the issuance by the Company to Steve Goedeker, as representative of Goedeker, of a 9% subordinated promissory note in the principal amount of $4,100,000. ~~As of December 31, 2019,~~The note will accrue interest at 9% per annum, amortized on a five-year straight-line basis and payable quarterly in accordance with the amortization schedule attached thereto, and mature on April 5, 2024. The remaining balance of the note ~~was $3,300,444.~~at June 30, 2020 is $3,416,226 comprised of principal of $3,930,293, net of unamortized debt discount of $354,276 and loan costs of $159,791.

On June 2, 2020, the parties entered into an amendment and restatement of the note that became effective as of the closing of the IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the IPO, the Company agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. The Company also agreed to grant to the sellers, Goedeker, Steve Goedeker and Mike Goedeker, a security interest in all of the assets of the Company to secure its obligations under the amended and restated note and entered into a security agreement with them that became effective upon the closing of the IPO.

The Company has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by the Company of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of the Company. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans with Burnley and SBCC are not payment defaults, they fall under clause (B) above and would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.

As stated above, although the Company has defaulted under this note, Goedeker has no right to accelerate the note because the note has specific subordination provisions that prohibit such acceleration.

In accordance with the terms of the amended and restated note that became effective upon closing of the IPO on August 4, 2020, the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.

Paycheck Protection Program Loan

On ~~August 25,~~April 8, 2020, the Company received a $642,600 Paycheck Protection Program (the “PPP”) loan from the United States Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. The PPP provides that the loan may be partially or wholly forgiven if the funds are used ~~a portion of~~for certain qualifying expenses as described in the CARES Act. The Company intends to use the proceeds from the PPP loan ~~from Arvest Bank~~for qualifying expenses and to ~~repay this promissory note~~apply for forgiveness of the PPP loan in ~~full.~~accordance with the terms of the CARES Act. The Company has classified $284,411 of the PPP loan as a current liability and $358,189 as a long-term liability pending classification of the final loan terms by the SBA.

Contractual Obligations

Offsetting Management Services Agreement

On April 5, 2019, we entered into an offsetting management services agreement with 1847 Partners LLC (the “Manager”), which also serves as the manager for 1847 Holdings. This agreement was amended on April 21, 2020 with the amendment becoming effective at the closing of IPO on August 4, 2020. Pursuant to the offsetting management services agreement, as amended, we appointed the Manager to provide certain services to us for a quarterly management fee equal to $62,500. Under certain circumstances specified in the offsetting management services agreement, our quarterly fee may be reduced if similar fees payable to the Manager by other subsidiaries of 1847 Holdings exceed a threshold amount.

Pursuant to the offsetting management services agreement, we must also reimburse the Manager for all costs and expenses which are specifically approved by our board of directors, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on our behalf in connection with performing services under the offsetting management services agreement.

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

WeThe Company expensed ~~$187,500~~$125,000 and ~~$121,290~~$58,790 in management fees for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, respectively. Payment of the management fee is subordinated to the payment of interest on the 9% subordinated promissory note, such that no payment of the management fee may be made if the Company is in default under the note with regard to interest payments and, for the avoidance of doubt, such payment of the management fee will be contingent on the Company being in good standing on all associated loan covenants. In addition, during the period that that any amounts are owed under the 9% subordinated promissory note or the earn out payments described below, the annual management fee shall be capped at $250,000. The rights of the Manager to receive payments under the offsetting management services agreement were also subordinate to the rights of Burnley and SBCC under separate subordination agreements that the Manager entered into with Burnley and SBCC on April 5, 2019. Accordingly, $188,653 due the Manager is classified as an accrued liability as of June 30, 2020.

Earn Out Payments

Pursuant to the asset purchase agreement with Goedeker, it is also entitled to receive the following earn out payments to the extent that our business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets:

An earn out payment of $200,000 if the EBITDA of our business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;

An earn out payment of $200,000 if the EBITDA of our business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and

An earn out payment of $200,000 if the EBITDA of our business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.

To the extent the EBITDA of our business for any applicable period is less than $2,500,000 but greater than $1,500,000, we must pay a partial earn out payment to Goedeker in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the “Achievement Percentage” is the percentage determined by dividing (A) the amount of (i) the EBITDA of our business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of our business for any applicable period is equal or less than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA was $(2,825,000) so Goedeker is not entitled to an earn our payment for that period.

To the extent Goedeker is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The following discussion relates to critical accounting policies for our company. The preparation of financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

4046

Revenue Recognition and Cost of Revenue

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standard Codification (“ASC”) Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

The Company collects the full sales price from the customer at the time the order is ~~placed, which is recorded as customer deposits on the accompanying condensed balance sheet.~~placed. The Company does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that the Company recognizes arises from orders it receives from its customers. The Company’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed.

Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, the Company’s products, which generally occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products through a third-party carrier from the Company’s warehouse to the customer (a “Company Shipment”). The second way is through a shipment of the products through a third-party carrier from a warehouse other than the Company’s warehouse to the customer (a “Drop Shipment”) and the third way is where the Company itself delivers the products to the customer and often also installs the product (a “Local Delivery”). In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the customer’s location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer’s location. In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company’s warehouse or a third party’s warehouse). Therefore, risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company’s warehouse or a third-party’s warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer’s control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company recognizes revenue.

The Company agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company’s contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing activities are excluded from revenue.

If the Company continued to apply legacy revenue recognition guidance for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, revenues, gross margin, and net loss would not have changed.

Cost of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.

Substantially all the Company’s sales are to individual retail consumers.

Shipping and Handling ‒ The Company bills its customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.

Disaggregated Revenue ‒ The Company disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

4147

Receivables

Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufacturers from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.

Merchandise Inventory

Inventory consists of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on an average item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions.

Property and Equipment

Property and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Depreciation is computed using the straight-line method over estimated useful lives as follows:

Category	Useful Life (Years)
Machinery and equipment		5
Office equipment		5
Vehicles		5

Goodwill

~~The Company tests its goodwill for impairment at least annually on December 31~~ and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the three and nine months ended September 30, 2020 and 2019.

Intangible Assets

At September 30, 2020 and December 31, 2019, definite-lived intangible assets primarily consisted of tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 5 to 15 years.

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired Intangible Asset	Amortization Basis	Expected Life (Years)
Customer related	Straight-line		5
Marketing related	Straight-line		5

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.

Sales Tax Liability

On June 21, 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), whereby the longstanding Quill Corp v. North Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. In 2020, the Company began collecting sales tax in nearly all states that have sales tax. The Company accrued sales taxes in the states with sales tax. The Company accrued the potential liability from the effective date of a state’s adoption of the Wayfair decision up to the date the Company began collecting and filing sales taxes in the various states. At June 30, 2020 and December 31, 2019, the amount of such accrual was $4,767,000 and $2,910,200, respectively, which is included in accounts payable and accrued expenses.

Recent Accounting Pronouncements

Recently Adopted

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), which requires lessees to recognize right-of-use (“ROU”) assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. The Company adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all of the Company’s lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on the Company’s statements of income or cash flows. See Note 13 for the required disclosures relating to the Company’s lease agreements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income ~~(“AOCI”)~~(AOCI) to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017. ASU 2018-02 became effective for the Company on January 1, 2019 and resulted in a decrease of approximately $748,000 to retained earnings due to the reclassification from AOCI of the effect of the corporate income tax rate change on our cash flow hedges. The adoption of this standard did not have a material impact on the Company’s financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s financial statements.

Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company ~~adopted ASU 2018-13 on January 1,~~will modify its disclosures beginning in the first quarter of 2020 ~~on a prospective basis.~~to conform to this guidance. The Company does not expect the adoption of this standard ~~did not~~and the associated changes to its disclosures to have a material impact onto the Company’s financial statements.

~~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 which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s financial position, results of operations, or cash flows.

The Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company’s financial statements.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES.~~

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”)). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of ~~September~~June 30, 2020. Based ~~upon,~~on that evaluation, and as a result of the ~~date of this evaluation,~~material weakness described below, our chief executive officer and chief financial officer ~~determined~~concluded that, as of June 30, 2020, our disclosure controls and procedures were not effective.

~~Changes in Internal Control Over Financial Reporting~~

~~Previously Disclosed Material Weakness~~

~~As previously disclosed in~~ In light of this fact, our ~~Quarterly Report on Form 10-Q for~~management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the ~~period ended June 30, 2020, management identified a~~ material weakness in our internal control over financial ~~reporting. A~~reporting, the unaudited interim financial statements for the periods covered by and included in this report fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Material Weakness

Under standards established by the United States Public Company Accounting Oversight Board, 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 ~~the company’s~~ annual or interim financial statements will not be prevented or detected on a timely basis. 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 in accordance with GAAP. In connection our evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020, we identified a material weakness in our internal control over financial reporting. We did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. These control deficiencies contributed to the following material weakness:

~~The material weakness was due to a control deficiency that existed related to our design and maintenance of~~
● We did not design and maintain adequate controls over the preparation and review of certain account reconciliations and journal entries. Specifically, we did not design and maintain controls to ensure (i) the appropriate segregation of duties in the preparation and review of account reconciliations and journal entries and (ii) account reconciliations and journal entries were reviewed at the appropriate level of precision.

The control deficiencies described above did not result in a misstatement to the unaudited interim financial statements for the periods covered by and included in this report. However, the control deficiencies described above, if not remediated, could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute a material weakness.

