UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~ ~~10−Q~~

FORM ~~(Mark One)~~10−Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2022

~~For the quarterly period ended: September 30, 2021~~or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ~~_____________~~____________

Commission File ~~Number:~~No. 001-39418

1847 GOEDEKER INC.

(Exact name of registrant as specified in its charter)

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

~~3817 Millstone Parkway, St. Charles, MO~~1870 Bath Avenue, Brooklyn, NY		~~63301~~11214
(Address of principal executive offices)		(Zip ~~Code)~~code)

~~888-768-1710~~800-299-9470

(Registrant’s telephone number, including area code)

(Former name, or former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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
Warrants to Purchase Common Stock	GOED WS	NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~May 12, ~~2021,~~2022, there were 106,387,332 shares of the registrant’s common stock issued and outstanding.

~~1847 GOEDEKER INC.~~

1847 GOEDEKER INC.

Quarterly Report on Form 10-Q
Period Ended March 31, 2022

~~Period Ended September 30, 2021~~

TABLE OF CONTENTS

~~TABLE OF CONTENTS~~

		PART I FINANCIAL INFORMATION

Item 1.		Financial Statements		1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		26	17
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		3728
Item 4.		Controls and Procedures		37	28

					PART II OTHER INFORMATION

Item 1.		Legal Proceedings		3830
Item 1A.		Risk Factors		38	31
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3831
Item 3.		Defaults Upon Senior Securities		3831
Item 4.		Mine Safety Disclosures		38	31
Item 5.		Other Information		3831
Item 6.	~~Exhibits~~		39Exhibits		32

CAUTIONARY STATEMENT 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:

●

the synergies that we expect to experience resulting from the Appliances Connection Acquisition (as defined below);

●

our ability to successfully integrate Appliances Connection’s business with our existing business;

●

our ability to acquire new customers and sustain and/or manage our growth;

●

the impact of the novel coronavirus (“COVID-19”) pandemic on our operations and financial condition;

●

the effect of supply chain delays and disruptions on our operations and financial condition;

●

our goals and strategies;

●

the identification of material weaknesses in our internal control over financial reporting and disclosure controls and procedures that, if not corrected, could affect the reliability of our unaudited condensed consolidated financial statements and have other adverse consequences such as a failure to meet reporting obligations;

●

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 Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 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.

PART I

~~FINANCIAL INFORMATION~~

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

1847 GOEDEKER INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page

Condensed Consolidated Balance Sheets as of ~~September 30, 2021 (unaudited)~~March 31, 2022 (Unaudited) and December 31, ~~2020~~ 2021		2
Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited)~~(Unaudited)		3
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited)~~(Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited)~~(Unaudited)		5
Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)		6

~~1847 GOEDEKER INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(in thousands, except share and per share data)~~

September 30,
2021 December 31,
2020
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 27,175 $ 935
Restricted cash 8,011 8,977
Receivables 24,018 1,998
Vendor deposits 12,134 548
Merchandise inventory, net 37,779 5,147
Prepaid expenses and other current assets 6,058 635
Total Current Assets 115,175 18,240
Property and equipment, net 2,520 246
Operating lease right-of-use assets, net 12,319 1,578
Goodwill 183,768 4,726
Intangible assets, net 47,858 1,382
Other long-term assets 344 45
TOTAL ASSETS $ 361,984 $ 26,217

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses $ 68,013 $ 12,702
Customer deposits 18,382 21,879
Current portion of notes payable, net 6,425 663
Current portion finance lease liability 41 -
Current portion of operating lease liabilities 2,127 451
Contingent note payable 188 -
Total Current Liabilities 95,176 35,695
Notes payable, net of current portion 49,940 2,522
Finance lease liability, net of current portion 153 -
Operating lease liabilities, net of current portion 11,628 1,128
Deferred income taxes payable, net 3,042 -
Contingent note payable - 188
TOTAL LIABILITIES 159,939 39,533
Stockholders’ Equity (Deficit)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of September 30, 2021 or December 31, 2020 - -
Common stock, $0.0001 par value, 200,000,000 shares authorized; 106,387,332 and 6,111,200 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively 11 1
Additional paid-in capital 224,904 13,409
Accumulated deficit (22,870 ) (26,726 )
Total Stockholders’ Equity (Deficit) 202,045 (13,316 )
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 361,984 $ 26,217
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements~~

~~1847 GOEDEKER INC.~~
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~
~~(UNAUDITED)~~
~~(in thousands, except share and per share data)~~
Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Product sales, net $ 141,867 $ 13,435 $ 219,637 $ 38,397
Cost of goods sold 110,495 11,265 172,581 32,061
Gross profit 31,372 2,170 47,056 6,336

Operating Expenses
Personnel 8,547 2,162 15,300 4,514
Advertising 3,715 1,433 7,730 2,991
Bank and credit card fees 4,918 575 7,546 1,274
Depreciation and amortization 3,610 93 3,908 277
Acquisition expenses 62 - 865 -
Loss on abandonment of right of use asset - - 1,437 -
General and administrative 4,018 1,451 8,311 4,400
Total Operating Expenses 24,870 5,714 45,097 13,456

INCOME (LOSS) FROM OPERATIONS 6,502 (3,544 ) 1,959 (7,120 )

Other Income (Expense)
Interest income 34 1 57 2
Financing costs (200 ) (488 ) (280 ) (758 )
Interest expense (899 ) (229 ) (2,070 ) (787 )
Loss on extinguishment of debt - (807 ) (1,748 ) (1,756 )
Write-off of acquisition receivable - - - (809 )
Change in fair value of warrant liability - - - (2,128 )
Other income (expense) 8 2 19 7
Total Other Income (Expense) (1,057 ) (1,521 ) (4,022 ) (6,229 )

NET INCOME (LOSS) BEFORE INCOME TAXES 5,445 (5,065 ) (2,063 ) (13,349 )

INCOME TAX (EXPENSE) BENEFIT (2,129 ) 838 5,919 1,962

NET INCOME (LOSS) $ 3,316 $ (4,227 ) $ 3,856 $ (11,387 )

NET INCOME (LOSS) PER COMMON SHARE $ 0.03 $ (0.74 ) $ 0.08 $ (2.17 )
DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.03 $ (0.74 ) $ 0.06 $ (2.17 )

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –
    BASIC 106,387,331 5,736,774 50,047,045 5,247,384
    DILUTED 131,787,293 5,736,774 61,816,085 5,247,384
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements~~

1847 GOEDEKER INC.

CONDENSED CONSOLIDATED ~~STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)~~
~~(UNAUDITED)~~
~~(in thousands)~~
~~For the Three and Nine Months Ended September 30, 2021~~BALANCE SHEETS
(in thousands, except share and per share data)
Common Stock Additional
Paid-in Accumulated Total
Stockholders’
Equity
Shares Amount Capital Deficit (Deficit)
Balance, January 1, 2021 6,111 $ 1 $ 13,409 $ (26,726 ) $ (13,316 )
Stock-based compensation expense - - 125 - 125
Issuance of warrants in connection with notes payable - - 1,340 - 1,340
Net loss - - - (3,493 ) (3,493 )
Balance, March 31, 2021 6,111 $ 1 $ 14,874 $ (30,219 ) $ (15,344 )
Issuance of common stock in connection with acquisition 5,896 1 12,263 - 12,264
Issuance of common stock in connection with public offering 93,111 9 194,588 - 194,597
Issuance of stock grants 217 - 555 - 555
Exercise of warrants 1,039 - 2,338 - 2,338
Stock-based compensation expense - - 125 - 125
Net income - - - 4,033 4,033
Balance, June 30, 2021 106,374 $ 11 $ 224,743 $ (26,186 ) $ 198,568
Exercise of warrants 13 - 29 - 29
Stock-based compensation expense - - 132 - 132
Net income - - - 3,316 3,316
Balance, September 30, 2021 106,387 $ 11 $ 224,904 $ (22,870 ) $ 202,045
~~For the Three and Nine Months Ended September 30, 2020~~
Common Stock Additional
Paid-in Accumulated Total
Stockholders’
Shares Amount Capital Deficit Deficit
Balance, January 1, 2020       4,750 $              - $ 1,079 $ (5,158 ) $           (4,079 )
Net loss - - - (2,207 ) (2,207 )
Balance, March 31, 2020 4,750 $ - $ 1,079 $ (7,365 ) $ (6,286 )
Issuance of 1847 Holdings warrants in connection with notes payable - - 567 - 567
Forgiveness of related party debt - - 138 - 138
Issuance of 1847 Holdings shares in connection with conversion of notes payable - - 275 - 275
Net loss - - - (4,952 ) (4,952 )
Balance, June 30, 2020 4,750 $ - $ 2,059 $ (12,317 ) $ (10,258 )
Issuance of common stock for cash 1,111 - 8,602 - 8,602
Issuance of common stock in connection with exercise of warrant 250 - 2,250 - 2,250
Issuance of options - - 281 - 281
Issuance of 1847 Holdings shares in connection with conversion of notes payable - - 100 - 100
Net loss - - - (4,227 ) (4,227 )
Balance, September 30, 2020 6,111 $ 1 $ 13,292 $ (16,544 ) $ (3,252 )
March 31, December 31,
2022 2021
(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents $ 25,821 $ 25,724
Restricted cash 2,583 8,067
Receivables, net 26,288 24,594
Vendor deposits 18,064 12,199
Merchandise inventory, net 52,963 44,754
Prepaid expenses and other current assets 8,291 5,980

Total Current Assets 134,010 121,318

Property and equipment, net 3,688 3,554
Operating lease right-of-use assets 15,262 14,937
Goodwill 191,614 191,614
Intangible assets, net 41,658 44,212
Other long-term assets 349 349

TOTAL ASSETS $ 386,581 $ 375,984

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable and accrued expenses $ 83,959 $ 72,592
Customer deposits 13,080 20,702
Current portion of notes payable, net 7,907 7,910
Current portion of finance lease liabilities 120 65
Current portion of operating lease liabilities 3,845 3,874
Contingent note payable 200 198

Total Current Liabilities 109,111 105,341

Notes payable, net of current portion 47,181 48,559
Finance lease liabilities, net of current portion 306 121
Operating lease liabilities, net of current portion 12,787 12,493
Deferred tax liability, net 5,652 3,867

TOTAL LIABILITIES 175,037 170,381

Stockholders’ Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of March 31, 2022 and December 31, 2021 - -
Common stock, $0.0001 par value, 250,000,000 shares authorized; 106,387,332 shares issued and outstanding as of March 31, 2022 and December 31, 2021 11 11
Additional paid-in capital 224,667 224,648
Accumulated deficit (13,134 ) (19,056 )

TOTAL STOCKHOLDERS’ EQUITY 211,544 205,603

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 386,581 $ 375,984
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

~~1847 GOEDEKER INC.~~
1847 GOEDEKER INC.
CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS
(UNAUDITED)
(in ~~thousands)~~thousands, except share and per share data)

Nine Months Ended
September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,856 $ (11,387 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 3,908 277
Amortization of debt discount 854 677
Stock-based compensation expense 936 281
Loss on extinguishment of debt 1,748 1,756
Loss on abandonment of right of use asset 1,437
Write-off of acquisition receivable - 809
Change in fair value of warrant liability - 2,128
Deferred tax expense (6,464 ) (1,962 )
Non-cash lease expense 845 314
Changes in operating assets and liabilities:
Receivables (2,616 ) 521
Vendor deposits (1,586 ) (253 )
Merchandise inventory (11,665 ) (1,707 )
Prepaid expenses and other assets (3,709 ) (989 )
Accounts payable and accrued expenses 11,796 4,306
Customer deposits (16,891 ) 12,926
Operating lease liabilities (765 ) (314 )
Net cash provided by (used in) provided by operating activities (18,316 ) 7,383

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (693 ) (51 )
Cash paid to sellers in acquisition of Appliances Connection, net of cash acquired (201,515 ) -
Cash paid to seller in acquisition of Appliance Gallery (1,420 ) -
Net cash used in investing activities (203,628 ) (51 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity offering 194,598 8,602
Cash received from warrant exercise 2,368 -
Proceeds from term note payable, net 55,217 643
Repayment on notes payable (4,944 ) (2,047 )
Payments on convertible notes payable - (771 )
Payments on finance leases (21 ) -
Net payments on lines of credit - (1,339 )
Cash paid for financing costs - (105 )
Net cash provided by financing activities 247,218 4,983

NET CHANGE IN CASH AND RESTRICTED CASH 25,274 12,315
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD 9,912 64
CASH AND RESTRICTED CASH, END OF PERIOD $ 35,186 $ 12,379

Cash, cash equivalents, and restricted cash consist of the following:
End of period
Cash and cash equivalents $ 27,175 $ 3,467
Restricted cash 8,011 8,912
$ 35,186 $ 12,379
Cash, cash equivalents, and restricted cash consist of the following
Beginning of period
Cash and cash equivalents $ 935 $ 64
Restricted cash 8,977 -
$ 9,912 $ 64
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 1,623 $ 820
Cash paid for taxes $ 2,480 $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES
Right of use assets acquired and liabilities assumed $ 11,108 $ -
Debt discount on notes payable from OID $ 2,310 $ -
Debt discount, warrants on short-term note payable $ 1,340 $ -
Stock issued in the acquisition of Appliances Connection $ 12,264 $ -
Debt paid off through issuance of new note $ 5,616 $ -
Due to Seller (consideration) settled by vendor deposits $ 5,000 $ -
Conversion of debt through issuance of 1847 Holdings common shares $ - $ 375
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest $ - $ 119
Derecognition of related party debt $ - $ 138
Adjustment to fair value of goodwill based on final purchase price allocation $ - $ 122
Conversion of warrant liability into common stock $ - $ 2,250
Issuance of note payable to repay Seller note $ - $ 3,500
For the Three Months
Ended March 31,
2022 2021

Product sales, net $ 152,752 $ 13,697
Cost of goods sold 116,883 11,069
Gross profit 35,869 2,628

Operating Expenses
Personnel 7,046 1,931
Advertising 4,288 1,083
Bank and credit card fees 6,167 533
Depreciation and amortization 2,734 122
General and administrative 5,567 2,240

Total Operating Expenses 25,802 5,909

INCOME (LOSS) FROM OPERATIONS 10,067 (3,281 )

Other Income (Expenses)
Interest income 41 10
Adjustment in value of contingency (2 ) -
Interest expense (936 ) (232 )
Other income 135 10

Total Other Income (Expenses) (762 ) (212 )

NET INCOME (LOSS) BEFORE INCOME TAXES 9,305 (3,493 )

INCOME TAX EXPENSE (3,383 ) -

NET INCOME (LOSS) $ 5,922 $ (3,493 )

NET INCOME (LOSS) PER COMMON SHARE – BASIC AND DILUTED $ 0.06 $ (0.57 )

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
– BASIC AND DILUTED 106,387,332 6,111,200
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

~~1847 GOEDEKER INC.~~
~~NOTES TO~~ 1847 GOEDEKER INC.
CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS
~~SEPTEMBER 30, 2021 AND 2020~~ OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
(in thousands, except share and per share data)
For the Three Months Ended March 31, 2022
~~NOTE 1—ORGANIZATION AND NATURE OF BUSINESS~~
Common Stock Additional
Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit  Equity

Balance at December 31, 2021 106,387,332 $ 11 $ 224,648 $ (19,056 ) $ 205,603
Stock-based compensation - - 19 - 19
Net income for the three months ended March 31, 2022 - - - 5,922 5,922

Balance at March 31, 2022 106,387,332 $ 11 $ 224,667 $ (13,134 ) $ 211,544

For the Three Months Ended March 31, 2021
1847 Goedeker Inc. (“1847 Goedeker”) was formed under the laws of the State of Delaware on January 10, 2019 for the sole purpose of acquiring the business of Goedeker Television Co. Prior to the acquisition, 1847 Goedeker did not have any operations other than operations relating to its incorporation and organization.

Common Stock Additional
Paid-in Accumulated Stockholders’
 Equity
Shares Amount Capital Deficit (Deficit)

Balance at December 31, 2020 6,111,200 $    1 $ 13,409 $ (26,726 ) $ (13,316 )
Issuance of warrants with debt - - 1,340 - 1,340
Stock-based compensation - - 125 - 125
Net loss for the three months ended March 31, 2021 - - - (3,493 ) (3,493 )

Balance at March 31, 2021 6,111,200 $ 1 $ 14,874 $ (30,219 ) $ (15,344 )
On April 5, 2019, 1847 Goedeker acquired substantially all the assets and assumed substantially all the liabilities of Goedeker Television Co., a Missouri corporation (“Goedeker”). As a result of this transaction, 1847 Goedeker acquired the former business of Goedeker and continues to operate this business.
~~On October 20, 2020, 1847 Goedeker formed Appliances Connection Inc. (“ACI”) as a wholly owned subsidiary in the State of Delaware.~~
On June 2, 2021, ACI acquired all of the issued and outstanding capital stock or other equity securities of 1 Stop Electronics Center, Inc., a New York corporation (“1 Stop”), Gold Coast Appliances, Inc., a New York corporation (“Gold Coast”), Superior Deals Inc., a New York corporation (“Superior Deals”), Joe’s Appliances LLC, a New York limited liability company (“Joe’s Appliances”) and YF Logistics LLC, a New Jersey limited liability company (“YF Logistics,” and collectively with 1 Stop, Gold Coast, Superior Deals, and Joe’s Appliances, “Appliances Connection”). See Note 9.
~~On July 6, 2021, 1847 Goedeker formed AC Gallery Inc. (“AC Gallery”) as a wholly owned subsidiary in the State of Delaware.~~
On July 29, 2021, AC Gallery acquired substantially all the assets and assumed substantially all the liabilities of Appliance Gallery, Inc., a retail appliance store in Largo, FL (“Appliance Gallery”). As a result of this transaction, AC Gallery acquired the former business of Appliance Gallery and continues to operate this business. See Note 9.
1847 Goedeker and its consolidated subsidiaries (collectively, the “Company”) operate an industry leading e-commerce destination for appliances, furniture, and home goods. Through its June 2021 acquisition of Appliances Connection, the Company created one of the largest pure-play online retailers of household appliances in the United States. With warehouse fulfillment centers in the Northeast and Midwest, as well as showrooms in Brooklyn, New York, St. Louis, Missouri, and Largo, Florida the Company offers one-stop shopping for national and global brands. The Company carries many household name-brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and also carries many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve, Jenn-Air and Viking, among others. The Company also sells furniture, fitness equipment, plumbing fixtures, televisions, outdoor appliances, and patio furniture, as well as commercial appliances for builder and business clients.
~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~
~~Basis~~The accompanying notes are an integral part of ~~Presentation~~
~~The~~these unaudited condensed consolidated financial statements ~~of the Company have been prepared~~

1847 GOEDEKER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in ~~accordance with generally accepted accounting principles in the United States of America (“GAAP”) and with the instructions to Article 8 of Regulation S-X.~~thousands)
For the Three Months
Ended March 31,
2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) Adjustments to reconcile net income (loss) to net cash $ 5,922 $ (3,493 )
used in by operating activities:
Depreciation and amortization 2,734 128
Amortization of debt discount 185 98
Stock-based compensation 19 125
Adjustment in value of contingency 2 -
Deferred tax (liability) asset 1,785 -
Non-cash lease expense 819 127
Changes in operating assets and liabilities:
Receivables (1,694 ) 1,049
Vendor deposits (5,864 ) (195 )
Merchandise inventory (8,209 ) (736 )
Prepaid expenses and other assets (2,312 ) 109
Accounts payable and accrued expenses 11,368 (345 )
Customer deposits (7,622 ) 390
Operating lease liabilities (880 ) (65 )
Net cash used in operating activities (3,747 ) (2,808 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6 ) (126 )
Net cash used in investing activities (6 ) (126 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - 4,590
Repayments of notes payable (1,615 ) (164 )
Repayments of finance lease liabilities (19 ) -
Net cash (used in) provided by financing activities (1,634 ) 4,426

NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (5,387 ) 1,492
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 33,791 9,912

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD $ 28,404 $ 11,404

Cash, cash equivalents, and restricted cash consist of the following:
End of the period
Cash and cash equivalents $ 25,821 $ 1,309
Restricted cash 2,583 10,095

$ 28,404 $ 11,404

Cash, cash equivalents, and restricted cash consist of the following:
Beginning of the period
Cash and cash equivalents $ 25,724 $ 935
Restricted cash 8,067 8,977

$ 33,791 $ 9,912

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 639 $ 29
Cash paid for income taxes $ - $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES
Operating lease right-of-use assets and liabilities assumed $ 1,145 $ 1,954
Financed purchases of property and equipment $ 308 $ -
Debt discount on notes payable from OID $ - $ 910
Debt discount on notes payable from warrants $ - $ 1,340

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 1—BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of 1847 Goedeker Inc. (the “Company,” “1847 Goedeker,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect all adjustments, ~~considered~~consisting of normal recurring adjustments, necessary ~~for a fair presentation~~to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been ~~included. Operating~~condensed or omitted pursuant to such rules and regulations. The information included in the Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. Furthermore, interim results for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2021.~~2022 or future periods.

