Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 29, 2019 | Jun. 30, 2018 | |
Entity Registrant Name | RumbleON, Inc. | ||
Entity Central Index Key | 0001596961 | ||
Document Type | 10-K | ||
Trading Symbol | RMBL | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 33,500,000 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Class A Common Stock [Member] | |||
Entity Common Stock, Shares Outstanding | 1,000,000 | ||
Class B Common Stock [Member] | |||
Entity Common Stock, Shares Outstanding | 20,087,120 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 9,134,902 | $ 9,170,652 |
Restricted cash | 6,650,000 | 0 |
Accounts receivable, net | 8,465,810 | 577,107 |
Inventory | 52,191,523 | 2,834,666 |
Prepaid expense and other current assets | 1,096,945 | 308,880 |
Total current assets | 77,539,180 | 12,891,305 |
Property and equipment, net | 5,177,877 | 3,360,832 |
Goodwill | 26,107,146 | 1,850,000 |
Other assets | 102,178 | 50,693 |
Total assets | 108,926,381 | 18,152,830 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 10,554,913 | 1,179,216 |
Accrued interest payable | 206,037 | 33,954 |
Current portion of long-term debt | 58,555,006 | 1,081,593 |
Total current liabilities | 69,315,956 | 2,294,763 |
Long term liabilities: | ||
Note payable | 8,792,919 | 1,459,410 |
Other liabilities | 0 | 32,665 |
Total long-term liabilities | 8,792,919 | 1,492,075 |
Total liabilities | 78,108,875 | 3,786,838 |
Commitments and contingencies (Notes 4, 6, 7, 9, 12, 15) | ||
Stockholders' equity: | ||
Class B Preferred stock, $0.001 par value, 10,000,000 shares authorized, 1,317,329 and 0 shares issued and outstanding as of December 31, 2018 and 2017, respectively | 1,317 | 0 |
Additional paid in capital | 64,998,817 | 23,372,360 |
Accumulated deficit | (34,201,114) | (9,019,297) |
Total stockholders' equity | 30,817,506 | 14,365,992 |
Total liabilities and stockholders' equity | 108,926,381 | 18,152,830 |
Class A Common Stock [Member] | ||
Stockholders' equity: | ||
Common stock | 1,000 | 1,000 |
Class B Common Stock [Member] | ||
Stockholders' equity: | ||
Common stock | $ 17,486 | $ 11,929 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Class B Preferred stock, par value | $ 0.001 | $ 0.001 |
Class B Preferred stock, authorized | 10,000,000 | 10,000,000 |
Class B Preferred stock, issued | 1,317,329 | 0 |
Class B Preferred stock, outstanding | 1,317,329 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Class A Common Stock [Member] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 1,000,000 | 1,000,000 |
Common stock, issued | 1,000,000 | 1,000,000 |
Common stock, outstanding | 1,000,000 | 1,000,000 |
Class B Common Stock [Member] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 99,000,000 | 99,000,000 |
Common stock, issued | 17,486,291 | 11,928,541 |
Common stock, outstanding | 17,486,291 | 11,928,541 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue: | ||
Revenue | $ 156,398,231 | $ 7,305,902 |
Cost of revenue | 143,761,940 | 7,027,793 |
Gross profit | 12,636,291 | 278,109 |
Selling, general and administrative | 35,053,417 | 7,586,999 |
Depreciation and amortization | 984,006 | 668,467 |
Operating loss | (23,401,132) | (7,977,357) |
Interest expense | 1,780,685 | 595,966 |
Net loss before benefit for income taxes | (25,181,817) | (8,573,323) |
Benefit for income taxes | 0 | 0 |
Net loss | $ (25,181,817) | $ (8,573,323) |
Weighted average number of common shares outstanding - basic and fully diluted | 14,833,162 | 9,917,584 |
Net loss per share - basic and fully diluted | $ (1.70) | $ (0.86) |
Powersports | ||
Revenue: | ||
Revenue | $ 61,204,416 | $ 7,171,457 |
Cost of revenue | 54,334,066 | 6,615,258 |
Automotive | ||
Revenue: | ||
Revenue | 90,094,536 | 0 |
Cost of revenue | 85,282,908 | 0 |
Transportation | ||
Revenue: | ||
Revenue | 3,823,819 | 0 |
Cost of revenue | 2,755,856 | 0 |
Other | ||
Revenue: | ||
Revenue | 1,275,460 | 134,445 |
Cost of revenue | $ 1,389,110 | $ 412,535 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (Deficit) - USD ($) | Preferred Stock [Member] | Class A Common Stock [Member] | Class B Common Stock [Member] | Additional Paid-In Capital [Member] | Subscriptions Receivable [Member] | Accumulated Deficit [Member] | Total |
Balance at beginning at Dec. 31, 2016 | $ 0 | $ 0 | $ 6,400 | $ 1,534,015 | $ (1,000) | $ (445,974) | $ 1,093,441 |
Balance at beginning (in shares) at Dec. 31, 2016 | 0 | 0 | 6,400,000 | ||||
Exchange of common stock | $ 1,000 | $ (1,000) | 0 | ||||
Exchange of common stock (in shares) | 1,000,000 | (1,000,000) | |||||
Issuance of common stock in connection with acquisition | $ 1,524 | 2,665,142 | 2,666,666 | ||||
Issuance of common stock in connection with acquisition (in shares) | 1,523,809 | ||||||
Issuance of stock in private placements | $ 658 | 2,629,342 | 2,630,000 | ||||
Issuance of stock in private placements (in shares) | 657,500 | ||||||
Issuance of common stock in connection with loan agreement | $ 1,162 | 1,348,878 | 1,350,040 | ||||
