Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 09, 2018 | |
Issuance of common stock in connection with loan agreement, shares | ||
Entity Registrant Name | RumbleON, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Entity Central Index Key | 1,596,961 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 17,468,291 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 11,831,602 | $ 9,170,652 |
Restricted Cash | 350,000 | 0 |
Accounts receivable, net | 193,135 | 577,107 |
Inventory | 5,626,186 | 2,834,666 |
Prepaid expenses | 132,433 | 308,880 |
Total current assets | 18,133,356 | 12,891,305 |
Property and equipment, net | 4,145,437 | 3,360,832 |
Goodwill | 1,850,000 | 1,850,000 |
Other assets | 103,235 | 50,693 |
Total assets | 24,232,028 | 18,152,830 |
Current liabilities: | ||
Accounts payable and other accrued liabilities | 1,839,210 | 1,179,216 |
Accrued interest payable - related party | 93,324 | 33,954 |
Current portion of long term debt | 4,349,746 | 1,081,593 |
Total current liabilities | 6,282,280 | 2,294,763 |
Long term liabilities: | ||
Notes payable | 4,653,708 | 1,459,410 |
Accrued interest payable - related party | 0 | 32,665 |
Total long term liabilities | 4,653,708 | 1,492,075 |
Total liabilities | 10,935,988 | 3,786,838 |
Commitments and contingencies (Notes 4, 5, 12) | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2018 and December 31, 2017 | 0 | 0 |
Additional paid in capital | 37,656,377 | 23,372,360 |
Accumulated deficit | (24,375,743) | (9,019,297) |
Total stockholders' equity | 13,296,040 | 14,365,992 |
Total liabilities and stockholders' equity | 24,232,028 | 18,152,830 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common stock | 1,000 | 1,000 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common stock | $ 14,406 | $ 11,929 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,000,000 | 1,000,000 |
Common stock, shares issued | 1,000,000 | 1,000,000 |
Common stock, shares outstanding | 1,000,000 | 1,000,000 |
Class B Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 99,000,000 | 99,000,000 |
Common stock, shares issued | 14,406,291 | 11,928,541 |
Common stock, shares outstanding | 14,406,291 | 11,928,541 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | ||||
Pre-owned vehicle sales | $ 18,975,968 | $ 3,544,372 | $ 40,821,764 | $ 3,626,312 |
Other sales and revenue | 279,054 | 161,770 | 427,997 | 235,241 |
Total Revenue | 19,255,022 | 3,706,142 | 41,249,761 | 3,861,553 |
Cost of revenue | 17,248,588 | 3,478,124 | 37,419,594 | 3,627,455 |
Gross profit | 2,006,434 | 228,018 | 3,830,167 | 234,098 |
Selling, general and administrative | 8,431,561 | 2,326,043 | 17,857,561 | 4,690,216 |
Depreciation and amortization | 247,669 | 129,277 | 671,264 | 302,697 |
Operating loss | (6,672,796) | (2,227,302) | (14,698,658) | (4,758,815) |
Interest expense | 333,448 | 90,201 | 657,788 | 373,808 |
Net loss before provision for income taxes | (7,006,244) | (2,317,503) | (15,356,446) | (5,132,623) |
Benefit for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (7,006,244) | $ (2,317,503) | $ (15,356,446) | $ (5,132,623) |
Weighted average number of common shares outstanding - basic and fully diluted | 14,920,693 | 10,018,541 | 13,626,006 | 9,105,429 |
Net loss per share - basic and fully diluted | $ (0.47) | $ (0.23) | $ (1.13) | $ (0.56) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) | Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, shares at Dec. 31, 2017 | 0 | 1,000,000 | 11,928,541 | |||
Beginning Balance, amount at Dec. 31, 2017 | $ 0 | $ 1,000 | $ 11,929 | $ 23,372,360 | $ (9,019,297) | $ 14,365,992 |
Issuance of common stock, shares | 2,328,750 | |||||
Issuance of common stock, amount | $ 2,328 | 13,013,497 | 13,015,825 | |||
Issuance of common stock for restricted stock units exercise, shares | 149,000 | |||||
Issuance of common stock for restricted stock units exercise, amount | $ 149 | (149) | 0 | |||
Stock-based compensation | 1,093,784 | 1,093,784 | ||||
Issuance of warrants in connection with loan agreement | 176,885 | 176,885 | ||||
Net loss | (15,356,446) | (15,356,446) | ||||
Ending Balance, shares at Sep. 30, 2018 | 0 | 1,000,000 | 14,406,291 | |||
Ending Balance, amount at Sep. 30, 2018 | $ 0 | $ 1,000 | $ 14,406 | $ 37,656,377 | $ (24,375,743) | $ 13,296,040 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (15,356,446) | $ (5,132,623) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 671,264 | 302,697 |
Amortization of debt discount | 149,906 | 91,877 |
Amortization of debt issuance costs | 146,607 | 0 |
Interest expense on conversion of debt | 0 | 196,076 |
Share based compensation expense | 1,093,784 | 287,550 |
Changes in operating assets and liabilities: | ||
Decrease (increase) in prepaid expenses | 176,447 | (121,846) |
Increase in inventory | (2,791,520) | (1,244,658) |
Decrease (increase) in accounts receivable | 383,972 | (320,575) |
Increase in other current assets | 0 | (174,419) |
Increase in other assets | (52,542) | 0 |
Increase in accounts payable and accrued liabilities | 659,993 | 1,683,442 |
Decrease in accrued interest payable | 26,704 | 43,351 |
Net cash used in operating activities | (14,891,831) | (4,389,128) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Cash used for acquisitions | 0 | (750,000) |
Technology development | (1,396,662) | (435,097) |
Purchase of property and equipment | (59,206) | (600,175) |
Net cash used in investing activities | (1,455,868) | (1,785,272) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from note payable | 7,424,417 | 2,167,000 |
Repayments of line of credit-floor plan | (1,081,593) | 0 |
Proceeds from sale of common stock | 13,015,825 | 3,313,040 |
Net cash provided by financing activities | 19,358,649 | 5,480,040 |
NET CHANGE IN CASH | 3,010,950 | (694,360) |
CASH AT BEGINNING OF PERIOD | 9,170,652 | 1,350,580 |
CASH AND RESTRICTED CASH AT END OF PERIOD | $ 12,181,602 | $ 656,220 |
Description of Business and Sig
Description of Business and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Text Block [Abstract] | |
Description of Business and Significant Accounting Policies | Organization RumbleOn, Inc. (the “Company”) was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. (“Smart Server”). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc. Description of Business Smart Server was originally formed to engage in the business of designing and developing mobile application payment software for smart phones and tablet computers. After Smart Server ceased its technology development activities in 2014, it had no operations and nominal assets, meeting the definition of a “shell company” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations thereunder. In July 2016, Berrard Holdings Limited Partnership (“Berrard Holdings”) acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company’s goal is to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. The Company’s initial emphasis has been motorcycles and other powersports, however, the Company’s platform is able to accommodate any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Serving both consumers and dealers, through its online marketplace platform, the Company makes cash offers for the purchase of pre-owned vehicles. In addition, the Company offers a large inventory of pre-owned vehicles for sale along with third-party financing and associated products. The Company’s operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with its regional partners, including dealers and auctions. The Company utilizes regional partners in the acquisition of pre-owned vehicles to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. Our business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC (“NextGen”). