UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−~~Q/A~~Q

~~(Amendment No. 1)~~

(Mark One)

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

For the quarterly period ended: June 30, ~~2020~~2021

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

For the transition period from ____________ to _____________

Commission File Number: 001-39418

1847 GOEDEKER INC.

(Exact name of registrant as specified in its charter)

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

~~13850 Manchester Rd., Ballwin,~~3817 Millstone Parkway, St. Charles, MO		~~63011~~63301
(Address of principal executive offices)		(Zip Code)

888-768-1710

(Registrant’s telephone number, including area code)

~~N/A~~

(Former name or former address, 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 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 August ~~19, 2020,~~10, 2021, there were ~~6,111,200~~106,387,332 shares of the registrant’s common stock issued and outstanding.

~~EXPLANATORY NOTE~~

1847 ~~Goedeker Inc. (the “Company”) is filing this amended Form 10-Q/A (this “Amendment”) to amend its~~ GOEDEKER INC.

Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 that was originally filed with the Securities and Exchange Commission (the “SEC”) on August 20, 2020 (“Original Filing”) to restate its unaudited financial statements as of June 30, 2020 and December 31, 2019 (successor), for the three and six months ended June 30, 2020 (successor), for the period from April 6, 2019 to June 30, 2019 (successor), for the period from April 1, 2019 to April 5, 2019 (predecessor) and for the period from January 1, 2019 to April 5, 2019 (predecessor). As described in Item 4.02 of the Company’s Current Report on Form 8-K filed with the SEC on March 29, 2021, the previously filed unaudited financial statements for these periods should no longer be relied upon. This Amendment also amends certain other items in the Original Filing, as listed below.

As further discussed in Note 3 to the Company’s unaudited financial statements in Part I, Item 1, “Financial Statements” of this Amendment, the Company concluded that it would restate the previously issued financial statements included in the Original Filing in connection with the modification of a sales tax liability and certain purchase accounting adjustments. In addition, the restated financial statements also include adjustments to correct certain other immaterial errors, including previously unrecorded immaterial adjustments identified in audits of prior years’ financial statements.

For the convenience of the reader, this Amendment sets forth the Original Filing in its entirety, as modified and superseded as necessary to reflect the restatement and other immaterial changes described above. Accordingly, the Amendment does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures affected by subsequent events and should be read in conjunction with the Original Filing and the Company’s other filings with the SEC. Information not affected by the restatement and other immaterial changes is unchanged and reflects disclosures made at the time of the filing of the Original Filing. The disclosures impacted by the restatement include, but are not limited to, those related to goodwill, accounts payable and accrued expenses, additional paid-in capital, accumulated deficit, general and administrative expenses and net loss. The following items in the Original Filing have been amended as a result of, and to reflect, the restatement:

~~Part I, Item 1. Financial Statements~~

~~Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation~~

~~Part II, Item 6. Exhibits~~

In accordance with applicable SEC rules, this Amendment includes new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, from the Company’s Chief Executive Officer and Chief Financial Officer dated as of the date of filing of this Amendment.

~~1847 GOEDEKER INC.~~

~~Quarterly Report on Form 10-Q~~

Period Ended June 30, ~~2020~~2021

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

1847 GOEDEKER INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page

Condensed Consolidated Balance Sheets as of June 30, ~~2020~~2021 (unaudited) and December 31, ~~2019 (As Restated)~~2020		2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 ~~and the Period from April 6, 2019 to June 30, 2019 (Successor), and for the Period from April 1, 2019 to April 5, 2019 and the Period from January 1, 2019 to April 5, 2019 (Predecessor)~~ (unaudited) ~~(As Restated)~~		3
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for ~~Predecessor for the Period from January 1, 2019 to April 5, 2019 (unaudited)~~		4
~~Statement of Stockholder’s Deficit for Successor for the Period from April 6, 2019 to June 30, 2019~~Three and ~~for~~ Six Months Ended June 30, 2021 and 2020 (unaudited) ~~(As Restated)~~		54
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 ~~and the Period from April 6, 2019 to June 30, 2019 (Successor) and for the Period from January 1, 2019 to April 5, 2019 (Predecessor)~~ (unaudited) ~~(As Restated)~~		65
Notes to Condensed Consolidated Financial Statements ~~(As Restated)~~(unaudited)		76

1847 GOEDEKER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	45,234,542		$	934,729
Restricted cash		8,385,848			8,977,187
Receivables		21,266,787			1,998,232
Vendor deposits		10,755,209			547,648
Merchandise inventory, net		21,134,023			5,147,241
Prepaid expenses and other current assets		3,680,975			635,084
Total Current Assets		110,457,384			18,240,121
Property and equipment, net		2,480,055			245,948
Operating lease right-of-use assets, net		12,822,972			1,578,235
Goodwill		222,107,789			4,725,689
Intangible assets, net		1,170,239			1,381,937
Deferred tax asset		8,049,978			-
Other long-term assets		45,000			45,000
TOTAL ASSETS	$	357,133,417		$	26,216,930

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	51,897,666		$	12,701,715
Due to Sellers		3,351,024			-
Customer deposits		30,811,985			21,879,210
Current portion of notes payable, net		6,455,272			663,339
Current portion finance lease liability		65,378			-
Current portion of operating lease liabilities		2,157,010			450,712
Contingent note payable		188,170			-
Total Current Liabilities		94,926,505			35,694,976
Notes payable, net of current portion, net		51,344,869			2,522,030
Finance lease liability, net of current portion		145,431			-
Operating lease liabilities, net of current portion		12,149,107			1,127,523
Contingent note payable		-			188,170
TOTAL LIABILITIES		158,565,912			39,532,699
Stockholders’ Equity (Deficit)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of June 30, 2021 or December 31, 2020		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 106,374,232 and 6,111,200 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		10,638			611
Additional paid-in capital		224,743,096			13,409,328
Accumulated deficit		(26,186,229	)		(26,725,708	)
Total Stockholders’ Equity (Deficit)		198,567,505			(13,315,769	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	357,133,417		$	26,216,930

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

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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

1847 GOEDEKER INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Product sales, net $ 64,072,098 $ 15,285,031 $ 77,769,466 $ 24,962,209
Cost of goods sold 51,016,609 12,685,158 62,085,520 20,796,328
Gross profit 13,055,489 2,599,873 15,683,946 4,165,881

Operating Expenses
Personnel 4,821,168 1,040,189 6,752,492 2,351,673
Advertising 2,931,815 891,907 4,015,063 1,558,343
Bank and credit card fees 2,095,359 454,569 2,628,101 699,309
Depreciation and amortization 175,143 91,790 297,475 183,631
Acquisition expenses 357,411 - 802,899 -
Loss on abandonment of right of use asset 1,437,042 - 1,437,042 -
General and administrative 2,500,381 1,509,417 4,294,390 2,949,257
Total Operating Expenses 14,318,319 3,987,872 20,227,462 7,742,213

LOSS FROM OPERATIONS (1,262,830 ) (1,387,999 ) (4,543,516 ) (3,576,332 )

Other Income (Expense)
Interest income 12,283 1,062 22,379 1,062
Financing costs (74,738 ) (74,504 ) (80,003 ) (269,186 )
Interest expense (943,392 ) (296,708 ) (1,170,957 ) (557,996 )
Loss on extinguishment of debt (1,747,901 ) (948,856 ) (1,747,901 ) (948,856 )
Write-off of acquisition receivable - (809,000 ) - (809,000 )
Change in fair value of warrant liability - (2,127,656 ) - (2,127,656 )
Other income (expense) 794 2,880 10,999 5,263
Total Other Income (Expense) (2,752,954 ) (4,252,782 ) (2,965,483 ) (4,706,369 )

NET LOSS BEFORE INCOME TAXES (4,015,784 ) (5,640,781 ) (7,508,999 ) (8,282,701 )

INCOME TAX (EXPENSE) BENEFIT 8,048,478 688,953 8,048,478 1,123,953

NET INCOME (LOSS) $ 4,032,694 $ (4,951,828 ) $ 539,479 $ (7,158,748 )

NET INCOME (LOSS) PER COMMON SHARE $ 0.11 $ (0.99 ) $ 0.03 $ (1.43 )
DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.09 $ (0.99 ) $ 0.02 $ (1.43 )

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –
BASIC 36,540,827 5,000,000 21,410,073 5,000,000
DILUTED 46,448,892 5,000,000 26,364,106 5,000,000
Successor Predecessor
Three Months Ended
June 30, 2020
(As Restated) Six Months Ended
June 30, 2020
(As Restated) Period from April 6, 2019 through
June 30, 2019
(As Restated) Period from April 1, 2019
through
April 5, 2019 Period from January 1, 2019
through
April 5, 2019
Product sales, net $ 15,285,031 $ 24,962,209 $ 10,545,880 $ 999,855 $ 12,946,901
Cost of goods sold 12,685,158 20,796,328 8,702,406 735,186 11,004,842
Gross profit 2,599,873 4,165,881 1,843,474 264,669 1,942,059

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

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

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

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

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

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

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

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED 5,000,000 5,000,000 5,000,000 7,000 7,000
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

3

1847 GOEDEKER INC.
~~STATEMENT~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(PREDECESSOR)~~(DEFICIT)
(UNAUDITED)
Common Stock Additional
Paid-in Retained Total Stockholders’
Shares Amount Capital Earnings Equity
Balance, December 31, 2018 7,000 $ 7,000 $ 707,049 $ 2,684,628 $ 3,398,677
Net loss for the period from January 1, 2019 through April 5, 2019 - - - (445,265 ) (445,265 )
Balance, April 5, 2019 7,000 $ 7,000 $ 707,049 $ 2,239,363 $ 2,953,412
For the Three and Six Months Ended June 30, 2021
Common Stock Additional
Paid-in Accumulated Total
Stockholders’
Equity
Shares Amount Capital Deficit (Deficit)
Balance, January 1, 2021 6,111,200 $ 611 $ 13,409,328 $ (26,725,708 ) $ (13,315,769 )
Stock-based compensation expense - - 124,575 - 124,575
Issuance of warrants in connection with notes payable - - 1,340,438 - 1,340,438
Net loss - - - (3,493,215 ) (3,493,215 )
Balance, March 31, 2021 6,111,200 $ 611 $ 14,874,341 $ (30,218,923 ) $ (15,343,971 )
Issuance of common stock in connection with acquisition 5,895,973 590 12,263,034 - 12,263,624
Issuance of common stock in connection with public offering 93,111,111 9,311 194,588,189 - 194,597,500
Issuance of stock grants 216,800 22 554,978 - 555,000
Exercise of warrants 1,039,148 104 2,337,979 - 2,338,083
Stock-based compensation expense - - 124,575 - 124,575
Net income - - - 4,032,694 4,032,694
Balance, June 30, 2021 106,374,232 $ 10,638 $ 224,743,096 $ (26,186,229 ) $ 198,567,505
For the Three and Six Months Ended June 30, 2020
Common Stock
Additional
Paid-in
Accumulated
Total
Stockholders’

Shares Amount Capital Deficit Deficit
Balance, January 1, 2020 4,750,000 $ 475 $ 1,079,179 $ (5,157,871 ) $ (4,078,217 )
Net loss - - - (2,206,920 ) (2,206,920 )
Balance, March 31, 2020 4,750,000 $ 475 $ 1,079,179 $ (7,364,791 ) $ (6,285,137 )
Issuance of 1847 Holdings warrants in connection with notes payable - - 566,711 - 566,711
Forgiveness of related party debt - - 137,500 - 137,500
Issuance of 1847 Holdings shares in connection with exercise of warrant - - 275,000 - 275,000
Net loss - - - (4,951,828 ) (4,951,828 )
Balance, June 30, 2020 4,750,000 $ 475 $ 2,058,390 $ (12,316,619 ) $ (10,257,754 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4
1847 GOEDEKER INC.
~~STATEMENT~~CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDER’S DEFICIT (SUCCESSOR)~~CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 539,479 $ (7,158,748 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 297,475 183,631
Amortization of debt discount 666,927 318,599
Stock-based compensation expense 804,150 -
Loss on extinguishment of debt 1,747,901 948,856
Loss on abandonment of right of use asset 1,437,042 -
Write-off of acquisition receivable - 809,000
Change in fair value of warrant liability - 2,127,656
Deferred tax asset (8,049,978 ) (1,123,953 )
Non-cash lease expense 340,687 207,883
Changes in operating assets and liabilities:
Receivables 475,812 (214,726 )
Vendor deposits (207,561 ) (50,543 )
Merchandise inventory 2,313,999 (344,635 )
Prepaid expenses and other assets (1,037,508 ) (1,914,049 )
Accounts payable and accrued expenses (4,358,830 ) 2,003,642
Customer deposits (1,740,825 ) 8,267,312
Operating lease liabilities (214,072 ) (207,883 )
Net cash provided by (used in) provided by operating activities (6,985,302 ) 3,852,042

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (509,428 ) (7,000 )
Cash paid to Sellers in acquisition, net of cash acquired (197,623,238 ) -
Net cash used in investing activities (198,132,666 ) (7,000 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity offering 194,597,500 -
Cash received from warrant exercise 2,338,083 -
Proceeds from term note payable 55,216,594 642,500
Repayment on notes payable (3,321,536 ) (181,674 )
Payments on finance leases (4,199 ) -
Net payments on lines of credit - (814,492 )
Net cash provided by (used in) financing activities 248,826,442 (353,566 )

NET CHANGE IN CASH AND RESTRICTED CASH 43,708,474 3,491,476
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD 9,911,916 64,470
CASH AND RESTRICTED CASH, END OF PERIOD $ 53,620,390 $ 3,555,946

Cash, cash equivalents, and restricted cash consist of the following:
End of period
Cash and cash equivalents $ 45,234,542 $ 3,555,946
Restricted cash 8,385,848 -
$ 53,620,390 $ 3,555,946
Cash, cash equivalents, and restricted cash consist of the following
Beginning of period
Cash and cash equivalents $ 934,729 $ 64,470
Restricted cash 8,977,187 -
$ 9,911,916 $ 64,470
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 1,018,317 $ 170,385
Cash paid for taxes $ 697,976 $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES
Right of use assets acquired $ 11,108,055 $ -
Right of use liabilities assumed $ 11,108,055 $ -
Debt discount on notes payable from OID $ 910,000 $ -
Debt discount, warrants on short-term note payable $ 1,340,438 $ -
Stock issued in the acquisition of Appliances Connection $ 12,263,624 $ -
Debt paid off through issuance of new note $ 5,616,111 $ -
Due to Seller (consideration) settled by vendor deposits $ 5,000,000 $ -
Conversion of debt through issuance of 1847 Holdings common shares $ - $ 275,000
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest $ - $ 118,500
Derecognition of related party debt $ - $ 137,500
Adjustment to fair value of goodwill based on final purchase price allocation $ - $ 121,736
~~For the Period from April 6, 2019 through June 30, 2019 (As Restated)~~
Common Stock
Additional
Paid-in
Accumulated Total
Stockholder’s
Shares Amount Capital Deficit Deficit
Balance, April 6, 2019 - $ - $ - $ - $ -
Capital contribution by Holdco for the acquisition of Goedeker Television Co. 4,750,000 475 786,506 - 786,981
Issuance of warrants in connection with notes payable - - 292,673 - 292,673
Net loss for the period from April 6, 2019 through June 30, 2019 - - - (2,185,083 ) (2,185,083 )
Balance, June 30, 2019 (As Restated) 4,750,000 $ 475 $ 1,079,179 $ (2,185,083 ) $ (1,105,429 )
~~For the Three and Six Months Ended June 30, 2020 (As Restated)~~
Common Stock Additional Accumulated Total
Stockholder’s
Shares Amount Paid-in
Capital Deficit Deficit
Balance, January 1, 2020 (As Restated) 4,750,000 $ 475 $ 1,079,179 $ (5,157,871 ) $ (4,078,217 )
Net loss - - - (2,206,920 ) (2,206,920 )
Balance, March 31, 2020 (As Restated) 4,750,000 $ 475 $ 1,079,179 $ (7,364,791 ) $ (6,285,137 )
Issuance of 1847 Holdings warrants in connection with notes payable - - 566,711 - 566,711
Forgiveness of related party debt - - 137,500 - 137,500
Issuance of 1847 Holdings shares in connection with exercise of warrant - - 275,000 - 275,000
Net loss - - - (4,951,828 ) (4,951,828 )
Balance, June 30, 2020 (As Restated) 4,750,000 $ 475 $ 2,058,390 $ (12,316,619 ) $ (10,257,754 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5
1847 GOEDEKER INC.
~~STATEMENTS OF CASH FLOWS~~
~~(UNAUDITED)~~
Successor Predecessor
Six Months Ended
June 30,
2020
(As Restated) Period from April 6,
2019 through
June 30,
2019
(As Restated) Period from January 1,
2019
through
April 5,
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,158,748 ) $ (2,185,083 ) $ (445,265 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 183,631 97,113 9,675
Amortization of finance costs 318,599 157,502 -
Gain on write-down of contingent liability - - -
Loss on extinguishment of debt 948,856 - -
Write-off of acquisition receivable 809,000 - -
Change in fair value of warrant liability 2,127,656 (2,600 ) -
Non-cash lease expense 207,883 98,166 -
Deferred tax assets (1,123,953 ) - -
Changes in operating assets and liabilities:
Receivables (214,726 ) (1,812,486 ) 1,730,079
Vendor deposits (50,543 ) - (73,770 )
Merchandise inventory (344,635 ) (608,073 ) 595,466
Prepaid expenses and other assets (1,914,049 ) 505,727 2,784
Accounts payable and accrued expenses 2,003,642 734,813 196,565
Customer deposits 8,267,312 995,742 (1,404,266 )
Operating lease liabilities (207,883 ) (98,166 ) -
Net cash provided by (used in) operating activities 3,852,042 (2,117,345 ) 611,268
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (7,000 ) - -
Net cash used in investing activities (7,000 ) - -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable 642,600 1,500,000 -
Repayment on notes payable (181,674 ) (93,750 ) -
Proceeds from convertible notes payable - 650,000 -
Net borrowings (payments) on lines of credit (814,492 ) 591,315 -
Cash paid for financing costs - (359,500 ) -
Net cash provided by (used in) financing activities (353,566 ) 2,288,065 -
NET CHANGE IN CASH 3,491,476 170,720 611,268
CASH, BEGINNING OF PERIOD 64,470 - 1,525,693
CASH, END OF PERIOD $ 3,555,946 $ 170,720 $ 2,136,961

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 170,385 $ 77,185 $ -
Cash paid for taxes $ - $ - $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES
Operating lease right-of-use asset $ - $ 2,300,000 $ -
Debt discounts on notes payable $ - $ 66,286 $ -
Warrants in 1847 Holdings contributed on notes payable $ - $ 229,244 $ -
Warrants in 1847 Holdings contributed on convertible notes payable $ - $ 292,673 $ -
1847 Holdings common shares contributed on note payable $ - $ 137,500 $ -
Acquisition of Goedeker Television Co. $ - $ 492,601 $ -
Conversion of debt through issuance of 1847 Holdings common shares $ 275,000 $ - $ -
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest $ 118,500 $ - $ -
Derecognition of related party debt $ 137,500 $ - $ -
Adjustment to fair value of goodwill based on final purchase price allocation $ 121,736 $ - $ -
~~The accompanying notes are an integral part of these unaudited financial statements~~
6
~~1847 GOEDEKER INC.~~
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, ~~2020~~2021 AND ~~2019~~2020
(UNAUDITED)

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS
1847 Goedeker Inc. (the “Company”) 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 ~~August 4, 2020,~~the acquisition, the Company ~~was a wholly owned subsidiary of 1847 Goedeker Holdco Inc. (“Holdco”), which was formed in State of Delaware on March 20, 2019. Neither the Company nor Holdco had~~did not have any operations other than operations relating to ~~their~~its incorporation and ~~organization prior to the acquisition of the business of Goedeker Television Co.~~organization.
Upon its formation, Holdco was a wholly owned subsidiary of 1847 Holdings LLC (“1847 Holdings”), which was formed under the laws of the State of Delaware on January 22, 2013. 1847 Holdings is in the business of acquiring small businesses in a variety of different industries.
On April 5, 2019, ~~the Company executed an asset purchase agreement with Goedeker Television Co., a Missouri corporation (“Goedeker”), pursuant to which~~ the Company acquired substantially all the assets and assumed substantially all the liabilities of ~~Goedeker. As partial consideration for the acquisition, the sellers of~~ Goedeker ~~acquired 22.5% of Holdco and Leonite Capital LLC,~~Television Co., a ~~lender involved with financing the acquisition of the Goedeker by the Company, acquired 7.5% of Holdco, as a result of which, 1847 Holdings held 70% of Holdco.~~
On August 4, 2020, Holdco distributed all of its shares in the Company to its stockholders. On the same date, the Company completed an initial public offering of its common stock, pursuant to which the Company issued 1,111,200 shares of its common stock.Missouri corporation (“Goedeker”). As a result of ~~these transactions,~~this transaction, the Company isacquired the former business of Goedeker and continues to operate this business.
On October 20, 2020, the Company formed Appliances Connection Inc. (“ACI”) as a ~~majority~~wholly owned ~~(53.59%~~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”) ~~subsidiary~~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.
The Company operates a technology-driven e-commerce platform for appliances, furniture, home goods and related products. Since its founding in 1951, the Company has evolved from a local brick and mortar operation serving the St. Louis metro area to a nationwide omni-channel retailer offering the largest online selection of ~~1847 Holdings.~~household appliances across all major appliance brands with competitive pricing.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The unaudited condensed consolidated financial statements of the Company and its consolidated subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and ~~are presented in US dollars.~~with the instructions to Article 8 of Regulation S-X.
In the opinion of management, all adjustments ~~(consisting of normal recurring accruals)~~ considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.
These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained ~~elsewhere~~ in ~~this report.~~the Company’s annual report on Form 10-K for the year ended December 31, 2020.

Principles of Consolidation
~~Accounting Basis~~
The unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, ACI, 1 Stop, Gold Coast, Superior Deals, Joe’s Appliances and YF Logistics. All significant intercompany balances and transactions have been eliminated in consolidation. The Company ~~uses the accrual basis of accounting and GAAP. The Company has adopted~~does not have a ~~calendar year end.~~majority or minority interest in any other company, either consolidated or unconsolidated.

Stock Split
On July 30, 2020, the Company completed a 4,750-for-1 forward stock split of its outstanding common stock. As a result of this stock split, the Company’s issued and outstanding common stock increased from 1,000 to 4,750,000 shares. Accordingly, all share and per share information has been restated to retroactively show the effect of this stock split.
~~Predecessor and Successor Reporting~~
The acquisition of Goedeker as described in Note 1 was accounted for under the acquisition method of accounting in accordance with GAAP. For the purpose of financial reporting, Goedeker was deemed to be the predecessor company and the Company is deemed to be the successor company in accordance with the rules and regulations issued by the Securities and Exchange Commission. The assets and liabilities of Goedeker were recorded at their respective fair values as of the acquisition date. Fair value adjustments related to the transaction are reflected in the books of the Company, resulting in assets and liabilities of the Company being recorded at fair value at April 6, 2019. Therefore, the Company’s financial information prior to the transaction is not comparable to its financial information subsequent to the transaction.