Issuance of common stock in connection with loan agreement (in shares) | 1,161,920 | ||||||
Issuance of common stock in connection with conversion of a Note Payable-related Party, net of debt discount | $ 275 | 284,639 | 284,914 | ||||
Issuance of common stock in connection with conversion of a Note Payable-related Party, net of debt discount (in shares) | 275,312 | ||||||
Issuance of common stock in connection with equity offering | $ 2,910 | 14,407,321 | 1,000 | 14,411,231 | |||
Issuance of common stock in connection with equity offering (in shares) | 2,910,000 | ||||||
Stock-based compensation | 503,023 | 503,023 | |||||
Net loss | (8,573,323) | (8,573,323) | |||||
Balance at end at Dec. 31, 2017 | $ 0 | $ 1,000 | $ 11,929 | 23,372,360 | 0 | (9,019,297) | 14,365,992 |
Balance at end (in shares) at Dec. 31, 2017 | 0 | 1,000,000 | 11,928,541 | ||||
Issuance of common stock | $ 5,358 | 33,096,621 | 33,101,979 | ||||
Issuance of common stock (in shares) | 5,358,750 | ||||||
Issuance of common stock for restricted stock units exercise | $ 199 | (199) | 0 | ||||
Issuance of preferred stock in connection with acquisition | $ 1,317 | 6,651,195 | 6,652,511 | ||||
Issuance of preferred stock in connection with acquisition (in shares) | 1,317,329 | ||||||
Issuance of warrants in connection with loan agreement | 221,160 | 221,160 | |||||
Stock-based compensation | 1,657,680 | 1,657,680 | |||||
Net loss | (25,181,817) | (25,181,817) | |||||
Balance at end at Dec. 31, 2018 | $ 1,317 | $ 1,000 | $ 17,486 | $ 64,998,817 | $ 0 | $ (34,201,114) | $ 30,817,506 |
Balance at end (in shares) at Dec. 31, 2018 | 1,317,329 | 1,000,000 | 17,486,291 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (25,181,817) | $ (8,573,323) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 984,006 | 668,467 |
Amortization of debt discount | 510,139 | 276,076 |
Interest expense on conversion of debt | 0 | 196,076 |
Share based compensation expense | 1,657,680 | 503,023 |
Changes in operating assets and liabilities: | ||
Decrease (increase) in prepaid expenses and other current assets | 340,483 | (307,213) |
Increase in inventory | (1,717,504) | (2,834,666) |
Increase in accounts receivable | (286,009) | (577,107) |
Increase in other assets | (51,485) | 0 |
Increase in accounts payable and accrued liabilities | 152,336 | 960,115 |
Increase in accrued interest payable | 172,083 | 70,237 |
Decrease in other liabilities | (32,665) | (5,178) |
Net cash used in operating activities | (23,452,753) | (9,623,493) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Cash used for acquisitions, net of cash received | (15,395,251) | (750,000) |
Technology development | (2,162,707) | (506,786) |
Purchase of property and equipment | (6,409) | (622,512) |
Net cash used in investing activities | (17,564,367) | (1,879,298) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from notes payable | 9,227,035 | 2,167,000 |
Repayments for notes payable | 0 | (1,650,000) |
Net proceeds from lines of credit | 5,302,355 | 1,081,593 |
Proceeds from sale of common stock | 33,101,980 | 17,724,270 |
Net cash provided by financing activities | 47,631,370 | 19,322,863 |
NET CHANGE IN CASH | 6,614,250 | 7,820,072 |
CASH AT BEGINNING OF PERIOD | 9,170,652 | 1,350,580 |
CASH AT END OF PERIOD | $ 15,784,902 | $ 9,170,652 |
DESCRIPTION OF BUSINESS AND SIG
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [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 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. On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with 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 Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company (the "Wholesale Transaction"). 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 Transaction," and together with the Wholesale Transaction, the "Transactions") in Wholesale Express, LLC, a Tennessee limited liability company . The Transactions were both completed on October 30, 2018. As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Wholesale 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 consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Wholesale Inc. is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express, LLC is a related logistics company. 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. Use of Estimates The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management's experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company's assets and liabilities and the results of operations. Earnings (Loss) Per Share The Company follows the FASB Accounting Standards Codification ("ASC") Topic 260- Earnings per share Revenue Recognition Revenue for our vehicle distribution segment is derived primarily from our online marketplace and auctions which include: (i) the sale of pre-owned vehicles to consumer and dealers; (ii) vehicle financing; (iii) vehicle service contracts; and (iv) subscription fees paid by dealers for access to the RumbleOn software solution. Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States. We adopted ASC 606, Revenue from Contracts with Customers For vehicles sold at wholesale to dealers we satisfy our performance obligation for vehicles sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle. For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers. Vehicle finance fee revenue is recognized upon delivery of the vehicle to the customer, when the sales contract is signed, and the financing has been arranged. We may be charged back for a fee in the event a contract is prepaid, defaulted upon, or terminated. Our risk related to contract cancellations is limited to the commissions that we receive. Cancellations will fluctuate depending on the customer financing default or prepayment rates and shifts in customer behavior. To the extent that actual experience differs from historical trends, there could be adjustments to our finance contract cancellation reserves. Commission revenue on vehicle service contracts is recognized at the time of sale, net of a reserve for estimated contract cancellations. The reserve for cancellations is estimated based on historical experience and recent trends. Our risk related to contract cancellations is limited to the commissions that we receive. Cancellations will fluctuate depending on the customer financing default or prepayment rates, and shifts in customer behavior, including those related to changes in the coverage or term of the product. To the extent that actual experience differs from historical trends, there could be adjustments to our contract cancellation reserves. Subscription fees for access to the RumbleOn software solution are paid monthly and revenue recognition commences when the installation of the software is complete, acceptance has occurred, and collectability of a determinable amount is probable. Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. freight brokerage Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Purchase Accounting for Business Combinations The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. Goodwill Goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged. Goodwill is not amortized but tested for impairment at least annually, and more frequently if events or circumstances indicate the carrying amount of the reporting unit more likely than not exceeds fair value. We have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill using a qualitative assessment process. Goodwill is tested for impairment at the reporting unit level. Our reporting units are individual stores as this is the level at which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance. We test our goodwill for impairment in December of each year. In 2018, we evaluated our goodwill using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired. If the qualitative assessment determines it is more likely than not the fair value is less than the carrying amount, we would further evaluate for potential impairment. No impairment charges related to intangible assets were recognized during the years ended December 31, 2018 and 2017 Other Assets Included in "Other assets" on the Company's Consolidated Balance Sheets are amounts related to acquired internet domain names which are considered to be an indefinite lived intangible assets. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. There was no impairment of indefinite lived assets as of December 31, 2018. Long-Lived Assets Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. 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 Valuation Allowance for Accounts Receivable The Company estimates the allowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from these assumptions. 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 December 31, 2018 and 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. In connection with the inventory financing contract (the "NextGear Facility"), entered into by the Company, its wholly owned subsidiary RMBL Tennessee, Inc, Wholesale, Inc. and NextGear Capital, Inc. ("NextGear"), dated October 30, 2018, Wholesale, Inc and NextGear entered into a Reserve Agreement requiring Wholesale, Inc to pay to NextGear $5.5 million (the "Reserve") to be collateral and security for Wholesale Inc.'s liability under the NextGear Facility as well as any amounts owed by Wholesale, Inc. to NextGear and its Affiliates, and each of their respective directors, officers, principals, trustees, partners, shareholders or other holders of any ownership interest, as the case may be, employees, representatives, attorneys and agents. NextGear is not required to pay Wholesale Inc. interest on the Reserve balance. Upon the satisfaction of all obligations and the termination by NextGear of the NextGear Facility, NextGear will return to Wholesale, Inc., upon its written request to NextGear no earlier than ten (10 business days from the date the obligations were indefeasibly paid and satisfied in full and the NextGear Facility and terminated by Lender. 