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure. Basis of Presentation The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of their financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2017 in the Company’s Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC on February 27, 2018, and as amended on March 30, 2018. The Company’s 2017 Annual Report on Form 10-K, together with the information incorporated by reference into such report, is referred to in this quarterly report as the “2017 Annual Report.” This quarterly report should be read in conjunction with the 2017 Annual Report. Use of Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, depreciable lives, carrying value of intangible assets, sales returns, receivables valuation, taxes, and contingencies. Actual results could differ materially from those estimates. Earnings (Loss) Per Share The Company follows the FASB Accounting Standards Codification (“ASC”) Topic 260- Earnings per share Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, when all of the following conditions are met: (i) there is persuasive evidence of an agreement on an enforceable contract; (ii) the performance obligations are identified based on the goods or services to be transferred; (iii) the transaction price is determinable and collection is probable; and (iv) the product or service has been provided to the customer. Goodwill Goodwill is not amortized but rather tested for impairment at least annually. The Company tests goodwill for impairment annually during the fourth quarter of each year. Goodwill will also be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill is done at the reporting unit level. The Company has concluded that currently it has one reporting unit. Goodwill is being amortized for income tax purposes over a 15-year period. Technology Development Costs Technology development costs are accounted for pursuant to ASC 350, Intangibles —Goodwill and Other. Vehicle Inventory Vehicle inventory is accounted for pursuant to ASC 330, Inventory, Cash and Cash Equivalents The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of September 30, 2018 and December 31, 2017, the Company did not have any investments with maturities greater than three months. Restricted Cash In connection with the execution of the Inventory Financing and Security Agreement (“the Credit Facility”) by and among the Company’s subsidiary, RMBL Missouri, LLC (“RMBL MO”), Ally Bank (“Ally”) and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10% of the amount of the Company’s approved and available credit line under the Credit Facility and 2) no greater than 25% of the total principal amount owed to Ally for inventory financed under the Credit Facility. Property and Equipment, Net Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. Advertising and marketing expenses for the three-month periods ended September 30, 2018 and 2017 was $4,096,521 and $752,017, respectively, and for the nine-month periods ended September 30, 2018 and 2017 was $7,448,656 and $1,060,195, respectively. Debt Issuance Costs Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , “Simplifying the Presentation of Debt Issuance Costs” Recent Pronouncements The Company has adopted FASB ASU 2014-09, Revenue from Contracts with Customers, The Company has adopted ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350) Simplifying the test for Goodwill Impairment In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity The Company adopted ASU 2017-11 during 2018. In February 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-02) related to the accounting for leases. This pronouncement requires lessees to record most leases on their balance sheet while also disclosing key information about those lease arrangements. Under the new guidance, lease classification as either a finance lease or an operating lease will affect the pattern and classification of expense recognition in the income statement. The classification criteria to distinguish between finance and operating leases are generally consistent with the classification criteria to distinguish between capital and operating leases under existing lease accounting guidance. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. We expect to adopt the new standard for our fiscal year beginning January 1, 2019. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with practical expedients available for election as a package. We are still evaluating the impact of the new standard on our financial statements. In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2018 | |
Acquisitions | |
Acquisitions | On February 8, 2017, the Company acquired substantially all of the assets of NextGen in exchange for $750,000 in cash, plus 1,523,809 unregistered shares of Class B Common Stock of the Company, which were issued at a negotiated fair value of $1.75 per share and a subordinated secured promissory note issued by the Company in favor of NextGen in the amount of $1,333,334 (the “NextGen Note”). The NextGen Note matures on the third anniversary of the closing date (the “Maturity Date”). During the fourth quarter of 2017, the Company finalized the preliminary purchase price allocation recorded at the acquisition date and made a measurement period adjustment to the preliminary purchase price allocation which included:(i) an increase to technology development of $1,500,000; (ii) a decrease in goodwill of $1,390,000; (iii) a decrease to customer contracts of $10,000; and (iv) a decrease to non-compete agreements of $100,000. The measurement period adjustment would have resulted in a $63,750 and $166,250 net increase in accumulated amortization and amortization expense previously recorded for the three-month and nine-month periods ended September 30, 2017. This measurement period adjustment is reflected in the table below. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. The following table presents the purchase price consideration: Preliminary Purchase Price Allocation Cumulative Measurement Period Adjustment Final Purchase Price Allocation Net tangible assets acquired: Technology development $ 1,400,000 $ 1,500,000 $ 2,900,000 Customer contracts 10,000 (10,000 ) - Non-compete agreements 100,000 (100,000 ) - Tangible assets acquired 1,510,000 1,390,000 2,900,000 Goodwill 3,240,000 (1,390,000 ) 1,850,000 Total purchase price 4,750,000 - 4,750,000 Less: Issuance of shares (2,666,666 ) - (2,666,666 ) Less: Debt issued (1,333,334 ) - (1,333,334 ) Cash paid $ 750,000 $ - $ 750,000 |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2018 | |
Property And Equipment Net | |