We have concluded that this material weakness arose because, as a private company prior to August 2020, we did not have the necessary business processes, systems, personnel and related internal controls. In 2020, we undertook measures to address material weaknesses in our internal controls. In particular, we (i) hired additional finance and accounting personnel with expertise in preparation of financial statements and account reconciliations and ~~journal entries. Specifically,~~(ii) further developed and documented our accounting policies. In addition, we ~~did not~~will continue to take steps to remediate this material weakness, including:

●

continuing to hire, additional qualified accounting and financial reporting personnel with public company experience;

●

providing additional training for our personnel on internal control over financial reporting;

●

implementing new financial systems and processes;

●

implementing additional review controls and processes and requiring timely account reconciliation and analyses;

●

implementing processes and controls to better identify and manage segregation of duties; and

●

engaging an external advisor to assist with evaluating and documenting the design and operating effectiveness of internal controls and assisting with the remediation of deficiencies, as necessary.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and ~~maintain~~procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to ensure (i) the appropriate segregation of duties in the preparation and review of account reconciliations and journal entries and (ii) account reconciliations and journal entries were reviewed at the appropriate level of precision.

~~Remediation of Previously Disclosed Material Weakness~~their costs.

~~As previously disclosed, we hired a new controller~~Changes in Internal Control Over Financial Reporting

We are taking actions to ~~take charge of the accounting process and improve processes and procedures to address the identified material weaknesses issues. Based on the remediation performed by us, management has concluded that~~remediate the material weakness relating to our internal control over financial reporting. Except as otherwise described ~~above and first disclosed~~herein, there was no change in our ~~Form 10-Q for the period ended June 30, 2020 has been remediated as of September 30, 2020.~~

~~We regularly review our system of~~ internal control over financial reporting (as defined in Rules 13a-15(f) and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

~~Except for~~15d-15(f) under the ~~changes described above, there were no changes in our internal controls over financial reporting~~Exchange Act) during the ~~third quarter of~~three months ended June 30, 2020 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS.~~

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

~~ITEM 1A.~~

~~RISK FACTORS.~~

ITEM 1A. RISK FACTORS.

Not applicable.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during three months ended ~~September~~June 30, 2020 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

We did not repurchase any of shares of our common stock during the three months ended ~~September~~June 30, 2020.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES.~~

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION.~~

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the ~~three months ended September 30,~~second quarter of fiscal 2020 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

4652

~~ITEM 6.~~

~~EXHIBITS.~~

ITEM 6. EXHIBITS.

Exhibit No.		Description of Exhibit
3.1		Amended and Restated Certificate of Incorporation of 1847 Goedeker Inc. (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed on August 3, 2020)
3.2		Bylaws of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on April 22, 2020)
4.1		Warrant to Purchase Company Shares issued by 1847 Goedeker Inc. to Small Business Community Capital II, L.P. on April 5, 2019 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 filed on April 22, 2020)
4.2		Form of Representative’s Warrant Agreement (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 5, 2020)
10.1		Amendment No. 1 to Management Services Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on April 22, 2020)
10.2		First Amendment to Secured Convertible Promissory Note, dated May 11, 2020, among 1847 Holdings LLC, 1847 Goedeker Holdco Inc. and 1847 Goedeker Inc. and Leonite Capital LLC (incorporated by reference to Exhibit 10.32 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
10.3		Letter Agreement, dated June 2, 2020, between 1847 Goedeker Inc. and Small Business Community Capital II, L.P. (incorporated by reference to Exhibit 10.33 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
10.4		Amendment to Letter Agreement, dated July 16, 2020, between 1847 Goedeker Inc. and Small Business Community Capital II, L.P. (incorporated by reference to Exhibit 10.38 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on July 16, 2020)
~~10.2~~10.5		~~Promissory Note and Security~~Settlement Agreement, dated ~~August 25,~~June 2, 2020, byamong 1847 Goedeker Holdco Inc. ~~in favor of Arvest Bank~~, 1847 Goedeker Inc., Goedeker Television Co., Steve Goedeker and Mike Goedeker (incorporated by reference to Exhibit ~~10.1~~10.34 to the ~~Current Report~~Amendment No. 4 to Registration Statement on Form ~~8-K~~S-1/A filed on ~~August 31,~~June 4, 2020)
~~10.3~~10.6		~~Securities Entitlement Control Agreement, dated August 25, 2020, among Arvest Bank,~~12% Amended and Restated Promissory Note issued by 1847 Goedeker Inc. ~~and Arvest Investments, Inc.~~to Steve Goedeker, in his capacity as the Seller’s Representative, on June 2, 2020 (incorporated by reference to Exhibit ~~10.2~~10.35 to the ~~Current Report~~Amendment No. 4 to Registration Statement on Form ~~8-K~~S-1/A filed on ~~August 31,~~June 4, 2020)
10.7		Security Agreement, dated June 2, 2020, between 1847 Goedeker Inc. and Steve Goedeker, in his capacity as the Seller’s Representative (incorporated by reference to Exhibit 10.36 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
10.9		Amendment to Employment Letter Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and Douglas T. Moore (incorporated by reference to Exhibit 10.24 to the Registration Statement on Form S-1 filed on April 22, 2020)
10.10		Employment Letter Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and Robert D. Barry (incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-1 filed on April 22, 2020)
10.11		1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.29 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on July 16, 2020)
31.1*		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

SIGNATURES

Pursuant to the requirements 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.