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. Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018 and December 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820-10-30-2 -Fair Value Measurement Level 1: The preferred inputs to valuation efforts are "quoted prices in active markets for identical assets or liabilities," with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as "unobservable," and limits their use by saying they "shall be used to measure fair value to the extent that observable inputs are not available." This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date". Earlier in the standard, FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. Beneficial Conversion Feature From time to time, the Company has issued convertible notes that have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20, Debt with Conversion and Other Options The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the conversion feature, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model, or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. Common Stock Warrants The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in Accounting Standards Codification (ASC) 815, Derivatives and Hedging – Contracts in Entity's Own Equity 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. Debt Issuance Costs Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , “Simplifying the Presentation of Debt Issuance Costs” Cost of Revenue Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of revenue also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value. Cost of subscription and other fee revenue includes the (i) various data feeds from third parties; (ii) hosting of the customer facing website; (iii) commissions for new sales; and (iv) implementation and training of new and existing customers. These costs and expenses are charged to cost of revenue as incurred. Selling, General and Administrative Expenses Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, transportation cost associated with selling vehicles, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Advertising and marketing expenses was $11,457,572 and $1,731,028 for the years ended December 31, 2018 and 2017, respectively. Stock-Based Compensation On June 30, 2017 the Company's shareholders approved a 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. Twelve percent (12%) of the Company's issued and outstanding shares of Class B Common Stock from time to time are reserved for issuance under the Plan. The Company estimates the fair value of awards granted under the Plan on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company's Class B Common Stock on the date of grant and is recognized as an expense on a straight-line basis over its vesting period; to date, substantially all the RSUs issued vest over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. During the year ended December 31, 2018 the Company granted 1,028,284 RSUs under the Plan to members of the Board of Directors, officers and employees. 1,657,680 and is included in selling, general and administrative expenses in the consolidated statements of operations. Income Taxes The Company follows ASC Topic 740, Income Taxes, The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2018, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a fifty percent likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months. Recent Pronouncements Adoption of New Accounting Standards . In January 2017, the FASB issued new guidance, ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the test for Goodwill Impairment The Company adopted ASU 2017-04 on January 1, 2018 and it did not have a material effect on its consolidated financial statements. In August 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-15) related to the classification of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, settlement of zero-coupon debt, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We adopted this pronouncement for our fiscal year beginning January 1, 2018, and it did not have a material effect on its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard (ASC Topic 606) that amends the accounting guidance on revenue recognition. The new accounting standard is intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard’s guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract. The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). The Company adopted ASC 606, Revenue from Contracts with Customers Accounting Standards Issued But Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments 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. 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 have not yet made a final determination whether this standard will have a material effect on our Consolidated balance sheets. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable, Net [Abstract] | |