Property and Equipment, Net | The following table summarizes property and equipment, net as of September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Vehicles $ 472,870 $ 472,870 Furniture and equipment 208,850 149,643 Technology development 4,803,447 3,406,786 Total property and equipment 5,485,167 4,029,299 Less: accumulated depreciation and amortization 1,339,730 668,467 Property and equipment, net $ 4,145,437 $ 3,360,832 Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from 3 to 5 years. During the fourth quarter of 2017, the Company finalized the preliminary purchase price allocation of the NextGen acquisition and recorded a measurement period adjustment to increase the amount of the preliminary purchase price allocated to technology development from $1,400,000 to $2,900,000. For additional information, see Note 2 “Acquisitions.” At September 30, 2018, capitalized technology development costs were $4,803,448, which includes $2,900,000 of software acquired in the NextGen acquisition. Total technology costs incurred for the three-month and nine-month periods ended September 30, 2018 were $1,012,970 and $2,125,868, respectively of which $778,592 and $1,396,662, respectively was capitalized and $234,378 and $729,206, respectively was charged to expense in the accompanying Condensed Consolidated Statements of Operations. The amortization of capitalized technology development costs for the three-month and nine-month periods ended September 30, 2018 was $213,801 and $572,631, respectively. Total technology development costs incurred for the three month and nine-month periods ended September 30, 2017 was $236,400 and $713,766, respectively of which $144,433 and $435,097, respectively was capitalized and $91,967 and $278,669, respectively was charged to expense in the accompanying Condensed Consolidated Statements of Operations. The amortization of capitalized technology development costs for the three-month and nine-month periods ended September 30, 2017 was $89,429 and $219,374, respectively. Depreciation on furniture and equipment for the three-month and nine-month periods ended September 30, 2018 was $33,868 and $98,632, respectively. Depreciation on furniture and equipment for the three-month and nine-month periods ended September 30, 2017 was $28,598 and $49,573, respectively. |
Accounts Payable And Other Accr
Accounts Payable And Other Accrued Liabilities | 9 Months Ended |
Sep. 30, 2018 | |
Accounts Payable And Other Accrued Liabilities | |
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES | The following table summarizes accounts payable and other accrued liabilities as of September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Accounts payable $ 1,673,885 $ 1,094,310 Accrued payroll 161,279 79,288 Other accrued expenses 4,046 5,618 $ 1,839,210 $ 1,179,216 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Text Block [Abstract] | |
Notes Payable | Notes payable consisted of the following as of September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020. $ 1,333,334 $ 1,333,334 Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. Net of debt discount of $391,018 and $540,924 as of September 30, 2018 and December 31, 2017, respectively. 275,982 126,076 Line of credit-floor plan dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at September 30, 2018 was 6.5%. Principal and interest is payable on demand. 2,829,319 - Loan Agreement with Hercules Capital Inc. dated April 30, 2018. Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on January 1, 2019 through maturity which is May 1, 2021. Net of $649,233 of unamortized debt issuance costs. 4,564,819 - Line of credit-floor plan dated November 2, 2017. Facility provides up to $2,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at December 31, 2017 was 6.5%. Principal and interest is payable on demand. - 1,081,593 $ 9,003,454 $ 2,541,003 Current portion 4,349,746 1,081,593 Long-term portion $ 4,653,708 $ 1,459,410 Note Payable-NextGen On February 8, 2017, in connection with the acquisition of NextGen, the Company issued the NextGen Note. Interest will be paid semi-annually and accrues (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from such second anniversary of the closing date through the maturity date, which is February 8, 2020. Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable upon election of the holder. The Company’s obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro, LLC, a wholly-owned subsidiary of the Company (“NextGen Pro”), pursuant to an Unconditional Guaranty Agreement (the “Guaranty Agreement”), in favor of NextGen from NextGen Pro, and a related Security Agreement by and among NextGen and NextGen Pro each dated as of February 8, 2017. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all the Company’s obligations under the NextGen Note. On or about December 31, 2017, NextGen assigned all of its right, title and interest in the NextGen Note to Halcyon Consulting LLC (“Halcyon”). Interest expense on the NextGen Note for the three-month and nine-month periods ended September 30, 2018 was $21,845 and $65,772, respectively. Notes Payable-Private Placement On March 31, 2017, the Company completed funding of the second tranche of a private placement. The investors were issued 1,161,920 shares of Class B Common Stock of the Company and promissory notes in the amount of $667,000 (the “Private Placement Notes”), in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amounts until paid in full. The Private Placement Notes mature on March 31, 2020. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. Based on the relative fair values attributed to the Class B Common Stock and the Private Placement Notes, the Company recorded a debt discount on the Private Promissory Notes of $667,000 with the corresponding amounts as addition to paid in capital. The debt discount is amortized to interest expense until the scheduled maturity of the Private Placement Notes in March 2020 using the effective interest method. The effective interest rate at September 67,169 188,867 52,879 149,906 September Line of Credit-Floor Plans On November 2, 2017, the Company, through RMBL MO, entered into a floor plan line of credit (the “Floor Plan Line”) with NextGear Capital, Inc. (“NextGear”) in the amount of $2,000,000, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, pursuant to that certain Demand Promissory Note and Loan and Security Agreement. Any advance under the Floor Plan Line bears interest on a per annum basis from the date of the request of such advance (or date of the financed receivable, as applicable), based upon a 360-day year, and such interest shall be compounded daily until such outstanding advances are paid in full at a rate of interest set forth in schedules published by NextGear. As of December 31, 2017, the effective rate of interest was 6.5%. Advances and interest under the Floor Plan Line are due and payable upon demand, but, in general, in no event later than 150 days from the date of request for the advance (or the date of purchase in the case of a universal funding agreement), or of the receivable, as applicable. The Floor Plan Line was secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment was guaranteed by the Company pursuant to a guaranty in favor of the NextGear and its affiliates. On February 20, 2018, the Company notified NextGear that it was terminating the Floor Plan Line, and all security or other credit documents entered into in connection therewith. At the time of the notification, there was no indebtedness outstanding under the Floor Plan Line. On February 16, 2018, the Company, through its wholly-owned subsidiary RMBL MO entered into an Inventory Financing