Date: ~~November 16, 2020~~May 3, 2021	1847 GOEDEKER INC.

	/s/ Douglas T. Moore
	Name: Douglas T. Moore
	Title: Chief Executive Officer
	(Principal Executive Officer)

	/s/ Robert D. Barry
	Name: Robert D. Barry
	Title: Chief Financial Officer
	(Principal Financial and Accounting Officer)

4854

Delaware		83-3713938
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

13850 Manchester Rd., Ballwin, MO		63011
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		GOED		NYSE American LLC

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

PART I
FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4448
Item 4.	Controls and Procedures	4448

PART II
~~PART II~~
OTHER INFORMATION

Item 1.	Legal Proceedings	4650
Item 1A.	Risk Factors	4650
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4650
Item 3.	Defaults Upon Senior Securities	4650
Item 4.	Mine Safety Disclosures	4650
Item 5.	Other Information	4650
Item 6.	Exhibits	4751

		Page

Balance Sheets as of ~~September~~June 30, 2020 (unaudited) and December 31, 2019 (As Restated)		2
Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, 2020 ~~for the Three Months Ended September 30, 2019,~~ and the Period from April 6, 2019 to ~~September~~June 30, 2019 (Successor), and for the Period from April 1, 2019 to April 5, 2019 and the Period from January 1, 2019 to April 5, 2019 (Predecessor) (unaudited) (As Restated)		3
Statement of Stockholders’ Equity for Predecessor for the Period from January 1, 2019 to April 5, 2019 (unaudited)		4
Statement of ~~Stockholders’ Equity (Defecit)~~Stockholder’s Deficit for Successor for the Period from April 6, 2019 to ~~September~~June 30, 2019 and for ~~Nine~~Six Months Ended ~~September~~June 30, 2020 (unaudited) (As Restated)		5
Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, 2020 and the Period from April 6, 2019 to ~~September~~June 30, 2019 (Successor) and for the Period from January 1, 2019 to April 5, 2019 (Predecessor) (unaudited) (As Restated)		6
Notes to Financial Statements (As Restated)		7

	September, 2020			December 31, 2019
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	3,466,981		$	64,470
Restricted cash		8,912,367			-
Receivables		1,219,455			1,862,086
Vendor deposits		547,648			294,960
Merchandise inventory, net		3,086,873			1,380,090
Prepaid expenses and other current assets		1,073,253			892,796
Total Current Assets		18,306,577			4,494,402
Property and equipment, net		202,402			185,606
Operating lease right-of-use assets		1,686,423			2,000,755
Goodwill		5,097,752			4,976,016
Intangible assets, net		1,636,195			1,878,844
Deferred tax assets		2,660,432			698,303
Other long-term assets		45,000			45,000
TOTAL ASSETS	$	29,634,781		$	14,278,926

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	4,371,204		$	2,465,220
Customer deposits		17,089,826			4,164,296
Advances, related party		-			137,500
Lines of credit		-			1,250,930
Current portion of notes payable, related parties		-			1,068,075
Current portion of notes payable		1,300,579			999,200
Convertible notes payable		-			584,943
Warrant liability		-			122,344
Current portion of operating lease liabilities		443,469			422,520
Total Current Liabilities		23,205,078			11,215,028
Notes payable, related parties, net of current portion		-			2,232,369
Notes payable, net of current portion		2,684,623			-
Operating lease liabilities, net of current portion		1,242,954			1,578,235
Contingent note payable		49,248			49,248
TOTAL LIABILITIES		27,181,903			15,074,880
Stockholders’ Equity (Deficit)
Preferred stock, $.0001 par value, 20,000,000 shares authorized; none issued and outstanding at September 30, 2020 or December 31, 2019		-			-
Common stock, $.0001 par value, 200,000,000 shares authorized; 6,111,200 and 4,750,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		611			475
Additional paid-in capital		13,484,156			1,271,721
Accumulated deficit		(11,031,889	)		(2,068,150	)
Total Stockholders’ Equity (Deficit)		2,452,878			(795,954	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	29,634,781		$	14,278,926

	June 30, 2020 (As Restated)			December 31, 2019 (As Restated)
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	3,555,946		$	64,470
Receivables		1,955,076			1,862,086
Vendor deposits		345,503			294,960
Merchandise inventory, net		1,724,725			1,380,090
Other assets		1,997,846			892,796
Total Current Assets		9,579,096			4,494,402
Property and equipment, net		170,741			185,606
Operating lease right-of-use assets, net		1,792,872			2,000,755
Goodwill		4,725,689			4,603,953
Intangible assets, net		1,717,078			1,878,844
Deferred tax assets		1,822,256			698,303
Other long-term assets		45,000			45,000
TOTAL ASSETS	$	19,852,732		$	13,906,863