~~These unaudited interim consolidated~~Certain reclassifications within property and equipment have been made to the prior period’s financial statements ~~should be read~~to conform to the current period financial statement presentation (see Note 6). There is no impact in ~~conjunction with the audited consolidated financial statements~~total net property and ~~notes thereto contained~~equipment, results of operations, and cash flows in ~~the Company’s annual report on Form 10-K for the year ended December 31, 2020.~~

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
all periods presented.
~~Principles of Consolidation~~
NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our unaudited condensed consolidated financial statements include the accounts of 1847 Goedeker and its consolidated subsidiaries, ACI, 1 Stop, Gold Coast, Superior Deals, Joe’s Appliances, YF Logistics and AC Gallery. All significant intercompany balances and transactions have been eliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
~~Use of Estimates~~statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ~~preparation~~ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has not completed its assessment of ~~these~~the standard but does not expect the adoption to have a material impact on our unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
~~Cash and Cash Equivalents~~
Cash and equivalents include: (1) currency on hand, (2) demand deposits with banks or financial institutions, (3) other kinds of accounts that have the general characteristics of demand deposits, and (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. The majority of payments due from financial institutions for the settlement of credit card and debit card transactions process within two business days and are, therefore, classified as cash and cash equivalents. Other payment methods that take more time to settle are classified as receivables.
At September 30, 2021, restricted cash includes approximately $0.2 million to secure vendor letters of credit and $7.8 million withheld by credit card processors as security for the Company’s customer refund claims and credit card chargebacks. Cash pledged to secure the letter of credit will be released when the vendor offers the Company credit terms, and the cash held by credit card processors will be released at the discretion of the credit card companies.
~~Revenue Recognition and Cost of Revenue~~statements.

The Company ~~records revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606. Revenue is recognized~~has evaluated all other recent accounting pronouncements and determined that the adoption of pronouncements applicable 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. ASC 606 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 performance obligation is to deliver the customer’s order. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which time revenue is recognized.
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 trucks 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~~not had or is not expected to have a material impact on the ~~Company recognizes revenue.~~
Company's consolidated financial position, results of operations or cash flows.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~

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.
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 (homeowners), builders and designers.~~
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 product type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
~~The Company’s disaggregated revenue by product type is as follows (in thousands):~~
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Appliance sales $ 130,837 $ 8,992 $ 197,416 $ 28,327
Furniture sales 5,880 3,555 14,393 7,605
Other sales 5,150 888 7,828 2,465
Total $ 141,867 $ 13,435 $ 219,637 $ 38,397
The Company also sells extended warranty contracts. The Company is an agent for the warranty company and earns a commission on the warranty contracts purchased by customers; therefore, the cost of the warranty contracts is netted against warranty revenue in the accompanying consolidated statement of operations. The Company assumes no liability for repairs to products on which it has sold a warranty contract.
~~Receivables~~
Receivables consists of customer’s balance payments for which the Company extends credit to certain homebuilders and designers based on prior business relationship, and vendor rebate receivables. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers (vendors). 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 its trade receivables from customers and bad debt expense has been historically immaterial to the condensed consolidated financial statements. Uncollectible balances are expensed in the period it is determined to be uncollectible. The Company had no significant concentrations of receivables balances as of September 30, 2021 and December 31, 2020.
~~Merchandise Inventory~~
Inventory consists of finished products acquired for resale and is valued at the lower-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.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021~~NOTE 3—LIQUIDITY AND ~~2020~~
~~(UNAUDITED)~~
~~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)~~
~~Furniture and fixtures~~ 7
~~Machinery and equipment~~ ~~5-7~~
~~Office equipment~~ ~~5-7~~
~~Transportation equipment~~ 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 three and nine months ended September 30, 2021 and 2020.
~~Intangible Assets~~
As of September 30, 2021 and December 31, 2020, definite-lived intangible assets primarily consisted of tradenames and customer relationships which are being amortized over their estimated useful lives, or 5 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. 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. Impairments for the nine months ended September 30, 2021 were $1.4 million due to an abandonment of certain right of use assets. There were no impairments for the nine months ended September 30, 2020.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~Long-Lived Assets~~
The Company reviews its property and equipment and any identifiable intangibles (including right of use assets) 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 upon triggering events. 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. There were no impairments for the nine months ended September 30, 2021 and 2020.
~~Lease Liabilities~~
Lease liabilities and their corresponding right of use assets are recorded based on the present value of lease payments over the expected lease term at the lease commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective lease to determine the present value of future payments. The determination of the IBR requires judgment and is primarily based on publicly available information for companies within the same industry and with similar credit profiles. The Company adjusts the rate for the impact of collateralization, the lease term and other specific terms included in each lease arrangement. The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease arrangement.
~~Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.~~
The Company reviews the right of use asset for impairment whenever events or changes in circumstances indicate that the carrying amount of the right of use asset may not be recoverable. When such events occur, the Company compares the carrying amount of the right of use asset to the undiscounted expected future cash flows related to the right of use asset. If the comparison indicates that an impairment exists, the amount of the impairment is calculated as the difference between the excess of the carrying amount over the fair value of the right of use asset. If a readily determinable market price does not exist, fair value is estimated using discounted expected cash flows attributable to the right of use asset.
~~Fair Value of Financial Instruments~~
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Cash, restricted cash, receivables, inventory, and prepaid expenses approximate fair value, due to their short-term nature. The fair value hierarchy is defined in the following three categories:
~~Level 1: Quoted market prices in active markets for identical assets or liabilities.~~
~~Level 2: Observable market-based inputs or inputs that are corroborated by market data.~~
~~Level 3: Unobservable inputs that are not corroborated by market data.~~
~~Customer Deposits~~
Customer deposits represent the amount collected from customers when an order is placed. The deposits are transferred to revenue when the order ships to the customer or returned to customer if the order is subsequently cancelled.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~Income Taxes~~
Under the Company’s accounting policies, the Company initially recognizes a tax position in its unaudited condensed consolidated financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although the Company believes its provisions for unrecognized tax positions are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which the Company has reflected in its income tax provisions and accruals. The tax law is subject to varied interpretations, and the Company has taken positions related to certain matters where the law is subject to interpretation. Such differences could have a material impact on the Company’s income tax provisions and operating results in the period(s) in which the Company makes such determination.
In the second quarter of 2021, the Company acquired Appliances Connection. Appliances Connection has a history of profitable operations. As such, the Company determined that it was more likely than not that it would have profitable operations in the future and therefore be able to realize the deferred tax assets and accordingly reversed the allowance for deferred tax assets at June 30, 2021.
~~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 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 September 30, 2021 and December 31, 2020, the amount of such accrual was $18.2 million and $5.8 million, respectively. The amount of sales tax liability acquired in the Appliances Connection transaction was $11.0 million plus accrued interest of $1.0 million, which are included in accounts payable and accrued expenses.
~~Income (Loss) Per Share~~
Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive securities. For the three and nine months ended September 30, 2021, the potentially dilutive securities were warrants for the purchase of 92,514,423 shares of common stock and options for the purchase of 705,000 shares of common stock. At September 30, 2020 there were warrants for the purchase of 55,560 shares of common stock and options for the purchase of 483,158 shares of common stock. These potentially dilutive securities were excluded from diluted loss per share. For the three and nine months ended September 30, 2021, 25,413,437 and 11,773,834 of shares from the above option and warrants were included in the dilutive earnings per share, respectively.
~~Reclassifications~~
~~Certain accounts have been reclassified to conform with classifications adopted in the period ended September 30, 2021. Such reclassifications had no effect on net earnings or financial position.~~

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~Impact of COVID-19~~
In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The extent of the COVID-19 pandemic’s continued effect on the Company’s operational and financial performance and those of third parties on which the Company relies will depend on future developments, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential impacts on its business and financing. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies.
~~Going Concern Assessment~~GOING CONCERN ASSESSMENT

Management assesses liquidity and going concern uncertainty in the Company’s ~~unaudited~~ condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the unaudited condensed consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. As of March 31, 2022, we had cash and cash equivalents of $25.8 million and restricted cash of $2.6 million. For the three months ended March 31, 2022, the Company incurred operating income of approximately $10.1 million, cash flows used in operations of $3.7 million, and working capital of $24.9 million.

For the nine months ended September 30, 2021, the Company had operating profit of $2.0 million, $18.3 million of cash flow used in operations, and working capital of $20.0 million. Additionally, the Company had $27.2 million of unrestricted cash at September 30, 2021. On June 2, 2021, the Company completed the acquisition of Appliances Connection. Appliances Connection has historically been profitable; however, less than 4 months of their operations are included in results for the nine months ended September 30, 2021.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Management has prepared estimates of operations for fiscal years ~~2021~~2022 and ~~2022~~2023 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for ~~at least~~ one year from the date of the filing of these unaudited condensed consolidated financial statements.
The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, with new COVID variants still in place it ismight be too early to know the full impact of COVID-19 or its timing on a return to more normal operations.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.
Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these unaudited condensed consolidated financial statements, indicate improved operations and the Company’s ability to continue operations as a going concern.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~Recent Accounting Pronouncements~~
~~Recently 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, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated 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.NOTE 4—REVENUES

The Company ~~currently believes that all other issued~~sells a vast assortment of household appliances, including refrigerators, ranges, ovens, dishwashers, microwaves, freezers, washers and ~~not yet effective accounting standards are not relevant~~dryers. In addition to appliances, we also offer a broad assortment of products in the ~~Company’s unaudited condensed consolidated financial statements.~~
~~NOTE 3—RECEIVABLES~~furniture, décor, bed & bath, lighting, outdoor living, electronics categories, fitness equipment, plumbing fixtures, air conditioners, fireplaces, fans, dehumidifiers, humidifiers, air purifiers and televisions.

~~At September 30, 2021 and December 31, 2020, receivables consisted~~Revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the ~~following (in thousands):~~
September 30,
2021 December 31, 2020
Trade receivables from customers $ 12,551 $ -
Vendor rebates receivable 7,499 1,338
Credit cards in process of collection 135 660
Other receivables 3,833 -
Total receivables $ 24,018 $ 1,998
~~NOTE 4—MERCHANDISE INVENTORY~~consideration to which the entity expects to be entitled in exchange for those goods or services. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which time revenue is recognized.
~~At September 30, 2021~~The Company disaggregates revenue from contracts with customers by product type, as it believes it best depicts how the nature, amount, timing and ~~December 31, 2020, the inventory balances~~uncertainty of revenue and cash flows are ~~composed of the following~~affected by economic factors.
The Company’s disaggregated revenue by product type is as follows (in thousands):
September 30,
2021 December 31, 2020
Appliances $ 34,317 $ 5,286
Furniture 1,903 195
Other 1,984 91
Total merchandise inventory 38,204 5,572
Allowance for inventory obsolescence (425 ) (425 )
Merchandise inventory, net $ 37,779 $
5,147

For the Three Months Ended
March 31, March 31,
2022 2021

Appliance sales $ 140,975 $ 10,273
Furniture sales 4,155 2,328
Other sales 7,622 1,096

Total $ 152,752 $ 13,697

1847 GOEDEKER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~SEPTEMBER 30, 2021~~
MARCH 31, 2022 AND ~~2020~~2021
(UNAUDITED)
~~(UNAUDITED)~~

NOTE 5—~~VENDOR DEPOSITS~~SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES

Deposits with vendors represent cash on deposit with one vendor arising from accumulated rebates paid by the vendor. The deposits are used by the vendor to seek to secure the Company’s purchases. The deposit can be withdrawnReceivables at ~~any time up to the amount~~March 31, 2022 and December 31, 2021, consisted of the ~~Company’s credit line with~~following (in thousands):
March 31, December 31,
2022 2021

Trade accounts receivable $ 15,295 $ 10,694
Vendor rebates receivable 9,125 11,633
Other receivables 2,261 2,660

Total receivables 26,681 24,987
Less allowance for doubtful accounts (393 ) (393 )

Total receivables, net $ 26,288 $ 24,594
Inventory as March 31, 2022 and December 31, 2021, consisted of the vendor. Alternatively, the Company could secure their credit line with a floor plan line from a lender and withdraw all its deposits. The Company has elected to leave the deposits with the vendor on which it earns interest income.following (in thousands):

March 31, December 31,
2022 2021

Appliances $ 50,856 $ 41,922
Furniture 986 1,166
Other 1,964 2,439

Total merchandize inventory 53,806 45,597
Less reserve for obsolescence (843 ) (843 )

Total merchandize inventory, net $ 52,963 $ 44,754
~~Vendor deposits as of September 30, 2021~~
Property and equipment at March 31, 2022 and December 31, ~~2020 were $12.1 million and $0.5 million, respectively.~~
~~NOTE 6—PROPERTY AND EQUIPMENT~~2021, consisted of the following (in thousands):

~~Property and equipment consist of the following at September 30, 2021 and December 31, 2020 (in thousands):~~
September 30,
2021 December 31, 2020
Equipment $ 88 $ 69
Warehouse equipment 374 61
Furniture and fixtures 8 1
Transportation equipment 1,418 64
Leasehold improvements 216 137
Construction in progress 693 -
Total property and equipment 2,797 332
Accumulated depreciation (277 ) (86 )
Property and equipment, net $ 2,520 $ 246
~~Depreciation expense for the nine months ended September 30, 2021 and 2020 was $0.2 million and $0.03 million, respectively.~~
~~All property and equipment are pledged to secure the Loans described below (See Note 10).~~
On June 30, 2021, the Company closed its old warehouse and retail showroom in anticipation of relocating to a new facility. Accordingly, the Company wrote the remaining right of use asset and related leasehold improvements as of that date.
~~NOTE 7—INTANGIBLE ASSETS AND GOODWILL~~
March 31, December 31,
2022 2021

Equipment $ 209 $ 203
Warehouse equipment 546 546
Furniture and fixtures 23 23
Transportation equipment 1,232 1,183
Financed assets 494 235
Leasehold improvements 217 217
Construction in progress 1,597 1,597

Total property and equipment 4,318 4,004
Less: accumulated depreciation (630 ) (450 )

Property and equipment, net $ 3,688 $ 3,554

The following provides a breakdown of identifiable intangible assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):

September 30,
2021 December 31, 2020 March 31,
2022 December 31,
2021
Customer relationships $ 26,549 $ 749 $ 24,148 $ 24,148
Marketing related - tradename 25,704 1,368 26,935 26,935
Total intangible assets 52,253 2,117 51,083 51,083
Accumulated amortization (4,395 ) (735 ) (9,425 ) (6,871 )
Intangible assets, net $ 47,858 $ 1,382 $ 41,658 $ 44,212

In connection with the acquisition of Goedeker, the Company identified intangible assets of $2.1 million, representing trade names and customer relationships. For the Appliances Connection acquisition, the Company preliminarily identified intangible assets of trade names and customer relationships. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 5.0 years. Amortization expense for the three months ended September 30, 2021 and 2020 was $3.4 million and $0.08 million, respectively. For the nine months ended September 30, 2021 and 2020, amortization expense was $3.7 million and $0.2 million, respectively.

1847 GOEDEKER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
At ~~September 30, 2021,~~March 31, 2022, estimated annual amortization expense for each of the next five years is as follows (in thousands):

2021 (remainder of year) $ 2,613
2022 10,451
2022 (remainder of year) $ 7,662
2023 10,451 10,217
2024 10,139 9,905
2025 10,027 9,793
Thereafter 4,177
2026 4,081
Total $ 47,858 $ 41,658

~~Following is a summary~~Accounts payable and accrued expenses at March 31, 2022 and December 31, 2021, consisted of ~~goodwill~~the following (in thousands):
Balance December 31, 2020 $ 4,726
Preliminary goodwill from acquisition of Appliances Connection 177,875
Preliminary goodwill from acquisition of Appliances Gallery 1,167
Balance September 30, 2021 $ 183,768
~~NOTE 8—ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~

~~The following is schedule of accounts payable and accrued expenses at September 30, 2021 and December 31, 2020 (in thousands):~~
March 31, December 31,
2022 2021

Trade accounts payable $ 51,660 $ 41,166
Accrued sales tax 24,812 23,628
Accrued payroll liabilities 1,707 984
Accrued interest 648 794
Accrued income taxes 1,933 334
Credit cards payable 1,447 1,004
Accrued severance 390 496
Other accrued liabilities 1,362 4,186

Total accounts payable and accrued expenses $ 83,959 $ 72,592

September 30,
2021 December 31,
2020
Trade accounts payable $ 37,845 $ 5,975
Sales tax 23,836 5,804
Accrued payroll liabilities 1,527 493
Accrued interest 210 10
Accrued liability for sales returns 200 200
Other accrued liabilities 4,395 220
Total accounts payable and accrued expenses $ 68,013 $ 12,702
NOTE ~~9—BUSINESS COMBINATIONS~~6—LEASES

~~Appliances Connection~~Operating Leases

On ~~October 20, 2020,~~March 15, 2022, the Company entered into a ~~securities purchase~~lease agreement ~~which was amended~~by and between the Company and 8780 19th Ave LLC, a New York limited liability company and related party (the “Office Lease”), for the lease of a new office building located in Brooklyn, New York. The Office Lease commenced on March 1, 2022 and shall expire on December ~~8, 2020 and April 6, 2021 (as amended,~~31, 2026. The Company has the ~~“AC Purchase Agreement”), with ACI, Appliances Connection and~~option to extend the ~~sellers set forth on Exhibit A thereto (the “Sellers”), pursuant to which ACI agreed to acquire all~~term of the ~~issued and outstanding capital stock or other equity securities~~Office Lease for one additional term of ~~Appliances Connection from the Sellers (the “AC Acquisition”).~~five years. The ~~AC Acquisition was completed on June 2, 2021.~~
~~The aggregate purchase price is $222.0 million (subject to adjustment), consisting of (i) $180.0 million in cash (subject to adjustment), (ii) 2,333,333 shares~~premises of the ~~Company’s common stock having a stated value that is equal to $21.0 million and (iii) 3,562,640 shares~~Office Lease contain approximately 5,835 rentable square feet. Under the terms of the ~~Company’s common stock, which is equal to (A) $21.0 million divided by (B)~~Office Lease, the ~~average~~Company will lease the premises at the monthly rate of ~~the closing price of the Company’s common stock (as reported on NYSE American)~~$22,000 for the ~~20 trading days immediately preceding the 3rd trading day prior to the closing date~~first year, with scheduled annual increases. The Company received a four-month rent concession so that its first rental payment shall become due on or before July 1, 2022. The lease agreement contains customary events of ~~the AC Acquisition.~~
default, representations, warranties, and covenants. The ~~purchase price was subject to a closing net working capital adjustment provision~~initial ROU asset and ~~a post-closing net working capital adjustment provision. As a result of these adjustments, the cash portion of the purchase price paid was $212.6~~liability associated with this operating lease is $1.1 million.

1847 GOEDEKER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~SEPTEMBER 30,~~
MARCH 31, 2022 AND 2021 ~~AND 2020~~

(UNAUDITED)

The ~~Company accounted for the AC Acquisition using the acquisition method of accounting~~following was included in ~~accordance with FASB ASC Topic 805 “Business Combinations”. In accordance with ASC 805, the Company used its best estimates~~our unaudited condensed consolidated balance sheet at March 31, 2022 and ~~assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.~~December 31, 2021 (in thousands):

March 31, December 31,
2022 2021

Operating lease right-of-use assets $ 15,262 $ 14,937

Lease liabilities, current portion 3,844 3,874
Lease liabilities, long-term 12,787 12,493

Total operating lease liabilities $ 16,631 $ 16,367

Weighted-average remaining lease term (months) 73 77

Weighted average discount rate 3.90 % 4.00 %
~~The fair value of the purchase consideration issued to Appliances Connection~~Operating lease expense was ~~allocated to the net tangible assets acquired. The Company accounted~~$1.0 million and $0.2 million for the ~~AC Acquisition as the purchase of a business under GAAP under the acquisition method of accounting,~~three months ended March 31, 2022 and ~~the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company.~~ ~~The preliminary fair value of the net assets to be acquired is $47.0 million. The excess of the aggregate estimated fair value of the net tangible assets, $177.9 million, has been allocated to provisional goodwill.~~December 31, 2021, respectively.

~~The table below represents the estimated preliminary purchase price allocation to the net assets acquired,~~As of March 31, 2022, maturities of operating lease liabilities were as ~~well as the associated estimated useful lives of the acquired intangible assets.~~follows, in thousands:
Provisional purchase consideration at preliminary fair value (in thousands):
Cash consideration $ 180,000
Share issuance 12,264
Working capital adjustment paid to sellers 27,597
Working capital adjustment due to sellers 5,000
Amount of consideration $ 224,861

Assets acquired and liabilities assumed at preliminary fair value
Cash $ 5,897
Accounts receivable 19,403
Inventories 20,484
Vendor deposits 15,000
Other assets 2,194
Property and equipment 1,891
Right of use operating lease assets 1,834
Customer relationships 25,800
Marketing related - tradename 24,336
Accounts payable and accrued expenses (43,633 )
Customer deposits (13,138 )
Finance lease obligation (215 )
Net deferred tax liabilities (9,506 )
Operating lease liability (1,834 )
Notes payable (1,527 )
Total net assets acquired $ 46,986
Consideration paid 224,861
Preliminary goodwill $ 177,875
Years Ending December 31, Amount
2022 – remaining $ 3,314
2023 4,446
2024 2,086
2025 1,776
2026 1,827
Thereafter 7,544

Total 20,993
Less: imputed interest (4,362 )

Total operating lease liabilities $ 16,631

~~Appliance Gallery~~Finance Leases

~~On July 6, 2021, AC Gallery~~During the period ending March 31, 2022, the Company entered ~~into~~in an ~~asset~~equipment financing lease to purchase agreement, which was amended on July 21, 2021 and July 29, 2021 (as amended, the “Gallery Purchase Agreement”), with Appliance Gallery, pursuant to which AC Gallery agreed to acquire substantially all the assets and assumed substantially all the liabilities of Appliance Gallery (the “Gallery Acquisition”). The Gallery Acquisition was completed on July 29, 2021.eight forklifts totaling $0.3 million, maturing in February 2026.