7
1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, ~~2020~~2021 AND ~~2019~~2020
(UNAUDITED)
As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the transaction (labeled “Predecessor”) and the period after that date (labeled “Successor”), to indicate the application of a different basis of accounting between the periods presented.

Use of Estimates
The preparation of these 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 June 30, 2021, restricted cash includes approximately $300,000 to secure vendor letters of credit and $8,085,848 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
~~On January 1, 2018, the~~The Company ~~adopted~~records revenue in accordance with Financial Accounting Standards ~~Update~~Board (“~~ASU”~~FASB”) ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~~~, which supersedes the revenue recognition requirements in~~ Accounting ~~Standard~~Standards Codification (“ASC”) Topic ~~605,~~ 606. Revenue ~~Recognition~~~~. This ASU is based on the principle that revenue~~ is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ~~This ASU~~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 adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.~~

The Company collects the full sales price from the customer at the time the order is placed. The Company does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.
~~The revenue that the Company recognizes arises from orders it receives from its customers.~~ 1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
The Company’s performance ~~obligations under~~obligation is to deliver the customer’s order. Each customer ~~orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase~~ order generally contains only one performance obligation based on the merchandise sale to be ~~completed.~~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 truck and delivers and installs the product at the customer’s location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer’s location. In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company’s warehouse or a third party’s warehouse). Therefore, risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company’s warehouse or a third-party’s warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer’s control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company recognizes revenue.
8
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(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.
~~If the Company continued to apply legacy revenue recognition guidance for the six months ended June 30, 2020 and 2019, revenues, gross margin, and net loss would not have changed.~~
Cost of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.
Substantially all the Company’s sales are to individual retail ~~consumers.~~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 ~~contract~~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 ~~sales~~product type is as follows:
Successor Predecessor
Three Months Ended
June 30, 2020 Six Months Ended
June 30, 2020 Period from April 6, 2019
through
June 30, 2019 Period from January 1, 2019
through
April 5, 2019
Appliance sales $ 11,533,006 $ 19,335,110 $ 8,449,312 $ 9,784,525
Furniture sales 2,768,327 4,050,163 1,570,546 2,456,085
Other sales 983,698 1,576,936 526,023 706,291
Total $ 15,285,031 $ 24,962,209 $ 10,545,881 $ 12,946,901
Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Appliance sales $ 56,202,115 $ 11,533,006 $ 66,387,297 $ 19,335,110
Furniture sales 6,172,784 2,768,327 8,487,474 4,050,163
Other sales 1,697,199 983,698 2,894,695 1,576,936
Total $ 64,072,098 $ 15,285,031 $ 77,769,466 $ 24,962,209
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.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
Receivables
Receivables ~~consist~~consists of customer’s balance payments for which the Company extends credit ~~card transactions in the process of settlement.~~to certain homebuilders and designers based on prior business relationship, and vendor rebate receivables. Vendor rebates receivable represent amounts due from ~~manufacturers~~manufactures from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers ~~net of accounts payable amounts due the vendor.~~(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 of its ~~outstanding rebates receivables.~~trade receivables from customers and bad debt expense has been historically immaterial to the combined financial statements. Uncollectible balances are expensed in the period it is determined to be uncollectible. The Company had no significant concentrations of receivables balances as of June 30, 2021

Merchandise Inventory
Inventory consists of finished products acquired for resale and is valued at the ~~low-of-cost-or-market~~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. ~~Reserves for slow-moving and potentially obsolete inventories was $425,000 as of June 30, 2020 and December 31, 2019.~~

9
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(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 55-7
Office equipment 55-7
~~Vehicles~~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 six months ended June 30, 2021 and 2020.
Intangible Assets
As of June 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.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.
In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value. Impairments for the three and six months ended June 30, 2021 were $1,437,042 due to an abandonment of certain right of use assets. There were no impairments for the six months ended June 30, 2020.
~~Acquired identifiable intangible assets are amortized over the following periods:~~
~~Acquired Intangible Asset~~
~~Amortization Basis~~ ~~Expected Life (Years)~~
~~Customer related~~ ~~Straight-line~~ 5
~~Marketing related~~ ~~Straight-line~~ 5

Long-Lived Assets
The Company reviews its property and equipment and any identifiable intangibles (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 ~~at least annually.~~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. Impairments for the three and six months ended June 30, 2021 were $1,437,042 due to an abandonment of certain right of use assets and the respective leasehold improvements. There were no impairments for the six months ended June 30, 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.

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

10
Customer Deposits
~~1847 GOEDEKER INC.~~
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 the customer if the order is subsequently cancelled.
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

~~Derivative Instrument Liability~~
~~The Company accounts for derivative instruments in accordance with ASC 815,~~ ~~Derivatives and Hedging~~, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At June 30, 2020 and December 31, 2019, the Company classified a warrant issued in conjunction with a term loan as a derivative instrument (see Note 10).
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 Dakotasales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. In 2020, the Company began collecting sales tax in nearly all states that have sales tax. The Company accrued sales taxes in the states with sales tax. The Company accrued the ~~potential~~ liability from the effective date of a state’s adoption of the Wayfair decision up to the date the Company began collecting and filing sales taxes in the various states. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the amount of such accrual was ~~$4,767,000~~$17,947,165 and ~~$2,910,200, respectively,~~$5,804,100. The amount of sales tax liability acquired in the Appliances Connection transaction was $10,975,324 plus accrued interest of $1,042,991, which isare included in accounts payable and accrued expenses.
As of June 30, 2021, only one state has notified the Company of a potential sales tax liability of approximately $82,000, all of which was previously accrued.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
~~Basic~~ Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive ~~debt or equity.~~securities. For the three and six ~~month periods~~months ended June 30, ~~2020 and 2019,~~2021, the potentially dilutive securities were ~~penny~~warrants for the purchase of 455,560 shares of common stock and options for the purchase of 555,000 shares of common stock. The potentially dilutive securities for the three and six months ended June 30, 2020 were warrants for the purchase of 250,000 shares of common ~~stock, which~~stock. These potentially dilutive securities were ~~included in basic loss per share, but~~ excluded from diluted loss per share.

Reclassifications
Certain accounts have been reclassified to conform with classifications adopted in the period ended June 30, 2021. Such reclassifications had no effect on net earnings or financial position.
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
Management assesses 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.
The Company has generated losses since its acquisition and has relied on cash on hand, external bank lines of credit, issuance of third party and related party debt and the sale of a note to support cashflow from operations.
For the six months ended June 30, ~~2020,~~2021, the Company incurred operating losses of ~~$3,576,332,~~approximately $4,543,516 and negative cash ~~flows~~flow from operations of ~~$3,852,042 and negative~~$6,985,302, but had working capital of ~~$16,554,304.~~$15,530,879. Additionally, the Company had over $45 million of unrestricted cash at June 30, 2021. On June 2, 2021, the Company closed on the acquisition of Appliances Connection. Appliances Connection has historically been profitable, however, only 29 days of their operations are included in results for the three and six months of 2021.
Management has prepared estimates of operations for fiscal ~~year 2020~~years 2021 and 2022 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of ~~the~~these unaudited condensed consolidated financial ~~statements~~statements. Additionally, only one month of operations for Appliances Connection, which has operated profitably, are included in the ~~Company’s 10-Q indicate improved~~results of operations ~~and~~for the ~~Company’s ability to continue operations as a going concern.~~six months ended June 30, 2021.
11
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
On August 4, 2020, the Company completed an initial public offering of its common stock, pursuant to which the Company sold 1,111,200 shares of its common stock, at a purchase price of $9.00 per share, for total gross proceeds of $10,000,800 (the “IPO”). After deducting the underwriting commission and offering expenses, the Company received net proceeds of approximately $8,992,000. The Company used a portion of the proceeds from this offering to pay off certain debt.
The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted stimulus bill provides for economic assistance loans through the United States Small Business Administration. On April 8, 2020, the Company received a $642,600 Paycheck Protection Program (the “PPP”) loan from the United States Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act provides that all or a portion of the PPP loan may be forgiven. The terms of such forgiveness and repayment terms for the portion, if any, that is not forgiven have not been announced by the SBA.
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. ~~The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.~~

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

Recent Accounting Pronouncements

Recently Adopted
~~In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“ASC 842”), which requires lessees to recognize right-of-use (“ROU”) assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. The Company adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all of the Company’s lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on the Company’s statements of income or cash flows. See Note 13 for the required disclosures relating to the Company’s lease agreements.
~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,~~ ~~which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718,~~ ~~Compensation - Stock Compensation~~, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~, which allows a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017. ASU 2018-02 became effective for the Company on January 1, 2019 and resulted in a decrease of approximately $748,000 to retained earnings due to the reclassification from AOCI of the effect of the corporate income tax rate change on our cash flow hedges. The adoption of this standard did not have a material impact on the Company’s financial statements.
12
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~Not Yet Adopted~~
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company ~~will modify its disclosures beginning in the first quarter of~~adopted ASU 2018-13 on January 1, 2020 ~~to conform to this guidance.~~on a prospective basis. The ~~Company does not expect the~~ adoption of this standard ~~and the associated changes to its disclosures to~~did not have a material impact toon 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.
The Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company’s unaudited condensed consolidated financial statements.
NOTE 3—RECEIVABLES
~~Reclassifications~~
~~Certain accounts have been reclassified to conform with classifications adopted in the period ended~~At June 30, ~~2020. Such reclassifications had no effect on net earnings or financial position.~~
~~NOTE 3—RESTATEMENT OF FINANCIAL STATEMENTS~~
~~The Company restated its previously issued financial statements as of June 30, 2020~~2021 and December 31, ~~2019 and for the periods April 6 to June 30, 2019 and the three and six months ended June 30,~~ 2020, ~~to reflect the modification of a sales tax liability and purchase accounting adjustments:~~
~~(1)~~ The Company determined that it should accrue a liability for potential 2020 and 2019 sales taxes that might be payable to the states in which it operates as a result of the Wayfair decision (See Note 2 – Sales Tax Liability). Accordingly, for the three months ended June 30, 2020, the Company accrued $935,000, of which $873,200 was sales tax and $61,800 was interest. For the six months ended June 30, 2020, the Company accrued $1,856,800, of which $1,746,400 was sales tax and $110,400 was interest. At June 30, 2020, the Company had a total accrued liability of $4,767,000 of which $4,554,400 was sales tax and $212,600 was interest. For the period April 6 to June 30, 2019, the Company accrued $1,262,300, of which $1,223,600 was sales tax and $28,700 was interest.
~~(2)~~ The Company adjusted the fair value of ownership interests in Holdco that were transferred to seller and the value of liabilities assumed in the April 5, 2019 acquisition (see Note 9) resulting in a $372,063 reduction in Goodwill, a $192,542 reduction in Additional Paid in Capital, and $179,521 reduction in liabilities assumed, which was recognized as a general and administrative expense.
13
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~The following tables summarize the effect of the restatement on the specific items presented in our previously reported financial statements:~~
~~1847 GOEDEKER INC.~~
~~BALANCE SHEET~~
~~June 30, 2020~~
June 30,
2020
(As Filed) Adjustments June 30,
2020
(As Restated)
ASSETS
Total Current Assets $ 9,579,066 $ - $ 9,579,099
Goodwill 5,097,752 (2) (372,063 ) 4,725,689
TOTAL ASSETS $ 20,224,795 $ (372,063 ) $ 19,852,732

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 2,605,793 (1)    $ 4,767,000 $ 7,372,793
Total Current Liabilities 21,363,400 4,767,000 26,130,400
TOTAL LIABILITIES 25,343,486 4,767,000 30,110,486
Stockholders’ Deficit
Additional paid-in capital 2,250,932 (2) (192,542 ) 2,058,390
Accumulated deficit (7,370,098 )(1) (4,767,000 ) (12,316,619 )
(2) (179,521 )
Total Stockholders’ Deficit (5,118,691 ) (5,139,063 ) (10,257,754 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 20,224,795 $ (372,063 ) $ 19,852,732
~~1847 GOEDEKER INC.~~
~~BALANCE SHEET~~
~~December 31, 2019~~
December 31,
2019
(As Filed) Adjustments December 31,
2019
(As Restated)
ASSETS
Total Current Assets $ 4,494,402 $ - $ 4,494,402
Goodwill 4,976,016 (2) (372,063 ) 4,603,953
TOTAL ASSETS $ 14,278,926 $ (372,063 ) $ 13,906,863

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 2,465,220 (1) $ 2,910,200 $ 5,375,420
Total Current Liabilities 11,215,028 2,910,200 14,125,228
TOTAL LIABILITIES 15,074,880 2,910,200 17,985,080
Stockholders’ Deficit
Additional paid-in capital 1,271,721 (2) (192,542 ) 1,079,179
Accumulated deficit (2,068,150 )(1) (2,910,200 ) (5,157,871 )
(2) (179,521 )
Total Stockholders’ Deficit (795,954 ) (3,282,263 ) (4,078,217 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 14,278,926 $ (372,063 ) $ 13,906,863
14
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF OPERATIONS~~
~~Three Months Ended June 30, 2020~~
Three Months Ended June 30, 2020
(As Filed) Adjustments Three Months Ended June 30, 2020
(As Restated)
Gross profit $ 2,599,873 $ - $ 2,599,873
Operating Expenses
General and administrative 636,217 (1 ) 873,200 1,509,417
Total Operating Expenses 3,114,672 873,200 3,987,872
LOSS FROM OPERATIONS (514,799 ) (873,200 ) (1,387,999 )
Total Other Income (Expense) (4,190,982 ) (61,800 ) (4,252,782 )
NET LOSS BEFORE INCOME TAXES (4,705,781 ) (935,000 ) (5,640,781 )
INCOME TAX BENEFIT (EXPENSE) 688,953 - 688,953
NET LOSS $ (4,016,828 ) $ (935,000 ) $ (4,951,828 )

LOSS PER COMMON SHARE – BASIC AND DILUTED $ (0.80 ) $ (0.99 )
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED 5,000,000 5,000,000
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF OPERATIONS~~
~~Six Months Ended June 30, 2020~~
Six Months Ended June 30, 2020
(As Filed) Adjustments Six Months Ended June 30, 2020
(As Restated)
Gross profit $ 4,165,881 $ - $ 4,165,881
Operating Expenses
General and administrative 1,202,857 (1 ) 1,746,400 2,949,257
Total Operating Expenses 5,995,813 1,746,400 7,742,213
LOSS FROM OPERATIONS (1,829,932 ) (1,746,400 ) (3,576,332 )
Total Other Income (Expense) (4,595,969 ) (110,400 ) (4,706,369 )
NET LOSS BEFORE INCOME TAXES (6,425,901 ) (1,856,800 ) (8,282,701 )
INCOME TAX BENEFIT (EXPENSE) 1,123,953 - 1,123,953
NET LOSS $ (5,301,948 ) $ 1,856,800 ) $ (7,158,748 )

LOSS PER COMMON SHARE – BASIC AND DILUTED $ (1.06 ) $ (1.43 )
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED 5,000,000 5,000,000
15
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF OPERATIONS~~
~~Period from April 6, 2019 through June 30, 2019~~
Period from April 6, 2019 through June 30, 2019
(As Filed) Adjustments Period from April 6, 2019 through June 30, 2019
(As Restated)
Gross profit 1,843,474 - 1,843,474
Operating Expenses
General and administrative 539,120 (1 ) 1,233,600 1,952,241
(2 ) 179,521
Total Operating Expenses 2,270,277 1,413,121 3,683,398
LOSS FROM OPERATIONS (426,803 ) (1,413,121 ) (1,839,924 )
Total Other Income (Expense) (316,459 ) (28,700 ) (345,159 )
NET LOSS BEFORE INCOME TAXES (743,262 ) (1,441,821 ) (2,185,083 )
INCOME TAX BENEFIT (EXPENSE) - - -
NET LOSS $ (743,262 ) $ (1,441,821 ) $ (2,185,083 )

LOSS PER COMMON SHARE – BASIC AND DILUTED $ (0.15 ) $ (0.44 )
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED 5,000,000 5,000,000
16
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF STOCKHOLDER’S EQUITY (DEFICIT)~~
~~Three and Six Months Ended June 30, 2020~~
Common Stock Additional
Paid-in Accumulated Total
Stockholder’s
Shares Amount Capital Deficit Deficit
As Filed:
Balance, January 1, 2020 4,750,000 $ 475 $ 1,271,721 $ (2,068,150 ) $ (795,954 )
Net loss - - - (1,285,120 ) (1,285,120 )
Balance, March 31, 2020 4,750,000 $ 475 $ 1,271,721 $ (3,353,270 ) $ (2,081,074 )
Net loss - - - (4,016,828 ) (4,016,828 )
Balance, June 30, 2020 4,750,000 $ 475 $ 2,250,932 $ (7,370,098 ) $ (5,118,691 )

As Restated:
Balance, January 1, 2020 4,750,000 $ 475 $ 1,079,179 $ (5,157,871 ) $ (4,078,217 )
Net loss - - - (2,206,920 ) (2,206,920 )
Balance, March 31, 2020 4,750,000 $ 475 $ 1,079,179 $ (7,364,791 ) $ (6,285,137 )
Net loss - - - (4,951,828 ) (4,951,828 )
Balance, June 30, 2020 4,750,000 $ 475 $ 2,058,390 $ (12,316,619 ) $ (10,257,754 )
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF STOCKHOLDER’S EQUITY (DEFICIT)~~
~~Period from April 6, 2019 through June 30, 2019~~
Common Stock Additional
Paid-in Accumulated Total
Stockholder’s
Equity
Shares Amount Capital Deficit (Deficit)
As Filed:
Capital contribution by Holdco for the acquisition of Goedeker Television Co. 4,750,000 $ 475 $ 979,048 $ - $ 979,523
Net loss for the period from April 6, 2019 through June 30, 2019 - - - $ (743,262 ) (743,262 )
Balance, June 30, 2019 4,750,000 $ 475 $ 1,271,721 $ (743,262 ) $ 528,934

As Restated:
Capital contribution by Holdco for the acquisition of Goedeker Television Co. 4,750,000 $ 475 $ 786,506 $ - $ 786,981
Net loss for the period from April 6, 2019 through June 30, 2019 - - - (2,185,083 ) (2,185,083 )
Balance, June 30, 2019 4,750,000 $ 475 $ 1,079,179 $ (2,185,083 ) $ (1,105,429 )
17
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF CASH FLOWS~~
~~Six Months Ended June 30, 2020~~
Six Months Ended June 30,
2020
(As Filed) Adjustments Six Months Ended June 30,
2020
(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,301,948 ) (1 ) $ (1,856,800 ) $ (7,158,748 )
Accounts payable and accrued expenses 146,842 (1 ) 1,856,800 2,003,642
Net cash provided by (used in) operating activities 3,852,052 - 3,852,052
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities (7,000 ) - (7,000 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities (353,566 ) - (353,566 )
NET CHANGE IN CASH AND RESTRICTED CASH 3,491,476 - 3,491,476
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD 64,470 - 64,470
CASH AND RESTRICTED CASH, END OF PERIOD $ 3,555,946 $ - $ 3,555,946
~~1847 GOEDEKER INC.~~
~~STATEMENTS OF CASH FLOWS~~
~~Period from April 6, 2019 through June 30, 2019~~
Period from April 6,
2019 through June 30,
2019
(As Filed) Adjustments Period from April 6,
2019 through June 30,
2019
(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (743,262 ) (1 ) $ (1,262,300 ) $ (2,185,083 )
(2 ) (179,521 )
Accounts payable and accrued expenses (707,008 ) (1 ) 1,262,300 734,813
(2 ) 179,521
Net cash provided by (used in) operating activities (2,117,345 ) (2,117,345 )
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities - - -
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities 2,288,065 - 2,288,065
NET CHANGE IN CASH AND RESTRICTED CASH 170,720 - 170,720
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD - - -
CASH AND RESTRICTED CASH, END OF PERIOD $ 170,270 $ - $ 170,720
~~NOTE 4—RECEIVABLES~~
~~At June 30, 2020 and December 31, 2019,~~ receivables consisted of the following:
June 30,
2020 December 31,
2019
Credit card payments in process of settlement $ 904,658 $ 406,838
Vendor rebates receivable 1,050,418 1,455,248
Total $ 1,955,076 $ 1,862,086
June 30,
2021 December 31,
2020
Trade receivables from customers $ 11,858,185 $ -
Vendor rebates receivable 5,486,634 1,337,791
Credit cards in process of collection 189,207 660,441
Other receivables 3,732,761 -
Total receivables $ 21,266,787 $ 1,998,232
18

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, ~~2020~~2021 AND ~~2019~~2020
(UNAUDITED)
NOTE 5—4—MERCHANDISE INVENTORY
At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the inventory balances are composed of:
June 30,
2021 December 31,
2020
Appliances $ 19,974,548 $ 5,285,975
Furniture 486,207 194,852
Other 1,098,268 91,414
Total merchandise inventory 21,559,023 5,572,241

Allowance for inventory obsolescence (425,000 ) (425,000 )
Merchandise inventory, net $ 21,134,023 $ 5,147,241

June 30,
2020 December 31,
2019
Appliances $ 1,917,128 $ 1,538,552
Furniture 148,368 184,755
Other 84,229 81,783
Total merchandise inventory 2,149,725 1,805,090

Allowance for inventory obsolescence (425,000 ) (425,000 )
Merchandise inventory, net $ 1,724,725 $ 1,380,090
~~Inventory and accounts receivable are pledged to secure a loan from Burnley and SBCC described and defined in the notes below.~~
NOTE 6—5—VENDOR DEPOSITS
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 withdrawn at any time up to the amount of the Company’s credit line with 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.
Prior to obtaining an open line of credit with a major vendor, the Company paid in advance for its purchases. The vendor did not ship product to the Company until an order was complete. As a result, the vendor held Company funds. A second vendor uses the Company’s vendor deposit account as collateral. Orders from this vendor exceeded the deposit account and the Company prepaid for some orders. Vendor deposits as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$345,503~~$10,755,209 and ~~$294,960,~~$547,648, respectively.
NOTE 7—6—PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:
June 30,
2021 December 31,
2020
Equipment $ 69,336 $ 69,336
Warehouse equipment 374,448 61,070
Furniture and fixtures 8,434 512
Transportation equipment 1,417,047 63,784
Leasehold improvements 216,405 136,931
Construction in progress 509,428 -
Total property and equipment 2,595,098 331,633
Accumulated depreciation (115,043 ) (85,685 )
Property and equipment, net $ 2,480,055 $ 245,948