LIABILITIES AND STOCKHOLDER’S DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	7,372,793		$	5,375,420
Customer deposits		12,431,608			4,164,296
Advances, related party		-			137,500
Lines of credit		456,105			1,250,930
Current portion of notes payable, related parties		1,260,564			1,068,075
Current portion of notes payable		1,162,014			999,200
Convertible notes payable		821,431			584,943
Warrant liability		2,250,000			122,344
Current portion of operating lease liabilities		375,885			422,520
Total Current Liabilities		26,130,400			14,125,228
Notes payable, related parties, net of current portion		2,155,662			2,232,369
Notes payable, net of current portion		358,189			-
Operating lease liabilities, net of current portion		1,416,987			1,578,235
Contingent note payable		49,248			49,248
TOTAL LIABILITIES		30,110,486			17,985,080
Stockholder’s Deficit
Common stock, $.0001 par value, 200,000,000 shares authorized and 4,750,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019		475			475
Additional paid-in capital		2,058,390			1,079,179
Accumulated deficit		(12,316,619	)		(5,157,871	)
Total Stockholder’s Deficit		(10,257,754	)		(4,078,217	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	19,852,732		$	13,906,863

	Successor												Predecessor
	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019			Nine Months Ended September 30, 2020			Period from April 6, 2019 through September 30, 2019			Period from January 1, 2019 through April 5, 2019
Product sales, net	$	13,435,095		$	12,202,271		$	38,397,304		$	22,748,151		$	12,946,901
Cost of goods sold		11,264,569			10,183,711			32,060,897			18,886,117			11,004,842
Gross profit		2,170,527			2,018,560			6,336,407			3,862,034			1,942,059

Operating Expenses
Personnel		2,161,929			989,318			4,513,602			1,875,543			913,919
Advertising		1,432,834			696,771			2,991,177			1,221,993			714,276
Bank and credit card fees		574,808			279,412			1,274,117			511,685			329,247
Depreciation and amortization		93,283			11,044			276,914			98,481			9,675
General and administrative		957,703			594,916			2,160,560			1,134036			451,214
Total Operating Expenses		5,220,557			2,571,461			11,216,370			4,841,738			2,418,331

LOSS FROM OPERATIONS		(3,050,031	)		(552,901	)		(4,879,963	)		(979,704	)		(476,272	)

Other Income (Expense)
Interest income		1,418			-			2,480			-			23,807
Financing costs		(488,460	)		(165,097	)		(757,646	)		(324,352	)		-
Interest expense		(157,312	)		(182,772	)		(604,908	)		(387,794	)		-
Loss on extinguishment of debt		(807,239	)		-			(1,756,095	)		-			-
Write-off of acquisition receivable		-			-			(809,000	)		-			-
Change in fair value of warrant liability		-			54,500			(2,127,656	)		57,100			-
Other income (expense)		1,657			(35,388	)		6,920			9,830			7,200
Total Other Income (Expense)		(1,449,936	)		(328,757	)		(6,045,905	)		(645,216	)		31,007

NET LOSS BEFORE INCOME TAXES		(4,499,967	)		(881,658	)		(10,925,868	)		(1,624,920	)		(445,265	)

INCOME TAX BENEFIT		838,176			-			1,962,129			-			-

NET LOSS	$	(3,661,791	)	$	(881,658	)	$	(8,963,739	)	$	(1,624,920	)	$	(445,265	)

LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(0.65	)	$	(0.19	)	$	(1.77	)	$	(0.34	)	$	(63.61	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		5,667,330			4,750,000			5,059,137			4,750,000			7,000

	Successor									Predecessor
	Three Months Ended June 30, 2020 (As Restated)			Six Months Ended June 30, 2020 (As Restated)			Period from April 6, 2019 through June 30, 2019 (As Restated)			Period from April 1, 2019 through April 5, 2019		Period from January 1, 2019 through April 5, 2019
Product sales, net	$	15,285,031		$	24,962,209		$	10,545,880		$	999,855	$	12,946,901
Cost of goods sold		12,685,158			20,796,328			8,702,406			735,186		11,004,842
Gross profit		2,599,873			4,165,881			1,843,474			264,669		1,942,059

Operating Expenses
Personnel		1,040,189			2,351,673			886,225			31,198		913,919
Advertising		891,907			1,558,343			525,222			113,477		714,276
Bank and credit card fees		454,569			699,309			232,273			72,130		329,247
Depreciation and amortization		91,790			183,631			87,437			-		9,675
General and administrative		1,509,417			2,949,257			1,952,241			34,767		451,214
Total Operating Expenses		3,987,872			7,742,213			3,683,398			251,572		2,418,331

INCOME (LOSS) FROM OPERATIONS		(1,387,999	)		(3,576,332	)		(1,839,924	)		13,097		(476,272	)