~~Pursuant to~~At March 31, 2022, the ~~Gallery Purchase Agreement, the total purchase price~~outstanding balance of our finance leases is ~~$1.7 million in cash, subject to certain adjustments at closing. As a result of these adjustments, the purchase price paid at closing was $1.4~~$0.4 million.
NOTE 7—RELATED PARTIES

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
The Company accounted for the Gallery Acquisition using the acquisition method of accounting in accordance with FASB ASC Topic 805 “Business Combinations”. In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.
The fair value of the purchase consideration issued to Appliances Gallery was allocated to the net tangible assets acquired. The Company accounted for the Gallery Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The preliminary fair value of the net assets to be acquired was $0.3 million. The excess of the aggregate estimated fair value of the net tangible assets, plus $0.02 million of seller expenses paid by the Company, of $1.2 million has been allocated to provisional goodwill.
~~The table below represents the estimated preliminary purchase price allocation to the net assets acquired, as well as the associated estimated useful lives of the acquired intangible assets.~~
Provisional purchase consideration at fair value (in thousands):
Cash consideration $ 1,420
Amount of consideration $ 1,420
Assets acquired and liabilities assumed at preliminary fair value
Inventory 483
Prepaid assets 6
Property and equipment 19
Customer deposits (255 )
Net tangible assets acquired $ 253

Total net assets acquired $ 253
Consideration paid 1,420
Preliminary goodwill $ 1,167
~~Pro forma~~
The following unaudited proforma results of operations are presented for information purposes only. The unaudited proforma results of operations are not intended to present actual results that would have been attained had the AC Acquisition been completed as of January 1, 2020, or to project potential operating results as of any future date or for any future periods. Appliances Connection revenue and net income in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 was $129.3 million and $15.1 million and $177.1 million and $20.0 million, respectively.
Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(in thousands, except share and per share data)
Product sales, net $ 141,867 $ 102,201 $ 404,953 $ 260,443
Net income (loss) $ 3,946 $ (657 ) $ 31,128 $ (3,196 )
Amortization of intangibles included in net income (loss) (b) $ 2,507 $ 2,507 $ 7,520 $ 7,520
Basic earnings per share $ 0.04 $ (0.01 ) $ 0.31 $ (0.03 )
Diluted earnings per share (a) $ 0.03 $ (0.01 ) $ 0.31 $ (0.03 )

Basic number of shares 106,387,331 105,335,084 105,335,084 105,335,084
Diluted number of shares 131,787,293 105,335,084 105,335,084 105,335,084
~~(a)~~ ~~Assumes shares outstanding at offering were outstanding for all periods and that warrant price is equal to the offering price resulting in no diluted shares.~~
~~(b)~~ ~~Represents amortization of the identified intangible assets acquired in the Appliances Connection acquisition.~~
~~(c)~~ ~~Appliance Gallery pro forma is not included in the table above as it was determined to be immaterial.~~

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
The Company believes that as a result of the Appliances Connection acquisition, it acquired identified intangible assets which will reduce goodwill. The nature and amount of intangible assets acquired will be determined by a valuation report, but the amount of any intangible assets will create an additional deferred tax liability increasing the amount of goodwill as there is no tax basis in goodwill or intangible assets. The Company estimates that goodwill will increase by approximately $9.5 million for the tax effect of net assets acquired.
~~NOTE 10—NOTES PAYABLE~~
~~Credit Facilities~~
On June 2, 2021, the Company and ACI, as borrowers, entered into a credit and guaranty agreement (the “Credit Agreement”) with Appliances Connection and certain other subsidiaries of the Company party thereto from time to time as guarantors (the “Guarantors”), the financial institutions party thereto from time to time (“Lenders”), and Manufacturers and Traders Trust Company, as sole lead arranger, sole book runner, administrative agent and collateral agent (“M&T), pursuant to which the Lenders have agreed to make available to the Company and ACI senior secured credit facilities in the aggregate initial amount of $70.0 million, including (i) a $60.0 million term loan (the “Term Loan”) and (ii) a $10.0 million revolving credit facility (the “Revolving Loan”), which revolving credit facility includes a $2.0 million swingline subfacility (the “Swing Line Loan” and together with the Term Loan and the Revolving Loan, the “Loans”) and a $2.0 million letter of credit subfacility, in each case, on the terms and conditions contained in the Credit Agreement. On June 2, 2021, the Company borrowed the entire amount of the Term Loan and issued term loan notes to the Lenders in the aggregate principal amount of $60.0 million. As of September 30, 2021, the Company has not made any loans under the Revolving Loan. As of September 30, 2021, the outstanding balance of the Term Loan is $55.0 million, comprised of principal of $58.5 million, net of unamortized loan costs of $3.5 million. Loan costs before amortization included $3.5 million of lender and placement agent fees and $0.3 million of legal other fees. The Company classified $6.0 million as a current liability and the balance as a long-term liability.
Each of the Loans matures on June 2, 2026. The Loans will bear interest on the unpaid principal amount thereof as follows: (i) if it is a Loan bearing interest at a rate determined by the Base Rate (as defined in the Credit Agreement), then at the Base Rate plus the Applicable Margin (as defined in the Credit Agreement) for such Loan; (ii) if it is a Loan bearing interest at a rate determined by the LIBOR Rate (as defined in the Credit Agreement), then at the LIBOR Rate plus the Applicable Margin for such Loan; and (iii) if it is a Swing Line Loan, then at the rate applicable to Loans bearing interest at a rate determined by the Base Rate. The Term Loan initially bears interest at the LIBOR Rate plus Applicable Margin (3.9%), with an initial interest period of six months. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from LIBOR Rate to Base Rate, and may elect the interest rate benchmark for future Revolving Loans as either LIBOR Rate or Base Rate (and, with respect to any Loan made at the LIBOR Rate, may also select the interest period applicable to any such Loan), by notifying M&T and Lenders from time to time in accordance with the provisions of the Credit Agreement. Notwithstanding the foregoing, following an event of default, the Loans will bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable Loan.
The Company must repay the principal amount of the Term Loan in quarterly installments of $1.5 million each, payable on the last business day of each March, June, September and December, commencing on September 30, 2021. The remaining unpaid principal amount of the Term Loan must be repaid on the maturity date, unless payment is sooner required by the Credit Agreement. Mandatory repayments of amounts borrowed under the Revolving Loan facility are required only if the amount borrowed at any time exceeds the commitment amount. Amounts borrowed under Revolving Loans may be repaid and reborrowed at any time until the maturity date.
The Company may voluntarily prepay the Loans from time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of insurance or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically set forth in the Credit Agreement.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
Under the Credit Agreement, the Company is required to pay certain fees to M&T, including a commitment fee of up to 0.5% per annum with respect to the unused portion of the Lenders’ revolving loan commitments, determined as set forth in the Credit Agreement, and certain fees in connection with the issuance of any letters of credit under the Credit Agreement.
The Credit Agreement contains customary representations, warranties, affirmative and negative financial and other covenants, including leverage ratio and fixed charge coverage ratios, and events of default for loans of this type. The Loans are guaranteed by the Guarantors and are secured by a first priority security interest in substantially all of the assets of the Company, ACI and the Guarantors.
~~Maturities of the Term Loan are as follows (in thousands):~~
For the years ended December 31, Amount
2021 (remainder of year) $ 1,500
2022 6,000
2023 6,000
2024 6,000
2025 6,000
Thereafter 33,000
Total 58,500
Less: Loan costs (3,501 )
Total $ 54,999
Amount classified as a current liability $ 6,000
Amount classified as long-term liability $ 48,999
~~Northpoint Loan~~
On June 3, 2021, the Company entered into a loan and security agreement with Northpoint Commercial Finance LLC (“Northpoint”), pursuant to which Northpoint may from time to time advance funds for the acquisition, financing and/or refinancing by the Company of inventory purchased from Samsung Electronics America, Inc. and/or affiliates and for such other purposes as are acceptable Northpoint. The loan and security agreement provides that Northpoint may establish a credit limit and may adjust such credit limit from time to time; provided that such credit limit does not constitute a commitment or committed line of credit Northpoint. As of September 30, 2021, such credit limit is $1.0 million and the Company has not borrowed any funds.
The applicable per annum interest rates for a loan, including any default rates, will be determined at the time of the loan. The loan and security agreement contains customary events of default and is secured by a security interest in all of the Company’s inventory (i) that is manufactured, distributed, or sold by Samsung Electronics America, Inc. and/or its affiliates and/or (ii) that bears any trade names, trademarks, or logos of Samsung Electronics America, Inc. and/or its affiliates; all returns, repossessions, exchanges, substitutions, replacements, attachments, parts, accessories and accessions of any of the foregoing; all price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments related to any of the foregoing; supporting obligations to any of the foregoing; and products and proceeds in whatever form of any of the foregoing.
~~Arvest Loan~~
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 $3.5 million. As of December 31, 2020, the outstanding balance of this loan is $3.2 million, comprised of principal of $3.3 million, net of unamortized loan costs of $0.1 million. On May 10, 2021, the Company repaid this loan by transferring principal and accrued interest from the restricted cash account.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~10% OID Senior Promissory Notes~~
On March 19, 2021, the Company entered into a securities purchase agreement with two institutional investors, pursuant to which the Company issued to each investor (i) a 10% OID senior secured promissory note in the principal amount of $2.8 million and (ii) a four-year warrant to purchase 200,000 shares of the Company’s common stock at an exercise price of $12.00 (subject to adjustments), which may be exercised on a cashless basis, for a purchase price of $2.5 million each, or $5.0 million in the aggregate, the relative fair value of which is $1.3 million and was recorded as debt discount. After deducting a placement fee and other expenses, the Company received net proceeds of $4.6 million. The original issue discount and warrant expense were amortized as interest expense. On June 2, 2021, the Company repaid these notes in full from the proceeds of the Term Loan. At the time of repayment, the Company wrote off the balance of the debt discount, $1.7 million, as a loss on early extinguishment of debt.
~~Vehicle Loans~~
The Company has financed purchases of transportation vehicles with notes payable which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging from 3.59% to 5.74%. As of September 30, 2021, the outstanding balance of these notes is $1.4 million.
~~Following is a summary of payments due for the succeeding five years (in thousands):~~
For the years ended December 31, Amount
2021 (remainder of year) $ 124
2022 397
2023 364
2024 312
2025 169
Total $ 1,366
Amount classified as a current liability $ 425
Amount classified as a long-term liability $ 941
~~NOTE 11—LEASES~~
~~Financing Leases~~
~~The Company has three finance leases for the acquisition of forklifts. At September 30, 2021, the total amount due on these leases was $0.2 million.~~
~~The Following is a summary of payments due on financing leases for the succeeding five years (in thousands):~~
For the years ended December 31, Amount
2021 (remainder of year) $ 26
2022 66
2023 53
2024 36
2025 and thereafter 49
Total payments 230
Less: amount representing interest (36 )
Present value of minimum lease payments $ 194
~~Operating Leases~~
On April 5, 2019, the Company entered into a lease agreement with S.H.J., L.L.C for its prior principal office in Ballwin, Missouri. The lease is for a term five (5) years and provides for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term. The lease contains customary events of default.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
On January 13, 2021, the Company entered into a lease agreement with Westgate 200, LLC, which was amended on March 31, 2021, for its new principal office and showroom in St. Charles, Missouri. The lease terminates on April 30, 2027, with two (2) options to renew for additional five (5) year periods. The base rent is $20,977 per month until September 30, 2021, and increases to $31,465 per month until April 30, 2022, after which time the base rent increases at approximately 2.5% per year thereafter. The Company must also pay its 43.4% pro rata portion of the property taxes, operating expenses and insurance costs and is also responsible to pay for the utilities used on the premises. The lease contains customary events of default. In connection with the new lease, the Company recorded a right of use asset and liability of $2.0 million representing the initial present value of future lease payments.
On June 2, 2021, 1 Stop entered into a new lease agreement with 1870 Bath Ave. LLC, a related party, for the premises located at 1870 Bath Avenue, Brooklyn, NY. The lease is for a term of ten (10) years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896 during the last year of the term. 1 Stop is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The initial right of use asset and liability associated with this lease is $8.4 million.
On June 2, 2021, Joe’s Appliances entered into a new lease agreement with 812 5th Ave Realty LLC, a related party, for the premises located at 7812 5th Avenue, Brooklyn, NY. The lease is for a term of ten (10) years and provides for a base rent of $6,365 per month during the first year with annual increases to $8,305 during the last year of the term. Joe’s Appliances is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The initial right of use asset and liability associated with this lease is $0.7 million.
On May 31, 2019, YF Logistics entered into a sublease agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in Hamilton, NJ. The initial term of the sublease was for a period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one year terms until the earlier of (i) termination by either upon thirty (30) days’ prior written notice or (ii) April 30, 2024. The sublease provides for a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses, additional charges or any other amounts due by DMI, for a total of $56,250 per month. The initial right of use asset and liability associated with this lease is $3.0 million.
On July 29, 2021, AC Gallery entered into a lease agreement with Tom’s Flooring, LLC for the showroom and warehouse located in Largo, Florida. The lease is for a term of four (4) months commencing on September 1, 2021 and ending on December 31, 2021 and provides for a case rent of $6,500 per month. AC Gallery must also pay its one-third (1/3) pro rata portion of the common area maintenance charges, utilities and sales taxes. The lease contains customary events of default. The lease is short term and therefore not recorded as a right of use asset and liability.
During the three and nine months ended September 30, 2021, the Company had rent expense of $0.6 million and $0.1 million, respectively. During the three and nine months ended September 30, 2020, the Company had rent expense of $0.1 million and $0.4 million, respectively.
~~Supplemental balance sheet information related to leases at September 30, 2021 was as follows (in thousands):~~
Operating lease right-of-use assets $ 12,319

Lease liabilities, current portion $ 2,127
Lease liabilities, long-term 11,628
Total operating lease liabilities $ 13,755

Weighted average remaining lease term (months) 91

Weighted average discount rate 4.4 %

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
~~Maturities of the lease liabilities for each of the next five years is as follows (in thousands):~~
2021 (remainder of year) $ 559
2022 2,581
2023 2,620
2024 1,805
2025 1,487
Thereafter 7,065
Total lease payments 16,117
Less imputed interest (2,362 )
Total lease liability $ 13,755
On June 30, 2021, the Company closed an old warehouse and retail showroom in anticipation of relocating to a new facility. Accordingly, the Company wrote-off $1.4 million representing the remaining right of use asset and related leasehold improvements as of that date.
On September 9, 2021, the Company entered into a warehouse agreement for a new warehouse in Somerset, NJ. The warehouse agreement is for a term of 26 months commencing on October 1, 2021 and ending November 29, 2023, unless the master lease for the premises is terminated earlier. The monthly storage fee is $136,274 for the first year, $140,274 for the second year, and $144,573 for the last two months. The Company also paid a security deposit of $272,549. The right of use asset and liability associated with this operating lease are $3.5 million.
~~NOTE 12—SUPPLIER CONCENTRATION~~
~~Significant customers and suppliers are those that account for greater than 10 percent of the Company’s revenues and purchases.~~
~~For the three and nine months ended September 30, 2021, the Company purchased a substantial portion of finished goods from DMI, 79% and 66%, respectively.~~
~~The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.~~
~~NOTE 13—RELATED PARTIES~~
Management Services Agreement
On April 5, 2019, the Company entered into a management services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by ~~Ellery W. Roberts,~~ the Company’s chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to the offsetting management services agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500; provided, however, that under certain circumstances specified in the management services agreement, the quarterly fee may be reduced if similar fees payable to the Manager by subsidiaries of the Company’s former parent company, 1847 Holdings LLC, exceed a threshold amount.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
The Company shall also reimburse the Manager for all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing services under the management services agreement. The Company did not pay any expenses for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.
The Company expensed management fees of ~~$0.06~~$0.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 and $0.2 million for the nine months ended September 30, 2021 and 2020.~~2021.

~~1847 GOEDEKER INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2021 AND 2020~~
~~(UNAUDITED)~~
DMI
The Company is a member of DMI, an appliance purchasing cooperative. DMI purchases consumer electronics and appliances at wholesale prices from various vendors, and then makes such products available to its members, including the Company, who sell such products to end consumers. DMI’s purchasing group arrangement provides its members, including the Company, with leverage and purchasing power with appliance vendors, and increases the Company’s ability to compete with competitors, including big box appliance and electronics retailers. The Company owns an approximate 5% interest in DMI. Additionally, ~~Albert Fouerti,~~ the Company’s Chief Executive Officer, ~~director~~ and ~~a former significant stockholder of Appliances Connection prior to the Acquisition,~~director, is on the board of DMI. As such, DMI is deemed to be a related party.
~~At September 30, 2021, vendor rebate deposits due from DMI were $3.7 million.~~ During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, total purchases from DMI, net of holdbacks, were ~~$63.4~~$73.4 million, ~~and $91.4 million respectively. At September 30, 2021,~~ deposits at DMI totaled ~~$12.1~~$18.1 million and the vendor rebate due from DMI was $3.1 million.
Lease Agreements
~~As described above, 1 Stop, Joe’s Appliances and Gold Coast have entered into~~The Company has lease agreements with 1870 Bath Ave. LLC, 812 5th Ave Realty LLC, ~~and~~ 54 Glen Cove Realty, LLC, and 8780 19th Ave LLC respectively. Each of these entities is owned by ~~Albert Fouerti~~the Company’s Chief Executive Officer and ~~Elie Fouerti (the vice president of 1 Stop, Joe’s Appliances and Gold Coast and former significant stockholder of each prior to the Acquisition).~~Chief Operating Officer. In addition, ~~YF Logistics~~the Company has ~~entered into~~ a sublease agreement with DMI. The total rent expense under these related party leases was ~~$0.6~~$0.5 million for the ~~period of June 2, 2021 to September 30, 2021.~~ three months ended March 31, 2022.
NOTE ~~14—STOCKHOLDERS’~~8—STOCKHOLDERS' EQUITY ~~(DEFICIT)~~
As of ~~September 30, 2021,~~March 31, 2022, the Company was authorized to issue ~~200,000,000~~250,000,000 shares of common stock, ~~$0.0001~~$0.0001 par value per share, and 20,000,000 shares of “blank check” preferred stock, 0.0001 par value per share. On December 17 2021, the board of directors approved an increase to the number of shares of common stock that the Company is authorized to issue from 200,000,000 to 250,000,000 shares. Such increase was approved by the Company’s stockholders effective as of December 21, 2021. See Note 12, “Commitments and Contingencies” for additional discussion of the Share Increase Proposal (as defined below). To date, the Company has not designated or issued any shares of preferred stock.
~~Common~~ Stock Options
~~As of September 30, 2021 and December~~Below is a table summarizing the changes in stock options outstanding during the three months ended March 31, 2020, the Company had 106,387,332 and 6,111,200 shares of common stock issued and outstanding, respectively. Each share entitles the holder thereof to one vote per share on all matters coming before the stockholders of the Company for a vote.2022:
Weighted
-Average
Options Exercise
Price

Outstanding at December 31, 2021 312,960 $ 6.17

Granted - -
Exercised - -
Forfeited (132,960 ) 9.00

Outstanding at March 31, 2022 180,000 $ 4.08

Exercisable at March 31, 2022 30,000 $ 9.00
On May 27, 2021, the Company entered into an underwriting agreement with ThinkEquity, a division of Fordham Financial Management, Inc. (the “Underwriter”), relating to a public offering of units, each unit consisting of one share of common stock and a warrant to purchase one share of common stock. Under the underwriting agreement, the Company agreed to sell 91,111,111 units to the Underwriter, at a purchase price per unit of $2.0925 (the offering price to the public of $2.25 per unit minus the Underwriter’s discount), and also agreed to grant to the Underwriter a 30-day option to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $2.0832 per share, and/or warrants to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $0.0093 per warrant, in any combination thereof, solely to cover over-allotments, if any. The Underwriter exercised its option to purchase 2,000,000 additional warrants on May 28, 2021 and exercised its option to purchase 2,000,000 additional shares on June 3, 2021. The shares of common stock and warrants contained in the units were immediately separable and were issued separately.
On June 2, 2021, the Company sold 91,111,111 shares of common stock and warrants to purchase 93,111,111 shares of common stock to the Underwriter for total gross proceeds of $205.0 million. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $194.6 million. The Company used the proceeds of the offering to fund a portion of the purchase price for the Acquisition.
On June 7, 2021, the Company sold 2,000,000 shares of common stock to the Underwriter for total gross proceeds of $4.5 million. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $4.2 million.