June 30,
2020 December 31,
2019
Equipment $ 14,375 $ 7,376
Warehouse equipment 29,188 29,188
Furniture and fixtures 512 512
Transportation equipment 63,784 63,784
Leasehold improvements 117,626 117,626
Total property and equipment 225,485 218,486
Accumulated depreciation (54,744 ) (32,880 )
Property and equipment, net $ 170,741 $ 185,606
Depreciation expense for the six months ended June 30, 2021 and 2020 ~~the period April 6, 2019 to June 30, 2019~~was $85,777 and ~~the period January 1, 2019 to April 5, 2019 was~~ $21,864, ~~$11,533, and $9,675,~~ respectively.
All property and equipment are pledged to secure ~~loans from Burnley~~the Loans described below (See Note 10).
On June 30, 2021, the Company closed its old warehouse and ~~SBCC~~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 ~~described and defined in the notes below.~~
of that date.
19

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, ~~2020~~2021 AND ~~2019~~2020
(UNAUDITED)
NOTE 8—7—INTANGIBLE ASSETS AND GOODWILL
The following provides a breakdown of identifiable intangible assets as of June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

June 30,
2020 December 31,
2019
Customer relationships $ 749,000 $ 749,000
Marketing related 1,368,000 1,368,000
Total intangible assets 2,117,000 2,117,000
Accumulated amortization (399,922 ) (238,156 )
Intangible assets, net $ 1,717,078 $ 1,878,844
June 30,
2021 December 31,
2020
Customer relationships $ 749,000 $ 749,000
Marketing related - tradename 1,368,000 1,368,000
Total intangible assets 2,117,000 2,117,000
Accumulated amortization (946,761 ) (735,063 )
Intangible assets, net $ 1,170,239 $ 1,381,937
In connection with the acquisition of Goedeker, the Company identified intangible assets of $2,117,000, representing trade names and customer relationships. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of ~~8.5~~2.75 years. Amortization expense for the three months ended June 30, 2021 and 2020 was $10,849 and $80,883, respectively. For the six months ended June 30, 2021 and 2020 ~~the period April 6, 2019 to June 30, 2019~~amortization expense was $211,698 and ~~the period January 1, 2019 to April 5, 2019 was~~ $161,766, ~~$76,390, and $-0-,~~ respectively.
As of June 30, ~~2020,~~2021, the estimated annual amortization expense for each of the next five years is as follows:
2020 (remainder of year) $ 161,766
2021 323,532
2022 323,532
2023 323,532
2024 122,132
Thereafter 462,584
Total $ 1,717,078
2021 (remainder of year) $ 211,698
2022 423,396
2023 423,396
2024 111,749
Total $ 1,170,239
Following is a summary of goodwill:
Balance December 31, 2020 $ 4,725,689
Preliminary goodwill from acquisition of Appliances Connection 217,382,100
Balance June 30, 2021 $ 222,107,789
NOTE 8—ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following is schedule of accounts payable and accrued expenses at June 30, 2021 and December 31, 2020:
June 30,
2021 December 31,
2020
Trade accounts payable $ 23,939,457 $ 5,975,486
Sales tax 17,947,165 5,804,100
Accrued payroll liabilities 786,407 492,573
Accrued interest 199,340 10,000
Accrued liability for sales returns 200,000 200,000
Other accrued liabilities 8,825,297 219,556
Total accounts payable and accrued expenses $ 51,897,666 $ 12,701,715

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
NOTE 9—BUSINESS COMBINATION
On January 18, 2019, the Company entered into an asset purchase agreement with Goedeker and Steve Goedeker and Mike Goedeker (the “Stockholders”), pursuant to which the Company agreed to acquire substantially all of the assets of Goedeker used in its retail appliance and furniture business (the “Goedeker Business”).
On April 5, 2019, the Company, Goedeker and the Stockholders entered into an amendment to the asset purchase agreement and closing of the acquisition of substantially all of the assets of Goedeker was completed.
The aggregate purchase price, recorded as a capital contribution from Holdco, was $4,175,373 consisting of: (i) the issuance of a promissory note in the principal amount of $4,100,000 and a deemed fair value of $3,637,898; (ii) up to $600,000 in earn out payments (as described below) with a deemed fair value of $81,494; and (iii) a 22.5% ownership interest in Holdco transferred to the sellers with a deemed fair value of $786,981.
October 20,
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
The asset purchase agreement provided for an adjustment to the purchase price based on the difference between actual working capital at closing and the seller’s preliminary estimate of closing date working capital. In accordance with the asset purchase agreement, an independent CPA firm was retained by the Company and Goedeker to resolve differences in the working capital amounts. The report issued by that CPA firm determined that Goedeker owed the Company $809,000, which Goedeker has not paid. On or about March 23, 2020, the Company submitted a claim for arbitration to the American Arbitration Association relating to Goedeker’s failure to pay. The claim alleged, ~~inter alia~~, breach of contract, fraud, indemnification and the breach of the covenant of good faith and fair dealing. The Company alleged damages in the amount of $809,000, plus attorneys’ fees and costs. The $809,000 is included in other assets in the accompanying balance sheet as of December 31, 2019.
~~On June 2,~~ 2020, the Company entered into a ~~settlement~~securities purchase agreement, which was amended on December 8, 2020 and April 6, 2021 (as amended, the “Purchase Agreement”), with ~~Goedeker, Steve Goedeker, Mike Goedeker and 1847 Holdings. The settlement agreement~~ACI, Appliances Connection and the ~~related transaction documents that are exhibits~~sellers set forth on Exhibit A thereto (the “Sellers”), pursuant to which ACI agreed to acquire all of the ~~settlement agreement were all signed~~issued and outstanding capital stock or other equity securities of Appliances Connection from the Sellers (the “Acquisition”). The Acquisition was completed on June 2, ~~2020 only became effective~~2021.
The aggregate purchase price is $222,000,000 (subject to adjustment), consisting of (i) $180,000,000 in cash (subject to adjustment), (ii) 2,333,333 shares of the Company’s common stock having a stated value that is equal to $21,000,000 and (iii) 3,562,640 shares of the Company’s common stock, which is equal to (A) $21,000,000 divided by (B) the average of the closing price of the Company’s common stock (as reported on NYSE American) for the 20 trading days immediately preceding the 3rd trading day prior to the closing date of the Acquisition.
The purchase price was subject to a closing net working capital adjustment provision. Under this provision, the Sellers delivered to ACI a statement setting forth their good faith estimate of the net working capital of Appliances Connection (which excludes accruals for sales tax liabilities). If such estimated net working capital exceeded a target net working capital of ($15,476,941), then ACI was required to make a cash payment to the Sellers that is equal to such excess. If such target net working capital exceeded such estimated net working capital, then the Sellers were required make a cash payment to ACI that is equal to such excess.
Upon execution of the Purchase Agreement, ACI paid a deposit in the amount of $100,000, and upon execution of the first amendment to Purchase Agreement, ACI paid an additional deposit in the amount of $75,000, all of which was credited towards the cash portion of the purchase price at closing.
As a result of these adjustments, the cash portion of the purchase price paid was $212,597,483. The purchase price is also subject to a post-closing net working capital adjustment provision. On or before the 75th day following the closing of the ~~IPO on August 4, 2020. Pursuant~~Acquisition, ACI shall deliver to the ~~settlement agreement, the parties entered into an amendment and restatement~~Sellers a statement setting forth its calculation of the 9% subordinated promissory note described below (see Note 11). In addition, the parties agreed that the arbitration action described above would be settled effective upon the closing of the IPO and that each party to such arbitration action would release all claims that it has against the other parties to such action. As part of the settlement of the arbitration action, the Company agreed that the sellers will not have to pay the $809,000net working capital ~~adjustment amount, which resulted in a loss on write-off of acquisition receivable during the six months ended June 30, 2020.~~
~~Goedeker is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA~~ (as defined in the ~~asset purchase agreement) targets:~~
1. ~~An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;~~
2. ~~An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and~~
3. ~~An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.~~
ToPurchase Agreement). If such net working capital exceeds the ~~extent~~estimated net working capital described above, then within five (5) days after the ~~EBITDA~~final determination of such net working capital ACI shall send payment by wire transfer of immediately available funds to the ~~Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, the Company must pay a partial earn out payment to Goedeker~~Sellers in an amount equal to such excess. If the ~~product determined by multiplying (i)~~estimated net working capital exceeds such net working capital, then within five (5) days the ~~EBITDA Achievement Percentage by (ii) the applicable earn out payment for~~Sellers shall pay to ACI in cash an amount equal to such ~~period, where the “Achievement Percentage” is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business~~excess.
The Company accounted for the ~~applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance~~Acquisition using the acquisition method of ~~doubt, no partial earn out payments shall be earned or paid~~accounting in accordance with FASB ASC Topic 805 “Business Combinations”. In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the ~~extent~~tangible and intangible assets acquired and liabilities assumed at the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA for the Goedeker Business was ($2,825,000) so Goedeker is not entitled to an earn our payment for that period.acquisition date.
To the extent Goedeker is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.
The Company determined the fair value of the earnout on the date of acquisition was $81,494. Such amount was recorded as a contingent consideration liability within the accounts payable and accrued expense line item on the balance sheet and is revalued to fair value each reporting period until settled. The year 1 contingent liability of $32,246 was written-off in the year ending December 31, 2019 as the target was not met and the balance of the liability at December 31, 2019 is $49,248. Management reviewed the contingent consideration due at June 30, 2020 and does not believe any adjustments are required at June 30, 2020 or for the six months then ended.
21
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
The fair value of the purchase consideration issued to ~~Goedeker~~Appliances Connection was allocated to the net tangible assets acquired. The Company accounted for the ~~acquisition~~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 ~~liabilities assumed was approximately $550,316.~~assets to be acquired is $7,479,007. The excess of the aggregate estimated fair value of the net tangible assets, $217,382,100, has been allocated to provisional goodwill. Provisional goodwill was estimated at $4,603,953 at December 31, 2019 due to the preliminary valuation. During the period ending June 30, 2020, the Company subsequently adjusted the value of goodwill by $121,736 to $4,725,609 based on the finalized purchase price allocation.
The table below ~~shows~~represents the ~~analysis~~estimated preliminary purchase price allocation to the net assets acquired, as well as the associated estimated useful lives of the ~~Goedeker asset purchase:~~acquired intangible assets.
Purchase consideration at fair value:
Note payable, net of $462,102 debt discount and $215,500 of capitalized financing costs $ 3,637,898
Cash to seller at closing 478,000
working capital adjustment (809,000 )
Contingent note payable 81,494
Fair value of ownership interest in Holdco transferred to seller 786,981
Amount of consideration $ 4,175,373

Assets acquired and liabilities assumed at fair value
Accounts receivable $ 456,183
Inventories 1,851,251
Other assets 295,863
Property and equipment 216,286
Customer related intangibles 749,000
Marketing related intangibles 1,368,000
Accounts payable and accrued expenses (3,056,855 )
Customer deposits (2,430,044 )
Net tangible assets acquired (liabilities assumed) $ (550,316 )

Total net assets acquired (liabilities assumed) $ (550,316 )
Consideration paid 4,175,373
Goodwill $ 4,725,689

~~NOTE 10—LINES OF CREDIT~~
1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
Provisional purchase consideration at preliminary fair value:
Cash consideration $ 180,000,000
Share issuance 12,263,624
Working capital adjustment paid to sellers 24,060,458
Working capital adjustment payable to sellers 8,537,025
Amount of consideration $ 224,861,107

Assets acquired and liabilities assumed at preliminary fair value
Cash $ 6,437,220
Accounts receivable 19,744,368
Inventories 18,300,781
Vendor deposits 15,000,000
Other assets 2,194,384
Property and equipment 1,890,968
Right of use operating lease assets 1,833,899
Accounts payable and accrued expenses (43,673,578 )
Customer deposits (10,673,600 )
Finance lease obligation (215,008 )
Operating lease liability (1,833,899 )
Current portion of notes payable (458,913 )
Long term portion of notes payable (1,067,615 )
Net tangible assets acquired $ 7,479,007

Total net assets acquired $ 7,479,007
Consideration paid 224,861,107
Preliminary goodwill $ 217,382,100

Pro forma
~~Burnley Capital LLC~~
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 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’s revenue and net income for the three and six months ended June 30, 2021 included in the consolidated statement of operations amounted to approximately $47,780,835 and $4,872,936, respectively.
Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Product sales, net $ 140,128,696 $ 91,490,100 $ 263,086,153 $ 158,241,719
Net income $ 17,288,674 $ 799,593 $ 32,898,194 $ 3,443,584
Basic earnings per share $ 0.16 $ 0.01 $ 0.31 $ 0.03
Diluted earnings per share (a) $ 0.16 $ 0.01 $ 0.31 $ 0.03

Basic number of shares 105,335,084 105,335,084 105,335,084 105,335,084
Diluted number of shares 105,335,084 105,335,084 105,335,084 105,335,084
(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.
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.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
NOTE 10—NOTES PAYABLE
Credit Facilities
On ~~April 5, 2019,~~June 2, 2021, the Company and ACI, as ~~borrower, and Holdco~~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 $70,000,000, including (i) a $60,000,000 term loan (the “Term Loan”) and ~~security agreement~~(ii) a $10,000,000 revolving credit facility (the “Revolving Loan”), which revolving credit facility includes a $2,000,000 swingline subfacility (the “Swing Line Loan” and together with ~~Burnley Capital LLC (“Burnley”~~the Term Loan and the Revolving Loan, the “Loans”) ~~for revolving loans~~and a $2,000,000 letter of credit subfacility, in aneach 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 ~~that~~of $60,000,000. As of June 30, 2021, the Company has not made any loans under the Revolving Loan. As of June 30, 2021, the outstanding balance of the Term Loan is $56,311,521, comprised of principal of $60,000,000, net of unamortized loan costs of $3,688,479. Loan costs before amortization include $3,500,000 of lender and placement agent fees and $250,995 of legal other fees. The Company classified $6,000,000 as a current liability and the balance as a long-term liability.
Each of the Loans matures on June 2, 2026. The Loans will ~~not exceed~~bear interest on the ~~lesser of~~unpaid principal amount thereof as follows: (i) if it is a Loan bearing interest at a rate determined by the ~~borrowing base~~Base Rate (as defined in the ~~loan~~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 ~~security agreement)~~(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 ~~(ii) $1,500,000 (provided that~~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 ~~amount may be increased~~Loan), by notifying M&T and Lenders from time to ~~$3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any~~ time in accordance with the ~~loan and security agreement. In connection with the closing~~provisions of the ~~acquisition~~Credit Agreement. Notwithstanding the foregoing, following an event of ~~Goedeker on April 5, 2019,~~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 ~~borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in~~must repay the principal amount of the Term Loan in quarterly installments of $1,500,000 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.
Under the Credit Agreement, the Company is required to pay certain fees to M&T, including a commitment fee of up to $1,500,000. As of June 30, 2020, there was $232,000 available for borrowing and the balance of the line of credit was $456,104, comprised of principal of $524,938 and net of unamortized debt issuance costs of $68,834.
At June 30, 2020, the Company did not meet certain loan covenants under the loan and security agreement. The agreement requires compliance with the following ratios as a percentage of earnings before interest, taxes, depreciation, and amortization for the twelve-month period ended June 30, 2020. The table below shows the required ratio and actual ratio for such period.
~~Covenant~~
~~Actual Ratio~~ ~~Required Ratio~~
~~Total debt ratio~~ ~~(2.9)x~~ ~~4.0x~~
~~Senior debt ratio~~ ~~(0.7)x~~ ~~1.5x~~
~~Interest coverage ratio~~ ~~(1.2)x~~ ~~1.0x~~
22
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~In addition, the Company was not in compliance with a requirement~~0.5% per annum with respect to the ~~liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At June 30, 2020, the actual ratio was 0.36x compared to a requirement of 1.00x.~~
The loan and security agreement with SBCC described below contains the same covenants and a cross default provision, whereby a default under the Burnley loan and security agreement triggers a default under the SBCC loan and security agreement. Accordingly, at June 30, 2020, the Company was in technical, not payment default, on these loan and security agreements and classified such debt as a current liability.
There are no cross-default provisions that would require any other long-term liabilities to be classified as current. Although the Company has defaulted under the 9% subordinated promissory note described below as the result of its failure to make payments thereunder from and after August 27, 2019, the date that Burnley notified the Company that it is in technical default under Burnley’s loan and security agreement, Burnley’s notice also stated that pursuant to the subordination agreement, dated April 5, 2019, between Burnley and Goedeker, no payment can be made under the note so long as the Company’s default relating to Burnley’s loan continues. Therefore, notwithstanding the default, Goedeker has no right to accelerate the note because, in addition to the subordination agreement which otherwise would have permitted acceleration, the note itself also has specific subordination provisions that prohibit such acceleration. Since Goedeker does not currently have the right to accelerate the note, the Company has classified all amounts other than the currently dueunused portion of the ~~note~~Lenders’ revolving loan commitments, determined as ~~long-term liabilities.~~set forth in the Credit Agreement, and certain fees in connection with the issuance of any letters of credit under the Credit Agreement.
~~Upon closing~~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 ~~IPO on August 4, 2020,~~assets of the Company, ~~repaid the revolving note in full~~ACI and the ~~loan and security agreement was terminated (see Note 16).~~Guarantors.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
Maturities of the Term Loan are as follows:
For the years ended December 31, Amount
2021 (remainder of year) $ 3,000,000
2022 6,000,000
2023 6,000,000
2024 6,000,000
2025 6,000,000
Thereafter 33,000,000
Total 60,000,000
Less: Loan costs (3,688,479 )
Total $ 56,311,521
Amount classified as a current liability $ 6,000,000
Amount classified as long-term liability $ 50,311,521

Northpoint ~~Commercial Finance LLC~~Loan
On June ~~24, 2019,~~3, 2021, the Company ~~as borrower,~~ entered into a loan and security agreement with Northpoint Commercial Finance LLC (“Northpoint”), pursuant to which ~~was amended on August 2, 2019, for revolving loans up~~Northpoint may from time to ~~an aggregate maximum loan amount of $1,000,000~~time advance funds for the acquisition, financing and/or refinancing by the Company of inventory ~~at an interest rate of LIBOR plus 7.99%.~~purchased from Samsung Electronics America, Inc. and/or affiliates and for such other purposes as are acceptable Northpoint. The ~~Company terminated the~~ loan and security agreement ~~on May 18, 2020~~provides that Northpoint may establish a credit limit and ~~there is no outstanding balance as~~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 June 30, ~~2020.~~
~~NOTE 11—NOTES PAYABLE AND WARRANT LIABILITY~~
~~Small Business Community Capital II, L.P.~~
~~On April 5, 2019,~~2021, such credit limit is $1,000,000 and the Company ~~as borrower, and Holdco entered into~~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 ~~Small Business Community Capital II, L.P. (“SBCC”)~~Arvest Bank for a ~~term~~ loan in the principal amount of ~~$1,500,000,~~$3,500,000. As of December 31, 2020, the outstanding balance of this loan is $3,185,369 comprised of principal of $3,283,628, net of unamortized loan costs of $98,259. On May 10, 2021, the Company repaid this loan by transferring principal and accrued interest from the restricted cash account.
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 ~~SBCC~~each investor (i) a ~~term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most~~10% OID 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. The Company classified the warrant as a derivative liability on the balance sheet of $2,250,000 based on the estimated value of the warrants in the IPO (see Note 16). The increase in the value of the warrant from the estimated value of $122,344 at March 31, 2020 resulted in a charge of $2,127,656. The warrant is subject to remeasurement at every reporting period, however, by agreement between the Company and SBCC the warrant will convert into shares of the Company immediately upon closing of the IPO, thus, no further valuation will be necessary.
The balance of the note amounts to $877,603 as of June 30, 2020, comprised of principal of $1,130,826, capitalized PIK interest of $27,476 and net of unamortized warrant feature of $158,321 and unamortized debt discount of $122,375.
~~As noted above, as of June 30, 2020, the Company was in technical, not payment default, on this loan and security agreement and classified such debt as a current liability.~~
~~Upon closing of the IPO on August 4, 2020, the Company repaid the term note in full and the loan and security agreement was terminated (see Note 16).~~
23
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~PPP Loan~~
On April 8, 2020, the Company received a $642,600 PPP loan from the SBA under provisions of the CARES Act. The PPP loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. The PPP provides that the loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the proceeds from the PPP loan for qualifying expenses and to apply for forgiveness of the PPP loan in accordance with the terms of the CARES Act. The Company has classified $284,411 of the PPP loan as a current liability and $358,189 as a long-term liability pending classification of the final loan terms by the SBA.
~~NOTE 12—NOTES PAYABLE, RELATED PARTIES~~
~~As noted above, a portion of the purchase price for the acquisition was paid by the issuance by the Company to Steve Goedeker, as representative of Goedeker, of a 9% subordinated~~secured promissory note in the principal amount of ~~$4,100,000. The note will accrue interest at 9% per annum, amortized on a five-year straight-line basis~~$2,750,000 and payable quarterly in accordance with the amortization schedule attached thereto, and mature on April 5, 2024. The remaining balance of the note at June 30, 2020 is $3,416,226 comprised of principal of $3,930,293, net of unamortized debt discount of $354,276 and loan costs of $159,791.
Pursuant to the settlement agreement described above (see Note 8), the parties entered into an amendment and restatement of the note that became effective as of the closing of the IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the IPO, the Company agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. The Company also agreed to grant to the sellers, Goedeker, Steve Goedeker and Mike Goedeker, a security interest in all of the assets of the Company to secure its obligations under the amended and restated note and entered into a security agreement with them that became effective upon the closing of the IPO.
The Company has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by the Company of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of the Company. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans with Burnley and SBCC are not payment defaults, they fall under clause (B) above and would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.
As stated above, although the Company has defaulted under this note, Goedeker has no right to accelerate the note because the note has specific subordination provisions that prohibit such acceleration.
24
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~Maturities of debt are as follows:~~
For the years ended December 31,
2020 (remainder of year) $ 1,068,243
2021 795,639
2022 869,700
2023 950,655
2024 246,056
Total 3,930,293
Less:  loan costs (159,791 )
Discounts (354,276 )
Total $ 3,416,226
~~NOTE 13—CONVERTIBLE PROMISSORY NOTE~~
On April 5, 2019, 1847 Holdings, Holdco and the Company (collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-yearfour-year warrant to purchase 200,000 shares of the Company’s common ~~shares~~stock at an exercise price of ~~$1.25 per share (subject~~$12.00, subject to ~~adjustment),~~adjustments, which may be exercised on a cashless basis, for a purchase price of $2,500,000 each, or $5,000,000 in the aggregate, the relative fair value of which is $1,340,438 and ~~(iii) Holdco issued to Leonite shares~~was recorded as debt discount. After deducting a placement fee and other expenses, the Company received net proceeds of ~~common stock equal to a 7.5% non-dilutable~~$4,590,000. The original issue discount and warrant expense were amortized as interest expense. On June 2, 2021, the Company repaid these notes in ~~Holdco.~~
~~On May 11, 2020, 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which~~full from the ~~parties agreed (i) to extend the maturity date~~proceeds of the ~~note to October 5, 2020, (ii) that 1847’s failure to repay~~Term Loan. At the ~~note on~~time of repayment, the ~~original maturity date of April 5, 2020 shall not constitute and event of default under~~Company wrote off the ~~note and (iii) to increase the principal amount~~balance of the ~~note by $207,145, as a forbearance fee. The Company accounted for this transaction~~debt discount, $1,653,048, as a loss on early extinguishment of debt.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
Vehicle Loans
~~In connection~~
Appliances Connection has financed purchases of transportation vehicles with notes payable which are secured by the ~~amendment, (i) 1847 Holdings issued~~vehicles purchased. These notes have five-year terms and interest rates ranging from 3.59% to ~~Leonite another five-year warrant to purchase 200,000 common shares at an exercise price~~5.74%. As of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings’ acquisition of Asien’s Appliance, Inc., 1847 Holdings’ wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien Inc. The Company accounted for the issuance of the 200,000 additional warrants as a $566,711 loss on debt restructuring and an increase in additional paid-in-capital, representing the estimated fair value of the 200,000 additional warrants for a five-year period.
The note carries an original issue discount of $64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Furthermore, 1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the six months ended June 30, ~~2020.~~
Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of 1847 Holdings into which such common shares may be changed or reclassified.
~~On May 4, 2020, Leonite converted $100,000 of~~2021, the outstanding balance of these notes is $1,488,620.
Following is a summary of payments due for the ~~note into 100,000 common shares~~succeeding five years:
For the years ended December 31, Amount
2021 (remainder of year) $ 246,761
2022 396,848
2023 363,842
2024 311,979
2025 169,190
Thereafter -
Total $ 1,488,620
Amount classified as a current liability $ 455,272
Amount classified as a long-term liability $ 1,033,348
NOTE 11—LEASES
Financing Leases
Appliances connection has three finance leases for the acquisition of 1847 Holdings. The Company accounted for this transaction as a $100,000 reduction in the principal amount of the debt, a $175,000 loss on extinguishment of debt, and a $275,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date. The remaining net balance of the note atforklifts. At June 30, ~~2020~~2021, the total amount due on these leases was $210,809.
The Following is ~~$821,431. As~~ a ~~result~~summary of payments due on financing leases for the ~~activity on this note, $948,856 was recorded as loss on extinguishment of debt.~~succeeding five years:
For the years ended December 31, Amount
2021 (remainder of year) $ 36,528
2022 66,284
2023 52,644
2024 35,688
2025 and thereafter 48,960
Total payments 240,104
Less: amount representing interest (29,295 )
Present value of minimum lease payments $ 210,809
Operating Leases
~~Upon closing of the IPO on August 4, 2020, the Company repaid the term note in full (see Note 17).~~
25
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~NOTE 14—OPERATING LEASE~~
On April 5, 2019, the Company entered into a lease agreement with S.H.J., ~~L.L.C., a Missouri limited liability company and affiliate of the Company at that time.~~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. ~~In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum.~~ The lease contains customary events of ~~default, including if: (i)~~default.
On January 13, 2021, the Company ~~shall fail~~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 ~~rent within five (5) days after~~for the ~~due date; (ii) any insurance required to be maintained by~~utilities used on the premises. The lease contains customary events of default. In connection with the new lease, the Company ~~pursuant~~recorded a right of use asset and liability of $1,954,022 representing the initial present value of future lease payments.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
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 ~~shall be canceled, terminated, expire, reduced,~~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 $8,430,959.
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 $723,074.
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 ~~materially changed; (iii)~~(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 $3,007,661.
During the three and six months ended June 20, 2021, the Company ~~shall fail to comply with any term, provision, or covenant~~accrued rent expense of $62,386 and $721,959, respectively. During the ~~lease~~three and ~~shall not begin~~six months ended June 30, 2020, rent expense was $461,401 and pursue with reasonable diligence the cure of such failure within fifteen (15) days after written notice thereof to the Company; (iv) the Company shall become insolvent, make an assignment for the benefit of creditors, or file a petition under any section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States of America or any State thereof; or (v) a receiver or trustee shall be appointed for the leased premises or for all or substantially all of the assets of the Company.$671,135, respectively.
Supplemental balance sheet information related to leases at June 30, 2021 was as follows:

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

Lease liability, current portion $ 375,885
Lease liability, long-term 1,416,987
Total operating lease liability $ 1,792,872

Weighted average remaining lease term (months) 45

Weighted average discount rate 6.5 %
Operating lease right-of-use assets $ 12,822,972

Lease liabilities, current portion $ 2,157,010
Lease liabilities, long-term 12,149,107
Total operating lease liabilities $ 14,306,117

Weighted average remaining lease term (months) 100

Weighted average discount rate 4.2 %
Maturities of the lease ~~liability~~liabilities for each of the next five years is as follows:

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

Less imputed interest (232,128 )
Total lease liability $ 1,792,872
2021 (remainder of year) $ 1,167,967
2022 2,580,999
2023 2,620,008
2024 1,805,142
2025 1,486,525
Thereafter 7,065,391
Total lease payments $ 16,726,032

Less imputed interest (2,419,915 )
Total lease liability $ 14,306,117

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
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-off the remaining right of use asset and related leasehold improvements as of that date.
NOTE ~~15—~~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 six months ended June 30, 2021, the Company purchased a substantial portion of finished goods from DMI, 55% and 60%, 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

~~Offsetting~~ Management Services Agreement
On April 5, 2019, the Company entered into ~~an offsetting~~a management services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts, the Company’s chairman and ~~controlling shareholder of 1847 Holdings.~~
26
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
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 ~~the greater of $62,500 or 2% of adjusted net assets (as defined in the offsetting management services agreement);~~$62,500; provided, however, that ~~(i) pro-rated payments shall be made~~under certain circumstances specified in the ~~first quarter and~~management services agreement, the last quarter of the term, (ii) if the aggregate amount of management fees paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of 1847 Holdings’ gross income with respect to such fiscal year, then the managementquarterly fee ~~to be paid by the Company for any remaining fiscal quarters in such fiscal year shall~~may be reduced ~~on a pro rata basis determined by reference to the management~~if similar fees ~~to be paid~~payable to the Manager by ~~all~~subsidiaries of the ~~subsidiaries of~~Company’s former parent company, 1847 Holdings until the aggregate amount of the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to such fiscal year, does notLLC, exceed 9.5% of 1847 Holdings’ gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the aggregate amount of the parent management fee (as defined in the offsetting management services agreement) with respect to such fiscal quarter, then the management fee to be paid by the Company for such fiscal quarter shall be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to such fiscal quarter, does not exceed the parent management fee calculated and payable with respect to such fiscal quarter.threshold amount.
On April 21, 2020, the Company entered into an amendment to the offsetting management services agreement, pursuant to which the quarterly management fee was amended to provide for a flat fee of $62,500, as opposed to the greater of $62,500 or 2% of adjusted net assets, which amendment will became effective upon closing of the IPO on August 4, 2020.
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 ~~Goedeker~~the Company in connection with performing services under the ~~offsetting~~ management services agreement. The Company did not pay any expenses for the three and six months ended June 30, 2021 and 2020.
The Company expensed ~~$62,500 and $58,790 in~~ management fees of $62,500 for the three months ended June 30, 2021 and 2020 and $125,000 for the six months ended June 30, ~~2020~~2021 and ~~2019, respectively. Payment~~2020.
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 the cooperative. Additionally, Albert Fouerti, who is a member of the ~~management fee~~Company’s board of directors, is ~~subordinated~~the president of ACI and Appliances Connection, and a former significant stockholder of Appliances Connection prior to the ~~payment of interest~~Acquisition, is on the ~~9% subordinated promissory note (see Note 11),~~board of DMI. As such, ~~that no payment~~DMI is deemed to be a related party.
At June 30, 2021, vendor rebate deposits due from DMI were $10,009,836. During the three and six months ended June 30, 2021, total purchases from DMI, net of holdbacks, were $26,999,225 and $27,970,121, respectively.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
Lease Agreements
As described above, 1 Stop, Joe’s Appliances and Gold Coast have entered into lease agreements with 1870 Bath Ave. LLC, 812 5th Ave Realty LLC and 54 Glen Cove Realty, LLC, respectively. Each of these entities is owned by Albert Fouerti and Elie Fouerti (the vice president of 1 Stop, Joe’s Appliances and Gold Coast and former significant stockholder of each prior to the ~~management fee may be made if the Company is in default~~Acquisition). In addition, YF Logistics has entered into a sublease agreement with DMI. The total rent expense under ~~the note with regard to interest payments and,~~these related party leases was $148,685 for the ~~avoidance of doubt, such payment of the management fee will be contingent on the Company being in good standing on all associated loan covenants. In addition, during the~~ period ~~that that any amounts are owed under the 9% subordinated promissory note or the earn out payments, the annual management fee shall be capped at $250,000. The rights of the Manager~~June 2 to receive payments under the offsetting management services agreement were also subordinate to the rights of Burnley and SBCC under separate subordination agreements that the Manager entered into with Burnley and SBCC on April 5, 2019. Accordingly, $188,653 due the Manager is classified as an accrued liability as of June 30, ~~2020.~~2021.
NOTE 14—STOCKHOLDERS’ DEFICIT
~~Advances~~
As of June 30, ~~2020, the Manager had funded the Company $78,959 in related party advances. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.~~
As discussed in Note 12, on April 5, 2019, 1847 Holdings issued 50,000 common shares and 200,000 warrants to Leonite in order to induce Leonite to extend credit to the Company. The common shares of 1847 Holdings were valued at $137,500. As part of the modification to this convertible note payable, 1847 Holdings also granted an additional 200,000 warrants to purchase 1847 Holdings’ common shares to Leonite.
27
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~NOTE 16—STOCKHOLDER’S DEFICIT~~
~~Common Stock~~
~~As of June 30, 2020 and December 31, 2019,~~2021, the Company was authorized to issue ~~5,000~~200,000,000 shares of common stock, $0.0001 par value ~~$0.001~~ per share. On July 30, 2020, the Company amended its certificate of incorporation to (i) increase the authorized common stock from 5,000 shares to 200,000,000 shares, (ii) change the par value of the Company’s common stock from $0.001 to $0.0001,share, and ~~(iii) authorize~~ 20,000,000 shares of “blank check” preferred stock, 0.0001 par value per share. To date, the Company has not designated or issued any shares of preferred stock.
Common Stock
As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~4,750,000~~106,374,232 and 6,111,200 shares of common stock issued and ~~outstanding.~~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.
~~Warrants~~
On April 5, 2019, the Company issued to SBCC a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100 (see Note 10). SBCC exercised this warrant on August 4, 2020 (see Note 16).
~~NOTE 17—SUBSEQUENT EVENTS~~
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2020 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements, except as set forth below.
~~Underwriting Agreement, Representative’s Warrants and Closing of IPO~~
~~On July 30, 2020,~~May 27, 2021, the Company entered into an underwriting agreement ~~(the “Underwriting Agreement”)~~ with ThinkEquity, a division of Fordham Financial Management, Inc., (the ~~“Representative”), as representative of the underwriters set forth on Schedule 1 thereto (collectively, the “Underwriters”~~“Underwriter”), relating to ~~the IPO.~~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,~~underwriting agreement, the Company agreed to sell ~~1,111,200 shares of common stock~~91,111,111 units to the ~~Underwriters,~~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 ~~Underwriters’~~Underwriter a ~~45-day over-allotment~~30-day option to purchase anup to 2,000,000 additional ~~166,577~~ shares of common stock, at a purchase price of $2.0832 per share, ~~of $8.325 (the offering price to the public of $9.00 per share minus the underwriters’ discount).~~
~~Pursuant to the Underwriting Agreement, the Company also agreed to issue to the Representative~~ and/or ~~its affiliates~~ warrants to purchase ~~a number of~~up to 2,000,000 additional shares of common stock, ~~equal~~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 ~~aggregate to 5% of the total shares sold. The warrants will be exercisable at any time~~units were immediately separable and ~~from time to time, in whole or in part,~~ ~~beginning on~~ ~~January 26,~~were issued separately.
On June 2, 2021,~~until July 30, 2025,~~ ~~at a per share exercise price equal to $11.25 (125% of the public offering price per share).~~
~~On August 4, 2020,~~ the Company sold ~~1,111,200~~91,111,111 shares of ~~its~~ common stock and warrants to ~~the Underwriters~~purchase 93,111,111 shares of common stock for total gross proceeds of ~~$10,000,800.~~$205,020,000. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately ~~$8,602,166.~~$194,597,500. The Company ~~also issued warrants~~used the proceeds of the offering to fund a portion of the purchase price for the ~~purchase of 55,560~~Acquisition.
On June 7, 2021, the Company sold 2,000,000 shares of common stock to ~~affiliates~~the Underwriter for total gross proceeds of $4,480,000. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $4,166,400.
During June 2021, 1,039,148 shares of common stock were issued as a result of the ~~Representative.~~exercise of 1,039,148 warrants with proceeds of $2,338,083
~~Repayment of Burnley Loan~~
On ~~August 4, 2020,~~June 2, 2021, the Company ~~used a portion~~issued 5,895,973 shares of common stock to the Sellers in connection with the Acquisition (See Note 9).

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
On June 3, 2021, the Company granted restricted stock awards under the Plan described below to certain directors and officers of the ~~proceeds from the IPO to repay the loan from Burnley (Note 9). The total payoff amount was $118,194, consisting~~Company for an aggregate of ~~principal of $32,350, interest of $42 and prepayment, legal, and other fees of $85,802.~~
28
~~1847 GOEDEKER INC.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
~~Repayment of SBCC Loan~~
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the loan from SBCC (Note 10). The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999.
~~Leonite Conversion and Repayment~~
~~On July 24, 2020, Leonite converted $50,000 of the outstanding balance of the secured convertible promissory note (Note 12) into 50,000 common~~216,800 shares of ~~1847 Holdings.~~
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the secured convertible promissory note. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.
~~Payment on Subordinated Promissory Note~~
In accordance with the terms of the amended and restated note that became effective upon closing of the IPO on August 4, 2020 (Note 11), the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.
~~Amendment and Restatement of Certificate of Incorporation~~
~~On July 30, 2020, the Company amended and restated its certificate of incorporation to (i) increase the authorized~~ common stock ~~from 5,000 shares to 200,000,000 shares, (ii) change~~valued at $555,000, the ~~par~~ value of the ~~Company’s~~stock on the date of grant. All shares were immediately vested.
The Company did not issue any shares of common stock ~~from $0.001 to $0.0001,~~during the three and ~~(iii) authorize 20,000,000 shares of preferred stock, 0.0001 par value per share.~~six months ended June 20, 2020.

~~Adoption of~~ Equity Incentive Plan
Effective as of July 30, 2020, the Company established the 1847 Goedeker Inc. 2020 Equity Incentive Plan ~~(“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. ~~The maximum number~~As of June 30, 2021, a total of 228,200 shares of common stock ~~that may be issued pursuant to awards granted~~remain available for issuance under the ~~Plan~~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 $1,848,056. The Company recorded stock option expense related to these options of $113,886 and $227,772 for the three and six months ended June 30, 2021, respectively. The remaining compensation expense of $1,199,998 will be recognized over the remaining vesting period of 37 months.
The following table presents activity relating to stock options for the six months ended June 30, 2021:
Shares
Weighted Average
Exercise Price Weighted Average
Contractual
Term in Years
Outstanding at January 1, 2021 555,000 $ 9.00 9
Granted - - -
Exercised - - -
Forfeited / Cancelled / Expired - - -
Outstanding at June 30, 2021 555,000 $ 9.00 8.50

Exercisable at June 30, 2021 65,790 $ 9.00 8.50
As of June 30, 2021, vested outstanding stock options had no intrinsic value as the exercise price is ~~555,000 shares.~~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
~~Option Grant~~
On August 4, 2020, the Company issued ~~an incentive stock option under the Plan to the Company’s Chief Executive Officer, Douglas T. Moore,~~warrants for the purchase of ~~263,158~~ 55,560 shares of common stock to affiliates of the representative in its initial public offering. These 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, 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.
On March 19, 2021, the Company issued four-year warrants to purchase an aggregate of 400,000 shares of common stock to two investors. These warrants are exercisable at any time and from time to time, in whole or in part, at an exercise price of ~~$9.00~~$12.00 per ~~share.~~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.

1847 GOEDEKER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
(UNAUDITED)
On June 2, 2021, the Company issued warrants to purchase 93,111,111 shares of common stock in the public offering. These warrants are exercisable immediately and expire five years from the date of issuance. The warrants have an exercise price of $2.25 per share, subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting 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 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.
All of the foregoing warrants contain an exercise limitation, pursuant to which a holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, which such percentage may be increased or decreased to any other percentage not in excess of 9.99% upon 61 days’ notice to the Company.
The following table presents activity relating to the warrants for the six months ended June 30, 2021:
Shares Weighted
Average
Exercise Price Weighted Average
Contractual
Term in Years
Outstanding at January 1, 2021 55,560 $ 11.25 4.5
Granted 93,511,111 2.25 5.0
Exercised (1,039,148 ) 2.25 -
Cancelled / Expired - - -
Outstanding at June 30, 2021 92,527,523 $ 2.30 5.0
NOTE 15—COMMITMENTS AND CONTINGENCIES
On January 18, 2019, the Company entered into an asset purchase agreement with Goedeker, Steve Goedeker and Mike Goedeker, pursuant to which on April 5, 2019 the Company acquired substantially all of the assets of Goedeker used in its retail appliance and furniture business (the “Goedeker Business”).
Pursuant to the asset purchase agreement, Goedeker entitled to receive an earn out payment of $200,000 if the EBITDA (as defined in the asset purchase agreement) of the Goedeker Business for the trailing twelve (12) month period from April 5, 2022 is $2,500,000 or greater, and may be entitled to receive a partial earn out payment if the EBITDA of the Goedeker Business is less than $2,500,000 but greater than $1,500,000. 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.
NOTE 16—SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2021 to the date these unaudited condensed consolidated financial statements were issued and has determined that it does not have any material subsequent events to disclose in these unaudited condensed consolidated financial statements, except as set forth below.
On July 28, 2021, the Company issued an option under the Plan for the purchase of 150,000 shares of common stock to the Company’s new Chief Financial Officer, Maria Johnson. The option has an exercise price of $3.10 per share and vests with respect to 25% of the shares commencing on ~~August 15, 2020~~July 28, 2022 and on each of the first, second and third anniversaries thereof, ~~respectively.~~
~~Conversion of SBCC Warrant~~
~~Immediately prior~~respectively, subject to Ms. Johnson’s continuous service to the ~~closing~~Company on each applicable vesting date; provided that, in the event of a change in control (as defined in the ~~IPO on August 4, 2020, SBCC converted its warrant (Note 15) into 250,000 shares of common stock.~~Plan), the option will vest in full.

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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.

~~All periods presented on or prior to April 5, 2019 represent~~Use of Terms
Except as otherwise indicated by the ~~operations of Goedeker (as defined below), our predecessor. Unless otherwise specified, all results of operations information~~context and for the ~~three~~purposes of this report only, references in this report to “we,” “us,” “our” and ~~six months ended June 30, 2019 reflects~~ the ~~full periods.~~“Company” are to 1847 Goedeker Inc., a Delaware corporation, and its consolidated subsidiaries, Appliances Connection Inc., a Delaware corporation (“ACI”), 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”). 1 Stop, Gold Coast, Superior Deals, Joe’s Appliances and YF Logistics are sometimes referred to herein as “Appliances Connection.”

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

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
● 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” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under ~~the heading~~Item 1A “Risk Factors” included in our ~~Registration Statement~~Annual Report on Form ~~S-1, originally filed with~~10-K for the ~~Securities and Exchange Commission on April 22,~~year ended December 31, 2020 ~~as amended,~~ and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

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

1847 Goedeker Inc. (“we,” “us,” “our” or the “Company”) was incorporated in the State of Delaware on January 10, 2019 for the sole purpose of acquiring substantially all of the assets of Goedeker Television Co. (“Goedeker”). On April 5, 2019, we acquired substantially all of the assets of Goedeker. AsWe operate a result of this transaction, we acquired the former business of Goedeker and continue to operate this business. All discussions in this report regarding our business prior to the acquisition reflect the business of Goedeker, our predecessor company. Prior to our acquisition of substantially all of the assets of Goedeker, we had no operations other than operations relating to our incorporation and organization.
~~The Company is a one-stop~~technology-driven e-commerce ~~destination~~platform for ~~home furnishings, including~~ appliances, furniture, home goods and related products. Since our founding in 1951, we have evolved from a local brick and mortar operation serving the St. Louis metro area to a ~~large~~ nationwide ~~omnichannel~~omni-channel retailer ~~that offers one-stop shopping for~~ offering the ~~leading brands.~~ largest online selection of household appliances across all major appliance brands with competitive pricing. While we still maintain ~~our~~showrooms in the St. Louis ~~showroom,~~area and, following the acquisition described below, in Brooklyn, New York, over ~~90%~~95% of our sales are placed through our ~~website~~websites at ~~www.goedekers.com. We offer over 185,000 SKUs organized by category~~www.goedekers.com and ~~product features, providing visitors to the site an~~www.appliancesconnection.com. Our relentless focus on customer experience encompasses our easy to navigate ~~shopping experience.~~websites, highly trained call center representatives and sophisticated fulfillment ecosystem.

~~Through~~

Our customers span a wide range of demographics, style and budget, which we attract with our ~~e-commerce business model, we offer an online marketplace for consumers looking for variety, style, service~~efficient digital marketing capabilities and ~~value when shopping for nearly any home~~match with our broad product ~~needed.~~selection. We ~~are focused on bringing~~have invested considerably in our ~~customers an experience that is at the forefront of shopping online~~scalable logistics infrastructure, purpose built for the ~~home. We have built~~unique demands of the appliance market and see it as a ~~large online selection of appliances, furniture, home goods~~competitive advantage, strengthening as we grow. Our tightly-integrated vendor relationships and ~~related products. We are able~~order management tools allow us to offer ~~this~~our vast selection of products ~~because~~while holding limited inventory, contributing to strong and improving operating metrics.
On June 2, 2021, we acquired Appliances Connection, a leading retailer of household appliances based in Brooklyn, New York. Appliances Connection has built powerful home-grown logistics technology that can help reduce cycle time and efficiencies for our ~~model requires minimal inventory.~~operations. Appliances Connection brings the relationships, network, and technology necessary to continue economies of scale for our business throughout the United States e-commerce market. We ~~specialize in the home category~~intend to leverage Appliances Connection’s powerful platform to increase speed, reduce costs and ~~this has enabled us to build a shopping experience and logistics infrastructure that is tailored to the unique characteristics of~~increase margins across our ~~market.~~entire business.