Other Income (Expense)
Interest income		1,062			1,062			-			-		23,807
Financing costs		(74,504	)		(269,186	)		(159,255	)		-		-
Interest expense		(296,708	)		(557,996	)		(233,722	)		-		-
Loss on extinguishment of debt		(948,856	)		(948,856	)		-			-		-
Write-off of acquisition receivable		(809,000	)		(809,000	)		-			-		-
Change in fair value of warrant liability		(2,127,656	)		(2,127,656	)		2,600			-		-
Other income (expense)		2,880			5,263			45,218			160		7,200
Total Other Income (Expense)		(4,252,782	)		(4,706,369	)		(345,159	)		160		31,007

NET INCOME (LOSS) BEFORE INCOME TAXES		(5,640,781	)		(8,282,701	)		(2,185,083	)		13,257		(445,265	)

INCOME TAX BENEFIT		688,953			1,123,953			-			-		-

NET INCOME (LOSS)	$	(4,951,828	)	$	(7,158,748	)	$	(2,185,083	)	$	13,257	$	(445,265	)

INCOME (LOSS) PER COMMON SHARE – BASIC AND DILUTED	$	(0.99	)	$	(1.43	)	$	(0.44	)	$	1.89	$	(63.61	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		5,000,000			5,000,000			5,000,000			7,000		7,000

	Common Stock				Additional Paid-in		Retained			Total Stockholders’
	Shares		Amount		Capital		Earnings			Equity
Balance, December 31, 2018		7,000	$	7,000	$	707,049	$	2,684,628		$	3,398,677
Net loss for the period from January 1, 2019 through April 5, 2019		-		-		-		(445,265	)		(445,265	)
Balance, April 5, 2019		7,000	$	7,000	$	707,049	$	2,239,363		$	2,953,412

					Additional					Total
	Common Stock				Paid-in		Retained			Stockholder’s
	Shares		Amount		Capital		Earnings			Equity
Balance, December 31, 2018	7,000	$	7,000	$	707,049	$	2,684,628		$	3,398,677
Net loss for the period from January 1, 2019 through April 5, 2019	-		-		-		(445,265	)		(445,265	)
Balance, April 5, 2019	7,000	$	7,000	$	707,049	$	2,239,263		$	2,953,412

					Additional					Total Stockholder’s
	Common Stock				Paid-in		Accumulated			Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balance, April 6, 2019	-	$	-	$	-	$	-		$	-
Capital contribution by Holdco for the acquisition of Goedeker Television Co.	4,750,000		475		979,048		-			979,523
Issuance of warrants in connection with notes payable	-		-		292,673		-			292,673
Net loss for the period from April 6, 2019 through June 30, 2019	-		-		-		(743,262	)		(743,262	)
Balance, June 30, 2019	4,750,000	$	475	$	1,271,721	$	(743,262	)	$	528,934
Net loss	-		-		-		(881,658	)		(881,658	)
Balance, September 30, 2019	4,750,000	$	475	$	1,271,721	$	(1,624,920	)	$	(352,724	)

	June 30, 2020 (As Filed)			Adjustments			June 30, 2020 (As Restated)
ASSETS
Total Current Assets	$	9,579,066		$	-		$	9,579,099
Goodwill		5,097,752	(2)		(372,063	)		4,725,689
TOTAL ASSETS	$	20,224,795		$	(372,063	)	$	19,852,732

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	2,605,793	(1)	$	4,767,000		$	7,372,793
Total Current Liabilities		21,363,400			4,767,000			26,130,400
TOTAL LIABILITIES		25,343,486			4,767,000			30,110,486
Stockholders’ Deficit
Additional paid-in capital		2,250,932	(2)		(192,542	)		2,058,390
Accumulated deficit		(7,370,098	)(1)		(4,767,000	)		(12,316,619	)
			(2)		(179,521	)
Total Stockholders’ Deficit		(5,118,691	)		(5,139,063	)		(10,257,754	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	20,224,795		$	(372,063	)	$	19,852,732

	December 31, 2019 (As Filed)			Adjustments			December 31, 2019 (As Restated)
ASSETS
Total Current Assets	$	4,494,402		$	-		$	4,494,402
Goodwill		4,976,016	(2)		(372,063	)		4,603,953
TOTAL ASSETS	$	14,278,926		$	(372,063	)	$	13,906,863

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	2,465,220	(1)	$	2,910,200		$	5,375,420
Total Current Liabilities		11,215,028			2,910,200			14,125,228
TOTAL LIABILITIES		15,074,880			2,910,200			17,985,080
Stockholders’ Deficit
Additional paid-in capital		1,271,721	(2)		(192,542	)		1,079,179
Accumulated deficit		(2,068,150	)(1)		(2,910,200	)		(5,157,871	)
			(2)		(179,521	)
Total Stockholders’ Deficit		(795,954	)		(3,282,263	)		(4,078,217	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	14,278,926		$	(372,063	)	$	13,906,863