and Security Agreement (the “Credit Facility”) with Ally and Ally Financial, Inc., a Delaware corporation (“Ally” together with Ally Bank, the “Lender”), pursuant to which the Lender may provide up to $25 million in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require that the Company maintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, RMBL MO’s obligation to pay upon demand any outstanding liabilities of the Credit Facility), the Lender may, at its option and without notice to the RMBL MO, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the Lender and secured by the Company pursuant to a General Security Agreement. Interest expense on the Credit Facility for the three-month and nine-month periods ended September 30, 2018 was $18,123 and $27,724, respectively. Loan Agreement-Hercules Capital On April 30, 2018 (the “Closing Date”), the Company, and its wholly owned subsidiaries (collectively the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. a Maryland Corporation (“Hercules”) pursuant to which Hercules may provide one or more term loans in an aggregate principal amount of up to $15.0 million (the “Hercules Loan”). Under the terms of the Loan Agreement, $5.0 million was funded at closing with the balance available in two additional tranches over the term of the Loan Agreement, subject to certain operating targets and otherwise as set forth in the Loan Agreement. The Hercules Loan has an initial 36-month maturity and initial 10.5% interest rate. Under the Loan Agreement, on the Closing Date, the Company issued Hercules a warrant to purchase 81,818 (increasing to 109,091 if a fourth tranche in the principal amount of up to $5.0 million is advanced at the party’s agreement) shares of the Company’s Class B Common Stock (the “Warrant”) at an exercise price of $5.50 per share (the “Warrant Price”). The Warrant is immediately exercisable and expires on April 30, 2023. If at any time before April 30, 2019, the Company makes a New Issuance (as defined below) for no consideration or for a consideration per share less than the Warrant Price in effect immediately before the New Issuance (a “Dilutive Issuance”) or the consideration for an issuance is later adjusted downward with certain exceptions as set forth in the Warrant, then the Warrant Price will be reduced to an amount equal to the lower consideration price or adjusted exercise price or conversion price (the “New Issuance Price”). If at any time after April 30, 2019, the Company makes a Dilutive Issuance, then the Warrant Price will be reduced to the amount computed using the following formula: A*[(C+D)/B]. For purposes of this formula, (i) A represents the Warrant Price in effect immediately before the Dilutive Issuance, (ii) B represents the number of shares of common stock outstanding immediately after the New Issuance (on a fully-diluted basis), (iii) C represents the number of shares of common stock outstanding immediately before the New Issuance (on a fully-diluted basis), and (iv) D represents the number of shares of common stock that would be issuable for total consideration to be received for the New Issuance if the purchaser paid the Warrant Price in effect immediately prior to the New Issuance. New Issuance shall mean (A) any issuance or sale by the Company of any class of shares of the Company (including the issuance or sale of any shares owned or held by or for the account of the Company) other than certain excluded securities as set forth in the Warrant, (B) any issuance or sale by the Company of any options, rights or warrants to subscribe for any class of shares of the Company other than certain excluded securities as set forth in the Warrant, or (C) the issuance or sale of any securities convertible into or exchangeable for any class of shares of the Company other than certain excluded securities as set forth in the Warrant. Advances under the Hercules Loan (“Advances”) will bear interest at a per annum rate equal to the greater of either (i) the prime rate plus 5.75%, and (ii) 10.25%, based on a year consisting of 360 days. Advances under the Loan Agreement are due and payable on May 1, 2021, unless Borrowers achieve certain performance milestones, in which case Advances will be due and payable on November 1, 2021. Upon any event of default, Hercules may, at its option, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Hercules by Borrowers. In connection with the Loan Agreement, Hercules required the holders of the NextGen Note and the Private Placement Notes to enter into subordination agreements and required Ally to enter into an intercreditor agreement. The Hercules Loan is secured by a grant of a security interest in substantially all assets of the Borrowers (the “Collateral”), except the Collateral does not include (a) certain outstanding equity of Borrowers’ foreign subsidiaries, if any, or (b) nonassignable licenses or contracts of Borrowers, if any. The effective interest rate at September 30, 2018 was 22.0%. Interest expense on the Hercules Loan for the three-month and nine-month periods ended September 30, 2018 was $ 226,311 and $375,427, respectively 88,950 146,607 September |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Text Block [Abstract] | |
Stockholders' Equity | On June 30, 2017, the Company’s stockholders approved the RumbleOn Inc. Stock Incentive Plan (the “Plan”) under which restricted stock units (“RSUs”) and other equity awards may be granted to employees and non-employee members of the Board of Directors. th th On July 20, 2018, the Company completed an underwritten public offering of 2,328,750 shares of its Class B Common Stock at a price of $6.05 per share for net proceeds to the Company of approximately $13,015,825 million. The completed offering included 303,750 shares of Class B Common Stock issued upon the underwriter’s exercise in full of its over-allotment option. The Company will use the net proceeds from the offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business. |
Selling, General And Administra
Selling, General And Administrative | 9 Months Ended |
Sep. 30, 2018 | |
Selling General And Administrative | |
Selling, General And Administrative | The following table summarizes the detail of selling, general and administrative expense for the three-month and nine-month periods ended September 30, 2018 and 2017: Three-months Ended September 30, Nine-months Ended September 30, 2018 2017 2018 2017 Selling, General and Administrative: Compensation and related costs $ 1,928,606 $ 1,028,819 $ 4,859,509 $ 1,951,911 Advertising and marketing 4,096,521 752,017 7,448,656 1,060,195 Professional fees 246,032 192,041 692,492 724,486 Technology development 234,378 91,967 729,206 278,668 General and administrative 1,926,024 261,199 4,127,698 674,956 $ 8,431,561 $ 2,326,043 $ 17,857,561 $ 4,690,216 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 9 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | The following table includes supplemental cash flow information, including noncash investing and financing activity for the nine-month period ended September 30, 2018 and 2017: Nine-months Ended September 30, 2018 2017 Cash paid for interest $ 207,255 $ 42,502 Note payable issued on acquisition - $ 1,333,334 Conversion of notes payable-related party $ - 206,484 Issuance of shares for acquisition $ $ 2,666,666 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Taxes | |