1847 GOEDEKER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~SEPTEMBER 30, 2021~~
MARCH 31, 2022 AND ~~2020~~
2021
(UNAUDITED)
~~During June 2021, 1,039,148 shares of common stock were issued as a result of the exercise of 1,039,148 warrants with proceeds of $2.3 million.~~
During the three months ended ~~September 30,~~March 31, 2022, 132,960 stock options were forfeited, as a result of employee terminations.
Stock-based compensation expense of $0.02 million and $0.1 million was recorded during the three months ended March 31, 2022 and 2021, ~~13,100~~respectively. As of March 31, 2022, the remaining unrecognized compensation cost related to non-vested stock options is $0.3 million and is expected to be recognized over 3.33 years. The outstanding stock options have a weighted average remaining contractual life of 7.79 years and a total intrinsic value of $nil.
Warrants
Below is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2022:
Weighted-
Average
Warrants Exercise
Price

Outstanding at December 31, 2021 92,514,423 $ 2.30

Granted - -
Exercised - -
Forfeited - -

Outstanding at March 31, 2022 92,514,423 $ 2.30

Exercisable at March 31, 2022 92,514,423 $ 2.30
As of March 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 4.17 years and a total intrinsic value of $nil.
NOTE 9—BUSINESS COMBINATIONS
Appliances Connection
On October 20, 2020, the Company entered into a securities purchase agreement, which was amended on December 8, 2020 and April 6, 2021 (as amended, the “AC Purchase Agreement”), with ACI, Appliances Connection and the sellers (the “Sellers”), pursuant to which ACI agreed to acquire all of the issued and outstanding capital stock or other equity securities of Appliances Connection from the Sellers (the “Appliances Connection Acquisition”). The Appliances Connection Acquisition was completed on June 2, 2021.
The aggregate purchase price was $224.7 million, consisting of (i) $180.0 million in cash, (ii) 5,895,973 shares of the Company’s common stock ~~were issued~~valued at $12.3 million, and (iii) $32.4 million as a result of the ~~exercise of warrants with proceeds of $0.03 million.~~
~~On June 2, 2021, the Company issued 5,895,973 shares of common stock to the Sellers in connection with the Acquisition (See Note 9).~~
~~On June 3, 2021, the Company granted restricted stock awards under the Plan described below to certain directors and officers of the Company for an aggregate of~~ ~~216,800 shares of common stock valued at $0.6 million, the value of the stock on the date of grant. All shares were immediately vested.~~
~~On August 4, 2020, the Company sold 1,111,200 shares of common stock for total gross proceeds of $10.0 million. After deducting the underwriting commission and expenses, the Company received~~post-closing net ~~proceeds of $8.6 million.~~
~~On August 4, 2020, the Company issued 250,000 shares of common stock to Small Business Community Capital II, L.P. upon conversion of a warrant.~~
~~Equity Incentive Plan~~
Effective as of July 30, 2020, the Company established the 1847 Goedeker Inc. 2020 Equity Incentive Plan (the “Plan”) and reserved 555,000 shares of common stock for issuance under the Plan. The Plan was approved by the Company’s board of directors and stockholders on April 21, 2020. On April 9, 2021, the board of directors approved an amendment to the Plan to increase the number of shares of common Stock reserved for issuance under the Plan from 555,000 to 1,000,000 shares. Such increase was approved by the Company’s stockholders effective as of May 13, 2021.
The Plan is administered by compensation committee of the board of directors. The Plan permits the grant of restricted stock, stock options and other forms of incentive compensation to the Company’s officers, employees, directors and consultants. On July 28, 2021, the Company issued an option for the purchase of 150,000 shares of common stock with a total fair value of $0.3 million. As of September 30, 2021, no shares of common stock available for issuance under the Plan. During the third and fourth quarters of 2020, the Company issued options for the purchase of 555,000 shares of common stock with a total fair value of $1.8 million.working capital adjustment provision. The Company recorded ~~stock option expense related to these options of $0.1 million and~~ $0.9 million for the three and nine months ended September 30, 2021, respectively, and $0.3 million for the three and nine months ended September 30, 2020. The remaining compensation expense of $1.0 million will be recognized over the remaining vesting period of 24 months. During the nine months ended September 30, 2021, the Company issued 216,800 shares of restricted stock to directors and officers valued at $0.6 million.in acquisition related expenses.
The Company ~~recognizes compensation expense~~accounted for ~~stock option awards on a straight-line basis over~~ the ~~applicable service period~~Appliances Connection Acquisition using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance with ASC 805, the ~~award. The service period is generally~~Company assigned fair value to the ~~vesting period. The following assumptions were used to calculate stock-based compensation expense for options granted during~~tangible and intangible assets acquired and liabilities assumed at the ~~three and nine-months ended September 30, 2021:~~acquisition date.
~~Volatility~~ ~~77.65~~ %
~~Risk-free interest rate~~ ~~1.00~~ %
~~Dividend yield~~ ~~0.00~~ %
~~Expected term~~ ~~6.25 Years~~
We are amortizing the customer relationship and tradename intangible assets acquired over 5 years. Goodwill and intangibles recognized for this transaction are not deductible for tax purposes.

1847 GOEDEKER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~SEPTEMBER 30, 2021~~
MARCH 31, 2022 AND ~~2020~~2021
(UNAUDITED)
~~(UNAUDITED)~~

~~The following table presents activity relating to stock options for the nine months ended September 30, 2021:~~
Shares Weighted
Average
Exercise Price Weighted
Average
Contractual
Term in Years
Outstanding at January 1, 2021 555,000 $ 9.00 9
Granted 150,000 3.10 10
Exercised - - -
Forfeited / Cancelled / Expired (131,579 ) - -
Outstanding at September 30, 2021 573,421 $ 7.74 8.85

Exercisable at September 30, 2021 204,540 $ 9.00 8.85
~~As of September 30, 2021, 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.~~
~~Warrants~~Appliance Gallery
~~On April 5, 2019, the Company issued to~~ ~~Small Business Community Capital II, L.P.~~ 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. ~~Small Business Community Capital II, L.P.~~ ~~exercised this warrant for the purchase of 250,000 shares of common stock on August 4, 2020.~~

On ~~August 4, 2020,~~July 6, 2021, AC Gallery entered into an asset purchase agreement, which was amended on July 21, 2021 and July 29, 2021 (as amended, the ~~Company issued~~ ~~warrants for~~“AG Purchase Agreement”), with Appliance Gallery, pursuant to which AC Gallery agreed to acquire substantially all the ~~purchase~~assets and assumed substantially all the liabilities of ~~55,560 shares of common stock to affiliates of the representative in its initial public offering~~Appliance Gallery (the “AC Gallery Acquisition”). ~~These warrants are exercisable at any time and from time to time, in whole or in part,~~ ~~beginning~~The AC Gallery Acquisition was completed on ~~January 26, 2021~~ ~~until~~ July ~~30, 2025,~~ ~~an exercise price of $11.25 per share (subject to customary adjustments),~~ and may also be exercised on a cashless basis if at any time during the term of the warrants the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement.29, 2021.

~~On March 19, 2021,~~Pursuant to the AG Purchase Agreement, the purchase price paid at closing was $1.4 million.
The Company accounted for the Gallery Acquisition using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance with ASC 805, the Company ~~issued four-year warrants~~assigned fair value to ~~purchase an aggregate of 400,000 shares of common stock to two investors.~~ ~~These warrants are exercisable~~the tangible and intangible assets acquired and liabilities assumed at ~~any time and from time to time, in whole or in part~~, ~~at an exercise price of $12.00 per share (subject to customary adjustments),~~ ~~and may also be exercised on a cashless basis if at any time during~~ the ~~term~~acquisition date.
Goodwill recognized for this transaction is deductible for tax purposes.
Pro Forma Information
The following unaudited pro forma results presented below (in thousands) include the effects of the ~~warrants~~Appliances Connection and AC Gallery Acquisitions as if they had been consummated as of January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the ~~issuance~~acquisitions.
Three Months
Ended
March 31, Three Months
Ended
March 31,
2022 2021

Net sales $ 152,752 $ 123,711
Net income 5,922 10,899
Earnings (loss) per share:
Basic and Diluted $ 0.06 $ 1.78
These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of ~~common stock upon exercise~~what the actual results of operations would have been if the acquisitions had occurred at the beginning of the ~~warrants is not covered by an effective registration statement~~period presented, nor are they indicative of future results of operations. The amortization of the identified intangible assets acquired in the Appliances Connection Acquisition included in 2021 Net income was $2.5 million.
.
NOTE 10—NOTES PAYABLE

M&T Credit Facilities
On June 2, 2021, the Company ~~issued warrants~~and ACI, as borrowers, entered into a credit and guaranty agreement (the “M&T Credit Agreement”) with Appliances Connection and certain other subsidiaries of the Company party thereto from time to ~~purchase 93,111,111 shares of common stock~~time as guarantors, the financial institutions party thereto from time to time (“M&T Lenders”), and Manufacturers and Traders Trust Company, as sole lead arranger, sole book runner, administrative agent and collateral agent (“M&T”), pursuant to which the M&T Lenders have agreed to make available to the Company and ACI senior secured credit facilities in the ~~public offering. These warrants are exercisable immediately~~aggregate initial amount of $70.0 million, including (i) a $60.0 million term loan (the “M&T Term Loan”) and ~~expire five years from~~(ii) a $10.0 million revolving credit facility (the “M&T Revolving Loan”), which revolving credit facility includes a $2.0 million swingline subfacility (the “M&T Swing Line Loan” and together with the ~~date~~M&T Term Loan and the M&T Revolving Loan, the “M&T Loans”) and a $2.0 million letter of ~~issuance. The warrants have an exercise price of $2.25 per share, subject to appropriate adjustment~~credit subfacility, in each case, on the terms and conditions contained in the M&T Credit Agreement. On June 2, 2021, the Company borrowed the entire amount of the M&T Term Loan and issued term loan notes to the M&T Lenders in the aggregate principal amount of $60.0 million. As of March 31, 2022, the Company has not borrowed any amounts under the M&T Revolving Loan. As of March 31, 2022, the carrying value of the M&T Term Loan was $53.9 million, comprised of principal of $57 million, net of unamortized loan costs of $3.1 million. The Company classified $7.5 million as a current liability and the balance as a long-term liability.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Each of the M&T Loans matures on June 2, 2026. The M&T Loans will bear interest on the unpaid principal amount thereof as follows: (i) if it is a M&T Loan bearing interest at a rate determined by the Base Rate (as defined in the M&T Credit Agreement), then at the Base Rate plus the Applicable Margin (as defined in the M&T Credit Agreement) for such M&T Loan; (ii) if it is a M&T Loan bearing interest at a rate determined by the LIBOR Rate (as defined in the M&T Credit Agreement), then at the LIBOR Rate plus the Applicable Margin for such M&T Loan; and (iii) if it is a M&T Swing Line Loan, then at the rate applicable to M&T Loans bearing interest at a rate determined by the Base Rate. The M&T Term Loan initially bears interest at the LIBOR Rate plus Applicable Margin (3.9%), with an initial interest period of six months. The Company may elect to continue or convert the existing interest rate benchmark for the M&T Term Loan from LIBOR Rate to Base Rate, and may elect the interest rate benchmark for future M&T Revolving Loans as either LIBOR Rate or Base Rate (and, with respect to any M&T Loan made at the LIBOR Rate, may also select the interest period applicable to any such M&T Loan), by notifying M&T and M&T Lenders from time to time in accordance with the provisions of the M&T Credit Agreement. Notwithstanding the foregoing, following an event of ~~certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting~~default, the ~~Company’s common stock or upon any distributions of assets, including cash, stock or other property to stockholders, and may also be exercised on~~M&T Loans will bear interest at a ~~cashless basis if at any time during~~rate that is 2% per annum higher than the ~~term of~~interest rate then in effect for the ~~warrants the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement.~~applicable M&T Loan.

The ~~following table presents activity relating to~~Company must repay the ~~warrants for~~principal amount of the ~~nine months ended~~M&T Term Loan in quarterly installments of $1.5 million each, payable on the last business day of each March, June, September and December, commencing on September 30, ~~2021:~~2021. The remaining unpaid principal amount of the M&T Term Loan must be repaid on the maturity date, unless payment is sooner required by the M&T Credit Agreement. Mandatory repayments of amounts borrowed under the M&T Revolving Loan facility are required only if the amount borrowed at any time exceeds the commitment amount. Amounts borrowed under M&T Revolving Loans may be repaid and reborrowed at any time until the maturity date.

Shares Weighted
Average
Exercise Price Weighted
Average
Contractual
Term in Years
Outstanding at January 1, 2021 55,560 $ 11.25 5.00
Granted 93,511,111 25.29 5.00
Exercised (1,052,248 ) 2.25 -
Cancelled / Expired - - -
Outstanding at September 30, 2021 92,514,423 $ 2.30 4.67
The Company may voluntarily prepay the M&T Loans from time to time in accordance with the provisions of the M&T Credit Agreement, and will be required to prepay the M&T Loans under certain limited circumstances as set forth in the M&T Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of insurance or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the M&T Credit Agreement, all as more specifically set forth in the M&T Credit Agreement.
~~NOTE 15—COMMITMENTS AND CONTINGENCIES~~

~~On January 18, 2019,~~Under the M&T Credit Agreement, the Company ~~entered into an asset purchase agreement~~is required to pay certain fees to M&T, including a commitment fee of up to 0.5% per annum with ~~Goedeker, Steve Goedeker~~respect to the unused portion of the M&T Lenders’ revolving loan commitments, determined as set forth in the M&T Credit Agreement, and ~~Mike Goedeker, pursuant to which on April 5, 2019~~certain fees in connection with the ~~Company acquired~~issuance of any letters of credit under the M&T Credit Agreement.
The M&T Credit Agreement contains customary representations, warranties, affirmative and negative financial and other covenants, including leverage ratio and fixed charge coverage ratios, and events of default for loans of this type. The M&T Loans are guaranteed by the Guarantors (as defined in the M&T Credit Agreement) and are secured by a first priority security interest in substantially all of the assets of ~~Goedeker used in its retail appliance~~the Company, ACI and ~~furniture business (the “Goedeker Business”).~~the guarantors.

~~Pursuant to the asset purchase agreement, Goedeker entitled to receive an earn out payment of $0.2 million if the EBITDA (as defined in the asset purchase agreement)~~Maturities of the ~~Goedeker Business for the trailing twelve (12) month period from April 5,~~M&T Term Loan are as follows:
For the years ended December 31,
2022 (remainder of year) $ 4,500
2023 6,000
2024 6,000
2025 6,000
Thereafter 33,000
Total 55,500
Less: Loan costs (3,501 )
Total $ 51,999
Amount classified as a current liability $ 6,000
Amount classified as long-term liability $ 45,999
M&T Loan was paid in full on May 9, 2022 is $2.5 million or greater, and may be entitled to receive a partial earn out payment if the EBITDA of the Goedeker Business is less than $2.5 million but greater than $1.5 million. The Company expects to meet this target and adjusted the contingent note payable in the condensed consolidated balance sheet to the present value of the amount due. (see Note 13, “Subsequent Events”).

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 11—EARNINGS (LOSS) PER SHARE
The computation of weighted average shares outstanding and the basic and diluted earnings (loss) per common share for the following periods consisted of the following (in thousands, except per share amounts):
March 31, March 31,
2022 2021
Basic and Diluted Earnings (Loss) Per Share

Net income (loss) $ 5,922 $ (3,493 )
Weighted average common shares outstanding 106,387,332 6,111,200

Basic and diluted earnings (loss) per share $ 0.06 $ (0.57 )
For the three months ended March 31, 2022, there were 92,694,423 potential common share equivalents from stock options and warrants excluded from the diluted EPS calculations as their effect is anti-dilutive.
For the three months ended March 31, 2021, there were 1,010,560, potential common share equivalents from stock options and warrants excluded from the diluted EPS calculations as their effect is anti-dilutive.
NOTE 12—COMMITMENTS AND CONTINGENCIES
Legal Proceedings
At the Company’s annual meeting on December 21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s common stock, par value $0.0001 per share (“Common Stock” and such proposal, the “Share Increase Proposal”) by 50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021, the Share Increase Proposal was adopted and a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment adopted pursuant to the Share Increase Proposal (the “Certificate of Amendment”) was filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”). To date, none of these newly authorized shares has actually been issued.
Three purported beneficial owners of Common Stock subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the situation performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated and that the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure against any future question as to the validity of these newly authorized shares, the Company elected to seek validation of its Certificate of Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section 205 of the Delaware General Corporation Law (the “205 Petition”). The action, styled In re 1847 Goedeker Inc., C.A. 2022-0219-SG, seeks entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating the additional shares of Common Stock authorized under the Share Increase Proposal.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Shortly before the 205 Petition was filed, one of the purported stockholders who had submitted a demand related to adoption of the Share Increase Proposal also has filed a Class Action Complaint in the Court of Chancery against the Company and its Board of Directors. That lawsuit, captioned Scot T. Boden v. 1847 Goedeker Inc., et al., C.A. No. 2022-0196-SG (the “Boden Action”), asserts two claims for relief. The first is against the Company for alleged violation of the Delaware General Corporation Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal. The second asserts that the Company’s directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment to our Certificate of Incorporation to be filed with the Delaware Secretary of State. The Boden Action has been consolidated with the 205 Petition; and for reasons set out in the 205 Petition, the Company and its directors believe the Boden Action to be without merit and intend to defend the claims. Mr. Boden and a second purported stockholder, Robert Corwin, have both filed briefs opposing the 205 Petition. Under a scheduling order issued by the Court of Chancery on May 6, 2022, the Company intends to file a reply brief in further support of the 205 Petition by May 20, 2022. The Court of Chancery has scheduled a hearing on the matter for May 27, 2022. The Company cannot predict the outcome of these proceedings, or the timing of any decision from the Court.
NOTE 13—SUBSEQUENT EVENTS
On May 9, 2022, the Company and ACI (together, the “Borrowers”) and certain subsidiaries of the Borrowers, as guarantors, entered into a Credit Agreement (the “New Credit Agreement”) by and among the Borrowers, the guarantors, each of the lenders identified therein (the “Lenders”) and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to which the Lenders have agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140,000,000, including (i) a $100,000,000 term loan (the “New Term Loan”) and (ii) a $40,000,000 revolving credit facility (the “New Revolving Loan”), which revolving credit facility includes a $2,000,000 swingline subfacility (the “New Swing Line Loan” and together with the New Term Loan and the New Revolving Loan, the “New Loans”) and a $2,000,000 letter of credit subfacility, in each case, on the terms and conditions contained in the New Credit Agreement. The New Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers. On May 9, 2022, the Company borrowed the entire amount of the New Term Loan, but no New Revolving Loans have been made as of May 16, 2022.
The proceeds of the New Term Loan were applied, among other uses, to prepay the obligations in full under the Borrowers’ existing M&T Credit Agreement. On May 9, 2022, in connection with prepayment of the obligations under the M&T Credit Agreement, the M&T Credit Agreement was terminated.
NOTE 14—SUPPLIER CONCENTRATION
Significant customers and suppliers are those that account for greater than 10 percent of the Company’s revenues and purchases.
For the three months ended March 31, 2022, the Company purchased 77% of finished goods from DMI.
The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

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 condensed consolidated financial statements and should be read in conjunction with such condensed consolidated financial statements and notes thereto set forth elsewhere herein.
~~Use of Terms~~
Except as otherwise indicated by the context and for the purposes of this ~~report only, references in this report to~~Quarterly Report on Form 10-Q, the terms “Company,” “we,” “us,” or “our” ~~and the “Company” are~~refer to 1847 Goedeker Inc., a Delaware corporation, and its consolidated subsidiaries, ~~Appliances Connection Inc., a Delaware corporation (“ACI”), AC Gallery Inc., a Delaware corporation (“AC Gallery”),~~including but not limited to, 1 Stop Electronics Center, Inc., a New York corporation (“1 Stop”), Gold Coast Appliances, Inc., a New York corporation (“Gold Coast”), Superior Deals Inc., a New York corporation (“Superior Deals”), Joe’s Appliances LLC, a New York limited liability company (“Joe’s Appliances”), and YF Logistics LLC, a New Jersey limited liability company (“YF Logistics”). and together with 1 Stop, Gold Coast, Superior Deals, and Joe’s Appliances, “Appliances Connection”), Appliances Connection Inc. (“ACI”) and ~~YF Logistics are sometimes referred to herein~~AC Gallery Inc., a Delaware corporation (“AC Gallery”). The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as ~~“Appliances Connection.”~~
~~Special Note Regarding Forward Looking Statements~~
~~This report~~of and for the periods presented below. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on ~~our management’s~~the beliefs ~~and~~of management, as well as assumptions made by, 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 actualmanagement. Actual results ~~levels of activity, performance or achievements to be~~could differ materially ~~different~~ from ~~any future results, levels of activity, performance or achievements expressed~~those discussed in or implied by ~~these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:~~
● ~~the impact of the coronavirus pandemic on our operations and financial condition;~~
● ~~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” ora result of various factors, including those discussed below and elsewhere in this report, particularly in 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~~section “Cautionary Statement Regarding Forward-Looking Statements” 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 Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020 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 by2021 under the ~~forward-looking statements. No forward-looking statement is a guarantee of future performance.~~heading Item 1A “Risk Factors.”
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
~~Overview~~The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto, which are included in Part I, Item 1 of this Form 10-Q.
We operate ~~an industry leading e-commerce~~a content-driven and technology-enabled shopping destination for appliances, furniture and home goods. ~~Through our June 2021 acquisition of Appliances Connection, we created one of the largest pure-play online retailers of household appliances in the United States.~~ With warehouse fulfillment centers in the Northeast and Midwest, as well as showrooms in Brooklyn, New York, St. Louis, Missouri and Largo, Florida, we offer one-stop shopping for national and global brands. We carry many household name-brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and also carry many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve, Jenn-Air and Viking, among others. We also sell furniture, fitness equipment, plumbing fixtures, televisions, outdoor appliances, and patio furniture, as well as commercial appliances for builder and business clients.
Recent Developments
New Credit Agreement
On May 9, 2022, we entered into a Credit Agreement (the “New Credit Agreement”) by and among the Company and ACI, as borrowers, certain of our subsidiaries as guarantors, each of the lenders identified therein (the “Lenders”) and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to which the Lenders have agreed to make available to us senior secured credit facilities in the aggregate initial amount of $140,000,000, including (i) a $100,000,000 term loan (the “New Term Loan”) and (ii) a $40,000,000 revolving credit facility (the “New Revolving Loan”), which revolving credit facility includes a $2,000,000 swingline subfacility (the “New Swing Line Loan” and together with the New Term Loan and the New Revolving Loan, the “New Loans”) and a $2,000,000 letter of credit subfacility, in each case, on the terms and conditions contained in the New Credit Agreement. The New Loans may from time to time be further evidenced by separate promissory notes issued by the borrowers. On May 9, 2022, we borrowed the entire amount of the New Term Loan, but no New Revolving Loans have been made as of May 16, 2022.
The proceeds of the New Term Loan were applied, among other uses, to prepay the obligations in full under the Company’s existing M&T Credit Agreement (as defined below). On May 9, 2022, in connection with prepayment of the obligations under the M&T Credit Agreement, the M&T Credit Agreement was terminated.

