| NOTES PAYABLE | Notes payable consisted of the following as
of December 31, 2018 and 2017:
2018 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 at maturity and
accrues at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. Unamortized debt discount of $334,998
and $540,924 as of December 31, 2018 and December 31, 2017, respectively. 667,000 667,000
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 December
31, 2018 was 7.61 %. Principal and interest are payable on demand. 8,866,894 -
Loan Agreement with Hercules Capital Inc. dated April 30, 2018 and as amended for tranche
II on October 30, 2018. Tranche I- Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest
payments commence on June 1, 2019 through maturity which is May 1, 2021. Trance II-Interest payable monthly at 11.0%. Principal
payable at maturity on October 1, 2021. Unamortized debt issuance costs as of December 31, 2018 of $1,547,412. 10,857,500 -
Line of credit-floor plan dated February 16, 2018. Facility initially provides available
credit of up to $63,000,000 with a decrease to $55,000,000 after February 28, 2019. Secured by vehicle inventory and other
assets. Interest rate at December 31, 2018 was 5.25 %. Principal
and interest are payable on demand. 47,505,607 -
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
Less: Debt discount (1,882,410 ) (540,924 )
67,347,925 2,541,003
Current portion 58,555,006 1,081,593
Long-term portion $ 8,792,919 $ 1,459,410 As of December 31, 2018, future principal debt payments
are due as follows: 2019 - $58,555,006; 2020 - $6,073,864; 2021 - $4,601,465. Notes Payable-Hercules 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 9. 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. The Hercules Loan is subject to various covenants, including gross profit and EBITDA. As of December 31, 2018,
the Company was in compliance with such covenants. Under the Loan Agreement, on the Closing Date,
the Company issued Hercules a warrant to purchase 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 December 31, 2018 was 22.0%. Interest expense on the Hercules Loan for year ended December
31, 2018 was $770,810 which included amortization of issuance costs of $304,213. Line of Credit-Floor Plan 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. Interest
expense on the line of credit-floor plan for the year ended December 31, 2018 was $513,306. Line of Credit-Ally 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 year ended December 31, 2018
was $149,776. Note Payable-NextGen On February 8, 2017, in connection with the
acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen in the amount of $1,333,334.
Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary
of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date.
Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable
upon election of the holder. The Company's obligations under the NextGen Note are secured by substantially all the assets of NextGen
Pro, pursuant to an Unconditional Guaranty Agreement (the "Guaranty Agreement"), by and among NextGen and NextGen Pro,
and a related Security Agreement between the parties, each dated as of February 8, 2017. Under the terms of the Guaranty Agreement,
NextGen Pro has agreed to guarantee the performance of all the Company's obligations under the NextGen Note. Interest expense
on the Credit Facility for the years ended December 31, 2018 and 2017 was $87,617 and $54,849, respectively. Notes Payable-Private Placement On March 31, 2017, the Company completed funding
of the second tranche of the 2016 Private Placement (as defined below). The investors were issued 1,161,920 shares of Class B
Common Stock of the Company and promissory notes (the "Private Placement Notes") in the amount of $667,000, 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 promissory
notes issued in the 2016 Private Placement, the Company recorded a debt discount on the promissory notes of $667,000 with the
corresponding amounts recorded as an addition to paid-in capital. The debt discount is amortized to interest expense until the
scheduled maturity of the Private Placement Notes in March 2020 using the effective interest method. The effective interest rate
at December 31, 2018 was 26.0%. Interest expense on the Private Placement Notes for the year ended December 31, 2018 was $259,177
and $158,740, respectively for the years ended December 31, 2018 and 2017, which included debt discount amortization of $205,926
and $81,603, respectively for the years ended December 31, 2018 and 2017. Notes Payable-Senior Secured Promissory Notes On September 5, 2017, the Company executed Senior
Secured Promissory Notes (the "Notes") in favor of several investors, including certain executive officers and directors
of the Company, in the aggregate principal amount of $1,650,000 ("Principal Amount"), which includes an aggregate original
issue discount of $150,000. The proceeds to the Company from the Senior Secured Promissory Notes, net of original issuance discount,
was $1,500,000. The Senior Secured Promissory Notes are secured by an interest in all the Company's Collateral, as such term is
defined in the Senior Secured Promissory Notes. The Senior Secured Promissory Notes mature on September 5, 2018 and bear