~~Recent Developments~~
Impact of Coronavirus Pandemic

~~In December~~Starting in late 2019, a novel strain of the coronavirus, ~~was reported~~or COVID-19, began to ~~have surfaced in Wuhan, China. The virus has since~~rapidly spread ~~to over 150 countries~~around the world and every state in the United States. ~~On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.~~
Most states and cities have ~~reacted by instituting~~at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that ~~may~~could continue to operate, as well as guidance in response to the pandemic and the need to contain it. ~~Effective April 6, 2020, the Governor of Missouri announced a stay at home order that was in effect until May 3, 2020.~~ Pursuant to ~~this order, non-essential businesses, such as~~restrictions in Missouri, our showroom ~~were forced to close. However,~~was closed from April through June of 2020, but our call center and warehouse continued to operate. ~~According to Missouri’s re-opening plan, retail stores, such as our showroom, may re-open effective May 4, 2020 but with limitations on the number of individuals allowed in the showroom.~~ Since ~~over 90%~~most of our sales are completed online and our call center and warehouse and distribution operations continued to operate, the restrictions put in place ~~have~~in response to the pandemic did not ~~yet~~ had a materially negative impact on our operations. On June 16, 2020, our showroom re-opened to the public, with restrictions that masks be worn by customers and employees, in compliance with St. Louis County mandates later issued on July 3, 2020 requiring face masks be worn in public places.

We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, andHowever, we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.
We are dependent upon suppliers to provide us with all of the products that we sell. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain ~~of our~~ products. As a result, we have faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such products, they may cost more, which could adversely impact our profitability and financial condition.

IfThe 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, and decreased consumer confidence resulting from the ~~current pace~~pandemic. Changing consumer behaviors as a result of the pandemic ~~cannot be slowed and~~may also have a material impact on revenue.
Furthermore, the spread of ~~the virus is not contained, our business operations could be further delayed or interrupted. We expect that government~~COVID-19 has adversely impacted global economic activity and ~~health authorities~~has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may ~~announce new or extend existing restrictions,~~continue to result, in a significant disruption of global financial markets, which ~~could require us to make further adjustments to our operations in order to comply with any such restrictions. We~~ may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. The duration of any business disruption cannot be reasonably estimated at this time but may materially affectreduce our ability to ~~operate our business and result~~access capital in ~~additional costs.~~
the future, which could negatively affect liquidity.
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The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including 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.
~~Closing of Initial Public Offering~~
On July 30, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity, a division of Fordham Financial Management, Inc., (the “Representative”), as representative of the underwriters set forth on Schedule 1 thereto (collectively, the “Underwriters”), relating to an initial public offering of the Company’s common stock (the “IPO”). Under the Underwriting Agreement, the Company agreed to sell 1,111,200 shares of common stock to the Underwriters, and also agreed to grant the Underwriters’ a 45-day over-allotment option to purchase an additional 166,577 shares of common stock, at a purchase price per share of $8.325 (the offering price to the public of $9.00 per share minus the underwriters’ discount).
Pursuant to the Underwriting Agreement, the Company also agreed to issue to the Representative and/or its affiliates warrants to purchase a number of shares of common stock equal in the aggregate to 5% of the total shares sold. The warrants will be exercisable at any time and from time to time, in whole or in part, ~~beginning on~~ ~~January 26, 2021~~ ~~until July 30, 2025,~~ ~~at a per share exercise price equal to $11.25 (125% of the public offering price per share).~~
On August 4, 2020, the Company sold 1,111,200 shares of its common stock to the Underwriters for total gross proceeds of $10,000,800. After deducting the underwriting commission and expenses, the Company received net proceeds of approximately $8,602,166. The Company also issued warrants for the purchase of 55,560 shares of common stock to affiliates of the Representative.
~~Principal Factors Affecting Our Financial Performance~~
~~Our operating results are primarily affected by the following factors:~~
● ~~our ability to acquire new customers or retain existing customers;~~
● ~~our ability to offer competitive product pricing;~~
● ~~our ability to broaden product offerings;~~
● ~~industry demand and competition; and~~
● ~~market conditions and our market position.~~
~~Key Financial Operating Metrics~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020 2019 2020 2019
Site Sessions (in millions) 3.1 1.5 4.5 3.3
Order History $ 29,861,000 $ 15,552,000 $ 45,017,000 $ 29,484,000
Days from Order to Shipment (Average) 26.2 19.2 29.4 20.3
A site session occurs when a person visits our website. An order occurs when a customer has visited our website and ordered one or more items and has paid for them. The days from order to shipment is a measure, in the case of orders shipped from our warehouse, of the time from the order until the product ordered is loaded onto the shipper’s truck for delivery, and in the case of drop shipments, the time between the order and the date that we are invoiced (assuming that the vendor invoices us on the day that shipment to the customer is made).
Total revenues and total orders for any given month may not be equal for two primary reasons: (1) normal customer cancellations and (2) the time required to ship an order and recognize revenue. The time from order to shipping is between 20 and 25 days. Thus, an order made after the 10th of the current month will become revenue in the succeeding month, distorting the comparison between a months’ orders and its sales.
Our site sessions increased from approximately 1.4 million in the quarter ended March 31, 2020 to approximately 3.1 million in the quarter ended June 30, 2020. These increased site sessions were achieved at a lower cost per session beginning in February of 2020 and have continued through the date of this report.
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These increased site sessions resulted in three-year highs for orders in the quarter ended June 30, 2020. An order is paid for by our customer when the order is placed and booked as revenue by us when the order is shipped.

Higher orders have positively impacted our working capital as orders yield cash in advance of shipment. Improvements in our working capital as a result of higher orders have positively impacted our delivery times thereby reducing the time from order to shipment. A reduction in days from order to shipment results in fewer cancelled orders and, as a result, higher revenues.
Given what we believe to be the linear relationship between advertising, site visits, orders, and days from order to shipment impacting cancellations, we believe that the increase in working capital provided by the IPO will have a dramatically positive impact on accelerating our growth rate and profitability.
Emerging Growth Company

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company ~~for up to five years, or~~ until the earliest of (i) the last day of the 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 ~~exceed $1~~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 ~~(iii)~~(iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
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Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
● our ability to acquire new customers or retain existing customers;
● our ability to offer competitive product pricing;
● our ability to broaden product offerings;
● industry demand and competition;
● market conditions and our market position; and
● our ability to successfully integrate the operations of Appliances Connection without business.
Key Financial Operating Metrics
Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Site Sessions (in millions) 5.3 3.1 7.8 4.5
Order History (in millions) $ 105.1 $ 29.8 $ 105.7 $ 45.2
A site session occurs when a person visits our websites. An order occurs when a customer has visited our websites and ordered one or more items and has paid for them. An order is paid for by our customer when the order is placed and booked as revenue by us when the order is shipped.
Total revenues and total orders for any given month may not be equal for two primary reasons: (1) normal customer cancellations and (2) the time required to ship an order and recognize revenue. When there are no supply chain issues, the time from order to shipping is between 20 and 25 days. Thus, an order made after the 10th of the current month will become revenue in the succeeding month, distorting the comparison between a months’ orders and its sales. COVID-19 significantly increased the time between order and shipment, which increased customer cancellations.
Our site sessions increased to approximately 5.3 million in the three months ended June 30, 2021, which included approximately 2.7 million site sessions attributable to Appliances Connection from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to approximately 3.1 million in the three months ended June 30, 2020. These increased site sessions resulted in three-year highs for orders in the three months ended June 30, 2021.

Results of Operations
Comparison of Three Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

The following table sets forth key components of our results of operations for the three months ended June 30, ~~2020 (Successor), the period from April 6, 2020 to June 30, 2019 (Successor),~~2021 and ~~the period from April 1, 2019 to April 5, 2019 (Predecessor),~~2020, in dollars and as a percentage of our ~~revenue.~~
Successor Predecessor

Three Months Ended
June 30,
2020
(As Restated)

Period April 6 to
June 30,
2019
(As Restated)

Period April 1 to
April 5,
2019

Amount % of Net
Sales Amount % of Net
Sales Amount % of Net
Sales
Product sales, net $ 15,285,031 100.0 % $ 10,545,880 100.0 % $ 999,855 100.0 %
Cost of goods sold 12,685,158 83.0 % 8,702,406 82.5 % 735,186 73.5 %
Gross profit 2,599,873 17.0 % 1,843,474 17.5 % 264,669 26.5 %
Operating expenses
Personnel 1,040,189 6.8 % 886,225 8.4 % 31,198 3.1 %
Advertising 891,907 5.8 % 525,222 5.0 % 113,477 11.3 %
Bank and credit card fees 454,569 3.0 % 232,273 2.2 % 72,130 7.2 %
Depreciation and amortization 91,790 0.6 % 87,437 0.8 % - -
General and administrative 1,509,417 9.9 % 1,952,241 18.5 % 34,767 3.5 %
Total operating expenses 3,987,872 26.1 % 3,683,398 34.9 % 251,572 25.2 %
Income (loss) from operations (1,387,999 ) (9.1 )% (1,839,924 ) (17.4 )% 13,097 1.3 %
Other income (expense)
Interest income 1,062 - - - - -
Financing costs (74,504 ) (0.5 )% (159,255 ) (1.5 )% - -
Interest expense (296,708 ) (1.9 )% (233,722 ) (2.2 )% - -
Loss on extinguishment of debt (948,856 ) (6.2 )% - - - -
Write-off of acquisition receivable (809,000 ) (5.3 )% - - - -
Change in fair value of warrant liability (2,127,656 ) (13.9 )% 2,600 - - -
Other income (expense) 2,880 - 45,218 (0.4 )% 160 -
Total other income (expense) (4,252,782 ) (27.8 )% (345,159 ) (3.3 )% 160 -
Net income (loss) before income taxes (5,640,781 ) (36.9 )% (2,185,083 ) (20.7 )% 13,257 1.3 %
Income tax benefit 688,953 4.5 % - - - -
Net income (loss) $ (4,951,828 ) (32.4 )% $ (2,185,083 ) (20.7 )% $ 13,257 1.3 %
We believe that reviewing our operating results for the three months ended June 30, 2019 by combining the results of the 2019 successor period (April 6, 2019 through June 30, 2019) and 2019 predecessor period (April 1, 2019 through April 5, 2019) with the pro forma adjustments related to the acquisition is more useful in discussing our overall operating performance compared to the results of the three months ended June 30, 2020 (successor). We do not see any potential risks associated with utilizing this pro forma presentation.
net sales.
34

Three Months Ended
June 30, 2021

Three Months Ended
June 30, 2020

Amount
% of
Net Sales
Amount
% of
Net Sales

Products sales, net $ 64,072,098 100.00 % $ 15,285,031 100.00 %
Cost of goods sold 51,016,609 79.62 % 12,685,158 82.99 %
Gross profit 13,055,489 20.38 % 2,599,873 17.01 %
Operating expenses
Personnel 4,821,168 7.52 % 1,040,189 6.81 %
Advertising 2,931,815 4.58 % 891,907 5.84 %
Bank and credit card fees 2,095,359 3.27 % 454,569 2.97 %
Depreciation and amortization 175,143 0.27 % 91,790 0.60 %
Acquisition expenses 357,411 0.56 % - -
Loss on abandonment of right of use asset 1,437,042 2.25 % - -
General and administrative 2,500,381 3.90 % 1,509,417 9.88 %
Total operating expenses 14,318,319 22.35 % 3,987,872 26.09 %
Loss from operations (1,262,830 ) (1.97 )% (1,387,999 ) (9.08 )%
Other income (expense)
Interest income 12,283 0.02 % 1,062 0.01 %
Financing costs (74,738 ) (0.12 )% (74,504 ) (0.49 )%
Interest expense (943,392 ) (1.47 )% (296,708 ) (1.94 )%
Loss on extinguishment of debt (1,747,901 ) (2.73 )% (948,856 ) (6.21 )%
Write-off of acquisition receivable - - (809,000 ) (5.29 )%
Change in fair value of warrant liability - - (2,127,656 ) (13.92 )%
Other income 794 - 2,880 0.02 %
Total other income (expense) (2,752,954 ) (4.30 )% (4,252,782 ) (27.82 )%
Net loss before income taxes (4,015,784 ) (6.27 )% (5,640,781 ) (36.90 )%
Income tax benefit (expense) 8,048,478 12.56 % 688,953 4.51 %
Net income (loss) $ 4,032,694 6.29 % $ (4,951,828 ) (32.40 )%
~~Following are the combined periods for 2020 and 2019:~~

Three Months Ended June 30,
2020
Successor
(As Restated)

Period April 6 to June 30,
2019
Successor (As Restated)

Period April 1 to April 5,
2019
Predecessor
Pro Forma Adjustments Pro Forma Combined Three Months Ended June 30, 2019 Increase (Decrease)
Product sales, net $ 15,285,031 $ 10,545,880 $ 999,855 $ - $ 11,545,735 $ 3,739,296
Cost of goods sold 12,685,158 8,702,406 735,186 - 9,437,592 3,247,566
Gross profit 2,599,873 1,843,474 264,669 - 2,108,143 491,730
Operating expenses
Personnel 1,040,189 886,225 31,198 - 917,423 122,766
Advertising 891,907 525,222 113,477 - 638,699 253,208
Bank and credit card fees 454,569 �� 232,273 72,130 - 304,403 150,166
Depreciation and amortization 91,790 87,437 - - 87,438 4,352
General and administrative 1,509,417 1,952,241 34,767 - 1,987,008 (477,591 )
Total operating expenses 3,987,872 3,683,398 251,572 - 3,934,970 52,902
Income (loss) from operations (1,387,999 ) (1,839,924 ) 13,097 - (1,826,827 ) 438,828
Other income (expense)
Interest income 1,062 - - - - 1,062
Financing costs (74,504 ) (159,255 ) - (a) (116,639 ) (275,894 ) 201,390
Interest expense (296,708 ) (233,722 ) - (b) (15,403 ) (249,125 ) 47,583
Loss on extinguishment of debt (948,856 ) - - - - (948,856 )
Write-off of acquisition receivable (809,000 ) - - - - (809,000 )
Change in fair value of warrant (2,127,656 ) 2,600 - 2,600 (2,130,256 )
Other income 2,880 45,218 160 - 45,378 (42,498 )
Total other income (expense) (4,252,782 ) (345,159 ) 160 (132,042 ) (477,041 ) (3,775,741 )
Net income (loss) before income taxes (5,640,781 ) (2,185,083 ) 13,257 (132,042 ) (2,303,868 ) (3,336,913 )
Income tax benefit 688,953 - - - - 688,953
Net income (loss) $ (4,951,828 ) $ (2,185,083 ) $ 13,257 $ (132,042 ) $ (2,303,868 ) $ (2,647,960 )
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~~Notes~~
(a) Reflects amortization of costs associated with acquisition debt as follows:
Amortization of the cost of shares issued in acquisition $ 34,375
Amortization of the cost of warrants issued in acquisition 82,264
Total $ 116,639

(b) Amortization of discount on note to seller $ 15,403
Product sales, net. We generate revenue from the retail sale of home furnishings, including appliances, furniture, home goods and related products. Our product sales were $64,072,098 for the three months ended June 30, 2021, which included $47,780,835 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $15,285,031 for the three months ended June 30, 2020, ~~as compared to $11,545,735 for the three months ended June 30, 2019,~~ an increase of ~~$3,739,296,~~$48,787,067, or ~~32%, which included $10,545,881 for~~319.18%. Excluding Appliances Connection, our ~~successor from April 6, 2019 to June 30, 2019 and $999,855 for our predecessor from April 1, 2019 to April 5, 2019. The~~product sales increased by $1,006,232, or 6.58%. This increase is due to increased sales volume to meet appliance and furniture demand resulting from increased advertising, which has a direct impact on customer orders and shipped sales.

~~Late in~~During the three months ended June 30, ~~2020,~~2021, we ~~suffered~~experienced delays in getting products from manufacturers ~~whose production facilities were closed because of~~due to continued supply chain issues related to the ~~coronavirus pandemic. The lack of available products~~COVID-19 pandemic, which resulted in ~~some~~ cancellations of some customer orders. For the three months ended June 30, ~~2020,~~2021, we estimate that cancellations caused by shipping delays approximated $9$11.5 million based on the historical ratio of shipped sales to customer orders ~~to shipped sales~~ of approximately ~~80%~~80.7% for the three most recent pre COVID-19 years (2017 to 2019) to the actual ratio of approximately ~~50%~~47.3% in the three months ended June 30, ~~2020.~~2021.

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

Our revenue by sales type is as follows:
Three Months Ended June 30,
2020
Successor 2019
Successor 2019
Predecessor 2019
Total
Appliance sales $ 11,533,006 $ 8,395,603 $ 765,293 $ 9,160,896
Furniture sales 2,768,327 1,557,813 176,325 1,734,138
Other sales 983,698 592,464 58,237 650,701
Total $ 15,285,031 $ 10,545,880 $ 999,855 $ 11,545,735
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Three Months Ended
June 30, 2021 Three Months Ended
June 30, 2020
Amount % Amount %
Appliance sales $ 56,202,115 87.72 % $ 11,533,006 75.45 %
Furniture sales 6,172,784 9.63 % 2,768,327 18.11 %
Other sales 1,697,199 2.65 % 983,698 6.44 %
Total $ 64,072,098 100.00 % $ 15,285,031 100.00 %
The percentage of furniture sales declined in the 2021 period as compared to the 2020 period as furniture sales comprised a lower percentage of Appliances Connection’s sales (3.27%) as compared to the Company (28.18%).
Cost of goods sold. Our cost of goods sold consists of the cost of purchased merchandise plus the cost of delivering merchandise and, where applicable, installation, net of promotional rebates and other incentives received from vendors. Our cost of goods sold was $51,016,609 for the three months ended June 30, 2021, which included $37,661,999 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $12,685,158 for the three months ended June 30, 2020, ~~as compared to $9,437,592 for the three months ended June 30, 2019,~~ an increase of ~~$3,247,566,~~$38,331,451, or ~~34%, which included $8,702,406 for~~302.18%. Excluding Appliances Connection, our ~~successor from April 6, 2019 to June 30, 2019 and $735,186 for our predecessor from April 1, 2019 to April 5, 2019. Such increase was due to the increase in sales volume.~~cost of goods sold increased by $669,452, or 5.28%. As a percentage of net sales, cost of goods sold was 79.62% (or 81.97% excluding Appliances Connection) and 82.99% for the three months ended June 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 ~~declined~~decreased slightly ~~from 81.7%~~due to a change in product mix with furniture sales, which have lower costs, comprising a larger percentage of our net sales in the ~~2019~~2021 period.
Gross profit and gross margin. As a result of the foregoing, our gross profit was $13,055,489 for the three months ended June 30, 2021, which included $10,118,836 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to ~~83.0%~~June 30, 2021, as compared to $2,599,873 for the three months ended June 30, 2020, an increase of $10,455,616, or 402.16%. Excluding Appliances Connection, our gross profit increased by $336,780, or 12.95%. Our gross margin (gross profit as a percentage of net sales) was 20.38% (or 18.03% excluding Appliances Connection) and 17.01% for the three months ended June 30, 2021 and 2020, respectively. Such increase was primarily due to the impact of the acquisition of Appliances Connection. Excluding Appliances Connection, our gross margin increased slightly due to the change in ~~the 2020 period.~~product mix described above.
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 ~~training costs.~~stock compensation expense. Our personnel expenses were $4,821,168 for the three months ended June 30, 2021, which included $1,951,705 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $1,040,189 for the three months ended June 30, 2020, ~~as compared to $917,423~~an increase of $3,780,979, or 363.49%. Excluding Appliances Connection, our personnel expenses increased by $1,829,274, or 175.86%. As a percentage of net sales, personnel expenses were 7.52% (or 17.61% excluding Appliances Connection) and 6.81% for the three months ended June 30, ~~2019, an increase of $122,766, or 13%, which included $886,225 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$31,198 for our predecessor from April 1, 2019 to April 5, 2019. The~~2020, respectively. Such increase is the result of hiring ~~additional~~the senior management team and support staff needed because of increased customer ~~demand for our products.~~orders. Additionally, during the 2021 period, we incurred stock compensation expenses of $679,575 that we did not have in the 2020 period.
Advertising expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $2,931,815 for the three months ended June 30, 2021, which included $913,533 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $891,907 for the three months ended June 30, 2020, ~~as compared to $638,699~~an increase of $2,039,908, or 228.71%. Excluding Appliances Connection, our advertising expenses increased by $1,126,375, or 126.29%. As a percentage of net sales, advertising expenses were 4.58% (or 12.39% excluding Appliances Connection) and 5.84% for the three months ended June 30, ~~2019, an increase of $253,208, or 40%, which included $525,222 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$113,477 for our predecessor from April 1, 2019 to April 5, 2019.~~2020, respectively. The increase relates to an increase in advertising spending to drive traffic to our website.
Bank and credit card fees. Bank and credit card fees are primarily the fees we pay credit card processors for processing credit card payments made by customers. Our bank and credit card fees were $2,095,359 for the three months ended June 30, 2021, which included $1,573,462 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $454,569 for the three months ended June 30, 2020, ~~as compared to $304,403~~an increase of $1,640,790, or 360.96%. Excluding Appliances Connection, our bank and credit card fees increased by $67,328 or 14.81%. As a percentage of net sales, bank and credit card fees were 3.27% (or 3.20% excluding Appliances Connection) and 2.97% for the three months ended June 30, ~~2019, an increase of $150,166, or 49%, which included $232,273 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$72,130, for our predecessor from April 1, 2019 to April 5, 2019.~~2020, respectively. These fees are based on ~~sales,~~customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to the increase in ~~revenue.~~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 $175,143, or 0.27% of net sales, for the three months ended June 30, 2021, which included $52,812 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $91,790, or 0.60% of net sales, for the three months ended June 30, 2020.
Acquisition expenses. During the three months ended June 30, 2021, we incurred expenses related to the acquisition of Appliances Connection in the amount of $357,411.