New Headquarters
We have transitioned our corporate headquarters to our office space and showroom in Brooklyn, New York. On March 15, 2022, we entered into a lease agreement with 8780 19 Ave LLC, a related party, for additional office space in Brooklyn to expand our headquarter office, currently located in the adjacent building, as we continue scaling our business and consolidating our corporate functions in Brooklyn. The lease expires on December 31, 2026, with an option to extend for an additional five years thereafter.
Share Repurchase Plan
On December 17, 2021, we approved a new share repurchase program under which we may repurchase up to $25.0 million of our outstanding shares of common stock in the open market, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our decision to repurchase shares, as well as the timing of such repurchases, will depend on a variety of factors that include ongoing assessments of our capital needs, obtaining requisite senior lender consent, market conditions and the price of our common stock, and other corporate considerations, as determined by our management. The repurchase program may be suspended or discontinued at any time. As of March 31, 2022, no shares have been repurchased.

Ongoing Impact of Coronavirus Pandemic
~~Starting in late 2019, a novel strain~~We are continuing to closely monitor the impact of the ~~coronavirus, or~~ COVID-19 ~~began to rapidly spread around~~ pandemic on our business, results of operations and financial results. The situation surrounding the ~~world~~COVID-19 pandemic remains fluid and ~~every state in~~ the ~~United States. Most states~~full extent of the impact of the COVID-19 pandemic on our business will depend on certain developments including the duration and ~~cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on~~severity of the ~~types~~pandemic, the emergence of ~~businesses~~new variants that ~~could~~may continue to ~~operate, as well as guidance in response to~~prolong the pandemic, the amount of time it will take for normal economic activity to resume, future government actions that may be taken, the impact on consumer activity and behaviors and the ~~need to contain it. Pursuant to restrictions in Missouri,~~effect on our ~~showroom was closed from April through June~~customers, employees, suppliers, partners and stockholders, all of ~~2020, but our call center~~which are uncertain and ~~warehouse continued to operate. Since most~~cannot be predicted. Our focus remains on promoting the health, safety and financial security of our ~~sales are completed online~~employees and serving our ~~call center and warehouse and distribution operations continued to operate, the restrictions put in place in response to the pandemic did not had a materially negative impact on our operations.~~
~~However, we~~customers. We are dependent upon suppliers to provide us with all of the products that we sell. ~~The~~While the home industry has fared much better during the COVID-19 pandemic than other sectors of the economy, the pandemic has negatively impacted and may continue to negatively impact suppliers, manufacturers and ~~manufacturers~~the overall supply chain of ~~certain~~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.
The global deterioration in economic conditions, which may have an adverse impact on discretionary consumer spending, could also impact our business. For instance, consumer spending may be negatively impacted by general macroeconomic conditions, including a rise in unemployment, increased inflation, and decreased consumer confidence resulting from the ~~pandemic.~~pandemic and other economic conditions. Changing consumer behaviors as a result of the pandemic may also have a material impact on our revenue.
~~Furthermore,~~As the ~~spread of~~ COVID-19 ~~has adversely impacted global economic activity~~pandemic remains dynamic and ~~has contributed~~subject to ~~significant volatility~~rapid and ~~negative pressure in financial markets. The pandemic has resulted,~~possibly material change, we will continue to actively monitor the COVID-19 situation and may ~~continue to result, in a significant disruption of global financial markets, which~~take further actions that alter our business operations as may ~~reduce our ability to access capital~~be required by federal, state, local or foreign authorities, or that we determine are in the ~~future, which could negatively affect liquidity.~~best interests of our customers, employees, suppliers, partners, stockholders and communities. We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue, and we expect to face difficulty in accurately forecasting our financial condition and operational results. See also Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information.
~~The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain~~Trends and cannot be predicted as of the date of this report, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.
~~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 until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (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 (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
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;~~
customers, including those shopping online as a result of COVID-19;
● our ability to offer competitive product pricing;
● our ability to broaden product offerings;
● industry demand and competition;
● market conditions and our market position; and
● our ability to successfully integrate the operations of Appliances Connection with our business.

Notably, due to the ~~impact of the global~~COVID-19 pandemic and associated supply chain crisis, our freight costs have increased materially as a proportion of sales, putting downward pressure on our gross margins. ~~Over the course of 2021,~~While our historical freight costs as a percentage of sales ~~increased~~decreased from ~~7.4%~~13.7% for the three months ended March 31, 2021 to ~~8.9%, or 150 bps,~~9.6% for the three months ended March 31, 2022 as we brought efficiencies to our pre-Appliances Connection Acquisition fulfillment operations, on a consolidated proforma basis, ~~and~~our freight costs as a percentage of sales increased 220 basis points from ~~13.7% to 16.6%, or 290 bps, excluding Appliance Connection.~~the first quarter of 2021. Recent increases in the fuel costs are putting additional downward pressure on our gross margins. Management believes that ~~this situation is~~these trends are temporary in nature, and our margins will ~~revert once the~~continue improving as supply chain ~~situation improves.~~stabilizes and fuel costs return back to normal.
Supply chain constraints also impacted our order fulfillment timing, further amplifying order cancellations and refunds caused by the outbreak of the COVID-19 pandemic.

Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations
The comparability of our results of operations between the periods discussed below is affected by the acquisitions we have completed during such periods. We may also evaluate and pursue acquisitions in the future, and such acquisitions, if completed, will continue to impact the comparability of our financial results. Our acquisitions may have materially different characteristics than our historical results, and such differences in economics may impact the comparability of our future results of operations to our historical results.
● On June 2, 2021, we completed the Appliances Connection Acquisition.
● On July 29, 2021, we completed the AC Gallery Acquisition.
The Company accounted for the above acquisitions using the acquisition method of accounting in accordance with FASB ASC Topic 805 “Business Combinations.” In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.
Results of Operations
Comparison of Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~
The unaudited condensed consolidated operating results presented below for the three months ended March 31, 2022 include the results of Appliances Connection, and, therefore, are not comparable to the consolidated operating results for the three months ended March 31, 2021.
The following table sets forth key components of our results of operations for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ in ~~dollars~~thousands and as a percentage of our ~~net sales.~~revenue.

Three Months Ended
September 30, 2021

Three Months Ended
September 30, 2020

Amount
(in thousands)

% of
Net Sales

Amount
(in thousands)

% of
Net Sales

Products sales, net $ 141,867 100.0 % $ 13,435 100.0 %
Cost of goods sold 110,495 77.9 % 11,265 83.8 %
Gross profit 31,372 22.1 % 2,170 16.2 %
Operating expenses
Personnel 8,547 6.0 % 2,162 16.1 %
Advertising 3,715 2.6 % 1,433 10.7 %
Bank and credit card fees 4,918 3.5 % 575 4.3 %
Depreciation and amortization 3,610 2.5 % 93 0.7 %
Acquisition expenses 62 - - -
General and administrative 4,018 2.8 % 1,451 10.8 %
Total operating expenses 24,870 17.5 % 5,714 42.5 %
Income (loss) from operations 6,502 4.6 % (3,544 ) (26.4 )%
Other income (expense)
Interest income 34 - 1 -
Financing costs (200 ) (0.1 )% (488 ) (3.6 )%
Interest expense (899 ) (0.6 )% (229 ) (1.7 )%
Loss on extinguishment of debt - - (807 ) (6.0 )%
Other income 8 - 2 -
Total other income (expense) (1,057 ) (0.7 )% (1,521 ) (11.3 )%
Net income (loss) before income taxes 5,445 3.8 % (5,065 ) (37.7 )%
Income tax benefit (expense) (2,129 ) (1.5 )% 838 6.2 %
Net income (loss) $ 3,316 2.3 % $ (4,227 ) (31.5 )%
For the Three Months For the Three Months
Ended March 31, 2022 Ended March 31, 2021
Amount
% of
Net Sales
Amount
% of
Net Sales

Product sales, net $ 152,752 100.0 % $ 13,697 100.0 %
Cost of goods sold 116,883 76.5 % 11,069 80.8 %
Gross profit 35,869 23.5 % 2,628 19.2 %

Operating Expenses
Personnel 7,046 4.6 % 1,931 14.1 %
Advertising 4,288 2.8 % 1,083 7.9 %
Bank and credit card fees 6,167 4.0 % 533 3.9 %
Depreciation and amortization 2,734 1.8 % 122 0.9 %
General and administrative 5,567 3.6 % 2,240 16.4 %

Total Operating Expenses 25,802 16.9 % 5,909 43.1 %

INCOME (LOSS) FROM OPERATIONS 10,067 6.6 % (3,281 ) (24.0 )%

Other Income (Expenses)
Interest income 41 0.0 % 10 0.1 %
Adjustment in value of contingency (2 ) (0.0 )% - 0.0 %
Interest expense (936 ) (0.6 )% (232 ) (1.7 )%
Other income 135 0.1 % 10 0.1 %

Total Other Income (Expenses) (762 ) (0.5 )% (212 ) (1.5 )%

NET INCOME (LOSS) BEFORE INCOME TAXES 9,305 6.1 % (3,493 ) (25.5 )%

INCOME TAX EXPENSE 3,383 2.0 % - 0.0 %

NET INCOME (LOSS) $ 5,922 4.0 % $ (3,493 ) (25.5 )%

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 ~~$141.9~~$152.8 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$13.4~~$13.7 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$128.4~~$139.1 million, or ~~956.0%~~1,015.2%. ~~The increase is~~Such increases were primarily due to ~~our June 2021 acquisition~~the impact of ~~Appliances Connection. Excluding~~the Appliances Connection our product sales decreased by $0.9 million, or 6.7%. This decrease is the result of reduced advertising spend to drive traffic to the Goedeker website as we develop a company-wide advertising program.Acquisition.
During the three months ended September 30, 2021, we experienced delays in getting products from manufacturers due to continued supply chain issues related to the COVID-19 pandemic, which resulted in cancellations of some customer orders.
Our ~~revenue~~product sale, net by ~~sales~~ type is as follows (in thousands):
For the Three Months For the Three Months

Three Months Ended
September 30, 2021

Three Months Ended
September 30, 2020
Ended March 31, 2022 Ended March 31, 2021
Amount % Amount % Amount
% of
Net Sales
Amount
% of
Net Sales

Appliance sales $ 130,837 92.2 % $ 8,992 66.9 % $ 140,975 92.3 % $ 10,273 75.0 %
Furniture sales 5,880 4.2 % 3,555 26.5 % 4,155 2.7 % 2,328 17.0 %
Other sales 5,150 3.6 % 888 6.6 % 7,622 5.0 % 1,096 8.0 %

Total $ 141,867 100.0 % $ 13,435 100.0 % $ 152,752 100.0 % $ 13,697 100.0 %
The percentage of furniture and other sales declined in the ~~2021~~first quarter 2022 period as compared to the ~~2020~~first quarter 2021 period as furniture and other sales comprised a lower percentage of Appliances ~~Connection’s sales (2.9%) as compared to the total Company’s (4.1%).~~ Connection sales.

Cost of goods sold. Our costs of goods sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their product. We negotiate special terms and pricing with the manufacturer, which are generally based on the ~~amount~~number of products we purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time. Funding might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to ~~customers..~~customers. Our cost of goods sold was ~~$110.5~~$116.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$11.3~~$11.1 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$99.2~~$105.8 million, or ~~880.9%. Excluding~~956.0%, with the increase driven by the impact of the Appliances Connection ~~our~~Acquisition.

Our cost of goods sold ~~increased~~ by ~~$0.2 million, or 1.8%, driven by a $0.2 million, or 12.5%, increase in freight costs~~type is as the result of the nationwide shortage of shipping capacity, resulting in higher rates. As a percentage of net sales, cost of goods sold was 77.9% and 83.8% for the three months ended September 30, 2021 and 2020, respectively. Such decrease was due to impact of the acquisition of Appliances Connection, which has a lower cost of goods sold as a percentage of revenue than the Company. Excluding Appliances Connection, our cost of goods sold as a percentage of net sales increased from 83.8% to 91.4%. Product costs as a percentage of net sales for the three months ended September 30, 2021 was 74.8% compared to 70.1% for the three months ended September 30, 2020. The increase in product cost is the result of reduced vendor rebates because of reduced volume. Freight costs as a percentage of net sales was 16.6% for the three months ended September 30, 2021 compared to 13.8% for the three months ended September 30, 2020.follows (in thousands):
For the Three Months For the Three Months
Ended
March 31, 2022 Ended
March 31, 2021
Amount % of Net
Sales Amount % of Net
Sales
Product costs, net of vendor rebates $ 102,293 67.0 % $ 9,193 67.1 %
Freight costs 14,590 9.6 % 1,876 13.7 %

Total $ 116,883 76.5 % $ 11,069 80.8 %
Gross profit and gross margin. As a result of the foregoing, our gross profit was ~~$31.4~~$35.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$2.2~~$2.6 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$29.2~~$33.2 million, or ~~1,345.7%~~1,264.6%. Our gross margin (gross profit as a percentage of net sales) was ~~22.1% and 16.2%~~23.5% for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020, respectively.~~19.2% for the three months ended March 31, 2021. Such increases were primarily due to the impact of the ~~acquisition of Appliances Connection. Excluding~~ Appliances Connection ~~our gross profit decreased by $1.1 million, or 50.4%, and our gross margin declined 16.2% to 8.6%, or 760 bps, driven by a reduced vendor rebates and a significant increase in shipping costs.~~Acquisition.
Personnel expenses. Personnel expenses include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, training costs and stock compensation expense. Our personnel expenses were ~~$8.5~~$7.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$2.2~~$1.9 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$6.4~~$5.1 million, or ~~295.3%~~264.9%. As a percentage of net sales, personnel expenses were ~~6.0%~~4.6% and ~~16.1%~~14.1% for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Such ~~increases~~changes were primarily due to the impact of the ~~acquisition of Appliances Connection. Excluding~~ Appliances Connection our personnel expenses increased by $1.6 million, or 71.9%, and our personnel expenses as a percentage of net sales increased to 29.6%. Such increase is the result of accruing the severance payments due a former officer and accruals for a management bonus.Acquisition.
Advertising expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were ~~$3.7~~$4.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$1.4~~$1.1 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$2.3~~$3.2 million, or ~~159.2%~~295.9%. As a percentage of net sales, advertising expenses were ~~2.6%~~2.8% and ~~10.7%~~7.9% for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Such ~~increases~~changes were primarily due to the impact of the ~~acquisition of Appliances Connection. Excluding~~ Appliances Connection our advertising expenses decreased by $0.6 million, or 40.8%, and our advertising expenses as a percentage of net sales decreased from 10.7% in the 2020 period to 6.8% in the 2021 period. The decrease relates to our efforts at improving the efficiency of our company-wide advertising program.Acquisition.
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 and to third party sellers on whose websites we sell parts and other small items. Our bank and credit card fees were ~~$4.9~~$6.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$0.6~~$0.5 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$4.3~~$5.6 million, or ~~755.3%~~1,057.0%. As a percentage of net sales, bank and credit card fees were ~~3.5%~~4.0% and ~~4.3%~~3.9% for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. Bank and ~~2020, respectively. These~~credit card fees are based on customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to the increase in customer ~~orders. We pay a credit card fee for each order, regardless of whether that order is shipped or cancelled by customer. Excluding~~orders associated with the Appliances Connection our bank and credit card fees decreased by $0.5 million, or 87.1%, and our bank and credit card fees as a percentage of net sales decreased to 0.6%. On July 29, 2021, we adopted an authorization model for charging customer credit cards rather than charging at the time of purchase. This change resulted in lower credit fees.Acquisition.
~~Acquisition Expenses~~~~. During the three months ended September 30, 2021, we incurred expenses related to the acquisitions of Appliances Connection and Appliance Gallery in the amount of $0.06 million.~~
Depreciation and amortization. Depreciation and amortization was ~~$3.6~~$2.7 million, or ~~2.5%~~1.8% of net sales, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$0.09~~$0.1 million, or ~~0.7%~~0.9% of net sales, for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase is the result of amortizing ~~the preliminary estimate of~~ intangible assets acquired in the Appliances Connection ~~acquisition.~~Acquisition.
General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, unremitted sales tax, and other expenses incurred in connection with general operations. Our general and administrative expenses were ~~$4.0~~$5.6 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$1.5~~$2.2 million for the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of ~~$2.6~~$3.3 million, or ~~176.9%~~148.5%. As a percentage of net sales, general and administrative expenses were ~~2.8%~~3.6% and ~~10.8%~~16.4% for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Such ~~increases~~changes were primarily due to the impact of the ~~acquisition of Appliances Connection. Excluding~~ Appliances Connection our general and administrative expenses increased by $0.8 million, or 55.6%. The increase was largely due to increased directors and officers insurance expenses, fees to our independent directors, and legal, audit and other professional fees in connection with becoming a public company in August 2020.Acquisition.