interest at a rate equal to 5% per annum through December 31, 2017, and a rate of 10% per annum thereafter. Interest
is payable monthly in arrears. Upon the occurrence of any event of default, the outstanding balance under the Senior Secured
Promissory Notes shall become immediately due and payable upon election of the holders. The Principal Amount and any unpaid
interest accrued thereon may be prepaid by the Company at any time prior to the maturity date without premium or penalty upon
five days prior written notice to the noteholder. If the Company consummates in one or more transactions financing of any nature
resulting in net proceeds available to the Company of $5,000,000 or more, then the noteholders may require the Company to prepay
the Senior Secured Promissory Notes on thirty (30) days prior written notice to the Company. The original issue discount
is amortized to interest expense until the scheduled maturity of the Senior Secured Promissory Notes in September 2018 using the
effective interest method. The effective interest rate at September 30, 2017 was 10.0%. Interest expense on the Senior Secured
Promissory Notes for the year ended December 31, 2017 was $161,075 which included $150,000 of original issue discount amortization. On
October 23, 2017, the Company completed a public offering and used approximately $1,661,075 of the net proceeds of the
offering for the repayment of the Senior Secured Promissory Notes in the aggregate principal amount of $1,650,000, plus accrued
interest, which resulted in the termination of the Senior Secured Promissory Notes. Line of Credit-Floor Plan On November 2, 2017, the Company through its
wholly-owned subsidiary RMBL Missouri, LLC (the "Borrower"), entered into a floor plan line of credit (the "Credit
Line") with NextGear Capital, Inc. ("NextGear") in the amount of $2,000,000, or such lesser sum which may have been
advanced to or on behalf of the Borrower from time to time, pursuant to that certain Demand Promissory Note and Loan and Security
Agreement. Any advance under the Credit Line bore 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 was compounded daily until such
outstanding advances were 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 Credit Line were 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. Upon any event of default (including, without limitation, the
Borrower's obligation to pay upon demand any outstanding liabilities of the Credit Line), NextGear could have, at its option and
without notice to the Borrower, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts
owed to NextGear and its affiliates by the Borrower and its affiliates. The Credit Line was secured by a grant of a security interest
in the vehicle inventory and other assets of the Borrower 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 Credit
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 Credit Line. Convertible Note Payable-Related Party On July 13, 2016, the Company entered into an
unsecured convertible note (the "BHLP Note") with Berrard Holdings, an entity owned and controlled by a current officer
and director, Mr. Berrard, pursuant to which the Company was required to repay $191,858 on or before July 13, 2026 plus interest
at 6% per annum. The BHLP Note was also convertible into common stock, in whole, at any time before maturity at the option of
the holder at the greater of $0.06 per share or 50% of the price per share of the next qualified financing which is defined as
$500,000 or greater. Effective August 31, 2016, the principal amount of the BHLP Note was amended to include an additional $5,500
loaned to the Company, on the same terms. On November 28, 2016, the Company completed its qualified financing at $1.50 per share
which established the conversion price per share for the BHLP Note of $0.75 per share, resulting in the principal amount of the
BHLP Note being convertible into 263,144 shares of Class B Common Stock. As such, November 28, 2016 became the "commitment
date" for determining the value of the BHLP Note conversion feature. Because there had been no trading in the Company's common
stock since July 2014, other than the purchase by Berrard Holdings of 99.5% of the outstanding shares in a single transaction,
the Company used the Monte Carlo simulation to determine the intrinsic value of the conversion feature of the BHLP Note, which
resulted in a value in excess of the principal amount of the BHLP Note. Thus, the Company recorded a note discount of $197,358
with the corresponding amount as an addition to paid in capital. This note discount was amortized to interest expense until the
scheduled maturity of the BHLP Note in July 2026 or until it was converted using the effective interest method. On March 31, 2017,
the Company issued 275,312 shares of Class B Common Stock upon full conversion of the BHLP Note, having an aggregate principal
amount, including accrued interest, of $206,484 and a conversion price of $0.75 per share. In connection with the conversion of
the BHLP Note, the remaining debt discount of $196,076 was charged to interest expense in the Consolidated statements of operations
and the related deferred tax liability was credited to Additional paid in capital in the Consolidated Balance Sheets. |