Loss on abandonment of right of use asset. During the three months ended June 30, 2021, we incurred a loss in the amount of $1,437,042 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 consist primarily of professional advisor fees, ~~bad debts,~~ rent expense, insurance, unremitted sales tax, and other expenses incurred in connection with general operations. Our general and administrative expenses were $2,500,381 for the three months ended June 30, 2021, which included $703,723 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $1,509,417 for the three months ended June 30, 2020, ~~as compared to $1,987,008~~an increase of $990,964, or 65.65%. Excluding Appliances Connection, our general and administrative expenses increased by $287,241, or 19.03%. As a percentage of net sales, general and administrative expenses were 3.90% (or 11.03% excluding Appliances Connection) and 9.88% for the three months ended June 30, ~~2019,~~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 ~~decrease of $477,591, or 24%, which included $1,952,241~~public company in August 2020, as well as consulting fees to upgrade our online shopping cart, fees for our ~~successor from April 6, 2019 to June 30, 2019~~Electronic Data Interchange initiative, and ~~$34,766 for our predecessor from April 1, 2019 to April 5, 2019. The primary decreases are The accrual for 2019 sales taxes was greater than the 2020 accrual and audit,~~other consulting ~~and search firm expense related to the acquisition.~~fees.
Total other income (expense). We had ~~$4,252,782~~$2,752,954 in total other expense, net, for the three months ended June 30, ~~2020,~~2021, which included other expense, net, of $50,665 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to total other expense, net, of ~~$477,041~~$4,252,782 for the three months ended June 30, ~~2019, which included expenses of 345,159~~2020. Total other expense, net, for ~~our successor from April 6, 2019 to~~the three months ended June 30, ~~2019,~~2021 consisted of interest expense of $943,392, financing costs of $74,738 and a loss on extinguishment of debt of $1,747,901, offset by interest income of ~~$160 for our predecessor from April 1, 2019 to April 5, 2019~~$12,283 and ~~adjustments~~other income of ~~$(132,042).~~$794. Total other expense, net, for the three months ended June 30, 2020 consisted of interest expense of $296,708, financing costs of $74,504, a loss on ~~debt modification and~~ extinguishment of debt of $948,856, a loss on acquisition working capital receivable of $809,000, and change in the warrant liability of $2,127,656, offset by interest income of $1,062 and other income of ~~$2,880, while other expense~~$2,880.
Income tax benefit (expense). We had an income tax net benefit of $8,048,478 for the three months ended June 30, ~~2019 consisted~~2021, as compared to an income tax benefit of ~~financing costs~~$688,953 for the three months ended June 30, 2020. The tax benefit arose from the elimination of ~~$275,894~~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 ~~interest expense,~~will be able to utilize previously derived net ~~of $249,125, offset by a change in warrant liability of $2,600 and other~~operating losses.
Net income ~~of $45,378.~~
~~Net loss.~~(loss). As a result of the cumulative effect of the factors described above, we had net income of $4,032,694 for the three months ended June 30, 2021, which include a net income of $4,872,936 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to a net loss of $4,951,828 for the three months ended June 30, 2020, ~~as compared to $2,303,868 for the three months ended June 30, 2019,~~ an increase of ~~$2,647,960,~~$8,984,522, or 115%, which included a loss of $2,185,083 for our successor from April 6, 2019 to June 30, 2019, net income of $13,257 for our predecessor from April 1, 2019 to April 5, 2019 and adjustments of $(132,042)181.44%. ~~The~~Excluding Appliances Connection, net loss ~~for the three months ended June 30, 2020 was affected three non-cash charges equal to $3,885,512 in the aggregate.~~
decreased by $4,111,586, or 83.03%.
37
Comparison of Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

The following table sets forth key components of our results of operations for the six months ended June 30, ~~2020 (Successor), the period from April 6, 2020 to June 30, 2019 (Successor),~~2021 and ~~the period from April 1, 2019 to April 5, 2019 (Predecessor),~~2020, in dollars and as a percentage of our ~~revenue.~~net sales.

Successor Predecessor

Six Months Ended
June 30,
2020
(As Restated)

Period April 6
to June 30,
2019
(As Restated)
Period January 1 to
April 5,
2019
Amount % of Net
Sales Amount % of Net
Sales Amount % of Net
Sales
Product sales, net $ 24,962,209 100.0 % $ 10,545,880 100.0 % $ 12,946,901 100.0 %
Cost of goods sold 20,796,328 84.0 % 8,702,406 82.5 % 11,004,842 85.0 %
Gross profit 4,165,881 16.7 % 1,843,474 17.5 % 1,942,059 15.0 %
Operating expenses
Personnel 2,351,673 9.4 % 886,225 8.4 % 913,919 7.1 %
Advertising 1,558,343 6.2 % 525,222 5.0 % 714,276 5.5 %
Bank and credit card fees 699,309 2.8 % 232,273 2.2 % 329,247 2.5 %
Depreciation and amortization 183,631 0.7 % 87,437 0.8 % 9,675 0.1 %
General and administrative 2,949,257 11.8 % 1,952,241 18.5 % 451,214 3.5 %
Total operating expenses 7,742,213 31.0 % 3,683,398 34.9 % 2,418,331 18.7 %
Loss from operations (3,576,332 ) (14.3 )% (1,839,924 ) (17.4 )% (476,272 ) (3.7 )%
Other income (expense)
Interest income 1,062 - - - 23,807 0.2 %
Financing costs (269,186 ) (1.1 )% (159,255 ) (1.5 )% - -
Interest expense (557,996 ) (2.2 )% (233,722 ) (2.2 )% - -
Loss on extinguishment of debt (948,856 ) (3.8 )% - - - -
Write-off of acquisition receivable (809,000 ) (3.2 )% - - - -
Change in fair value of warrant liability (2,127,656 ) (8.5 )% 2,600 - - -
Other income (expense) 5,263 - 45,218 0.4 % 7,200 -
Total other income (expense) (4,706,369 ) (18.9 )% (345,159 ) (3.3 )% 31,007 0.2 %
Net loss before income taxes (8,282,701 ) (33.2 )% (2,185,083 ) (20.7 )% (445,265 ) (3.4 )%
Income tax benefit 1,123,953 4.5 % - - - -
Net loss $ (7,158,748 ) (28.7 )% $ (2,185,083 ) (20.7 )% $ (445,265 ) (3.4 )%

Six Months Ended
June 30, 2021

Six Months Ended
June 30, 2020

Amount
% of
Net Sales
Amount
% of
Net Sales

Products sales, net $ 77,769,466 100.00 % $ 24,962,209 100.00 %
Cost of goods sold 62,085,520 79.83 % 20,796,328 83.31 %
Gross profit 15,683,946 20.17 % 4,165,881 16.69 %
Operating expenses
Personnel 6,752,492 8.68 % 2,351,673 9.42 %
Advertising 4,015,063 5.16 % 1,558,343 6.24 %
Bank and credit card fees 2,628,101 3.38 % 699,309 2.80 %
Depreciation and amortization 297,475 0.38 % 183,631 0.74 %
Acquisition expenses 802,899 1.03 % - -
Loss on abandonment of right of use asset 1,437,042 1.85 % - -
General and administrative 4,294,390 5.52 % 2,949,257 11.81 %
Total operating expenses 20,227,462 26.01 % 7,742,213 31.02 %
Loss from operations (4,543,516 ) (5.84 )% (3,576,332 ) (14.33 )%
Other income (expense)
Interest income 22,379 0.03 % 1,062 -
Financing costs (80,003 ) (0.10 )% (269,186 ) (1.08 )%
Interest expense (1,170,957 ) (1.51 )% (557,996 ) (2.24 )%
Loss on extinguishment of debt (1,747,901 ) (2.25 )% (948,856 ) (3.80 )%
Write-off of acquisition receivable - - (809,000 ) (3.24 )%
Change in fair value of warrant liability - - (2,127,656 ) (8.52 )%
Other income 10,999 0.01 % 5,263 0.02 %
Total other income (expense) (2,965,483 ) (3.81 )% (4,706,369 ) (18.85 )%
Net loss before income taxes (7,508,999 ) (9.66 )% (8,282,701 ) (33.18 )%
Income tax benefit (expense) 8,048,478 10.35 % 1,123,953 4.50 %
Net income (loss) $ 539,479 0.69 % $ (7,158,748 ) (28.68 )%
~~We believe that reviewing our operating results~~

Product sales, net. Our product sales were $77,769,466 for the six months ended June 30, ~~2019 by combining~~2021, which included $47,780,835 from Appliances Connection for the ~~results~~period from June 2, 2021 (date of ~~the 2019 successor period (April 6, 2019 through~~acquisition) to June 30, ~~2019) and 2019 predecessor period (January 1, 2019 through April 5, 2019) with the pro forma adjustments related to the acquisition is more useful in discussing our overall operating performance~~2021, as compared to ~~the results of the six months ended June 30, 2020 (successor). We do not see any potential risks associated with utilizing this pro forma presentation.~~
38
~~Following are the combined periods 2020 and for 2019:~~

Six Months Ended June 30,
2020
Successor
(As Restated)

Period April 6 to June 30,
2019
Successor
(As Restated)

Period January 1 to April 5,
2019
Predecessor
Pro Forma Adjustments Pro Forma Combined Six Months Ended June 30,
2019 Increase (Decrease)
Product sales, net $ 24,962,209 $ 10,545,880 $ 12,946,901 $ - $ 23,492,781 $ 1,469,428
Cost of goods sold 20,796,328 8,702,406 11,004,842 - 19,707,248 1,269,080
Gross profit 4,165,881 1,843,474 1,942,059 - 3,785,533 380,348
Operating expenses
Personnel 2,351,673 886,225 913,919 - 1,800,144 551,529
Advertising 1,558,343 525,222 714,276 - 1,239,498 318,845
Bank and credit card fees 699,309 232,273 329,247 - 561,520 137,789
Depreciation and amortization 183,631 87,437 9,675 - 97,112 86,249
General and administrative 2,949,257 1,952,241 451,214 - 2,403,455 545,802
Total operating expenses 7,742,213 3,683,398 2,418,331 - 6,101,729 1,640,484
Loss from operations (3,576,332 ) (1,839,924 ) (476,272 ) - (2,316,196 ) 1,260,136
Other income (expense)
Interest income 1,062 - 23,807 - 23,807 (22,745 )
Financing costs (269,186 ) (159,255 ) - (a) (116,639 ) (275,894 ) 6,708
Interest expense (557,996 ) (233,722 ) - (b) (15,403 ) (249,125 ) 308,871
Loss on extinguishment of debt (948,856 ) - - - - (948,856 )
Write-off of acquisition receivable (809,000 ) - - - - (809,000 )
Change in fair value of warrant (2,127,656 ) 2,600 - - 2,600 (2,130,256 )
Other income 5,263 45,218 7,200 - 52,418 (47,155 )
Total other income (expense) (4,706,369 ) (345,159 ) 31,007 (132,042 ) (446,194 ) (4,260,175 )
Net loss before income taxes (8,282,701 ) (2,185,083 ) (445,265 ) (132,042 ) (2,762,390 ) 5,520,311
Income tax benefit 1,123,953 - - - 1,123,953
Net loss $ (7,158,748 ) $ (2,185,083 ) $ (445,265 ) $ (132,042 ) $ (2,762,390 ) $ 4,396,358
~~Notes~~
(a) Reflects amortization of costs associated with acquisition debt as follows:
Amortization of the cost of shares issued in acquisition $ 34,375
Amortization of the cost of warrants issued in acquisition 82,264
Total $ 116,639

(b) Amortization of discount on note to seller $ 15,403
~~Product sales, net~~~~. Our product sales were~~ $24,962,209 for the six months ended June 30, 2020, ~~as compared to $23,492,781 for the six months ended June 30, 2019,~~ an increase of ~~$1,469,428,~~$52,807,257, or ~~6.3%, which included $10,545,880 for~~211.55%. Excluding Appliances Connection, our ~~successor from April 6, 2019 to June 30, 2019 and $12,946,901 for our predecessor from January 1, 2019 to April 5, 2019. The~~product sales increased by $5,026,422 or 20.1%. This increase is due to increased sales volume to meet appliance and furniture demand resulting from increased advertising, which has a direct impact on customer orders and shipped sales. In
During the ~~first three~~six months ~~sales were affected by working capital issues, which delayed the timing of ordering product to fulfill customer orders resulting in increased order cancellations. Late in the second quarter of 2020,~~ended June 30, 2021, we ~~suffered~~experienced delays in getting products from manufacturers ~~whose production facilities were closed because of~~due to continued supply chain issues related to the ~~coronavirus pandemic. The lack of available products~~COVID-19 pandemic, which resulted in ~~some~~ cancellations of some customer orders.
For the six months ended June 30, 2021, we estimate that cancellations caused by shipping delays approximated $22.5 million based on the historical ratio of shipped sales to customer orders of approximately 80.7% for the three most recent pre COVID-19 years (2017 to 2019) to the actual ratio of approximately 46.1% in the six months ended June 30, 2021.
39

Our revenue by sales type is as follows:

Six Months Ended June 30,
2020
Successor 2019
Successor 2019
Predecessor
2019
Total

Appliance sales $ 19,335,110 $ 8,395,603 $ 9,838,232 $ 18,233,835
Furniture sales 4,050,163 1,557,813 2,468,818 4,026,631
Other sales 1,576,936 592,464 639,851 1,232,315
Total $ 24,962,209 $ 10,545,880 $ 12,946,901 $ 23,492,781
Six Months Ended
June 30, 2021 Six Months Ended
June 30, 2020
Amount % Amount %
Appliance sales $ 66,387,297 85.37 % $ 19,335,110 77.46 %
Furniture sales 8,487,474 10.91 % 4,050,163 16.23 %
Other sales 2,894,695 3.72 % 1,576,936 6.32 %
Total $ 77,769,466 100.00 % $ 24,962,209 100.00 %

The percentage of furniture sales declined in the 2021 period as compared to the 2020 period as furniture sales comprised a lower percentage of Appliances Connection’s sales (3.27%) compared to the Company (23.01%).
Cost of goods sold. Our cost of goods sold was $62,085,520 for the six months ended June 30, 2021, which included $37,661,999 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $20,796,328 for the six months ended June 30, 2020, ~~as compared to $19,707,248 for the six months ended June 30, 2019,~~ an increase of ~~$1,089,080,~~$41,289,192, or ~~5.5%, which included $8,702,406 for~~198.54%. Excluding Appliances Connection, our ~~successor from April 6, 2019 to June 30, 2019 and $11,004,842 for our predecessor from January 1, 2019 to April 5, 2019.~~cost of goods sold increased by $3,627,193, or 17.4%. As a percentage of net sales, cost of goods sold was 79.83% (or 81.44% excluding Appliances Connection) and 83.31% for the six months ended June 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.
Gross profit and gross margin. As a result of the foregoing, our gross profit was $15,683,946 for the six months ended June 30, 2021, which included $10,118,836 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $4,165,881 for the six months ended June 30, 2020, an increase of $11,518,065, or 276.49%. Excluding Appliances Connection, our gross profit increased by $1,399,229, or 33.6%%. Our gross margin (gross profit as a percentage of net sales) was 20.17% (or 18.56% excluding Appliances Connection) and 16.69% for the six months ended June 30, 2021 and 2020, respectively. Such increase was primarily due to the impact of the acquisition of Appliances Connection, as well as a change in product mix with furniture sales, ~~declined from 83.9%~~which have higher margins, comprising a larger percentage of our net sales in the ~~2019 period to 83.3% in the 2020~~2021 period. Prior to the acquisition in April 2019, we made adjustments to cost of sales in March 2019 that related to 2018. Had the adjustments been made in 2018, cost of sales would have been 82.6% in the 2019 period. The remaining difference is attributable to product mix and other normal variables.

Personnel expenses. Our personnel expenses were $6,752,492 for the six months ended June 30, 2021, which included $1,951,705 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $2,351,673 for the six months ended June 30, 2020, ~~as compared to $1,800,144~~an increase of $4,400,819, or 187.14%. Excluding Appliances Connection, our personnel expenses increased by $2,449,114, or 104.1%. As a percentage of net sales, personnel expenses were 8.68% (or 16.01% excluding Appliances Connection) and 9.42% for the six months ended June 30, ~~2019, an increase of $551,529, or 31%, which included $886,225 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$913,919 for our predecessor from January 1, 2019 to April 5, 2019. The~~2020, respectively. Such increase is the result of hiring ~~additional~~the senior management team and ~~other~~support staff needed ~~for~~because of increased customer ~~demand for our products, and~~orders. Additionally, during the ~~accrual~~2021 period, we incurred stock compensation expenses of ~~$359,216 as~~$804,150 that we did not have in the ~~present value of a severance contract payable to our former president.~~2020 period.
Advertising expenses. Our advertising expenses were $4,015,063 for the six months ended June 30, 2021, which included $913,533 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $1,558,343 for the six months ended June 30, 2020, ~~as compared to $1,239,498~~an increase of $2,456,720, or 157.65%. Excluding Appliances Connection, our advertising expenses increased by $1,543,187, or 99.00%. As a percentage of net sales, advertising expenses were 5.16% (or 10.34% excluding Appliances Connection) and 6.24% for the six months ended June 30, ~~2019, an increase of $318,845, or 26%, which included $525,222 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$714,276 for our predecessor from January 1, 2019 to April 5, 2019.~~2020, respectively. The increase relates to an increase in advertising spending to drive traffic to our website.
Bank and credit card fees. Our bank and credit card fees were $2,628,101 for the six months ended June 30, 2021, which included $1,573,462 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $699,309 for the six months ended June 30, 2020, ~~as compared to $561,520~~an increase of $1,928,792, or 275.81%. Excluding Appliances Connection, our bank and credit card fees increased by $355,330, or 50.81%. As a percentage of net sales, bank and credit card fees were 3.38% (or 3.52% excluding Appliances Connection) and 2.80% for the six months ended June 30, ~~2019, an increase of $137,789, or 25%, which included $232,273 for our successor from April 6, 2019 to June 30, 2019~~2021 and ~~$329,247 for our predecessor from January 1, 2019 to April 5, 2019.~~2020, respectively. These fees are based on ~~sales,~~customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to the increase in ~~revenue.~~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 $297,475, or 0.38% of net sales, for the six months ended June 30, 2021, which included $52,812 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $183,631, or 0.74% of net sales, for the six months ended June 30, 2020.
Acquisition expenses. During the six months ended June 30, 2021, we incurred expenses related to the acquisition of Appliances Connection in the amount of $802,899.
Loss on abandonment of right of use asset. During the six months ended June 30, 2021, we incurred a loss in the amount of $1,437,042 related to the closure of our old warehouse and showroom and write-off of related leasehold improvements.
General and administrative ~~expenses.~~ expenses. Our general and administrative expenses were $4,294,390 for the six months ended June 30, 2021, which included $703,723 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $2,949,257 for the six months ended June 30, 2020, ~~as compared to $2,403,455~~an increase of $1,345,133, or 45.61%. Excluding Appliances Connection, our general and administrative expenses increased by $641,410, or 21.75%. As a percentage of net sales, general and administrative expenses were 5.52% (or 11.97% excluding Appliances Connection) and 11.81% for the six months ended June 30, ~~2019, an~~2021 and 2020, respectively. The increase ~~of 545,802, or 23%, which included $1,952,241 for~~was largely due to increased directors and officers insurance expenses, fees to our ~~successor from April 6, 2019 to June 30, 2019~~independent directors, and ~~$451,214 for our predecessor from January 1, 2019 to April 5, 2019. The primary increases are~~legal, audit and other professional fees ~~for audits,~~in connection with becoming a public company in August 2020, as well as consulting fees to upgrade our online shopping cart, fees ~~to the Manager under the offsetting management services agreement described below,~~for our Electronic Data Interchange initiative, and other consulting fees.
Total other income (expense). We had ~~$4,706,369~~$2,965,483 in total other expense, net, for the six months ended June 30, ~~2020,~~2021, which included other expense, net, of $50,665 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to total other expense, net, of ~~$446,194~~$4,706,369 for the six months ended June 30, ~~2019, which included expenses of $345,159~~2020. Total other expense, net, for ~~our successor from April 6, 2019 to~~the three months ended June 30, ~~2019,~~2021 consisted of interest expense of $1,170,957, financing costs of $80,003 and a loss on extinguishment of debt of $1,747,901, offset by interest income of ~~$31,007 for our predecessor from January 1, 2019 to April 5, 2019~~$22,379 and ~~adjustments~~other income of ~~$(132,042).~~$10,999. Total other expense, net, for the six months ended June 30, 2020 consisted of interest expense of $557,996, financing costs of $269,186, a loss on ~~debt modification and~~ extinguishment of debt of $948,856, a loss on acquisition working capital receivable of $809,000, and change in the warrant liability of $2,127,656, offset by interest income of $1,062 and other income of ~~$5,263, while other expense~~$5,263.
Income tax benefit (expense). We had an income tax net benefit of $8,048,478 for the six months ended June 30, ~~2019 consisted~~2021, as compared to an income tax benefit of ~~financing costs~~$1,123,953 for the six months ended June 30, 2020. The tax benefit arose from the elimination of ~~$275,894~~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 ~~interest expense,~~will be able to utilize previously derived net ~~of $249,125, offset by a change in warrant liability of $2,600, interest~~operating losses.
Net income ~~of $23,807 and other income of $52,418.~~
~~Net loss~~(loss). As a result of the cumulative effect of the factors described above, we had net income of $539,479 for the six months ended June 30, 2021, which include a net income of $4,872,936 from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to a net loss of $7,158,748 for the six months ended June 30, 2020, ~~as compared~~an increase of $7,698,227, or 107.54%. Excluding Appliances Connection, net loss decreased by $2,828,291, or 39.47%.

Liquidity and Capital Resources
As of June 30, 2021, we had cash and cash equivalents of $45,234,542 and restricted cash of $8,385,848. We have relied on cash on hand, external bank lines of credit, proceeds from our public offerings described below, issuance of third party and related party debt and the issuance of notes to ~~$2,762,390~~support cashflow from operations.
For the six months ended June 30, 2021, the Company incurred operating losses of approximately $4,543,516 and negative cash flow from operations of $6,985,302, but had working capital of $15,530,879. Additionally, the Company had over $45 million of unrestricted cash at June 30, 2021. On June 2, 2021, the Company closed on the acquisition of Appliances Connection. Appliances Connection has historically been profitable, however, only 29 days of their operations are included in results for the three and six months of 2021.
Management has prepared estimates of operations for fiscal years 2021 and 2022 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of this report. Additionally, only one month of operations for Appliances Connection, which has operated profitably, are included in the results of operations for the six months ended June 30, ~~2019, an increase~~2021.
The impact of ~~$4,396,358,~~COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or ~~159%,~~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 ~~included $2,185,083 for our successor from April 6, 2019~~the Company is expected to ~~June 30, 2019~~be able to realize its assets and $445,265 for our predecessor from January 1, 2019 to April 5, 2019 and adjustments of $(132,042). The net loss for the six months ended June 30, 2020 was affected three non-cash charges equal to $3,885,512satisfy its liabilities in the ~~aggregate.~~
normal course of business.
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~~Non-GAAP to GAAP Reconciliation~~
This report contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The non-GAAP financial measures are net loss before taxes excluding the following non-cash charges (i) a loss on extinguishment of debt of $948,856, (ii) a write-off of acquisition receivable of $809,000 and (iii) a non-cash charge to change in warrant liability expense of $2,127,656.
The non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management, however, believes that these non-GAAP financial measures, when used in conjunction with the results presented in accordance with GAAP, may provide a more complete understanding of our results and may facilitate a fuller analysis of our results, particularly in evaluating performance from one period to another. Management has chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of results and to illustrate the results giving effect to the non-GAAP adjustments shown in the reconciliation described in the next paragraph. Furthermore, the economic substance behind our decision to use such non-GAAP measures is that such measures approximate our controllable operating performance more closely than the most directly comparable GAAP financial measures. Management strongly encourages investors to review our financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP measures used by us may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
~~The following tables provide a reconciliation of the non-GAAP measures disclosed above to the comparable GAAP measure.~~
Three Months Ended June 30, 2020
(As Restated)
GAAP Elimination of
Non-Cash Charges Non-GAAP
Loss from operations $ (1,387,999 ) $ - $ (1,387,999 )
Other income (expense)
Interest income 1,062 - 1,062
Financing costs (74,504 ) - (74,504 )
Interest expense (296,708 ) - (296,708 )
Loss on extinguishment of debt (948,856 ) (948,856 ) -
Write-off of acquisition receivable (809,000 ) (809,000 ) -
Change in fair value of warrant liability (2,127,656 ) (2,127,656 ) -
Other income (expense) 2,880 - 2,880
Total other income (expense) (4,252,782 ) (3,885,512 ) (367,270 )
Net loss before income taxes $ (5,640,781 ) $ $ (1,755,269 )

Six Months Ended June 30, 2020
(As Restated)

GAAP Elimination of Non-Cash Charges Non-GAAP
Loss from operations $ (3,576,332 ) $ - $ (3,576,332 )
Other income (expense)
Interest income 1,062 - 1,062
Financing costs (269,186 ) - (269,186 )
Interest expense (557,996 ) - (557,996 )
Loss on extinguishment of debt (948,856 ) (948,856 ) -
Write-off of acquisition receivable (809,000 ) (809,000 ) -
Change in fair value of warrant liability (2,127,656 ) (2,127,656 ) -
Other income (expense) 5,263 - 5,263
Total other income (expense) (4,706,369 ) (3,885,512 ) (820,857 )
Net loss before income taxes $ (8,282,701 ) $   $ (4,397,189 )
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~~Liquidity and Capital Resources~~
As of June 30, 2020, we had cash and cash equivalents of $3,555,946. To date, we have financed our operations primarily through revenue generated from operations, bank borrowings and equity contributions by our stockholders.
We believe that our current levels of cash will be sufficient to meet our anticipated cash needs for our operations for at least the next 12 months. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
At June 30, 2020, we did not meet certain loan covenants under the loan and security agreements with Burnley and SBCC described below. The agreements require compliance with the following ratios of earnings before interest, taxes, depreciation, and amortization to outstanding debt amounts for the twelve-month period ended June 30, 2020. The table below shows the required ratio and actual ratio for such period.
~~Covenant~~ ~~Actual Ratio~~ ~~Required Ratio~~
~~Total debt ratio~~ ~~(2.9)x~~ ~~4.0x~~
~~Senior debt ratio~~ ~~(0.7)x~~ ~~1.5x~~
~~Interest coverage ratio~~ ~~(1.2)x~~ ~~1.0x~~
In addition, we were not in compliance with a requirement with respect to the liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At June 30, 2020, the actual ratio was 0.36x compared to a requirement of 1.0x.
~~Accordingly, at June 30, 2020, we were in default on these loan and security agreements (though we remained current in our payments) and have classified such debt as a current liability.~~
There are no cross-default provisions that would require any other long-term liabilities to be classified as current. Although we have defaulted under the 9% subordinated promissory note described below as the result of our failure to make payments thereunder from and after August 27, 2019, the date that Burnley notified us that we are in technical default under its loan and security agreement, Burnley’s notice also stated that pursuant to the subordination agreement, dated April 5, 2019, between Burnley and Goedeker, no payment can be made under the note so long as our default relating to Burnley’s loan continues. Therefore, notwithstanding the default, Goedeker has no right to accelerate the note because, in addition to the subordination agreement which otherwise would have permitted acceleration, the note itself also has specific subordination provisions that prohibit such acceleration. Since Goedeker does not currently have the right to accelerate the note, we have classified all amounts other than the currently due portion of the note as long-term liabilities.
~~Upon closing of the IPO on August 4, 2020, we repaid the loans from Burnley and SBCC in full.~~
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Summary of Cash Flow

The following table provides detailed information about our net cash flow for ~~all financial statement periods presented in this report.~~the six months ended June 30, 2021 and 2020.