Total other income (expense). We had ~~$1.1~~$0.8 million in total other expense, net, for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to total other expense, net, of ~~$1.5~~$0.2 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Total other expense, net, for the three months ended ~~September 30, 2021~~March 31, 2022 consisted primarily of interest expense of ~~$0.9~~$0.7 million and financing costs of $0.2 million. Total other expense, net, for the three months ended ~~September 30, 2020~~March 31, 2021 consisted primarily of ~~financing costs of $0.5 million,~~ interest expense of $0.2 ~~million and loss on extinguishment of debt of $0.8~~ million.
Income tax benefit (expense). We had an income tax net expense of ~~$2.1~~$3.4 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to an income tax ~~benefit $0.8 million~~expense of $nil for the three months ended ~~September 30, 2020.~~March 31, 2021. Such change was due to the Company’s profitability, primarily driven by the Appliances Connection Acquisition.
Net income (loss). As a result of the cumulative effect of the factors described above, we had net income of ~~$3.3~~$5.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to a net loss of ~~$4.2~~$3.5 million for the three months ended September 30, 2020, a net increase of $7.5 million. Such increase was primarily due to the impact of the acquisition of Appliances Connection. Excluding Appliances Connection, net loss increased by $7.6 million, or 180.2%.
~~Comparison of Nine Months Ended September 30,~~March 31, 2021, ~~and 2020~~
~~The following table sets forth key components of our results of operations for the nine months ended September 30, 2021 and 2020, in dollars and as a percentage of our net sales.~~

Nine Months Ended
September 30, 2021

Nine Months Ended
September 30, 2020

Amount
(in thousands)

% of
Net Sales

Amount
(in thousands)

% of
Net Sales

Products sales, net $ 219,637 100.0 % $ 38,397 100.0 %
Cost of goods sold 172,581 78.6 % 32,061 83.5 %
Gross profit 47,056 21.4 % 6,336 16.5 %
Operating expenses
Personnel 15,300 7.0 % 4,514 11.8 %
Advertising 7,730 3.5 % 2,991 7.8 %
Bank and credit card fees 7,546 3.4 % 1,274 3.3 %
Depreciation and amortization 3,908 1.8 % 277 0.7 %
Acquisition expenses 865 0.4 % - -
Loss on abandonment of right of use asset 1,437 0.7 % - -
General and administrative 8,311 3.8 % 4,400 11.5 %
Total operating expenses 45,097 20.5 % 13,456 35.0 %
Income (loss) from operations 1,959 0.9 % (7,120 ) (18.5 )%
Other income (expense)
Interest income 57 - 2 -
Financing costs (280 ) (0.1 )% (758 ) (0.2 )%
Interest expense (2,070 ) (0.9 )% (787 ) (2.0 )%
Loss on extinguishment of debt (1,748 ) (0.8 )% (1,756 ) (4.6 )%
Write-off of acquisition receivable - - (809 ) (2.1 )%
Change in fair value of warrant liability - - (2,128 ) (5.5 )%
Other income 19 - 7 -
Total other income (expense) (4,022 ) (1.8 )% (6,229 ) (16.2 )%
Net loss before income taxes (2,063 ) (0.9 )% (13,349 ) (34.8 )%
Income tax benefit 5,919 2.7 % 1,962 5.1 %
Net income (loss) $ 3,856 1.8 % $ (11,387 ) (29.7 )%
~~Product sales, net~~. Our product sales were $219.6 million for the nine months ended September 30, 2021, which included $177.1 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $38.4 million for the nine months ended September 30, 2020, an increase of ~~$181.2~~$9.4 million, or ~~472.0%~~270.0%. ~~Excluding Appliances Connection, our product sales increased by $4.1 million, or 10.8%. This increase is due to increased advertising is the first six months that drove traffic to our website.~~
During the nine months ended September 30, 2021, we experienced delays in getting products from manufacturers due to continued supply chain issues related to the COVID-19 pandemic, which resulted in cancellations of some customer orders. Liquidity and Capital Resources

~~Our revenue by sales type is as follows (in thousands):~~

Nine Months Ended
September 30, 2021

Nine Months Ended
September 30, 2020

Amount % Amount %
Appliance sales $ 197,416 89.9 % $ 28,327 73.8 %
Furniture sales 14,393 6.5 % 7,605 19.8 %
Other sales 7,828 3.6 % 2,465 6.4 %
Total $ 219,637 100.00 % $ 38,397 100.00 %
~~The percentage~~As of ~~furniture sales declined in the 2021 period as compared to the 2020 period as furniture sales comprised a lower percentage~~March 31, 2022, we had cash and cash equivalents of ~~Appliances Connection’s sales (3.0%) compared to the Company’s (6.6%).~~
~~Cost~~$25.8 million and restricted cash of ~~goods sold~~. Our cost of goods sold was $172.6 million for the nine months ended September 30, 2021, which included $136.7 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $32.1 million for the nine months ended September 30, 2020, an increase of $140.5 million, or 438.3%. Excluding Appliances Connection, our cost of goods sold increased by $3.8 million, or 11.9%, as a result of an increase in product costs of $2.0 million, or 7.4%, and an increase in freight costs of $1.8 million, or 38.9%. As a percentage of net sales, cost of goods sold was 78.6% and 83.5% for the nine months ended September 30, 2021 and 2020, respectively. Such decrease was due to impact of the acquisition of Appliances Connection, which has a lower cost of goods sold than the Company. Excluding Appliances Connection, our cost of goods sold as a percentage of net sales increased from 83.5% to 84.4%. Product cost as a percentage of net sales for the for the nine months ended September 30, 2021 was 69.3% compared to 71.5% for the nine months ended September 30, 2020. Freight costs as a percentage of net sales were 15.0% for the for the nine months ended September 30, 2021 compared to 12.0% for the for the nine months ended September 30, 2020. The increase in freight costs is the result of the aforementioned nationwide shortage of shipping capacity.
~~Gross profit and gross margin~~. As a result of the foregoing, our gross profit was $47.1 million for the nine months ended September 30, 2021, which included $40.4 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $6.3 million for the nine months ended September 30, 2020, an increase of $40.7 million, or 642.7%. Our gross margin (gross profit as a percentage of net sales) was 21.4% (or 15.6% excluding Appliances Connection) and 16.5% for the nine months ended September 30, 2021 and 2020, respectively. Such increase was primarily due to the impact of the acquisition of Appliances Connection. Excluding Appliances Connection, our gross profit increased by $0.3 million, or 4.8%, and our gross margin declined from 16.5% to 15.6% or 90 bps driven by an increase in shipping costs.
~~Personnel expenses~~. Our personnel expenses were $15.3 million for the nine months ended September 30, 2021, which included $6.8 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $4.5 million for the nine months ended September 30, 2020, an increase of $10.8 million, or 238.9%. Excluding Appliances Connection, our personnel expenses increased by $4.0 million, or 88.7%. As a percentage of net sales, personnel expenses were 7.0% (or 20.0% excluding Appliances Connection) and 11.8% for the nine months ended September 30, 2021 and 2020, respectively. Such increase is the result of accruing the severance payments due a former officer and accruals for a management bonus plan. Additionally, during the 2021 period, we incurred stock compensation expenses of $0.9 million as compared to $0.3 million in the 2020 period.
~~Advertising expenses~~. Our advertising expenses were $7.7 million for the nine months ended September 30, 2021, which included $3.8 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $3.0 million for the nine months ended September 30, 2020, an increase of $4.7 million, or 158.4%. Excluding Appliances Connection, our advertising expenses increased by $1.0 million, or 32.1%. As a percentage of net sales, advertising expenses were 3.5% (or 9.3% excluding Appliances Connection) and 7.8% for the nine months ended September 30, 2021 and 2020, respectively. The increase relates to an increase in advertising spending to drive traffic to our website during the first six months of the period, which declined in$2.6 million. For the three months ended ~~September 30, 2021 as~~March 31, 2022, we ~~reduced the Goedeker only advertising as part~~had operating income of ~~our efforts at improving the efficiency~~approximately $10.1 million, cash flows used in operations of ~~our company-wide advertising program.~~
~~Bank and credit card fees~~. Our bank and credit card fees were $7.5 million for the nine months ended September 30, 2021, which included $6.4 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $1.3 million for the nine months ended September 30, 2020, an increase of $6.3 million, or 492.3%. Excluding Appliances Connection, our bank and credit card fees decreased by $0.1 million, or 11.4%. As a percentage of net sales, bank and credit card fees were 3.4% (or 2.7% excluding Appliances Connection) and 3.3% for the nine months ended September 30, 2021 and 2020, respectively. These fees are based on customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to the increase in customer orders. We pay a credit card fee for each order, regardless of whether that order is shipped or cancelled by customer.
~~Depreciation and amortization~~. Depreciation and amortization was $3.9 million, or 1.8% of net sales, for the nine months ended September 30, 2021, which included $0.2 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $0.3 million, or 0.7% of net sales, for the nine months ended September 30, 2020. The increase is the result of amortizing the preliminary estimate of intangible assets acquired in the Appliances Connection acquisition.

~~Acquisition expenses~~~~. During the nine months ended September 30, 2021, we incurred expenses related to the acquisitions of Appliances Connection and Appliance Gallery in the amount of $0.9 million.~~
~~Loss on abandonment of right of use asset~~. During the nine months ended September 30, 2021, we incurred a loss in the amount of $1.4 million related to the closure of our old warehouse and showroom and write-off of related leasehold improvements.
~~General and administrative expenses~~. Our general and administrative expenses were $8.3 million for the nine months ended September 30, 2021, which included $2.5 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $4.4 million for the nine months ended September 30, 2020, an increase of $3.9 million, or 88.9%. Excluding Appliances Connection, our general and administrative expenses increased by $1.4 million, or 32.9%. As a percentage of net sales, general and administrative expenses were 3.8% (or 13.8% excluding Appliances Connection) and 11.5% for the nine months ended September 30, 2021 and 2020, respectively. The increase was largely due to increased directors and officers insurance expenses, fees to our independent directors, and legal, audit and other professional fees in connection with becoming a public company in August 2020, as well as consulting fees to upgrade our online shopping cart, fees for our Electronic Data Interchange initiative, and other consulting fees.
~~Total other income (expense)~~. We had $4.0 million in total other expense, net, for the nine months ended September 30, 2021, which included other expense, net, of $0.2 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to total other expense, net, of $6.2 million for the nine months ended September 30, 2020. Total other expense, net, for the nine months ended September 30, 2021 consisted primarily of interest expense of $2.1 million, financing costs of $0.3$3.7 million and a loss on extinguishment of debt of $1.7 million. Total other expense, net, for the nine months ended September 30, 2020 consisted primarily of interest expense of $0.8 million, loss on debt modification and extinguishment of $1.8 million, loss on acquisition working capital ~~receivable~~ of ~~$0.8 million and change in the warrant liability of $2.1~~$24.9 million.
~~Income tax benefit~~. We had an income tax net benefit of $5.9 million for the nine months ended September 30, 2021, as compared to $2.0 million for the nine months ended September 30, 2020. The increase primarily arose from the elimination of the allowance for the deferred tax asset. The acquisition of Appliances Connection on June 2, 2021 makes it more likely than not that the Company will be profitable, and will be able to utilize previously derived net operating losses.
~~Net income (loss)~~. As a result of the cumulative effect of the factors described above, we had net income of $3.9 million for the nine months ended September 30, 2021, which include a net income of $20.0 million from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to a net loss of $11.4 million for the nine months ended September 30, 2020, an increase of $15.2 million, or 133.9%. Excluding Appliances Connection, net loss increased by $4.8 million, or 41.9%.
~~Liquidity and Capital Resources~~
As of ~~September 30,~~December 31, 2021, we had cash and cash equivalents of ~~$27.2~~$25.7 million and restricted cash of ~~$8.0~~$8.1 million and working capital of $16.0 million.
On May 9, 2022, we entered into the New Credit Agreement, borrowed the full amount of the $100 million New Term Loan and used $55.9 million of the proceeds to pay off the M&T Credit Agreement in full. As of May 16, 2022, we have not borrowed any additional funds under $40 million New Revolving Loan available under the New Credit Agreement.
We have previously generated significant losses since our acquisition of Goedeker Television and have relied on cash on hand, external bank lines of credit, proceeds from ~~our~~ public offerings, ~~described below,~~ issuance of ~~third party~~third-party and ~~related party~~related-party debt and the issuance of ~~notes~~a note to support cashflow from operations.
~~For the nine months ended September 30, 2021,~~Notably, we ~~had operating profit of $2.0 million, $18.3 million of~~reported positive cash flow ~~used~~from operations in ~~operations, and working capital~~2020 as money was collected from the customers at the time orders were placed, instead of ~~$20.0 million. Additionally, we had $27.2 million~~the time orders were shipped, leading to accumulation of ~~unrestricted cash at September 30, 2021.~~customer deposits. On June 2, 2021, we ~~completed the acquisition of Appliances Connection.~~acquired Appliances Connection, which historically has ~~historically~~ been ~~profitable;~~a profitable company with strong operating cash flow; however ~~less than 4 months~~due to the ongoing COVID-19 pandemic and resulting supply chain constraints, we refunded to customers $34.0 million in customer deposits throughout 2021, $27.4 million of ~~their~~which was due to order cancellations, leading to a negative operating cash flow in 2021. At this point we have been able to clear the majority of the historical customer deposit balances, and based on current facts and circumstances, we believe that we will have adequate cash flow from operations, ~~are included in results~~external bank lines of credit, and proceeds from any future issuances of debt or equity to fund operations and service debt obligations for at least the ~~nine months ended September 30, 2021.~~next twelve months.
~~Management has~~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.
We assess liquidity and going concern uncertainty in our unaudited condensed consolidated financial statements to determine whether there are sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the unaudited condensed consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, we will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, our ability to delay or curtail expenditures or programs and our ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, we make certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent we deem probable those implementations can be achieved and we have the proper authority to execute them within the look-forward period.

We have prepared estimates of operations for fiscal years ~~2021 and~~ 2022 and ~~believes~~2023 and believe that sufficient funds will be generated from operations to fund ~~its~~our operations and to service ~~its~~our debt obligations for ~~at least~~ one year from the date of the filing of ~~these unaudited condensed consolidated financial statements.~~
~~The~~this report. We have considered the impact of COVID-19 on our business ~~has been considered~~ in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations.
The ~~accompanying~~ unaudited condensed consolidated financial statements have been prepared on a going concern basis under which ~~the Company is~~we are expected to be able to realize ~~its~~our assets and satisfy ~~its~~our liabilities in the normal course of business. We believe, based on relevant conditions and events that are known and reasonably knowable, that our forecasts, for one year from the date of the filing of this report, indicate improved operations and our ability to continue operations as a going concern. See Note 3 to the unaudited condensed consolidated financial statements, “Liquidity and Going Concern Assessment.”

Summary of Cash Flow
The following table provides detailed information about our net cash flow for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands).

Nine Months Ended
September 30,

2021 2020
Net cash provided by (used in) operating activities $ (18,316 ) $ 7,383
Net cash used in investing activities (203,628 ) (51 )
Net cash provided by financing activities 247,218 4,983
Net change in cash and restricted cash 25,274 12,315
Cash and restricted cash, beginning of period 9,912 64
Cash and restricted cash, end of period $ 35,186 $ 12,379
For the Three Months
Ended
March 31, 2021
2022 2021
Net cash used in operating activities $ (3,747 ) $ (2,808 )
Net cash used in investing activities (6 ) (126 )
Net cash (used in) provided by in financing activities (1,634 ) 4,426

Net change in cash, cash equivalents, and restricted cash $ (5,387 ) $ 1,492
Cashflows used in operating activities. Our net cash used in operating activities was ~~$18.3~~$3.7 million for the ~~nine~~three months ended ~~September 30, 2021, which included $15.5 million in net cash provided by operating activities from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021,~~March 31, 2022, as compared to ~~$7.4 million~~ net cash provided by operating activities for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, our net income of $3.9 million, an increase in accounts payable and accrued expenses of $11.8 million and depreciation and amortization of $3.9 million, offset by a decrease in customer deposits of $16.9 million, a decrease in merchandise inventory of $11.7 million and deferred tax expense of $6.5 million, represent the primary drivers for cash used in ~~operations. For~~operating activities of $2.8 million for the ~~nine~~three months ended ~~September 30, 2020, our net loss of $11.4 million, deferred tax~~March 31, 2021. Significant changes in operating assets ~~of $2.0 million~~ and a decrease in merchandise inventory of $1.7 million, offset by an increase in customer deposits of $12.9 million, an increase in accounts payable and accrued expenses of $4.3 million, a change in fair value of warrant liability of $2.1 million and a loss on extinguishment of debt of $1.8 million, were the primary drivers of the netliabilities affecting cash ~~provided by operating activities.~~flows during these periods included:
● Net income was $5.9 million and $(3.5) million for the three months ended March 31, 2022 and 2021, respectively,
● Cash used by receivables was $(1.7) million and $1.0 million for the three months ended March 31, 2022 and 2021, respectively, due primarily to increases in sales volume as a result of the Appliances Connection Acquisition,
● Cash used by inventories was $(8.2) million and $(0.7) million for the three months ended March 31, 2022 and 2021, respectively, due primarily to efforts to manage inventory levels to support the growth in sales as a result of the Appliances Connection Acquisition, and
● Cash used by customer deposits was $(7.6) million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively, related to increases in sales volume as a result of the Appliances Connection Acquisition and the timing it can take to fulfill orders as a result of supply chain shortages as during the economic downturn related to the COVID-19 pandemic.
Cashflows used in investing activities. Our net cash used in investing activities was ~~$203.6~~$0.006 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$0.05~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2020. Net~~March 31, 2021.
Cashflows provided by financing activities. Our net cash used in ~~investing~~financing activities was $1.6 million for the ~~nine~~three months ended September 30, 2021 consisted of cash paid in the acquisition of Appliances Connection, net of cash acquired, of $201.5 million, cash paid in the acquisition of Appliance Gallery of $1.4 million and purchases of property and equipment of $0.7 million. Net cash used in investing activities for the for the nine months ended September 30, 2020 consisted of entirely purchases of property and equipment. Appliances Connection did not have any investing activities for the nine months ended September 30, 2021.
~~Our~~March 31, 2022, as compared to net cash provided by financing activities ~~was $247.2~~of $4.4 million for the ~~nine~~three months ended ~~September 30, 2021, which included $0.2 million in net cash used~~March 31, 2021. Significant changes in financing activities ~~from Appliances Connection for the period from June 2, 2021 (date of acquisition) to September 30, 2021, as compared to $5.0 million for the nine months ended September 30, 2020. Net~~affecting cash provided by financing activities for the nine months ended September 30, 2021 consisted of proceeds from the public offering described below of $194.6 million, proceeds from the exercise of warrants of $2.4 million and proceeds from the term loan described below of $55.2 million, offset by repayment on notes payable of $4.9 million and payments on finance leases of $0.02 million. Net cash provided by financing activities for the nine months ended September 30, 2020 consisted of net proceeds of $8.6 million from our initial public offering and $0.6 million in proceeds from our paycheck protection plan loan, offset by repayments on notes payable of $2.0 million, net payments on lines of credit of $1.3 million, payments on convertible notes payable of $0.8 million and financing costs of $0.1 million.flows during these years included:
● Net cash received from notes payable proceeds of $ 4.6 million for the three months ended March 31, 2021, and
~~Public Offerings~~
● Repayments of notes payable of $1.6 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.
On August 4, 2020, we sold 1,111,200 shares of common stock in connection with our initial public offering 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 $10.0 million. After deducting the underwriting commission and expenses, we received net proceeds of approximately $8.6 million. 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).~~ ~~We used to the proceeds of this offering repay certain debt.~~

Debt
New Credit Agreement
On May ~~27, 2021, we~~9, 2022, the Company and ACI as borrowers and certain of our subsidiaries as guarantors entered into ~~an underwriting agreement with ThinkEquity, a division~~the New Credit Agreement by and among the borrowers, the guarantors, the Lenders and the Agent, pursuant to which the Lenders have agreed to make available to the Company and ACI senior secured credit facilities in the aggregate initial amount of ~~Fordham Financial Management, Inc. (the “Underwriter”), relating to a public offering of units, each unit consisting of one share of common stock~~$140,000,000, including (i) the $100,000,000 New Term Loan and (ii) the $40,000,000 New Revolving Loan, which revolving credit facility includes the $2,000,000 New Swing Line Loan and a ~~warrant to purchase one share~~$2,000,000 letter of ~~common stock. Under~~credit subfacility, in each case, on the underwriting agreement, we agreed to sell 91,111,111 units to the Underwriter, at a purchase price per unit of $2.0925 (the offering price to the public of $2.25 per unit minus the Underwriter’s discount),terms and also agreed to grant to the Underwriter a 30-day option to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $2.0832 per share, and/or warrants to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $0.0093 per warrant, in any combination thereof, solely to cover over-allotments, if any. The Underwriter exercised its option to purchase 2,000,000 additional warrants on May 28, 2021 and exercised its option to purchase 2,000,000 additional shares on June 3, 2021. The shares of common stock and warrantsconditions contained in the ~~units were immediately separable~~New Credit Agreement. The New Loans may from time to time be further evidenced by separate promissory notes issued by the Company and ~~were issued separately.~~ACI. On May 9, 2022, the Company borrowed the entire amount of the New Term Loan, but no New Revolving Loans have been made as of May 16, 2022.
The proceeds of the New Term Loan were applied, among other uses, to prepay the obligations in full under the Company’s existing M&T Credit Agreement. On May 9, 2022, in connection with prepayment of the obligations under the M&T Credit Agreement, the M&T Credit Agreement was terminated.
Each of the New Loans matures on May 9, 2027 (the “Maturity Date”). The New Loans will bear interest on the unpaid principal amount thereof as follows: (i) if it is a New Loan bearing interest at a rate determined by the Base Rate (as defined in the New Credit Agreement), then at the Base Rate plus the Applicable Rate (as defined in the Credit New Agreement) for such New Loan; (ii) if it is a New Loan bearing interest at a rate determined by Term SOFR (as defined in the New Credit Agreement), then at Term SOFR plus the Applicable Rate for such New Loan; and (iii) if it is a New Swing Line Loan, then at the rate applicable to New Loans bearing interest at a rate determined by the Base Rate plus the Applicable Rate for such New Loan. The New Term Loan initially bears interest at Term SOFR plus Applicable Rate, with an initial interest period of one month. The Company may elect to continue or convert the existing interest rate benchmark for the New Term Loan from Term SOFR to Base Rate, and may elect the interest rate benchmark for future New Revolving Loans as either Term SOFR or Base Rate (and, with respect to any New Loan made using Term SOFR, may also select the interest period applicable to any such New Loan), by notifying the Agent and Lenders from time to time in accordance with the provisions of the New Credit Agreement. Interest is payable in arrears on each Interest Payment Date (as defined in the New Credit Agreement). Notwithstanding the foregoing, following an event of default, the New Loans will bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable New Loan.
Commencing on September 30, 2022, through and including June ~~2, 2021, we sold 91,111,111 shares~~30, 2023, the borrowers must repay the principal amount of ~~common stock~~the New Term Loan in quarterly installments of $1,250,000 each, payable on the last business day of each March, June, September and ~~warrants to purchase 93,111,111 shares~~December. Commencing on September 30, 2023, through and including June 30, 2024, the borrowers must repay the principal amount of ~~common stock~~the New Term Loan in quarterly installments of $1,875,000 each, payable on the last business day of each March, June, September and December. Commencing on September 30, 2024, through the Maturity Date, the borrowers must repay the principal amount of the New Term Loan in quarterly installments of $2,500,000 each, payable on the last business day of each March, June, September and December. The remaining unpaid principal amount of the New Term Loan must be repaid on the Maturity Date, unless payment is sooner required by the New Credit Agreement. Mandatory prepayments of New Revolving Loans are required if the amount borrowed at any time exceeds the commitment amount. New Revolving Loans may be repaid and reborrowed at any time until the Maturity Date, subject to the ~~Underwriter for total gross proceeds of $205.0 million. After deducting~~terms and conditions set forth in the ~~underwriting commission and expenses, we received net proceeds of approximately $190.5 million.~~New Credit Agreement.
~~On June 7, 2021, we sold 2,000,000 shares~~The Company may voluntarily prepay the New Loans from time to time in accordance with the provisions of ~~common stock~~the New Credit Agreement, and will be required to prepay the New Loans under certain limited circumstances as set forth in the New Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the New Credit Agreement, all as more specifically set forth in the New Credit Agreement.