Income Taxes | U.S. Tax Reform On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Tax Act, was signed into law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. On September 30, 2018, the Company did not have any foreign subsidiaries and the international aspects of the Tax Act are not applicable. In connection with the initial analysis of the impact of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 26.1%. The remeasurement of the Company’s deferred tax balance was primarily offset by application of its valuation allowance. In projecting the Company’s income tax expense for the year ended December 31, 2018, management has concluded it is not likely to recognize the benefit of its deferred tax asset, net of deferred tax liabilities, and as a result a full valuation allowance will be required. As such, no income tax benefit has been recorded for the three-month and nine-month periods ended September 30, 2018 and 2017. At December 31, 2017, the Company had an operating loss carryforward of approximately $8,740,879 which begins to expire in 2033. We have provided a valuation allowance on the deferred tax assets of $2,149,654 for the year ended December 31, 2017. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. |
Loss Per Share
Loss Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Loss Per Share | |
Loss Per Share | Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The computation of diluted net loss per share for the three-month and nine-month periods ended September 30, 2018 did not include 1,278,000 of RSUs and 300,068 of warrants to purchase shares of Class B Common Stock as their inclusion would be antidilutive. The computation of diluted net loss per share for the three-month and nine-month periods ended September 30, 2017 did not include 560,000 of RSUs to purchase shares of Class B Common Stock as their inclusion would be antidilutive. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Text Block [Abstract] | |
Related Party Transactions | On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock at a price of $4.00 per share for aggregate proceeds of $2,480,000 in a private placement (the “2017 Private Placement”). Also, in May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. Officers and directors of the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement. A key component of the Company’s business model is to utilize regional partners in the acquisition of pre-owned vehicles as well as utilize these regional partners to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. In connection with the development of the regional partner program, the Company tested various aspects of the program by utilizing a dealership (the “Dealer”) to which Marshall Chesrown, the Company’s Chief Executive Officer, has provided financing in the form of a $400,000 promissory note. The note matures on May 1, 2019 and interest is payable monthly at 5% per annum. This financing arrangement was terminated in April 2018. Revenue recognized by the Company from the Dealer for the nine-month period ended September 30, 2018 was $506,500 or 1.2%, of the Company’s total Revenue. Cost of revenue recognized by the Company from the Dealer for the nine-month period ended September 30, 2018 was $458,356 or 1.2% of the Company’s total Cost of revenue. Included in Accounts receivable at September 30, 2018 is $40,176 owed to the Company by the Dealer. Revenue recognized by the Company from the Dealer for the three-month and nine-month periods ended September 30, 2017 was $924,069 and $946,824 or 24.9% and 24.5% of the Company’s total Revenue, respectively. Included in accounts receivable at September 30, 2017 was $264,464 owed the Dealer. In addition, the Company subleased warehouse space from the Dealer that was separate and distinct from the location of the dealership, on the same terms as paid by the Dealer. This subleased facility served as the northwestern regional distribution center for the Company. The lease was terminated on June 30, 2018. For the nine-month periods ended September 30, 2018, the Company paid $90,000 in rent under the sublease. This amount is included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. There were no sublease payments for the three-month and nine-month periods ended September 30, 2017. In connection with the NextGen acquisition, the Company entered into a Services Agreement (the “Services Agreement”) with Halcyon, to provide development and support services to the Company. Mr. Kakarala, a director of the Company, currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company paid Halcyon hourly fees for specific services, set forth in the Services Agreement. The Company reimbursed Halcyon for any reasonable travel and pre-approved out-of-pocket expenses in connection with its services to the Company. The Services Agreement was terminated on March 31, 2018. For the nine-month period ended September 30, 2018, the Company paid $54,159 under the Services Agreement. For the three and nine-months periods ended September 30, 2017, the Company paid $221,400 and $678,760, respectively under the Services Agreement. As of September 30, 2018, the Company had promissory notes in the aggregate principal amount of $370,556, plus accrued interest of $15,705 due (1) to an entity controlled by a director of the Company and (2) to that director. These notes represent $370,556 of the Private Placement Notes described in Note 5 “Notes Payable”. Interest expense on the promissory notes for the three-month and nine-month periods ended September 30, 2018 was $37,316 and $78,751, respectively, which included debt discount amortization of $29,377 and $83,281, respectively. Interest expense on the promissory notes for the three-month and nine-month periods ended September 30, 2017 was $ $37,316 and $104,926, which included debt discount amortization of $29,377 and $83,281, respectively. The interest was charged to interest expense in the Condensed Consolidated Statements of Operations and included in accrued interest under long-term liabilities in the Condensed Consolidated Balance Sheets. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments And Contingencies | |
Commitments and Contingencies | The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions (or settlements) may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. As of September 30, 2018, and December 31, 2017, the Company was not aware of any threatened or pending material litigation. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Acquisitions On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) by and among the Company, the Company’s newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company (“Merger Sub”), Wholesale Holdings, Inc., a Tennessee corporation (“Holdings”), Wholesale, LLC, a Tennessee limited liability company (“Wholesale”), Steven Brewster and Janelle Brewster (each a “Stockholder”, and together the “Stockholders”), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the “Representative”), and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the merger (the “Wholesale Merger”) of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company. On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of “Parent Consideration Shares” contained in the Merger Agreement. Also, on October 26, 2018, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”), by and among the Company, Steven Brewster and Justin Becker (together the “Express Sellers”), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the “Express Acquisition”) in Wholesale Express, LLC, a Tennessee limited liability company (“Wholesale Express”). The Wholesale Merger and the Express Acquisition were both completed on October 30, 2018 (the “Wholesale Closing Date”). As consideration for the Wholesale Merger, the Company (i) paid cash consideration of $12,000,000, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the “Stock Consideration”) of the Company’s Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the “Series B Preferred”), as described below. As consideration for the Express Acquisition, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Series B Preferred On October 25, 2018, the Company filed the Certificate of Designation, Preferences, and Rights of Series B Non-Voting Convertible Preferred Stock (“Certificate of Designation”) with the Secretary of State for the State of Nevada, designating 2,500,000 shares of the Company’s preferred stock, par value $0.001 per share, as Series B Preferred. Shares of Series B Preferred rank pari passu Each share of Series B Preferred is convertible on a one-for-one basis into shares of the Company’s Class B Common Stock. The Series B Preferred will automatically convert into Class B Common Stock 21 days after the mailing of a definitive information statement of the type contemplated by and in accordance with Regulation 14C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the Company’s stockholders, without any further action on the part of the Company or any holder. Financing On October 30, 2018, the Company, NextGen Pro, RMBL Texas, LLC, a Delaware limited liability company (“RMBL Texas,” and together with the Company, NextGen Pro, and RMBL MO, each, an “Existing Borrower”, and collectively, the “Existing Borrowers”), Merger Sub, Wholesale, Wholesale Express, RMBL Express, LLC, a wholly-owned subsidiary of the Company (“RMBL Express”, and together with Merger Sub, Wholesale and Wholesale Express, the “New Borrowers”; together with the Existing Borrowers, the “Borrowers”), Hercules, in its capacity as lender (in such capacity, “Lender”), and Hercules, in its capacity as administrative agent and collateral agent for Lender (in such capacities, “Agent”), entered into the First Amendment and Waiver to Loan and Security Agreement (the “Amendment”), amending that certain Loan and Security Agreement, dated as of April 30, 2018 (the “Loan Agreement”; as amended by the Amendment, the “Amended Loan Agreement”), by and among the Existing Borrowers, Lender and Agent. Under the terms of the Amendment, $5,000,000 (less certain fees and expenses) was funded by Lender to the Borrowers in connection with the Wholesale Closing Date (the “Tranche II Advance”). The Tranche II Advance has a maturity date of October 1, 2021 and an initial interest rate of 11.00%. Pursuant to the Amendment, the Company issued to Hercules a warrant to purchase 20,950 shares of the Company’s Class B Common Stock at an exercise price of $7.16 per share. This warrant is immediately exercisable and expires on October 30, 2023. Except for the exercise price and expiration date, the terms of this warrant are substantially the same as the Warrant described in Note 5. Also, on October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the “NextGear Credit Line”) with NextGear. The available credit under the NextGear Credit Line is initially $63,000,000, will decrease to $55,000,000 after February 28, 2019 and will decrease to zero dollars after October 31, 2019. Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full. Private Placement On October 30, 2018, the Company completed the private placement of an aggregate of 3,030,000 shares of its Class B Common Stock (the “Private Placement”), at a price of $7.10 per share for non-affiliates of the Company, and, with respect to directors participating in the Private Placement, at a price of $8.10 per share. The gross proceeds for the Private Placement were approximately $21.6 million. National Securities Corporation, a wholly owned subsidiary of National Holdings Corporation, and Craig-Hallum Capital Group (together the “Placement Agents”) served as the placement agents for the Private Placement. The Company paid the Placement Agents a fee of 6.5% of the gross proceeds in the Private Placement. Net proceeds from the Private Placement and $5,000,000 funded under the Tranche II Advance were used to partially fund the cash consideration of the Wholesale Merger and the Express Acquisition and the balance will be used for working capital purposes. Denmar Dixon, a member of the Company’s Board of Directors, invested through Blue Flame Capital, LLC (an entity controlled by Mr. Dixon) $243,000 in the Private Placement for 30,000 shares of Class B Common Stock. Also, Joseph Reece, a member of the Company’s Board of Directors, individually invested $81,000 in the Private Placement for 10,000 shares of Class B Common Stock. These purchases were approved by the Company’s Board of Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act. Messrs. Dixon and Reece abstained from the Company’s Board of Directors’ vote in favor of the Private Placement. |
Description of Business and S_2
Description of Business and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Summary Of Significant Accounting Policies Policies | |
Organization | RumbleOn, Inc. (the “Company”) was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. (“Smart Server”). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc. |
Description of Business | Smart Server was originally formed to engage in the business of designing and developing mobile application payment software for smart phones and tablet computers. After Smart Server ceased its technology development activities in 2014, it had no operations and nominal assets, meeting the definition of a “shell company” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations thereunder. In July 2016, Berrard Holdings Limited Partnership (“Berrard Holdings”) acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company’s goal is to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. The Company’s initial emphasis has been motorcycles and other powersports, however, the Company’s platform is able to accommodate any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Serving both consumers and dealers, through its online marketplace platform, the Company makes cash offers for the purchase of pre-owned vehicles. In addition, the Company offers a large inventory of pre-owned vehicles for sale along with third-party financing and associated products. The Company’s operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with its regional partners, including dealers and auctions. The Company utilizes regional partners in the acquisition of pre-owned vehicles to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. Our business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC (“NextGen”). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure. |