Six Months Ended June 30,

Six Months Ended
June 30,
2019
(As Restated)

2020
Successor
(As Restated)
2019
Successor 2019
Predecessor 2019 Total
Net cash provided by (used in) operating activities $ 3,852,042 $ (2,117,345 ) $ 611,268 $ (1,506,077 )
Net cash used in investing activities (7,000 ) - - -
Net cash provided by (used in) financing activities (353,566 ) 2,288,065 - 2,288,065
Net change in cash $ 3,491,476 $ 170,712 $ 611,268 $ 781,980
Six Months Ended
June 30,
2021 2020
Net cash provided by (used in) operating activities $ (6,985,302 ) $ 3,852,042
Net cash used in investing activities (198,132,666 ) (7,000 )
Net cash provided by (used in) financing activities 248,826,442 (353,566 )
Net change in cash and restricted cash 43,708,474 3,491,476
Cash and restricted cash, beginning of period 9,911,916 64,470
Cash and restricted cash, end of period $ 53,620,390 $ 3,555,946

Our net cash ~~provided by~~used in operating activities was ~~$3,852,042~~$6,985,302 for the six months ended June 30, ~~2020,~~2021, which included $8,947,315 in net cash provided by operating activities from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to $3,852,042 net cash ~~used in~~provided by operating activities ~~of $ 1,506,077for~~for the six months ended June 30, ~~2019, which included~~2020. For the six months ended June 30, 2021, our net income of $539,479, a decrease in inventory of $2,313,999, non-cash expenses for early extinguishment of debt of $1,747,901 and an impairment loss of $1,437,042, offset by a decrease in accounts payable and accrued expenses of $4,358,830, customer deposits of $1,740,825, prepaid expenses and other current assets of $1,037,508, and an increase in deferred tax asset of $8,049,978, represent the primary drivers for cash used in ~~operating activities of $2,117,345 for our successor from April 6, 2019 to~~operations. For the six months ended June 30, 2019 and net cash provided by operating activities of $611,268 for our predecessor from January 1, 2019 to April 5, 2019. The increase in net cash used in operating activities is primarily due the increase in2020, our net loss ~~and~~of $7,158,748, a decrease in prepaid expenses and other ~~assets.~~assets of $1,914,049 and deferred tax assets of $1,123,953, offset by an in customer deposits of $8,267,312, an increase in accounts payable and accrued expenses of $2,003,642, and a change in fair value of warrant liability of $2,127,656, were the primary drivers of the net cash provided by operating activities.

Our net cash used in investing activities was $198,132,666 for the six months ended June 30, 2021, as compared to $7,000 for the six months ended June 30, ~~2020, which consisted entirely of purchases of property and equipment. We had no~~2020. Net cash used in investing activities for the six months ended June 30, ~~2019.~~2021 consisted of cash paid in the acquisition of Appliances Connection of $197,623,238 and purchases of property and equipment of $509,428. Net cash used in investing activities for the for the six months ended June 30, 2020 consisted of entirely purchases of property and equipment. Appliances Connection did not have any investing activities for the six months ended June 30, 2021.

Our net cash provided by financing activities was $248,826,442 for the six months ended June 30, 2021, which included $42,107 in net cash used in financing activities ~~was~~from Appliances Connection for the period from June 2, 2021 (date of acquisition) to June 30, 2021, as compared to net cash used in financing activities of $353,566 for the six months ended June 30, ~~2020, as compared to net~~2020. Net cash ~~used~~provided by financing activities ~~of $2,288,065~~ for the six months ended June 30, ~~2019, all~~2021 consisted of ~~which was during~~proceeds from the ~~period~~public offering described below of $194,597,500, proceeds from ~~April 6, 2019 to June 30, 2019.~~the exercise of warrants of $2,335,083, proceeds from the term loan described below of $55,216,594, offset by repayment on notes payable of $ 3,321,536. Net cash used in financing activities for the six months ended June 30, 2020 consisted of net payments on lines of credit of $814,492 and repayment on notes payable of $181,674, offset by proceeds from ~~the PPP~~a paycheck protection plan loan ~~described below~~ of $642,600, while net cash provided financing activities for the six months ended June 30, 2019 consisted of net borrowings from lines of credit of $591,315, proceeds from notes payable of $1,500,000, and proceeds from convertible notes payable of $650,000, offset by repayments on notes payable of $93,750 and cash paid for financing costs of $359,500.$642,600.
Public Offering

~~Revolving Loan - Burnley~~
On ~~April 5, 2019, the Company, as borrower, and the Company’s parent company at such time, 1847 Goedeker Holdco Inc. (“Holdco”),~~May 27, 2021, we entered into ~~a loan and security~~an underwriting agreement with ~~Burnley Capital LLC (“Burnley”~~ThinkEquity, a division of Fordham Financial Management, Inc. (the “Underwriter”) ~~for revolving loans~~, 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, 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), 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 ~~an aggregate principal amount that will not exceed the lesser~~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 ~~(i) the borrowing base (as defined~~common stock and warrants contained in the ~~loan~~units were immediately separable and ~~security agreement) or (ii) $1,500,000 (provided that such amount may be increased~~were issued separately.
On June 2, 2021, we sold 91,111,111 shares of common stock and warrants to ~~$3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any time in accordance with~~purchase 93,111,111 shares of common stock to the ~~loan~~Underwriter for total gross proceeds of $205,020,000. After deducting the underwriting commission and ~~security agreement. In connection with~~expenses, we received net proceeds of approximately $190,481,100.
On June 7, 2021, we sold 2,000,000 shares of common stock to the ~~closing~~Underwriter for total gross proceeds of $4,480,000. After deducting the ~~acquisition~~underwriting commission and expenses, we received net proceeds of ~~Goedeker on April 5, 2019, the Company borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000.~~ approximately $4,166,400.
As of June 30, ~~2020, there was $232,000 available for borrowing and the balance~~2021, an aggregate of ~~the line~~1,039,148 warrants were converted to common stock at $2.25 per share, yielding proceeds of ~~credit was $456,104, comprised of principal of $524,938 and net of unamortized debt issuance costs of $68,834.~~$2,338,083.

~~As noted above, as of June 30, 2020, the Company was in technical, not payment default, on this loan and security agreement and classified such debt as a current liability.~~
~~On August 4, 2020, the Company~~We used ~~a portion of~~to the proceeds ~~from the IPO~~of this offering to repay the loan in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350 interest of $42 and prepayment, legal, and other fees of $85,802.
~~Revolving Loan - Northpoint~~
~~On June 24, 2019, the Company, as borrower, entered into~~fund a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by the Company of inventory at an interest rate of LIBOR plus 7.99%. The Company terminated the loan and security agreement on May 18, 2020 and there is no outstanding balance as of June 30, 2020.
43
~~Term Loan - SBCC~~
On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan in the principal amount of $1,500,000, pursuant to which the Company issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. The Company classified the warrant as a derivative liability on the balance sheet of $2,250,000 based on the estimated value of the warrants in the IPO. The increase in the value of the warrant from the estimated value of $122,344 at March 31, 2020 resulted in a charge of $2,127,656. The balance of the note amounts to $877,603 as of June 30, 2020, comprised of principal of $1,130,826, capitalized PIK interest of $27,476 and net of unamortized warrant feature of $158,321 and unamortized debt discount of $122,375.
~~As noted above, as of June 30, 2020, the Company was in technical, not payment default, on this loan and security agreement and classified such debt as a current liability.~~
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the loan in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999. In addition, SBCC converted the warrant into 250,000 shares of our common stock.
~~Secured Convertible Promissory Note~~
On April 5, 2019, the Company’s parent company, 1847 Holdings LLC (“1847 Holdings”), Holdco and the Company (collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco.
On May 11, 2020, 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the note to October 5, 2020, (ii) that 1847’s failure to repay the note on the original maturity date of April 5, 2020 shall not constitute and event of default under the note and (iii) to increase the principal amount of the note by $207,145, as a forbearance fee.
In connection with the amendment, (i) 1847 Holdings issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings’ acquisition of Asien’s Appliance, Inc., 1847 Holdings’ wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien Inc.
The note carries an original issue discount of $64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Furthermore, 1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the six months ended June 30, 2020.
Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of 1847 Holdings into which such common shares may be changed or reclassified.
On May 4, 2020, Leonite converted $100,000 of the outstanding balance of the note into 100,000 common shares of 1847 Holdings. On July 24, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares of 1847 Holdings.
~~The remaining net balance of the note at June 30, 2020 is $821,431. As a result of the activity on this note, $948,856 was recorded as loss on extinguishment of debt.~~
~~On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.~~
~~9% Subordinated Promissory Note~~
A portion of the purchase price for the acquisition of ~~the assets of Goedeker was paid by the issuance by the Company~~Appliances Connection.
Private Placement
On March 19, 2021, we entered into a securities purchase agreement with two institutional investors, pursuant to ~~Steve Goedeker, as representative of Goedeker, of~~which we issued to each investor (i) a ~~9% subordinated~~10% OID senior secured promissory note in the principal amount of ~~$4,100,000.~~$2,750,000 and (ii) a four-year warrant to purchase 200,000 shares of our 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 $2,500,000 each, or $5,000,000 in the aggregate. After deducting a placement fee and other expenses, we received net proceeds of $4,590,000. On June 2, 2021, we repaid these notes in full from the proceeds of the term loan described below.
Credit Facilities
On June 2, 2021, the Company and ACI, as borrowers, entered into a credit and guaranty agreement with Appliances Connection and certain other subsidiaries 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 $70,000,000, including (i) a $60,000,000 term loan (the “Term Loan”) and (ii) a $10,000,000 revolving credit facility (the “Revolving Loan”), which revolving credit facility includes a $2,000,000 swingline subfacility (the “Swing Line Loan” and together with the Term Loan and the Revolving Loan, the “Loans”) and a $2,000,000 letter of credit subfacility, in each case, on the terms and conditions contained in the credit and guaranty agreement. On June 2, 2021, we borrowed the entire amount of the Term Loan and issued term loan notes to the Lenders in the aggregate principal amount of $60,000,000. As of June 30, 2021, we have not made any loans under the Revolving Loan. As of June 30, 2021, the outstanding balance of the Term Loan is $56,311,521, comprised of principal of $60,000,000 net of unamortized loan costs of $3,688,479. We have classified $6,000,000 as a current liability and the balance as a long-term liability.

Each of the Loans matures on June 2, 2026. The ~~note~~Loans will ~~accrue~~bear interest on the unpaid principal amount thereof as follows: (i) if it is a Loan bearing interest at ~~9% per annum, amortized on~~ a ~~five-year straight-line basis~~rate determined by the base rate (as defined in the credit and ~~payable quarterly~~guaranty agreement), then at the base rate plus the applicable margin (as defined in the credit and guaranty 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 and guaranty 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. We 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 ~~amortization schedule attached thereto, and mature on April 5, 2024. The remaining balance~~provisions of the ~~note~~credit and guaranty agreement. Notwithstanding the foregoing, following an event of default, the Loans will bear interest at ~~June 30, 2020~~a rate that is ~~$3,416,226 comprised of principal of $3,930,293, net of unamortized debt discount of $354,276 and loan costs of $159,791.~~
2% per annum higher than the interest rate then in effect for the applicable Loan.
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~~On June 2, 2020, the parties entered into an amendment and restatement of the note that became effective as of the closing of the IPO on August 4, 2020, pursuant to which (i)~~We must repay the principal amount of the ~~existing note was increased by $250,000, (ii) upon~~Term Loan in quarterly installments of $1,500,000 each, payable on the ~~closing~~last business day of each March, June, September and December, commencing on September 30, 2021. The remaining unpaid principal amount of the ~~IPO,~~Term Loan must be repaid on the ~~Company agreed to make all payments~~maturity date, unless payment is sooner required by the credit and guaranty agreement. Mandatory repayments of ~~principal and interest due~~amounts borrowed under the ~~note through~~Revolving Loan facility are required only if the ~~date~~amount borrowed at any time exceeds the commitment amount.
The credit and guaranty agreement contains customary representations, warranties, affirmative and negative financial and other covenants and events of default for loans of this type. The Loans are guaranteed by the ~~closing,~~Guarantors and ~~(iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. The Company also agreed to grant to the sellers, Goedeker, Steve Goedeker and Mike Goedeker,~~are secured by a first priority security interest in substantially all of the assets of the Company, ACI and the Guarantors.
Vehicle Loans
Appliances Connection 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 ~~secure its~~5.74%. As of June 30, 2021, the outstanding balance of these notes is $1,488,620.
Financing Leases
Appliances Connection has three finance leases for the acquisition of forklifts. At June 30, 2021, the total amount due on these leases was $210,809.
Contractual Obligations
Our principal commitments consist mostly of obligations under the ~~amended and restated note and entered into a security agreement with them that became effective upon the closing of the IPO.~~
The Company has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by the Company of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of the Company. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans ~~with Burnley and SBCC are not payment defaults, they fall under clause (B)~~described above and ~~would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.~~other contractual commitments described below.
As stated above, although the Company has defaulted under this note, Goedeker has no right to accelerate the note because the note has specific subordination provisions that prohibit such acceleration.
In accordance with the terms of the amended and restated note that became effective upon closing of the IPO on August 4, 2020, the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.
~~Paycheck Protection Program Loan~~
On April 8, 2020, the Company received a $642,600 Paycheck Protection Program (the “PPP”) loan from the United States Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. The PPP provides that the loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the proceeds from the PPP loan for qualifying expenses and to apply for forgiveness of the PPP loan in accordance with the terms of the CARES Act. The Company has classified $284,411 of the PPP loan as a current liability and $358,189 as a long-term liability pending classification of the final loan terms by the SBA.
~~Contractual Obligations~~
~~Offsetting~~ Management Services Agreement

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

Pursuant to the ~~offsetting~~ management services agreement, we must also reimburse the Manager for all costs and expenses which are specifically approved by our board of directors, including all out-of-pocket costs and expenses, that are actually incurred by ~~the Manager~~us or ~~its~~our affiliates on our behalf in connection with performing services under the ~~offsetting~~ management services agreement.
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~~The services provided by the Manager include: conducting general and administrative supervision and oversight~~We expensed management fees of our day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging$62,500 for the ~~maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits~~three months ended June 30, 2021 and ~~licenses, acquisition of any additional licenses~~2020 and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to our business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines.
~~The Company expensed~~ $125,000 ~~and $58,790 in management fees~~ for the six months ended June 30, ~~2020~~2021 and 2019, respectively. Payment of the management fee is subordinated to the payment of interest on the 9% subordinated promissory note, such that no payment of the management fee may be made if the Company is in default under the note with regard to interest payments and, for the avoidance of doubt, such payment of the management fee will be contingent on the Company being in good standing on all associated loan covenants. In addition, during the period that that any amounts are owed under the 9% subordinated promissory note or the earn out payments described below, the annual management fee shall be capped at $250,000. The rights of the Manager to receive payments under the offsetting management services agreement were also subordinate to the rights of Burnley and SBCC under separate subordination agreements that the Manager entered into with Burnley and SBCC on April 5, 2019. Accordingly, $188,653 due the Manager is classified as an accrued liability as of June 30, 2020.
Earn Out ~~Payments~~Payment

Pursuant to ~~the~~an asset purchase agreement, ~~with~~dated January 18, 2019, as amended, among the Company, Goedeker itTelevision Co. (“Goedeker”), Steve Goedeker and Mike Goedeker, Goedeker is ~~also~~ entitled to receive ~~the following~~an earn out ~~payments to~~payment of $200,000 if the ~~extent that our business achieves the applicable~~ EBITDA (as defined in the asset purchase agreement) ~~targets:~~
1. Anof the business acquired from Goedeker for the trailing twelve (12) month period from April 5, 2022 is $2,500,000 or greater, and may be entitled to receive a partial earn out payment ~~of $200,000~~ if the EBITDA ~~of our business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;~~
2. ~~An earn out payment of $200,000 if the EBITDA of our business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and~~
3. ~~An earn out payment of $200,000 if the EBITDA of our business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.~~
~~To the extent the EBITDA of our business for any applicable period~~ is less than $2,500,000 but greater than ~~$1,500,000, we~~$1,500,000.

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.
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 month every year. 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.
On June 2, 2021, 1 Stop entered into a ~~partial earn out payment~~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 ~~Goedeker~~$96,896.37 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.
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 $6,365.40 per month during the first year with annual increases to $8,305.40 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.
On May 31, 2019, YF Logistics entered into a sublease agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in ~~an amount~~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 ~~product determined~~base rent paid by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the “Achievement Percentage” is the percentage determined by dividing (A) the amount of (i) the EBITDA of our businessDMI under its lease for the ~~applicable period less (ii) $1,500,000,~~premises, plus 71.43% of any taxes, operating expenses, additional charges or any other amounts due by ~~(B) $1,000,000. For avoidance~~DMI, for a total of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of our business for any applicable period is equal or less than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA was $(2,825,000) so Goedeker is not entitled to an earn our payment for that period.$56,250 per month.

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

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

Critical Accounting Policies and Estimates

~~The following discussion relates to critical accounting policies for our company.~~ The preparation of the unaudited condensed consolidated financial statements ~~in conformity with GAAP~~ requires our management to make ~~assumptions,~~ estimates and ~~judgments~~assumptions that affect the reported amounts ~~reported, including the notes thereto,~~of assets, liabilities, revenues and expenses, and related ~~disclosures~~disclosure of ~~commitments~~contingent assets and ~~contingencies, if any. We have identified certain~~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.
For a description of the accounting policies that, are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and requirein management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policiesopinion, involve the most significant ~~estimates and judgments used in the preparation of our financial statements:~~
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~~Revenue Recognition and Cost of Revenue~~
~~On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~~~, which supersedes the revenue recognition requirements in Accounting Standard Codification (“ASC”) Topic 605,~~ ~~Revenue Recognition~~. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.
The Company collects the full sales price from the customer at the time the order is placed. The Company does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.
The revenue that the Company recognizes arises from orders it receives from its customers. The Company’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed.
Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, the Company’s products, which generally occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products through a third-party carrier from the Company’s warehouse to the customer (a “Company Shipment”). The second way is through a shipment of the products through a third-party carrier from a warehouse other than the Company’s warehouse to the customer (a “Drop Shipment”) and the third way is where the Company itself delivers the products to the customer and often also installs the product (a “Local Delivery”). In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the customer’s location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer’s location. In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company’s warehouse or a third party’s warehouse). Therefore, risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company’s warehouse or a third-party’s warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer’s control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company recognizes revenue.
The Company agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company’s contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing activities are excluded from revenue.
~~If the Company continued to apply legacy revenue recognition guidance for the six months ended June 30, 2020 and 2019, revenues, gross margin, and net loss would not have changed.~~
Cost of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.
~~Substantially all the Company’s sales are to individual retail consumers.~~
Shipping and Handling ‒ The Company bills its customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.
~~Disaggregated Revenue~~‒ The Company disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
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~~Receivables~~
Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufacturers from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.
~~Merchandise Inventory~~
Inventory consists of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on an average item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions.
~~Property and Equipment~~
Property and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Depreciation is computed using the straight-line method over estimated useful lives as follows:
~~Category~~ ~~Useful Life (Years)~~
~~Machinery and equipment~~ 5
~~Office equipment~~ 5
~~Vehicles~~ 5
~~Goodwill and Intangible Assets~~
In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.
~~Acquired identifiable intangible assets are amortized over the following periods:~~
~~Acquired Intangible Asset~~ ~~Amortization Basis~~ ~~Expected Life (Years)~~
~~Customer related~~ ~~Straight-line~~ 5
~~Marketing related~~ ~~Straight-line~~ 5
~~Long-Lived Assets~~
The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
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~~Derivative Instrument Liability~~
~~The Company accounts for derivative instruments in accordance with ASC 815,~~ ~~Derivatives and Hedging~~, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged.
~~Sales Tax Liability~~
~~On June 21, 2018, the U.S. Supreme Court issued an opinion in~~ ~~South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)~~~~, whereby the longstanding~~ ~~Quill Corp v. North Dakota~~ sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. In 2020, the Company began collecting sales tax in nearly all states that have sales tax. The Company accrued sales taxes in the states with sales tax. The Company accrued the potential liability from the effective date of a state’s adoption of the Wayfair decision up to the date the Company began collecting and filing sales taxes in the various states. At June 30, 2020 and December 31, 2019, the amount of such accrual was $4,767,000 and $2,910,200, respectively, which is included in accounts payable and accrued expenses.
~~Recent Accounting Pronouncements~~
~~Recently Adopted~~
~~In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“ASC 842”), which requires lessees to recognize right-of-use (“ROU”) assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. The Company adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all of the Company’s lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on the Company’s statements of income or cash flows. See Note 13 for the required disclosures relating to the Company’s lease agreements.
~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,~~ ~~which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718,~~ ~~Compensation - Stock Compensation~~, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~, which allows a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting from U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017. ASU 2018-02 became effective for the Company on January 1, 2019 and resulted in a decrease of approximately $748,000 to retained earnings due to the reclassification from AOCI of the effect of the corporate income tax rate change on our cash flow hedges. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. ASU 2017-12 became effective for the Company on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s financial statements.
~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles – Goodwill~~judgment or involve complex estimation and ~~Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to developcould, if different judgment or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s financial statements.
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~~Not Yet Adopted~~
~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement~~, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company will modify its disclosures beginning in the first quarter of 2020 to conform to this guidance. The Company does not expect the adoption of this standard and the associated changes to its disclosures to have a material impact to the Company’s financial statements.
~~In June 2016, the FASB issued ASU 2016-13~~ ~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’sestimates were made, materially affect our reported financial position, results of operations, or cash ~~flows.~~flows, see “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.