	September 30, 2020			December 31, 2019			June 30, 2020			December 31, 2019
Equipment	$	14,976		$	7,376		$	14,375		$	7,376
Warehouse equipment		61,070			29,188			29,188			29,188
Furniture and fixtures		512			512			512			512
Transportation equipment		63,784		��	63,784			63,784			63,784
Leasehold improvements		129,203			117,626			117,626			117,626
Total property and equipment		269,545			218,486			225,485			218,486
Accumulated depreciation		(67,143	)		(32,880	)		(54,744	)		(32,880	)
Property and equipment, net	$	202,402		$	185,606		$	170,741		$	185,606

	Three Months Ended June 30, 2020 (As Filed)					Adjustments			Three Months Ended June 30, 2020 (As Restated)
Gross profit	$	2,599,873				$	-		$	2,599,873
Operating Expenses
General and administrative		636,217		(1	)		873,200			1,509,417
Total Operating Expenses		3,114,672					873,200			3,987,872
LOSS FROM OPERATIONS		(514,799	)				(873,200	)		(1,387,999	)
Total Other Income (Expense)		(4,190,982	)				(61,800	)		(4,252,782	)
NET LOSS BEFORE INCOME TAXES		(4,705,781	)				(935,000	)		(5,640,781	)
INCOME TAX BENEFIT (EXPENSE)		688,953					-			688,953
NET LOSS	$	(4,016,828	)			$	(935,000	)	$	(4,951,828	)

LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(0.80	)						$	(0.99	)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		5,000,000								5,000,000

	Six Months Ended June 30, 2020 (As Filed)					Adjustments			Six Months Ended June 30, 2020 (As Restated)
Gross profit	$	4,165,881				$	-		$	4,165,881
Operating Expenses
General and administrative		1,202,857		(1	)		1,746,400			2,949,257
Total Operating Expenses		5,995,813					1,746,400			7,742,213
LOSS FROM OPERATIONS		(1,829,932	)				(1,746,400	)		(3,576,332	)
Total Other Income (Expense)		(4,595,969	)				(110,400	)		(4,706,369	)
NET LOSS BEFORE INCOME TAXES		(6,425,901	)				(1,856,800	)		(8,282,701	)
INCOME TAX BENEFIT (EXPENSE)		1,123,953					-			1,123,953
NET LOSS	$	(5,301,948	)			$	1,856,800	)	$	(7,158,748	)

LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(1.06	)						$	(1.43	)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		5,000,000								5,000,000

	Period from April 6, 2019 through June 30, 2019 (As Filed)					Adjustments			Period from April 6, 2019 through June 30, 2019 (As Restated)
Gross profit		1,843,474					-			1,843,474
Operating Expenses
General and administrative		539,120		(1	)		1,233,600			1,952,241
				(2	)		179,521
Total Operating Expenses		2,270,277					1,413,121			3,683,398
LOSS FROM OPERATIONS		(426,803	)				(1,413,121	)		(1,839,924	)
Total Other Income (Expense)		(316,459	)				(28,700	)		(345,159	)
NET LOSS BEFORE INCOME TAXES		(743,262	)				(1,441,821	)		(2,185,083	)
INCOME TAX BENEFIT (EXPENSE)		-					-			-
NET LOSS	$	(743,262	)			$	(1,441,821	)	$	(2,185,083	)

LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(0.15	)						$	(0.44	)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		5,000,000								5,000,000

	Six Months Ended June 30, 2020 (As Filed)					Adjustments			Six Months Ended June 30, 2020 (As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,301,948	)	(1	)	$	(1,856,800	)	$	(7,158,748	)
Accounts payable and accrued expenses		146,842		(1	)		1,856,800			2,003,642
Net cash provided by (used in) operating activities		3,852,052					-			3,852,052
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities		(7,000	)				-			(7,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities		(353,566	)				-			(353,566	)
NET CHANGE IN CASH AND RESTRICTED CASH		3,491,476					-			3,491,476
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		64,470					-			64,470
CASH AND RESTRICTED CASH, END OF PERIOD	$	3,555,946				$	-		$	3,555,946

	Period from April 6, 2019 through June 30, 2019 (As Filed)					Adjustments			Period from April 6, 2019 through June 30, 2019 (As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(743,262	)	(1	)	$	(1,262,300	)	$	(2,185,083	)
				(2	)		(179,521	)
Accounts payable and accrued expenses		(707,008	)	(1	)		1,262,300			734,813
				(2	)		179,521
Net cash provided by (used in) operating activities		(2,117,345	)							(2,117,345	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities		-					-			-
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities		2,288,065					-			2,288,065
NET CHANGE IN CASH AND RESTRICTED CASH		170,720					-			170,720
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		-					-			-
CASH AND RESTRICTED CASH, END OF PERIOD	$	170,270				$	-		$	170,720

	September 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Credit card payments in process of settlement	$	274,179	$	406,838	$	904,658	$	406,838
Vendor rebates receivable		945,276		1,455,248		1,050,418		1,455,248
Total	$	1,219,455	$	1,862,086	$	1,955,076	$	1,862,086