Basis of Presentation | The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of their financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2017 in the Company’s Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC on February 27, 2018, and as amended on March 30, 2018. The Company’s 2017 Annual Report on Form 10-K, together with the information incorporated by reference into such report, is referred to in this quarterly report as the “2017 Annual Report.” This quarterly report should be read in conjunction with the 2017 Annual Report. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, depreciable lives, carrying value of intangible assets, sales returns, receivables valuation, taxes, and contingencies. Actual results could differ materially from those estimates. |
Earnings (Loss) Per Share | The Company follows the FASB Accounting Standards Codification (“ASC”) Topic 260- Earnings per share |
Revenue Recognition | The Company recognizes revenue in accordance with ASC Topic 606, when all of the following conditions are met: (i) there is persuasive evidence of an agreement on an enforceable contract; (ii) the performance obligations are identified based on the goods or services to be transferred; (iii) the transaction price is determinable and collection is probable; and (iv) the product or service has been provided to the customer. |
Goodwill | Goodwill is not amortized but rather tested for impairment at least annually. The Company tests goodwill for impairment annually during the fourth quarter of each year. Goodwill will also be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill is done at the reporting unit level. The Company has concluded that currently it has one reporting unit. Goodwill is being amortized for income tax purposes over a 15-year period. |
Technology Development Costs | Technology development costs are accounted for pursuant to ASC 350, Intangibles —Goodwill and Other. |
Vehicle Inventory | Vehicle inventory is accounted for pursuant to ASC 330, Inventory, |
Cash and Cash Equivalents | The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of September 30, 2018 and December 31, 2017, the Company did not have any investments with maturities greater than three months. |
Restricted Cash | In connection with the execution of the Inventory Financing and Security Agreement (“the Credit Facility”) by and among the Company’s subsidiary, RMBL Missouri, LLC (“RMBL MO”), Ally Bank (“Ally”) and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10% of the amount of the Company’s approved and available credit line under the Credit Facility and 2) no greater than 25% of the total principal amount owed to Ally for inventory financed under the Credit Facility. |
Property and Equipment, Net | Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. |
Advertising and Marketing Costs | Advertising and marketing costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. Advertising and marketing expenses for the three-month periods ended September 30, 2018 and 2017 was $4,096,521 and $752,017, respectively, and for the nine-month periods ended September 30, 2018 and 2017 was $7,448,656 and $1,060,195, respectively. |
Debt Issuance Costs | Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , “Simplifying the Presentation of Debt Issuance Costs” |
Recent Pronouncements | The Company has adopted FASB ASU 2014-09, Revenue from Contracts with Customers, The Company has adopted ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350) Simplifying the test for Goodwill Impairment In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity The Company adopted ASU 2017-11 during 2018. In February 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-02) related to the accounting for leases. This pronouncement requires lessees to record most leases on their balance sheet while also disclosing key information about those lease arrangements. Under the new guidance, lease classification as either a finance lease or an operating lease will affect the pattern and classification of expense recognition in the income statement. The classification criteria to distinguish between finance and operating leases are generally consistent with the classification criteria to distinguish between capital and operating leases under existing lease accounting guidance. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. We expect to adopt the new standard for our fiscal year beginning January 1, 2019. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with practical expedients available for election as a package. We are still evaluating the impact of the new standard on our financial statements. In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Acquisitions Tables | |
Purchase price consideration | Preliminary Purchase Price Allocation Cumulative Measurement Period Adjustment Final Purchase Price Allocation Net tangible assets acquired: Technology development $ 1,400,000 $ 1,500,000 $ 2,900,000 Customer contracts 10,000 (10,000 ) - Non-compete agreements 100,000 (100,000 ) - Tangible assets acquired 1,510,000 1,390,000 2,900,000 Goodwill 3,240,000 (1,390,000 ) 1,850,000 Total purchase price 4,750,000 - 4,750,000 Less: Issuance of shares (2,666,666 ) - (2,666,666 ) Less: Debt issued (1,333,334 ) - (1,333,334 ) Cash paid $ 750,000 $ - $ 750,000 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property And Equipment Net Tables | |
Property and equipment | September 30, 2018 December 31, 2017 Vehicles $ 472,870 $ 472,870 Furniture and equipment 208,850 149,643 Technology development 4,803,447 3,406,786 Total property and equipment 5,485,167 4,029,299 Less: accumulated depreciation and amortization 1,339,730 668,467 Property and equipment, net $ 4,145,437 $ 3,360,832 |
Accounts Payable And Accrued Li
Accounts Payable And Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounts Payable And Accrued Liabilities | |
Accounts Payable And Accrued Liabilities | September 30, 2018 December 31, 2017 Accounts payable $ 1,673,885 $ 1,094,310 Accrued payroll 161,279 79,288 Other accrued expenses 4,046 5,618 $ 1,839,210 $ 1,179,216 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes Payable Tables | |
Notes payable | September 30, 2018 December 31, 2017 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020. $ 1,333,334 $ 1,333,334 Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. Net of debt discount of $391,018 and $540,924 as of September 30, 2018 and December 31, 2017, respectively. 275,982 126,076 Line of credit-floor plan dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at September 30, 2018 was 6.5%. Principal and interest is payable on demand. 2,829,319 - Loan Agreement with Hercules Capital Inc. dated April 30, 2018. Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on January 1, 2019 through maturity which is May 1, 2021. Net of $649,233 of unamortized debt issuance costs. 4,564,819 - Line of credit-floor plan dated November 2, 2017. Facility provides up to $2,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at December 31, 2017 was 6.5%. Principal and interest is payable on demand. - 1,081,593 $ 9,003,454 $ 2,541,003 Current portion 4,349,746 1,081,593 Long-term portion $ 4,653,708 $ 1,459,410 |
Selling, General And Administ_2
Selling, General And Administrative (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Selling General And Administrative Tables Abstract | |