Under the New Credit Agreement, the borrowers are required to pay certain fees to Agent, including, without limitation, a commitment fee of up to 0.25% per annum with respect to the ~~Underwriter for total gross proceeds of $4.5 million. After deducting the underwriting commission and expenses, we received net proceeds of approximately $4.2 million.~~
~~As of September 30, 2021, an aggregate of 1,052,248 warrants were converted to common stock at $2.25 per share, yielding proceeds of $2.4 million.~~
~~We used to the proceeds of this offering to fund a~~unused portion of the ~~purchase price~~Lenders’ revolving loan commitments, determined as set forth in the New Credit Agreement, and certain fees in connection with the issuance of any letters of credit under the New Credit Agreement.
The New Credit Agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on any of the New Loans when due, or to pay any fees or other amounts due under the New Credit Agreement; (ii) the occurrence of certain specified defaults under other agreements to which the Company or its subsidiaries is a party; (iii) for the ~~acquisition~~breach of certain specified covenants in the New Credit Agreement: (iv) if any representation, warranty or certification in the New Credit Agreement or any document delivered in connection therewith was incorrect in any material respect as of the date made; (v) in the case of any voluntary or involuntary bankruptcy, insolvency or dissolution; (vi) in the case of the imposition of any money judgment, writ or similar process in an aggregate amount in excess of $4,000,000 (in certain cases, to the extent not covered by insurance); or (vii) if a Change of Control (as defined in the New Credit Agreement) occurs.
The New Credit Agreement contains customary representations, warranties and affirmative and negative financial and other covenants for loans of this type. The closing of the New Loans was subject to customary closing conditions, including delivery of the security documents described below.
The New Loans are guaranteed by the guarantors and are secured by a first priority security interest in substantially all of the assets of the borrowers and the guarantors pursuant to a security and pledge agreement entered into on May 9, 2022 among the borrowers, the guarantors and the Agent, which includes a pledge of all of the outstanding common stock of Appliances Connection and AC Gallery Inc., each of which is held by the Company, and of all of the outstanding equity interests of the remaining guarantors which is held by Appliances Connection.
~~Debt~~M&T Credit Agreement - Refinanced
~~Credit Facilities~~
On June 2, 2021, the Company and ACI, as borrowers, entered into a credit and guaranty agreement (the “M&T Credit Agreement”) with Appliances Connection and certain other subsidiaries of the Company party thereto from time to time as guarantors, ~~(the “Guarantors”),~~ the financial institutions party thereto from time to time (“M&T Lenders”), and ~~Manufacturers and Traders Trust Company,~~M&T, as sole lead arranger, sole book runner, administrative agent and collateral agent, ~~(“M&T),~~ pursuant to which the M&T Lenders ~~have~~ agreed to make available to the Company and ACI senior secured credit facilities in the aggregate initial amount of $70.0 million, including (i) a $60.0 million term loan (the ~~“Term~~“M&T Term Loan”) and (ii) a $10.0 million revolving credit facility (the ~~“Revolving~~“M&T Revolving Loan”), which revolving credit facility includes a $2.0 million swingline subfacility (the ~~“Swing~~“M&T Swing Line Loan” and together with the M&T Term Loan and the M&T Revolving Loan, the ~~“Loans”~~“M&T Loans”) and a $2.0 million letter of credit subfacility, in each case, on the terms and conditions contained in the ~~credit and guaranty agreement.~~M&T Credit Agreement. On June 2, 2021, wethe Company borrowed the entire amount of the M&T Term Loan and issued term loan notes to the M&T Lenders in the aggregate principal amount of $60.0 million.
As of ~~September 30, 2021, we have~~March 31, 2022, the Company had not ~~made~~borrowed any ~~loans~~amounts under the M&T Revolving Loan. As of ~~September 30, 2021,~~March 31, 2022, the ~~outstanding balance~~carrying value of the M&T Term Loan ~~is $55.0~~was $53.9 million, comprised of principal of ~~$58.5~~$57 million, net of unamortized loan costs of ~~$3.5~~$3.1 million. ~~Loan costs before amortization included $3.5 million of lender and placement agent fees and $0.3 million of legal other fees. We~~The Company classified ~~$6.0~~$7.5 million as a current liability and the balance as a long-term liability.
~~Each~~The M&T Credit Agreement provided that each of the M&T Loans ~~matures~~would mature on June 2, ~~2026. The Loans will~~2026 and would bear interest on the unpaid principal amount thereof as follows: (i) if it is a M&T Loan bearing interest at a rate determined by the ~~base rate~~Base Rate (as defined in the ~~credit and guaranty agreement)~~M&T Credit Agreement), then at the ~~base rate~~Base Rate plus the ~~applicable margin~~Applicable Margin (as defined in the ~~credit and guaranty agreement)~~M&T Credit Agreement) for such M&T Loan; (ii) if it is a M&T Loan bearing interest at a rate determined by the LIBOR ~~rate~~Rate (as defined in the ~~credit and guaranty agreement)~~M&T Credit Agreement), then at the LIBOR ~~rate~~Rate plus the ~~applicable margin~~Applicable Margin for such M&T Loan; and (iii) if it is a M&T Swing Line Loan, then at the rate applicable to M&T Loans bearing interest at a rate determined by the ~~base rate.~~Base Rate. The M&T Term Loan initially ~~bears~~bore interest at the LIBOR ~~rate~~Rate plus ~~applicable margin~~Applicable Margin (3.9%), with an initial interest period of six months. ~~We may~~The Company had the option to elect to continue or convert the existing interest rate benchmark for the M&T Term Loan from LIBOR ~~rate~~Rate to ~~base rate,~~Base Rate, and ~~may~~could elect the interest rate benchmark for future M&T Revolving Loans as either LIBOR ~~rate~~Rate or ~~base rate~~Base Rate (and, with respect to any M&T Loan made at the LIBOR ~~rate,~~Rate, may also select the interest period applicable to any such M&T Loan), by notifying M&T and M&T Lenders from time to time in accordance with the provisions of the ~~credit and guaranty agreement.~~M&T Credit Agreement. Notwithstanding the foregoing, following an event of default, the M&T Loans ~~will~~would bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable M&T Loan.
~~We must~~

The M&T Credit Agreement also provided that the Company repay the principal amount of the M&T Term Loan in quarterly installments of $1.5 million each, payable on the last business day of each March, June, September, and December, commencing on September 30, ~~2021.~~2021 (the March 2022 payment was in April 2022). The remaining unpaid principal amount of the M&T Term Loan must be repaid on the ~~maturity date,~~M&T Term Loan Maturity Date (as defined in the M&T Credit Agreement) unless payment is required sooner ~~required~~ by the ~~credit~~M&T Credit Agreement. M&T Revolving Loans may be repaid and ~~guaranty agreement. Mandatory~~reborrowed at any time until the M&T Revolving Commitment Termination date (as defined in the M&T Credit Agreement).
The M&T Loans provided for voluntary prepayment from time to time in accordance with the provisions of the M&T Credit Agreement, and required prepayment under certain limited circumstances as set forth in the M&T Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of insurance or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the M&T Credit Agreement, all as more specifically set forth in the M&T Credit Agreement. Additionally, mandatory repayments of amounts borrowed under the M&T Revolving Loan facility are required ~~only~~ if the amount borrowed at any time exceeds the commitment amount.

Under the M&T Credit Agreement, the Company was required to pay certain fees to M&T, including a commitment fee of up to 0.5% per annum with respect to the unused portion of the M&T Lenders’ revolving loan commitments, determined as set forth in the M&T Credit Agreement, and certain fees in connection with the issuance of any letters of credit under the M&T Credit Agreement.
The ~~credit and guaranty agreement contains~~M&T Credit Agreement contained customary representations, warranties, affirmative and negative financial and other covenants, including leverage ratio and fixed charge coverage ratios, and events of default for loans of this type. The M&T Loans are guaranteed by the ~~Guarantors~~guarantors and are secured by a first priority security interest in substantially all of the assets of the Company, ACI and the ~~Guarantors.~~guarantors.
On May 9, 2022, the Company prepaid its obligations in full under the M&T Credit Agreement, and on May 9, 2022, in connection with the prepayment of the obligations under the M&T Credit Agreement, the M&T Credit Agreement was terminated.
Northpoint Loan
On June 3, 2021, we entered into a loan and security agreement with Northpoint Commercial Finance LLC (“Northpoint”), pursuant to which Northpoint may from time-to-time advance funds for the acquisition, financing and/or refinancing by the Company of inventory purchased from Samsung Electronics America, Inc. and/or affiliates and for such other purposes as are acceptable Northpoint. The loan and security agreement provides that Northpoint may establish a credit limit and may adjust such credit limit from time to time; provided that such credit limit does not constitute a commitment or committed line of credit to Northpoint. As of March 31, 2022, such credit limit is $2.0 million, of which $0.3 million was owed and included in accounts payable.
The applicable per annum interest rates for a loan, including any default rates, will be determined at the time of the loan. The loan and security agreement contains customary events of default and is secured by a security interest in all of the Company’s inventory (i) that is manufactured, distributed, or sold by Samsung Electronics America, Inc. and/or its affiliates and/or (ii) that bears any trade names, trademarks, or logos of Samsung Electronics America, Inc. and/or its affiliates; all returns, repossessions, exchanges, substitutions, replacements, attachments, parts, accessories and accessions of any of the foregoing; all price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments related to any of the foregoing; supporting obligations to any of the foregoing; and products and proceeds in whatever form of any of the foregoing.
Vehicle Loans
~~We have~~The Company has financed purchases of transportation vehicles with notes payable, which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging from 3.59% to 5.74%. As of ~~September 30, 2021,~~March 31, 2022, the outstanding balance of these ~~notes~~vehicle loans is ~~$1.4~~$1.2 million.
~~Financing Leases~~
~~We have three finance leases for the acquisition of forklifts. At September 30, 2021, the total amount due on these leases was $0.2 million.~~
~~Contractual Obligations~~
~~Our principal commitments consist mostly of obligations under the loans described above and other contractual commitments described below.~~
Management Services Agreement
On April 5, 2019, wethe Company entered into a management services agreement with 1847 Partners LLC (the “Manager”), ~~pursuant~~a company owned and controlled by Ellery W. Roberts, the Company’s chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to ~~which we~~the offsetting management services agreement, as amended, the Company appointed the Manager to provide certain services to usit for a quarterly management fee equal to ~~$62,500. Under~~$62,500; provided, however, that under certain circumstances specified in the management services agreement, ~~our~~the quarterly fee may be reduced if similar fees payable to the Manager by subsidiaries of ~~our~~the Company’s former parent company, 1847 Holdings LLC, exceed a threshold amount.
~~Pursuant to the management services agreement, we must~~

The Company shall also reimburse the Manager for all costs and expenses of the Company which are specifically approved by ~~our~~the board of directors of the Company, including all out-of-pocket costs and expenses, that are actually incurred by usthe Manager or ~~our~~its affiliates on ~~our~~ behalf of the Company in connection with performing services under the management services agreement. The Company did not pay any expenses for the three ended March 31, 2022 and 2021.
WeThe Company expensed management fees of ~~$0.06~~$0.1 million for each of the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020 and $0.2 million for the nine months ended September 30, 2021 and 2020.~~respectively.
~~Earn Out Payment~~Leases
Pursuant to an asset purchase agreement, dated January 18, 2019, as amended, among the Company, Goedeker Television Co. (“Goedeker”), Steve Goedeker and Mike Goedeker, Goedeker is entitled to receive an earn out payment of $0.2 million if the EBITDA (as defined in the asset purchase agreement) of the business acquired from Goedeker for the trailing twelve (12) month period from April 5, 2022 is $2.5 million or greater, and may be entitled to receive a partial earn out payment if the EBITDA is less than $2.5 million but greater than $1.5 million.

~~Leases~~
On April 5, 2019, the Company entered into a lease agreement with S.H.J., ~~L.L.C~~L.L.C. for its prior principal office in Ballwin, Missouri. The lease is for a term of five ~~(5)~~ years and provides for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term. The lease agreement contains customary events of ~~default.~~default, representations, warranties, and covenants.
On May 31, 2019, YF Logistics entered into a sublease agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in Hamilton, NJ. The initial term of the sublease was for a period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one year terms until the earlier of (i) termination by either upon thirty days’ prior written notice or (ii) April 30, 2024. The sublease provides for a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses, additional charges or any other amounts due by DMI, for a total of $56,250 per month. The initial right-of-use (“ROU”) asset and liability associated with this lease is $3.0 million.
On January 13, 2021, the Company entered into a lease agreement with Westgate 200, LLC, which was amended on March 31, 2021, for its new principal office and showroom in St. Charles, Missouri. The lease terminates on April 30, 2027, with two ~~(2)~~ options to renew for additional five ~~(5)~~ year periods. The base rent is $20,977 per month until September 30, 2021, and increases to $31,465 per month until April 30, 2022, after which time the base rent increases at approximately 2.5% per year thereafter. The Company must also pay its 43.4% pro rata portion of the property taxes, operating expenses and insurance costs and is also responsible to pay for the utilities used on the premises. The lease contains customary events of default. The initial ROU asset and liability associated with this lease is $2.0 million.

On June 2, 2021, 1 Stop entered into a new lease agreement with 1870 Bath Ave. LLC, a related party, for the premises located at 1870 Bath Avenue, Brooklyn, ~~NY.~~New York. The lease is for a term of ten ~~(10)~~ years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896 during the last year of the term. 1 Stop is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The initial ROU asset and liability associated with this lease is $8.4 million.

On June 2, 2021, Joe’s Appliances entered into a new lease agreement with 812 5th Ave Realty LLC, a related party, for the premises located at 7812 5th Avenue, Brooklyn, ~~NY.~~New York. The lease is for a term of ten ~~(10)~~ years and provides for a base rent of $6,365 per month during the first year with annual increases to $8,305 during the last year of the term. Joe’s Appliances is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The initial ROU asset and liability associated with this lease is $0.7 million.

On ~~May 31, 2019, YF Logistics entered into~~June 30, 2021, the Company closed an old warehouse and retail showroom in anticipation of relocating to a ~~sublease agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in Hamilton, NJ. The initial term~~new facility. Accordingly, the Company wrote-off $1.4 million representing the remaining ROU asset and related leasehold improvements as of the sublease was for a period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one year terms until the earlier of (i) termination by either upon thirty (30) days’ prior written notice or (ii) April 30, 2024. The sublease provides for a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses, additional charges or any other amounts due by DMI, for a total of $56,250 per month.that date.

On July 29, 2021, AC Gallery entered into a lease agreement with Tom’s Flooring, LLC for the showroom and warehouse located in Largo, Florida. The lease is for a term of four ~~(4)~~ months commencing on September 1, 2021 and ending on December 31, 2021 and provides for a ~~case~~base rent of $6,500 per month. AC Gallery must also pay its one-third ~~(1/3)~~ pro rata portion of the common area maintenance charges, utilities and sales taxes. The lease contains customary events of default. The lease is short term and therefore not recorded as a ROU asset and liability.

On September 9, 2021, the Company entered into a warehouse agreement for a new warehouse in Somerset, ~~NJ.~~New Jersey. The warehouse agreement is for a term of 26 months commencing on October 1, 2021, and ending November 29, 2023, unless the master lease for the premises is terminated earlier. The monthly storage fee is $136,274 for the first year, $140,274 for the second year, and $144,573 for the last two months. The Company also paid a security deposit of $272,549.
The lease agreement contains customary events of default, representations, warranties, and covenants. The initial ROU and liability associated with this operating lease is $3.4 million.
~~Off-Balance Sheet Arrangements~~

~~We have no off-balance sheet arrangements~~On March 15, 2022, the Company entered into a lease agreement by and between the Company and 8780 19 Ave LLC, a New York limited liability company and related party, for the lease of a new office building located in Brooklyn, New York. The lease commenced on March 1, 2022 and shall expire on December 31, 2026. The Company has the option to extend the term of the lease for one additional term of five years. The premises of the lease contain approximately 5,835 rentable square feet. Under the terms of the lease, the Company will lease the premises at the monthly rate of $22,000 for the first year, with scheduled annual increases. The Company will receive a four-month rent concession so that ~~have~~its first rental payment shall become due on 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.
before July 1, 2022.
~~Critical Accounting Policies and Estimates~~

~~The preparation of the unaudited condensed consolidated financial statements requires our management to make estimates~~Critical Accounting Policies and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.Estimates

For ~~a description~~information regarding the Company’s Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’sItem 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~– Critical Accounting Policies”~~” in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2020 filed with the Securities and Exchange Commission (the “SEC”) on March 29,~~ 2021.
During the three and nine months ended September 30, 2021, there were no significant changes in our accounting policies and estimates other than the newly adopted accounting standards that are disclosed in Note 2 to our unaudited condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~Not applicable.~~As a smaller reporting company, we are not required to disclose information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures

~~We have adopted and maintain disclosure~~The Company maintains “disclosure controls and procedures, ~~that are designed to provide reasonable assurance that information required to be disclosed~~” as defined in ~~the reports filed~~Rules 13a-15(e) and 15d-15(e) under the Exchange Act, such as this quarterly report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, our management, including our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q, have concluded that, due to deficiencies identified in our preliminary evaluation, our disclosure controls and procedures are ineffective to ensure that information required to be disclosed by usa company in the reports ~~that we file~~filed or ~~submit~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and ~~forms,~~forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that ~~such~~ information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to ~~our~~the company’s management, including ~~our Chief Executive Officer~~its principal executive and ~~Chief Financial Officer,~~principal financial officers, as appropriate to allow timely decisions regarding required disclosure. ~~Subject~~Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022.
Based on the evaluation performed as of March 31, 2022, as a result of the material weaknesses in internal control over financial reporting that are described below, and as further described in Item 9A of our Annual Report on Form 10-K filed with the SEC on March 31, 2022, our Chief Executive Officer and Chief Financial Officer determined that our disclosure controls and procedures were not effective as of such date.

Material Weaknesses in Internal Control over Financial Reporting
Management has determined that the Company’s ineffective internal control over financial reporting and resulting material weaknesses, stem primarily from management’s inability to ~~receipt~~maintain appropriately designed controls, which impacts the control environment, risk assessment procedures and ability to detect or prevent material misstatements to the financial statements. The material weaknesses were attributed to:
● Lack of structure and responsibility, insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls;
● Ineffective assessment and identification of changes in risk impacting internal control over financial reporting;
● Inadequate selection and development of effective control activities, general controls over technology and effective policies and procedures; and
● Ineffective evaluation and determination as to whether the components of internal control were present and functioning.
Management’s Remediation Plans
Management is actively engaged in the implementation of remediation plans to address the controls contributing to the material weaknesses. During the three months ended March 31, 2022, the Company has taken, and continues to take, the following remediation actions:
● Enhance reporting structure and increase the number of qualified resources in roles over internal control over financial reporting;
● Establish formal risk assessment procedures to identify and monitor changes in the organization that could have an impact on internal control over financial reporting; and
● Develop and document policies and procedures, including related business process and technology controls, assess their effectiveness and establish a program for continuous assessment of their effectiveness.
We believe these measures will remediate the control deficiencies, but management is assessing the need for any additional ~~financing, we intend~~steps to ~~retain~~remediate the underlying causes that give rise to these material weaknesses. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. There is no assurance that additional ~~individuals and resources to remedy the ineffective controls.~~remediation steps will not be necessary.
Changes in Internal Control Over Financial Reporting

~~Changes in Internal Control Over Financial Reporting~~
~~During the three months ended September 30, 2021, the Company hired a new Chief Executive Officer and a new Chief Financial Officer.~~
~~There~~Except as set forth above, there were no ~~other~~ changes in ~~the Company’s~~our internal control over financial reporting or(as defined in ~~any other factors that could significantly affect these controls~~Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~three months~~quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
At the Company’s annual meeting on December 21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s common stock, par value $0.0001 per share (“Common Stock” and such proposal, the “Share Increase Proposal”) by 50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021, the Share Increase Proposal was adopted and a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment adopted pursuant to the Share Increase Proposal (the “Certificate of Amendment”) was filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”). To date, none of these newly authorized shares has actually been issued.
Three purported beneficial owners of Common Stock subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the situation performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated and that the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure against any future question as to the validity of these newly authorized shares, the Company elected to seek validation of its Certificate of Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section 205 of the Delaware General Corporation Law (the “205 Petition”), dated as of March 9, 2022. The action, styled In re 1847 Goedeker Inc., C.A. 2022-0219-SG, seeks entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating the additional shares of Common Stock authorized under the Share Increase Proposal.
Shortly before the 205 Petition was filed, one of the purported stockholders who had submitted a demand related to adoption of the Share Increase Proposal also filed a Class Action Complaint in the Court of Chancery against the Company and its Board of Directors on March 1, 2022. That lawsuit, captioned Scot T. Boden v. 1847 Goedeker Inc., et al., C.A. No. 2022-0196-SG (the “Boden Action”), asserts two claims for relief. The first is against the Company for alleged violation of the Delaware General Corporation Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal. The second asserts that the Company’s directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment to our Certificate of Incorporation to be filed with the Delaware Secretary of State. The Boden Action has been consolidated with the 205 Petition; and for reasons set out in the 205 Petition, the Company and its directors believe the Boden Action to be without merit and intend to defend the claims. Mr. Boden and a second purported stockholder, Robert Corwin, have both filed briefs opposing the 205 Petition. Under a scheduling order issued by the Court of Chancery on May 6, 2022, the Company intends to file a reply brief in further support of the 205 Petition by May 20, 2022. The Court of Chancery has scheduled a hearing on the matter for May 27, 2022. The Company cannot predict the outcome of these proceedings, or the timing of any decision from the Court.
From time to time, we may ~~become involved in~~be subject to various ~~lawsuits and~~ legal proceedings ~~which arise,~~and claims arising in the ordinary course of business. ~~However,~~All other litigation ~~is subject~~currently pending against the Company relates to ~~inherent uncertainties,~~matters that have arisen in the ordinary course of business 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 that such matters will not have a material adverse effect on our ~~business,~~consolidated financial condition, results of operations or ~~operating results.~~cash flows.