2020 (remainder of year)	$	80,883	$	161,766
2021		323,532		323,532
2022		323,532		323,532
2023		323,532		323,532
2024		122,132		122,132
Thereafter		462,584		462,584
Total	$	1,636,195	$	1,717,078

Purchase consideration at fair value:
Note payable, net of $462,102 debt discount and $215,500 of capitalized financing costs	$	3,422,398		$	3,637,898
Cash to seller at closing					478,000
working capital adjustment					(809,000	)
Contingent note payable		81,494			81,494
Fair value of ownership interest in Holdco transferred to seller		979,523			786,981
Amount of consideration	$	4,483,415		$	4,175,373

Assets acquired and liabilities assumed at fair value
Accounts receivable	$	334,446		$	456,183
Inventories		1,851,251			1,851,251
Working capital adjustment receivable and other assets		1,104,863
Other assets					295,863
Property and equipment		216,286			216,286
Customer related intangibles		749,000			749,000
Marketing related intangibles		1,368,000			1,368,000
Accounts payable and accrued expenses		(3,929,876	)		(3,056,855	)
Customer deposits		(2,308,307	)		(2,430,044	)
Net tangible assets acquired (liabilities assumed)	$	(614,337	)	$	(550,316	)

Total net assets acquired (liabilities assumed)	$	(614,337	)	$	(550,316	)
Consideration paid		4,483,415			4,175,373
Goodwill	$	5,097,752		$	4,725,689

For the years ended December 31,
2020 (remainder of year)	$	162,498
2021		663,339
2022		685,222
2023		707,826
2024		731,177
2025		496,064
Total	$	3,446,126
Less: Loan costs		(103,524	)
Total	$	3,342,602

For the years ended December 31,
2020 (remainder of year)	$	1,068,243
2021		795,639
2022		869,700
2023		950,655
2024		246,056
Total		3,930,293
Less: loan costs		(159,791	)
Discounts		(354,276	)
Total	$	3,416,226

Operating lease right-of-use asset	$	2,300,000		$	2,300,000
Accumulated amortization		(613,577	)		(507,128	)
Net balance	$	1,686,423		$	1,792,872

Lease liability, current portion	$	443,469		$	375,885
Lease liability, long-term		1,242,954			1,416,987
Total operating lease liability	$	1,686,423		$	1,792,872

Weighted average remaining lease term (months)		42			45

Weighted average discount rate		6.5	%		6.5	%

2020 (remainder of year)	$	135,000		$	270,000
2021		540,000			540,000
2022		540,000			540,000
2023		540,000			540,000
2024		135,000			135,000
Total lease payments	$	1,890,000		$	2,025,000

Less imputed interest		(203,577	)		(232,128	)
Total lease liability	$	1,686,423		$	1,792,872

	Shares		Weighted Average Exercise Price		Weighted Average Contractual Term in Years
Outstanding at December 31, 2019		-	$	-		-
Granted		483,158		9.00		6.25
Exercised		-		-		-
Forfeited / Cancelled / Expired		-		-		-
Outstanding at September 30, 2020		483,158	$	9.00		6.25

Exercisable at September 30, 2020		65,790	$	9.00		6.25

~~Volatility~~	~~46.6~~	%
~~Risk-free interest rate~~	~~0.47~~	%
~~Dividend yield~~	~~0.0~~	%
~~Expected term~~	~~10 years~~

Three months ended September 30, 2020	$	281,194
Remainder of 2020		117,714
2021		483,185
2022		462,024
2023		367,198
2024		136,742
Total stock-based compensation	$	1,848,056

~~Volatility~~	~~46.5~~	%
~~Risk-free interest rate~~	~~0.47~~	%
~~Dividend yield~~	~~0.0~~	%
~~Expected term~~	~~5 years~~

(a)	Amortization of intangible assets acquired in acquisition	$	157,273

(b)	Reflects amortization of costs associated with acquisition debt as follows:
	Amortization of the cost of shares issued in acquisition	$	68,750
	Amortization of the cost of warrants issued in acquisition		170,268
	Total	$	239,018

(c)	Amortization of discount on note to seller	$	38,509

	Nine Months Ended September 30, 2020
	GAAP			Elimination of Non-Cash Charges			Non-GAAP
Loss from operations	$	(4,879,963	)	$	-		$	(4,879,963	)
Other income (expense)
Interest income		2,480			-			2,480
Financing costs		(757,646	)		-			(757,646	)
Interest expense		(604,908	)		-			(604,908	)
Loss on extinguishment of debt		(1,756,095	)		(1,756,095	)		-
Write-off of acquisition receivable		(809,000	)		(809,000	)		-
Change in fair value of warrant liability		(2,127,656	)		(2,127,656	)		-
Other income (expense)		6,920			-			6,920
Total other income (expense)		(6,045,905	)		(4,692,751	)		(1,353,154	)
Net loss before income taxes	$	(10,925,868	)				$	(6,233,117	)