~~The Company currently believes that all~~During the three and six months ended June 30, 2021, there were no significant changes in our accounting policies and estimates other ~~issued and not yet effective~~than the newly adopted accounting standards that are ~~not relevant~~disclosed in Note 2 to ~~the Company’s~~our unaudited condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed 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 ~~Rule 13a-15(e) under the Securities~~ Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~1934, as amended (the “Exchange Act”)). Disclosure~~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 ~~refer to controls and other procedures designed~~are ineffective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, ~~of the Securities and Exchange Commission~~ and that such information is accumulated and communicated to our management, including our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
~~As required by Rule 13a-15(e)~~ Subject to receipt of additional financing, we intend to retain additional individuals and resources to remedy the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of June 30, 2020. Based on that evaluation, and as a result of the material weakness described below, our chief executive officer and chief financial officer concluded that, as of June 30, 2020, our disclosure controls and procedures were not effective. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the unaudited interim financial statements for the periods covered by and included in this report fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
ineffective controls.
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~~Material Weakness~~
Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.  In connection our evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020, we identified a material weakness in our internal control over financial reporting. We did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. These control deficiencies contributed to the following material weakness:
● We did not design and maintain adequate controls over the preparation and review of certain account reconciliations and journal entries. Specifically, we did not design and maintain controls to ensure (i) the appropriate segregation of duties in the preparation and review of account reconciliations and journal entries and (ii) account reconciliations and journal entries were reviewed at the appropriate level of precision.
The control deficiencies described above did not result in a misstatement to the unaudited interim financial statements for the periods covered by and included in this report. However, the control deficiencies described above, if not remediated, could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute a material weakness.
We have concluded that this material weakness arose because, as a private company prior to August 2020, we did not have the necessary business processes, systems, personnel and related internal controls. In 2020, we undertook measures to address material weaknesses in our internal controls. In particular, we (i) hired additional finance and accounting personnel with expertise in preparation of financial statements and account reconciliations and (ii) further developed and documented our accounting policies. In addition, we will continue to take steps to remediate this material weakness, including:
● ~~continuing to hire, additional qualified accounting and financial reporting personnel with public company experience;~~
● ~~providing additional training for our personnel on internal control over financial reporting;~~
● ~~implementing new financial systems and processes;~~
● ~~implementing additional review controls and processes and requiring timely account reconciliation and analyses;~~
● ~~implementing processes and controls to better identify and manage segregation of duties; and~~
● ~~engaging an external advisor to assist with evaluating and documenting the design and operating effectiveness of internal controls and assisting with the remediation of deficiencies, as necessary.~~
~~In designing and eval~~uating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting

~~We are taking actions to remediate~~There were no changes in the ~~material weakness relating to our internal control over financial reporting. Except as otherwise described herein, there was no change in our~~Company’s internal control over financial reporting ~~(as defined~~or in ~~Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~any other factors that could significantly affect these controls during the three months ended June 30, ~~2020~~2021 that ~~has~~have materially affected, or isare reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.
51

PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS.

Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during three months ended June 30, ~~2020~~2021 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 June 30, ~~2020.~~2021.
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 ~~second quarter of fiscal 2020~~three months ended June 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.

52

ITEM 6. EXHIBITS.

Exhibit No. Description ~~of Exhibit~~
3.1 Amended and Restated Certificate of Incorporation of 1847 Goedeker Inc. (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed on August 3, 2020)
3.2 Bylaws of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on April 22, 2020)
4.1 Warrant ~~to Purchase Company Shares issued by~~Agent Agreement, dated May 27, 2021, between 1847 Goedeker Inc. and American Stock Transfer & Trust Company, LLC and Form of Warrant (incorporated by reference to ~~Small Business Community~~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 ~~II, L.P.~~Management LLC on ~~April 5, 2019~~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 ~~Registration Statement~~Current Report on Form ~~S-1~~8-K filed on ~~April 22, 2020)~~March 25, 2021)
~~4.2~~
4.4 Form of Representative’s Warrant ~~Agreement~~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 Amendment No. 1 to Management Services Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on April 22, 2020)
~~10.2~~ First Amendment to Secured Convertible Promissory Note, dated May 11, 2020, among 1847 Holdings LLC, 1847 Goedeker Holdco Inc. and 1847 Goedeker Inc. and Leonite Capital LLC (incorporated by reference to Exhibit 10.32 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
~~10.3~~ Letter Agreement, dated June 2, 2020, between 1847 Goedeker Inc. and Small Business Community Capital II, L.P. (incorporated by reference to Exhibit 10.33 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
~~10.4~~ Amendment to Letter Agreement, dated July 16, 2020, between 1847 Goedeker Inc. and Small Business Community Capital II, L.P. (incorporated by reference to Exhibit 10.38 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on July 16, 2020)
~~10.5~~ Settlement Agreement, dated June 2, 2020, among 1847 Goedeker Holdco Inc., 1847 Goedeker Inc., Goedeker Television Co., Steve Goedeker and Mike Goedeker (incorporated by reference to Exhibit 10.34 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
~~10.6~~ 12% Amended and Restated Promissory Note issued by 1847 Goedeker Inc. to Steve Goedeker, in his capacity as the Seller’s Representative, on June 2, 2020 (incorporated by reference to Exhibit 10.35 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
~~10.7~~ Security Agreement, dated June 2, 2020, between 1847 Goedeker Inc. and Steve Goedeker, in his capacity as the Seller’s Representative (incorporated by reference to Exhibit 10.36 to the Amendment No. 4 to Registration Statement on Form S-1/A filed on June 4, 2020)
~~10.9~~ Amendment to Employment Letter Agreement, dated ~~April 21, 2020,~~June 3, 2021, between 1847 Goedeker Inc. and Douglas T. Moore (incorporated by reference to Exhibit ~~10.24~~10.4 to the ~~Registration Statement~~Current Report on Form ~~S-1~~8-K filed on ~~April 22, 2020)~~June 9, 2021)
~~10.10~~
10.2 ~~Employment Letter~~Loan and Security Agreement, dated ~~April 21, 2020,~~June 3, 2021, between 1847 Goedeker Inc. and ~~Robert D. Barry~~Northpoint Commercial Finance LLC (incorporated by reference to Exhibit ~~10.25~~10.1 to the ~~Registration Statement~~Current Report on Form ~~S-1~~8-K filed on ~~April 22, 2020)~~June 9, 2021)
~~10.11~~
10.3 Credit and Guaranty Agreement, dated June 2, 2021, among 1847 Goedeker Inc. ~~2020 Equity Incentive Plan~~, Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, certain other subsidiaries party thereto from time to time as guarantors, the financial institutions party thereto from time to time, and Manufacturers and Traders Trust Company (incorporated by reference to Exhibit ~~10.29~~10.1 to the ~~Amendment No. 4 to Registration Statement~~Current Report on Form ~~S-1/A~~8-K filed on ~~July 16, 2020)~~June 3, 2021)
31.1*
10.4 Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Manufacturers and Traders Trust Company on June 2, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 3, 2021)
10.5 Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to First Horizon Bank on June 2, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on June 3, 2021)
10.6 Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Sterling National Bank on June 2, 2021 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on June 3, 2021)
10.7 Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to BankUnited N.A. on June 2, 2021 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on June 3, 2021)
10.8 Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Manufacturers and Traders Trust Company on June 2, 2021 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on June 3, 2021)
10.9 Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to First Horizon Bank on June 2, 2021 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on June 3, 2021)
10.10 Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Sterling National Bank on June 2, 2021 (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on June 3, 2021)
10.11 Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to BankUnited N.A. on June 2, 2021 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on June 3, 2021)

10.12 Pledge and Security Agreement, dated June 2, 2021, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and such other subsidiaries from time to time a party thereto, in favor of Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on June 3, 2021)
10.13 Lease, dated June 2, 2021, between 1870 Bath Ave. LLC and 1 Stop Electronics Center, Inc. (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on June 3, 2021)
10.14 Lease, dated June 2, 2021, between 7812 5th Ave Realty LLC and Joe’s Appliances LLC (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on June 3, 2021)
10.15 Amendment No. 2 to Securities Purchase Agreement, dated April 6, 2021, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and the other parties signatory thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on April 6, 2021)
10.16 Independent Director Agreement, dated May 18, 2021, between 1847 Goedeker Inc. and Alan P. Shor (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on June 3, 2021)
31.1* Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
31.2* Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
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*
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~~Document.
101.CAL*
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF*
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB*
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
101.PRE*
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith
53
** 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: ~~May 3,~~August 12, 2021 1847 GOEDEKER INC.

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

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

54

iso4217:USD xbrli:shares

PART I
FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4838
Item 4.	Controls and Procedures	4838

~~PART II~~
PART II OTHER INFORMATION

~~Item 1.~~	~~Legal Proceedings~~	50
Item ~~1A.~~1.	~~Risk Factors~~Legal Proceedings	5039
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5039
Item 3.	Defaults Upon Senior Securities	5039
Item 4.	Mine Safety Disclosures	5039
Item 5.	Other Information	5039
Item 6.	Exhibits	5140

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Product sales, net	$	64,072,098		$	15,285,031		$	77,769,466		$	24,962,209
Cost of goods sold		51,016,609			12,685,158			62,085,520			20,796,328
Gross profit		13,055,489			2,599,873			15,683,946			4,165,881

Operating Expenses
Personnel		4,821,168			1,040,189			6,752,492			2,351,673
Advertising		2,931,815			891,907			4,015,063			1,558,343
Bank and credit card fees		2,095,359			454,569			2,628,101			699,309
Depreciation and amortization		175,143			91,790			297,475			183,631
Acquisition expenses		357,411			-			802,899			-
Loss on abandonment of right of use asset		1,437,042			-			1,437,042			-
General and administrative		2,500,381			1,509,417			4,294,390			2,949,257
Total Operating Expenses		14,318,319			3,987,872			20,227,462			7,742,213

LOSS FROM OPERATIONS		(1,262,830	)		(1,387,999	)		(4,543,516	)		(3,576,332	)

Other Income (Expense)
Interest income		12,283			1,062			22,379			1,062
Financing costs		(74,738	)		(74,504	)		(80,003	)		(269,186	)
Interest expense		(943,392	)		(296,708	)		(1,170,957	)		(557,996	)
Loss on extinguishment of debt		(1,747,901	)		(948,856	)		(1,747,901	)		(948,856	)
Write-off of acquisition receivable		-			(809,000	)		-			(809,000	)
Change in fair value of warrant liability		-			(2,127,656	)		-			(2,127,656	)
Other income (expense)		794			2,880			10,999			5,263
Total Other Income (Expense)		(2,752,954	)		(4,252,782	)		(2,965,483	)		(4,706,369	)

NET LOSS BEFORE INCOME TAXES		(4,015,784	)		(5,640,781	)		(7,508,999	)		(8,282,701	)

INCOME TAX (EXPENSE) BENEFIT		8,048,478			688,953			8,048,478			1,123,953

NET INCOME (LOSS)	$	4,032,694		$	(4,951,828	)	$	539,479		$	(7,158,748	)

NET INCOME (LOSS) PER COMMON SHARE	$	0.11		$	(0.99	)	$	0.03		$	(1.43	)
DILUTED NET INCOME (LOSS) PER COMMON SHARE	$	0.09		$	(0.99	)	$	0.02		$	(1.43	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –
BASIC		36,540,827			5,000,000			21,410,073			5,000,000
DILUTED		46,448,892			5,000,000			26,364,106			5,000,000

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

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

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

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

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

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

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

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

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

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

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balance, January 1, 2021		6,111,200	$	611	$	13,409,328	$	(26,725,708	)	$	(13,315,769	)
Stock-based compensation expense		-		-		124,575		-			124,575
Issuance of warrants in connection with notes payable		-		-		1,340,438		-			1,340,438
Net loss		-		-		-		(3,493,215	)		(3,493,215	)
Balance, March 31, 2021		6,111,200	$	611	$	14,874,341	$	(30,218,923	)	$	(15,343,971	)
Issuance of common stock in connection with acquisition		5,895,973		590		12,263,034		-			12,263,624
Issuance of common stock in connection with public offering		93,111,111		9,311		194,588,189		-			194,597,500
Issuance of stock grants		216,800		22		554,978		-			555,000
Exercise of warrants		1,039,148		104		2,337,979		-			2,338,083
Stock-based compensation expense		-		-		124,575		-			124,575
Net income		-		-		-		4,032,694			4,032,694
Balance, June 30, 2021		106,374,232	$	10,638	$	224,743,096	$	(26,186,229	)	$	198,567,505

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance, January 1, 2020		4,750,000	$	475	$	1,079,179	$	(5,157,871	)	$	(4,078,217	)
Net loss		-		-		-		(2,206,920	)		(2,206,920	)
Balance, March 31, 2020		4,750,000	$	475	$	1,079,179	$	(7,364,791	)	$	(6,285,137	)
Issuance of 1847 Holdings warrants in connection with notes payable		-		-		566,711		-			566,711
Forgiveness of related party debt		-		-		137,500		-			137,500
Issuance of 1847 Holdings shares in connection with exercise of warrant		-		-		275,000		-			275,000
Net loss		-		-		-		(4,951,828	)		(4,951,828	)
Balance, June 30, 2020		4,750,000	$	475	$	2,058,390	$	(12,316,619	)	$	(10,257,754	)

	Common Stock				Additional		Accumulated			Total Stockholder’s
	Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance, January 1, 2020 (As Restated)		4,750,000	$	475	$	1,079,179	$	(5,157,871	)	$	(4,078,217	)
Net loss		-		-		-		(2,206,920	)		(2,206,920	)
Balance, March 31, 2020 (As Restated)		4,750,000	$	475	$	1,079,179	$	(7,364,791	)	$	(6,285,137	)
Issuance of 1847 Holdings warrants in connection with notes payable		-		-		566,711		-			566,711
Forgiveness of related party debt		-		-		137,500		-			137,500
Issuance of 1847 Holdings shares in connection with exercise of warrant		-		-		275,000		-			275,000
Net loss		-		-		-		(4,951,828	)		(4,951,828	)
Balance, June 30, 2020 (As Restated)		4,750,000	$	475	$	2,058,390	$	(12,316,619	)	$	(10,257,754	)

	Successor						Predecessor
	Six Months Ended June 30, 2020 (As Restated)			Period from April 6, 2019 through June 30, 2019 (As Restated)			Period from January 1, 2019 through April 5, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,158,748	)	$	(2,185,083	)	$	(445,265	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		183,631			97,113			9,675
Amortization of finance costs		318,599			157,502			-
Gain on write-down of contingent liability		-			-			-
Loss on extinguishment of debt		948,856			-			-
Write-off of acquisition receivable		809,000			-			-
Change in fair value of warrant liability		2,127,656			(2,600	)		-
Non-cash lease expense		207,883			98,166			-
Deferred tax assets		(1,123,953	)		-			-
Changes in operating assets and liabilities:
Receivables		(214,726	)		(1,812,486	)		1,730,079
Vendor deposits		(50,543	)		-			(73,770	)
Merchandise inventory		(344,635	)		(608,073	)		595,466
Prepaid expenses and other assets		(1,914,049	)		505,727			2,784
Accounts payable and accrued expenses		2,003,642			734,813			196,565
Customer deposits		8,267,312			995,742			(1,404,266	)
Operating lease liabilities		(207,883	)		(98,166	)		-
Net cash provided by (used in) operating activities		3,852,042			(2,117,345	)		611,268
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(7,000	)		-			-
Net cash used in investing activities		(7,000	)		-			-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable		642,600			1,500,000			-
Repayment on notes payable		(181,674	)		(93,750	)		-
Proceeds from convertible notes payable		-			650,000			-
Net borrowings (payments) on lines of credit		(814,492	)		591,315			-
Cash paid for financing costs		-			(359,500	)		-
Net cash provided by (used in) financing activities		(353,566	)		2,288,065			-
NET CHANGE IN CASH		3,491,476			170,720			611,268
CASH, BEGINNING OF PERIOD		64,470			-			1,525,693
CASH, END OF PERIOD	$	3,555,946		$	170,720		$	2,136,961

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	170,385		$	77,185		$	-
Cash paid for taxes	$	-		$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES
Operating lease right-of-use asset	$	-		$	2,300,000		$	-
Debt discounts on notes payable	$	-		$	66,286		$	-
Warrants in 1847 Holdings contributed on notes payable	$	-		$	229,244		$	-
Warrants in 1847 Holdings contributed on convertible notes payable	$	-		$	292,673		$	-
1847 Holdings common shares contributed on note payable	$	-		$	137,500		$	-
Acquisition of Goedeker Television Co.	$	-		$	492,601		$	-
Conversion of debt through issuance of 1847 Holdings common shares	$	275,000		$	-		$	-
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest	$	118,500		$	-		$	-
Derecognition of related party debt	$	137,500		$	-		$	-
Adjustment to fair value of goodwill based on final purchase price allocation	$	121,736		$	-		$	-

	Successor						Predecessor
	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020		Period from April 6, 2019 through June 30, 2019		Period from January 1, 2019 through April 5, 2019
Appliance sales	$	11,533,006	$	19,335,110	$	8,449,312	$	9,784,525
Furniture sales		2,768,327		4,050,163		1,570,546		2,456,085
Other sales		983,698		1,576,936		526,023		706,291
Total	$	15,285,031	$	24,962,209	$	10,545,881	$	12,946,901

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Appliance sales	$	56,202,115	$	11,533,006	$	66,387,297	$	19,335,110
Furniture sales		6,172,784		2,768,327		8,487,474		4,050,163
Other sales		1,697,199		983,698		2,894,695		1,576,936
Total	$	64,072,098	$	15,285,031	$	77,769,466	$	24,962,209

Category		Useful Life (Years)
Furniture and fixtures		7
Machinery and equipment		55-7
Office equipment		55-7
~~Vehicles~~Transportation equipment		5

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

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

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

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

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

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

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

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

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

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

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

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

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

	June 30, 2021		December 31, 2020
Trade receivables from customers	$	11,858,185	$	-
Vendor rebates receivable		5,486,634		1,337,791
Credit cards in process of collection		189,207		660,441
Other receivables		3,732,761		-
Total receivables	$	21,266,787	$	1,998,232

	June 30, 2021			December 31, 2020
Appliances	$	19,974,548		$	5,285,975
Furniture		486,207			194,852
Other		1,098,268			91,414
Total merchandise inventory		21,559,023			5,572,241

Allowance for inventory obsolescence		(425,000	)		(425,000	)
Merchandise inventory, net	$	21,134,023		$	5,147,241

	June 30, 2021			December 31, 2020
Equipment	$	69,336		$	69,336
Warehouse equipment		374,448			61,070
Furniture and fixtures		8,434			512
Transportation equipment		1,417,047			63,784
Leasehold improvements		216,405			136,931
Construction in progress		509,428			-
Total property and equipment		2,595,098			331,633
Accumulated depreciation		(115,043	)		(85,685	)
Property and equipment, net	$	2,480,055		$	245,948

	June 30, 2020			December 31, 2019
Customer relationships	$	749,000		$	749,000
Marketing related		1,368,000			1,368,000
Total intangible assets		2,117,000			2,117,000
Accumulated amortization		(399,922	)		(238,156	)
Intangible assets, net	$	1,717,078		$	1,878,844

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

2021 (remainder of year)	$	211,698
2022		423,396
2023		423,396
2024		111,749
Total	$	1,170,239

Balance December 31, 2020	$	4,725,689
Preliminary goodwill from acquisition of Appliances Connection		217,382,100
Balance June 30, 2021	$	222,107,789

	June 30, 2021		December 31, 2020
Trade accounts payable	$	23,939,457	$	5,975,486
Sales tax		17,947,165		5,804,100
Accrued payroll liabilities		786,407		492,573
Accrued interest		199,340		10,000
Accrued liability for sales returns		200,000		200,000
Other accrued liabilities		8,825,297		219,556
Total accounts payable and accrued expenses	$	51,897,666	$	12,701,715

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

Assets acquired and liabilities assumed at fair value
Accounts receivable	$	456,183
Inventories		1,851,251
Other assets		295,863
Property and equipment		216,286
Customer related intangibles		749,000
Marketing related intangibles		1,368,000
Accounts payable and accrued expenses		(3,056,855	)
Customer deposits		(2,430,044	)
Net tangible assets acquired (liabilities assumed)	$	(550,316	)

Total net assets acquired (liabilities assumed)	$	(550,316	)
Consideration paid		4,175,373
Goodwill	$	4,725,689

Provisional purchase consideration at preliminary fair value:
Cash consideration	$	180,000,000
Share issuance		12,263,624
Working capital adjustment paid to sellers		24,060,458
Working capital adjustment payable to sellers		8,537,025
Amount of consideration	$	224,861,107

Assets acquired and liabilities assumed at preliminary fair value
Cash	$	6,437,220
Accounts receivable		19,744,368
Inventories		18,300,781
Vendor deposits		15,000,000
Other assets		2,194,384
Property and equipment		1,890,968
Right of use operating lease assets		1,833,899
Accounts payable and accrued expenses		(43,673,578	)
Customer deposits		(10,673,600	)
Finance lease obligation		(215,008	)
Operating lease liability		(1,833,899	)
Current portion of notes payable		(458,913	)
Long term portion of notes payable		(1,067,615	)
Net tangible assets acquired	$	7,479,007

Total net assets acquired	$	7,479,007
Consideration paid		224,861,107
Preliminary goodwill	$	217,382,100

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