ITEM 1A. 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 31, 2022. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2022, except for the below risk factors. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Increasing tensions between the United States and Russia, and other effects of the ongoing conflict in Ukraine, could negatively impact our business, results of operations, and financial condition.

~~Not applicable.~~While we do not operate in Russia or Ukraine, the increasing tensions between the United States and Russia and the other effects of the ongoing conflict in Ukraine, have resulted in many broader economic impacts such as the United States imposing sanctions, bans against Russia and Russian products imported into the United States, and disruption of the production and delivery of products and parts from Ukraine and Russia. Such sanctions, bans and disruptions have affected and may continue to affect commodity pricing such as fuel and energy costs, making it more expensive for us and our partners to deliver products to our customers. Further sanctions, bans, disruptions or other economic actions in response to or because the ongoing conflict in Ukraine could result in an increase in costs, further disruptions to our supply chain, and a lack of consumer confidence resulting in reduced demand. While the extent of such items is not presently known, any of them could negatively affect our business, results of operations, and financial condition.

Numerous economic factors, including inflation, our exposure to the U.S. housing industry, and the potential for a decrease in consumer spending, could adversely affect us.
Economic conditions, including inflation and weakness in the U.S. housing industry, could decrease consumer discretionary spending and adversely affect our financial performance. Consumer prices have experienced their largest percentage increases since 1981, and interest rates have begun to increase. We believe that our sales of home-related products are affected by the strength of the U.S. housing industry. Downturns in the U.S. housing industry could have a material adverse effect on our financial results, business, and prospects. Similarly, a substantial portion of the products and services we offer are products or services that consumers may view as discretionary items rather than necessities. As a result, our results of operations are sensitive to changes in macroeconomic conditions that affect consumer spending, including discretionary spending. Difficult macroeconomic conditions also affect our customers' ability to obtain consumer credit. Other factors, including consumer confidence, employment levels, interest rates, tax rates, consumer debt levels, and fuel and energy costs could reduce consumer spending or change consumer purchasing habits. Slowdowns in the U.S. or global economy, or an uncertain economic outlook, could materially adversely affect consumer spending habits and could have a material adverse effect on our financial results, business, and prospects.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We have not sold any equity securities during three months ended ~~September 30, 2021~~March 31, 2022 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 30, 2021.~~March 31, 2022.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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, 2021 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.None.

ITEM 6. EXHIBITS.
Exhibit No.
Description
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 Certificate of Amendment of Amended and Restated Certificate of Incorporation of 1847 Goedeker Inc. (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 filed on December 28, 2021)
3.3 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)
~~3.3~~3.4 Amendment ~~No. 1~~No 1. to Bylaws of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 13, 2021)
~~4.1~~10.1 ~~Warrant Agent~~Lease Agreement, dated ~~May 27, 2021,~~March 15, 2022, between ~~1847 Goedeker Inc. and American Stock Transfer & Trust Company,~~8780 19 Ave LLC ~~and Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on June 3, 2021)~~
~~4.2~~ ~~Common Stock Purchase Warrant issued to Evergreen Capital Management LLC on March 19, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on March 25, 2021)~~
~~4.3~~ ~~Common Stock Purchase Warrant issued to SILAC Insurance Company on March 19, 2021 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 25, 2021)~~
~~4.4~~ ~~Form of Representative’s Warrant for Initial Public Offering (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 5, 2020)~~
~~10.1~~ ~~Employment Agreement, dated July 14, 2021, between 1847 Goedeker Inc. and Maria Johnson (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 20, 2021)~~
~~10.2~~ ~~Separation Agreement and Release, dated August 30, 2021, between Douglas T. Moore~~ and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on ~~September 3, 2021)~~March 21, 2022)
10.3*10.2 ~~Amendment No. 1~~Credit Agreement dated as of May 9, 2022, among the Borrowers, Guarantors, the lenders party hereto and the Agent (incorporated by reference to ~~Separation Agreement and Release, dated September 17, 2021, between Douglas T. Moore and 1847 Goedeker Inc.~~Exhibit 10.1 to the Current Report on Form 8-K filed on May 11, 2022)
10.4*10.3 ~~Warehouse~~Security and Pledge Agreement dated ~~September~~as of May 9, ~~2021, between Brook Warehousing Corporation~~2022, among the Borrowers, Grantors and ~~1847 Goedeker Inc.~~Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on May 11, 2022)
10.5* ~~Agreement, dated September 9, 2021, between Brook Warehousing Corporation and 1847 Goedeker Inc.~~
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 and Accounting 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 and Accounting 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*101.INS Inline XBRL Instance Document
101.SCH*101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL*101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith
** Furnished 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 15, 2021~~
May 16, 2022 1847 GOEDEKER INC.

/s/ Albert Fouerti
Name: Albert Fouerti
Title: Chief Executive Officer
(Principal Executive Officer)

/s/ Maria Johnson
Name: Maria Johnson
Title: Chief Financial Officer, Chief Accounting Officer and Secretary
(Principal Financial and Accounting Officer)

40
33

iso4217:USD xbrli:shares

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	27,175		$	935
Restricted cash		8,011			8,977
Receivables		24,018			1,998
Vendor deposits		12,134			548
Merchandise inventory, net		37,779			5,147
Prepaid expenses and other current assets		6,058			635
Total Current Assets		115,175			18,240
Property and equipment, net		2,520			246
Operating lease right-of-use assets, net		12,319			1,578
Goodwill		183,768			4,726
Intangible assets, net		47,858			1,382
Other long-term assets		344			45
TOTAL ASSETS	$	361,984		$	26,217

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	68,013		$	12,702
Customer deposits		18,382			21,879
Current portion of notes payable, net		6,425			663
Current portion finance lease liability		41			-
Current portion of operating lease liabilities		2,127			451
Contingent note payable		188			-
Total Current Liabilities		95,176			35,695
Notes payable, net of current portion		49,940			2,522
Finance lease liability, net of current portion		153			-
Operating lease liabilities, net of current portion		11,628			1,128
Deferred income taxes payable, net		3,042			-
Contingent note payable		-			188
TOTAL LIABILITIES		159,939			39,533
Stockholders’ Equity (Deficit)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of September 30, 2021 or December 31, 2020		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 106,387,332 and 6,111,200 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		11			1
Additional paid-in capital		224,904			13,409
Accumulated deficit		(22,870	)		(26,726	)
Total Stockholders’ Equity (Deficit)		202,045			(13,316	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	361,984		$	26,217

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Product sales, net	$	141,867		$	13,435		$	219,637		$	38,397
Cost of goods sold		110,495			11,265			172,581			32,061
Gross profit		31,372			2,170			47,056			6,336

Operating Expenses
Personnel		8,547			2,162			15,300			4,514
Advertising		3,715			1,433			7,730			2,991
Bank and credit card fees		4,918			575			7,546			1,274
Depreciation and amortization		3,610			93			3,908			277
Acquisition expenses		62			-			865			-
Loss on abandonment of right of use asset		-			-			1,437			-
General and administrative		4,018			1,451			8,311			4,400
Total Operating Expenses		24,870			5,714			45,097			13,456

INCOME (LOSS) FROM OPERATIONS		6,502			(3,544	)		1,959			(7,120	)

Other Income (Expense)
Interest income		34			1			57			2
Financing costs		(200	)		(488	)		(280	)		(758	)
Interest expense		(899	)		(229	)		(2,070	)		(787	)
Loss on extinguishment of debt		-			(807	)		(1,748	)		(1,756	)
Write-off of acquisition receivable		-			-			-			(809	)
Change in fair value of warrant liability		-			-			-			(2,128	)
Other income (expense)		8			2			19			7
Total Other Income (Expense)		(1,057	)		(1,521	)		(4,022	)		(6,229	)

NET INCOME (LOSS) BEFORE INCOME TAXES		5,445			(5,065	)		(2,063	)		(13,349	)

INCOME TAX (EXPENSE) BENEFIT		(2,129	)		838			5,919			1,962

NET INCOME (LOSS)	$	3,316		$	(4,227	)	$	3,856		$	(11,387	)

NET INCOME (LOSS) PER COMMON SHARE	$	0.03		$	(0.74	)	$	0.08		$	(2.17	)
DILUTED NET INCOME (LOSS) PER COMMON SHARE	$	0.03		$	(0.74	)	$	0.06		$	(2.17	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –
BASIC		106,387,331			5,736,774			50,047,045			5,247,384
DILUTED		131,787,293			5,736,774			61,816,085			5,247,384

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balance, January 1, 2021		6,111	$	1	$	13,409	$	(26,726	)	$	(13,316	)
Stock-based compensation expense		-		-		125		-			125
Issuance of warrants in connection with notes payable		-		-		1,340		-			1,340
Net loss		-		-		-		(3,493	)		(3,493	)
Balance, March 31, 2021		6,111	$	1	$	14,874	$	(30,219	)	$	(15,344	)
Issuance of common stock in connection with acquisition		5,896		1		12,263		-			12,264
Issuance of common stock in connection with public offering		93,111		9		194,588		-			194,597
Issuance of stock grants		217		-		555		-			555
Exercise of warrants		1,039		-		2,338		-			2,338
Stock-based compensation expense		-		-		125		-			125
Net income		-		-		-		4,033			4,033
Balance, June 30, 2021		106,374	$	11	$	224,743	$	(26,186	)	$	198,568
Exercise of warrants		13		-		29		-			29
Stock-based compensation expense		-		-		132		-			132
Net income		-		-		-		3,316			3,316
Balance, September 30, 2021		106,387	$	11	$	224,904	$	(22,870	)	$	202,045

	March 31,			December 31,
	2022			2021
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	25,821		$	25,724
Restricted cash		2,583			8,067
Receivables, net		26,288			24,594
Vendor deposits		18,064			12,199
Merchandise inventory, net		52,963			44,754
Prepaid expenses and other current assets		8,291			5,980

Total Current Assets		134,010			121,318

Property and equipment, net		3,688			3,554
Operating lease right-of-use assets		15,262			14,937
Goodwill		191,614			191,614
Intangible assets, net		41,658			44,212
Other long-term assets		349			349

TOTAL ASSETS	$	386,581		$	375,984

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	83,959		$	72,592
Customer deposits		13,080			20,702
Current portion of notes payable, net		7,907			7,910
Current portion of finance lease liabilities		120			65
Current portion of operating lease liabilities		3,845			3,874
Contingent note payable		200			198

Total Current Liabilities		109,111			105,341

Notes payable, net of current portion		47,181			48,559
Finance lease liabilities, net of current portion		306			121
Operating lease liabilities, net of current portion		12,787			12,493
Deferred tax liability, net		5,652			3,867

TOTAL LIABILITIES		175,037			170,381

Stockholders’ Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of March 31, 2022 and December 31, 2021		-			-
Common stock, $0.0001 par value, 250,000,000 shares authorized; 106,387,332 shares issued and outstanding as of March 31, 2022 and December 31, 2021		11			11
Additional paid-in capital		224,667			224,648
Accumulated deficit		(13,134	)		(19,056	)

TOTAL STOCKHOLDERS’ EQUITY		211,544			205,603

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	386,581		$	375,984

	For the Three Months
	Ended March 31,
	2022			2021

Product sales, net	$	152,752		$	13,697
Cost of goods sold		116,883			11,069
Gross profit		35,869			2,628

Operating Expenses
Personnel		7,046			1,931
Advertising		4,288			1,083
Bank and credit card fees		6,167			533
Depreciation and amortization		2,734			122
General and administrative		5,567			2,240

Total Operating Expenses		25,802			5,909

INCOME (LOSS) FROM OPERATIONS		10,067			(3,281	)

Other Income (Expenses)
Interest income		41			10
Adjustment in value of contingency		(2	)		-
Interest expense		(936	)		(232	)
Other income		135			10

Total Other Income (Expenses)		(762	)		(212	)

NET INCOME (LOSS) BEFORE INCOME TAXES		9,305			(3,493	)

INCOME TAX EXPENSE		(3,383	)		-

NET INCOME (LOSS)	$	5,922		$	(3,493	)

NET INCOME (LOSS) PER COMMON SHARE – BASIC AND DILUTED	$	0.06		$	(0.57	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED		106,387,332			6,111,200

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Appliance sales	$	130,837	$	8,992	$	197,416	$	28,327
Furniture sales		5,880		3,555		14,393		7,605
Other sales		5,150		888		7,828		2,465
Total	$	141,867	$	13,435	$	219,637	$	38,397

~~Category~~		~~Useful Life (Years)~~
~~Furniture and fixtures~~		7
~~Machinery and equipment~~		~~5-7~~
~~Office equipment~~		~~5-7~~
~~Transportation equipment~~		5

	September 30, 2021		December 31, 2020
Trade receivables from customers	$	12,551	$	-
Vendor rebates receivable		7,499		1,338
Credit cards in process of collection		135		660
Other receivables		3,833		-
Total receivables	$	24,018	$	1,998

	September 30, 2021			December 31, 2020
Appliances	$	34,317		$	5,286
Furniture		1,903			195
Other		1,984			91
Total merchandise inventory		38,204			5,572
Allowance for inventory obsolescence		(425	)		(425	)
Merchandise inventory, net	$	37,779		$	5,147

	For the Three Months Ended
	March 31,		March 31,
	2022		2021

Appliance sales	$	140,975	$	10,273
Furniture sales		4,155		2,328
Other sales		7,622		1,096

Total	$	152,752	$	13,697

	September 30, 2021			December 31, 2020
Equipment	$	88		$	69
Warehouse equipment		374			61
Furniture and fixtures		8			1
Transportation equipment		1,418			64
Leasehold improvements		216			137
Construction in progress		693			-
Total property and equipment		2,797			332
Accumulated depreciation		(277	)		(86	)
Property and equipment, net	$	2,520		$	246

	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Customer relationships	$	26,549		$	749		$	24,148		$	24,148
Marketing related - tradename		25,704			1,368			26,935			26,935
Total intangible assets		52,253			2,117			51,083			51,083
Accumulated amortization		(4,395	)		(735	)		(9,425	)		(6,871	)
Intangible assets, net	$	47,858		$	1,382		$	41,658		$	44,212

2021 (remainder of year)	$	2,613
2022		10,451
2022 (remainder of year)			$	7,662
2023		10,451		10,217
2024		10,139		9,905
2025		10,027		9,793
Thereafter		4,177
2026				4,081
Total	$	47,858	$	41,658

Balance December 31, 2020	$	4,726
Preliminary goodwill from acquisition of Appliances Connection		177,875
Preliminary goodwill from acquisition of Appliances Gallery		1,167
Balance September 30, 2021	$	183,768

	September 30, 2021		December 31, 2020
Trade accounts payable	$	37,845	$	5,975
Sales tax		23,836		5,804
Accrued payroll liabilities		1,527		493
Accrued interest		210		10
Accrued liability for sales returns		200		200
Other accrued liabilities		4,395		220
Total accounts payable and accrued expenses	$	68,013	$	12,702

Provisional purchase consideration at preliminary fair value (in thousands):
Cash consideration	$	180,000
Share issuance		12,264
Working capital adjustment paid to sellers		27,597
Working capital adjustment due to sellers		5,000
Amount of consideration	$	224,861

Assets acquired and liabilities assumed at preliminary fair value
Cash	$	5,897
Accounts receivable		19,403
Inventories		20,484
Vendor deposits		15,000
Other assets		2,194
Property and equipment		1,891
Right of use operating lease assets		1,834
Customer relationships		25,800
Marketing related - tradename		24,336
Accounts payable and accrued expenses		(43,633	)
Customer deposits		(13,138	)
Finance lease obligation		(215	)
Net deferred tax liabilities		(9,506	)
Operating lease liability		(1,834	)
Notes payable		(1,527	)
Total net assets acquired	$	46,986
Consideration paid		224,861
Preliminary goodwill	$	177,875

Years Ending December 31,	Amount
2022 – remaining	$	3,314
2023		4,446
2024		2,086
2025		1,776
2026		1,827
Thereafter		7,544

Total		20,993
Less: imputed interest		(4,362	)

Total operating lease liabilities	$	16,631

Provisional purchase consideration at fair value (in thousands):
Cash consideration	$	1,420
Amount of consideration	$	1,420
Assets acquired and liabilities assumed at preliminary fair value
Inventory		483
Prepaid assets		6
Property and equipment		19
Customer deposits		(255	)
Net tangible assets acquired	$	253

Total net assets acquired	$	253
Consideration paid		1,420
Preliminary goodwill	$	1,167

For the years ended December 31,	Amount
2021 (remainder of year)	$	1,500
2022		6,000
2023		6,000
2024		6,000
2025		6,000
Thereafter		33,000
Total		58,500
Less: Loan costs		(3,501	)
Total	$	54,999
Amount classified as a current liability	$	6,000
Amount classified as long-term liability	$	48,999

Operating lease right-of-use assets	$	12,319

Lease liabilities, current portion	$	2,127
Lease liabilities, long-term		11,628
Total operating lease liabilities	$	13,755

Weighted average remaining lease term (months)		91

Weighted average discount rate		4.4	%

2021 (remainder of year)	$	559
2022		2,581
2023		2,620
2024		1,805
2025		1,487
Thereafter		7,065
Total lease payments		16,117
Less imputed interest		(2,362	)
Total lease liability	$	13,755

				Weighted -Average
	Options			Exercise Price

Outstanding at December 31, 2021		312,960		$	6.17

Granted		-			-
Exercised		-			-
Forfeited		(132,960	)		9.00

Outstanding at March 31, 2022		180,000		$	4.08

Exercisable at March 31, 2022		30,000		$	9.00

			Weighted- Average
	Warrants		Exercise Price

Outstanding at December 31, 2021		92,514,423	$	2.30

Granted		-		-
Exercised		-		-
Forfeited		-		-

Outstanding at March 31, 2022		92,514,423	$	2.30

Exercisable at March 31, 2022		92,514,423	$	2.30

~~Volatility~~	~~77.65~~	%
~~Risk-free interest rate~~	~~1.00~~	%
~~Dividend yield~~	~~0.00~~	%
~~Expected term~~	~~6.25 Years~~ We are amortizing the customer relationship and tradename intangible assets acquired over 5 years. Goodwill and intangibles recognized for this transaction are not deductible for tax purposes.

	Shares			Weighted Average Exercise Price		Weighted Average Contractual Term in Years
Outstanding at January 1, 2021		555,000		$	9.00		9
Granted		150,000			3.10		10
Exercised		-			-		-
Forfeited / Cancelled / Expired		(131,579	)		-		-
Outstanding at September 30, 2021		573,421		$	7.74		8.85

Exercisable at September 30, 2021		204,540		$	9.00		8.85

	Three Months Ended March 31,		Three Months Ended March 31,
	2022		2021

Net sales	$	152,752	$	123,711
Net income		5,922		10,899
Earnings (loss) per share:
Basic and Diluted	$	0.06	$	1.78

For the years ended December 31,
2022 (remainder of year)	$	4,500
2023		6,000
2024		6,000
2025		6,000
Thereafter		33,000
Total		55,500
Less: Loan costs		(3,501	)
Total	$	51,999
Amount classified as a current liability	$	6,000
Amount classified as long-term liability	$	45,999

	●	~~the impact of the coronavirus pandemic on our operations and financial condition;~~

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

	●	~~expected changes in our revenue, costs or expenditures;~~