Selling, general and administrative expense | Three-months Ended September 30, Nine-months Ended September 30, 2018 2017 2018 2017 Selling, General and Administrative: Compensation and related costs $ 1,928,606 $ 1,028,819 $ 4,859,509 $ 1,951,911 Advertising and marketing 4,096,521 752,017 7,448,656 1,060,195 Professional fees 246,032 192,041 692,492 724,486 Technology development 234,378 91,967 729,206 278,668 General and administrative 1,926,024 261,199 4,127,698 674,956 $ 8,431,561 $ 2,326,043 $ 17,857,561 $ 4,690,216 |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Information Tables | |
Supplemental cash flow information | Nine-months Ended September 30, 2018 2017 Cash paid for interest $ 207,255 $ 42,502 Note payable issued on acquisition - $ 1,333,334 Conversion of notes payable-related party $ - 206,484 Issuance of shares for acquisition $ $ 2,666,666 |
Acquisitions (Details)
Acquisitions (Details) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Preliminary Purchase Price Allocation | |
Net tangible assets acquired: | |
Tangible assets acquired | $ 1,510,000 |
Goodwill | 3,240,000 |
Total purchase price | 4,750,000 |
Less: Issuance of shares | (2,666,666) |
Less: Debt issued | (1,333,334) |
Cash paid | 750,000 |
Preliminary Purchase Price Allocation | Technology development | |
Net tangible assets acquired: | |
Tangible assets acquired | 1,400,000 |
Preliminary Purchase Price Allocation | Customer Contracts | |
Net tangible assets acquired: | |
Tangible assets acquired | 10,000 |
Preliminary Purchase Price Allocation | Non-Compete Agreements | |
Net tangible assets acquired: | |
Tangible assets acquired | 100,000 |
Cumulative Measurement Period Adjustment | |
Net tangible assets acquired: | |
Tangible assets acquired | 1,390,000 |
Goodwill | (1,390,000) |
Total purchase price | 0 |
Less: Issuance of shares | 0 |
Less: Debt issued | 0 |
Cash paid | 0 |
Cumulative Measurement Period Adjustment | Technology development | |
Net tangible assets acquired: | |
Tangible assets acquired | 1,500,000 |
Cumulative Measurement Period Adjustment | Customer Contracts | |
Net tangible assets acquired: | |
Tangible assets acquired | (10,000) |
Cumulative Measurement Period Adjustment | Non-Compete Agreements | |
Net tangible assets acquired: | |
Tangible assets acquired | (100,000) |
Final Purchase Price Allocation | |
Net tangible assets acquired: | |
Tangible assets acquired | 2,900,000 |
Goodwill | 1,850,000 |
Total purchase price | 4,750,000 |
Less: Issuance of shares | (2,666,666) |
Less: Debt issued | (1,333,334) |
Cash paid | 750,000 |
Final Purchase Price Allocation | Technology development | |
Net tangible assets acquired: | |
Tangible assets acquired | 2,900,000 |
Final Purchase Price Allocation | Customer Contracts | |
Net tangible assets acquired: | |
Tangible assets acquired | 0 |
Final Purchase Price Allocation | Non-Compete Agreements | |
Net tangible assets acquired: | |
Tangible assets acquired | $ 0 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Property And Equipment Net Details | ||
Vehicles | $ 472,870 | $ 472,870 |
Furniture and equipment | 208,850 | 149,643 |
Technology development | 4,803,447 | 3,406,786 |
Total property and equipment | 5,485,167 | 4,029,299 |
Less: accumulated depreciation and amortization | 1,339,730 | 668,467 |
Property and equipment, net | $ 4,145,437 | $ 3,360,832 |
Property and Equipment, Net (_2
Property and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property And Equipment Net Details Narrative Abstract | ||||
Capitalized technology development cost | $ 4,803,448 | $ 4,803,448 | ||
Technology costs incurred | 1,012,970 | $ 236,400 | 2,125,868 | $ 713,766 |
Amortization of capitalized technology development costs | $ 213,801 | $ 89,429 | $ 572,631 | $ 219,374 |
Accounts Payable And Accrued _2
Accounts Payable And Accrued Liabilities (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Accounts Payable And Other Accrued Liabilities Details Abstract | ||
Accounts payable | $ 1,673,885 | $ 1,094,310 |
Accrued payroll | 161,279 | 79,288 |
Other accrued expenses | 4,046 | 5,618 |
Total accounts payable and accrued liabilities | $ 1,839,210 | $ 1,179,216 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Note payable | $ 9,003,454 | $ 2,541,003 |
Current portion | 4,349,746 | 1,081,593 |
Long-term portion | 4,653,708 | 1,459,410 |
Notes Payable 1 | ||
Note payable | 1,333,334 | 1,333,334 |
Note Payable 2 | ||
Note payable | 275,982 | 126,076 |
Notes Payable 3 | ||
Note payable | 2,829,319 | 0 |
Notes Payable 4 | ||
Note payable | 4,564,819 | 0 |
Notes Payable 5 | ||
Note payable | $ 0 | $ 1,081,593 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Interest expense | $ 333,448 | $ 90,201 | $ 657,788 | $ 373,808 |
Debt discount amortization | 29,377 | $ 29,377 | 83,281 | $ 83,281 |
Note Payable-NextGen | ||||
Interest expense | 21,845 | 65,772 | ||
Notes Payable-Private Placement | ||||
Interest expense | $ 67,169 | $ 188,867 | ||
Interest rate | 26.00% | 26.00% | ||
Debt discount amortization | $ 52,879 | $ 149,906 | ||
Line of Credit-Floor Plans | ||||
Interest expense | 18,123 | 27,724 | ||
Loan Agreement-Hercules Capital | ||||
Interest expense | $ 226,311 | $ 375,427 | ||
Interest rate | 22.00% | 22.00% | ||
Debt discount amortization | $ 88,950 | $ 146,607 |
Stockholders_ Equity (Details N
Stockholders’ Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stockholders' equity: | ||||
RSUs granted | 1,278,000 | |||
RSU aggregate fair value | $ 5,390,865 | $ 5,390,865 | ||
Compensation expense | $ 417,689 | $ 157,763 | $ 1,093,784 | $ 287,550 |
Selling, General And Administ_3
Selling, General And Administrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Selling, general and administrative: | ||||
Compensation and related costs | $ 1,928,606 | $ 1,028,819 | $ 4,859,509 | $ 1,951,911 |
Advertising and marketing | 4,096,521 | 752,017 | 7,448,656 | 1,060,195 |
Professional fees | 246,032 | 192,041 | 692,492 | 724,486 |
Technology development | 234,378 | 91,967 | 729,206 | 278,668 |
General and administrative | 1,926,024 | 261,199 | 4,127,698 | 674,956 |
Total selling general and administrative | $ 8,431,561 | $ 2,326,043 | $ 17,857,561 | $ 4,690,216 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Supplemental Cash Flow Information Details | ||
Cash paid for interest | $ 207,255 | $ 42,502 |
Note payable issued on acquisition | 0 | 1,333,334 |
Conversion of notes payable-related party | 0 | 206,484 |
Issuance of shares for acquisition | $ 0 | $ 2,666,666 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | Sep. 30, 2018USD ($) |
Income Taxes | |
Operating loss carryforward | $ 8,740,879 |
Valuation allowance on the deferred tax assets | $ 2,149,654 |
Loss Per Share (Details Narrati
Loss Per Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
RSU Member | ||||
Antidilutive shares excluded from computation | 1,278,000 | 560,000 | 1,278,000 | 560,000 |
Class B Common Stock | ||||
Antidilutive shares excluded from computation | 300,068 | 300,068 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Related Party Transactions Details Narrative Abstract | ||||
Revenue generated | $ 924,069 | $ 506,500 | $ 946,824 | |
Cost of revenue | 458,356 | |||
Services Agreement | 221,400 | 54,159 | 678,670 | |
Promissory notes | $ 370,556 | 370,556 | ||
Interest expense | 37,316 | 37,316 | 78,751 | 104,926 |
Debt discount amortization | $ 29,377 | $ 29,377 | $ 83,281 | $ 83,281 |