ACCOUNTS RECEIVABLE | Accounts receivable consists of the following as of December 31: 2018 2017 Trade $ 8,264,045 $ 577,107 Finance 148,378 - Other 229,577 - 8,642,000 577,107 Less: allowance for doubtful accounts 176,190 - $ 8,465,810 $ 577,107 |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORY | Inventory consists of the following as of December 31, 2018 2017 Pre-owned vehicles: Powersport vehicles $ 9,783,093 $ 3,019,965 Automobiles and trucks 43,081,136 - 52,864,229 3,019,965 Less: Valuation allowance 672,706 185,299 $ 52,191,523 $ 2,834,666 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
ACQUISITIONS | On October 26, 2018, we entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with 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. Also on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), with 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"). On October 30, 2018, the Company completed the Wholesale Merger and Express Acquisition. Also, on October 26, 2018, we 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 we 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, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of our Series B Non-Voting Convertible Preferred Stock, par value $0.001. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. The following tables summarize the consideration paid in cash and equity securities for the acquisitions and the preliminary amount of identified assets acquired and liabilities assumed as of the acquisition date Wholesale Express Issuance of shares $ 6,652,512 $ - Cash paid 12,353,941 4,000,000 Total purchase price $ 19,006,453 $ 4,000,000 Estimated fair value of assets: Cash 183,846 774,844 Accounts receivable 5,130,788 2,328,214 Inventory 47,639,354 - Prepaid expenses 186,659 59,377 Property & equipment 617,422 14,702 Due from Related party - 720,000 Other Assets 1,026,203 - 54,784,272 3,897,137 Estimated fair value of liabilities assumed: Accounts payable and other 8,144,040 1,079,509 Floor plan liability 49,988,553 - Due to related party 720,000 - 58,852,593 1,079,509 Excess of (liabilities over assets) assets over liabilities (4,068,321 ) 2,817,628 Goodwill 23,074,774 1,182,372 $ 19,006,453 $ 4,000,000 Supplemental pro forma information The results of operations of Wholesale and Express since the acquisition date are included in the accompanying Consolidated Financial Statements. The following supplemental pro forma information presents the financial results as if the acquisition of Wholesale and Express was made as of January 1, 2018 for the year ended December 31, 2018 and on January 1, 2017 for the year ended December 31, 2017. Pro forma adjustments for the year ended December 31, 2018 primarily include adjustments to reflect the: (i) amortization of stock compensation expense of $1,000,000; (ii) elimination of intercompany sales and cost of revenue of $3,744,911; (iii) income taxes of $158,742. Pro forma adjustments for the year ended December 31, 2017 primarily include adjustments to reflect the: (i) amortization of stock compensation expense of $1,000,000; (ii) elimination of intercompany sales and cost of revenue of $538,954; (iii) income taxes of $48,500. Year Ended December 31, 2018 2017 Pro forma revenue $ 727,313,174 $ 626,995,714 Pro forma net loss $ (24,402,816 ) $ (7,228,917 ) Loss per share - basic and fully diluted $ (1.32 ) $ (0.51 ) Weighted-average common shares and common stock equivalents outstanding basic and fully diluted 18,455,936 14,189,121 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 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 $ and $ 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 | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment, Net [Abstract] | |
PROPERTY AND EQUIPMENT, NET | The following table summarizes property and equipment, net of accumulated depreciation and amortization as of December 31, 2018 and 2017: 2018 2017 Vehicles $ 417,666 $ 472,870 Furniture and equipment 474,546 149,643 Technology development and software 5,777,504 3,406,786 Leasehold improvements 136,386 - Total property and equipment 6,806,102 4,029,299 Less: accumulated depreciation and amortization 1,628,225 668,467 $ 5,177,877 $ 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. At December 31, 2018, capitalized technology development costs were $5,569,493 which includes $2,900,000 of software acquired in the NextGen transaction. Total technology development costs incurred was $3,314,815 for the year ended December 31, 2018 of which $2,162,707 was capitalized and $1,152,108 was charged to expense in the accompanying Consolidated statements of operations. Depreciation expense for the year ended December 31, 2018 was $984,006, which included the amortization of capitalized technology costs of $825,782. Depreciation expense for the year ended December 31, 2017 was $668,467, which included the amortization of capitalized technology costs of $588,519. |
ACCOUNTS PAYABLE AND OTHER ACCR
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES | The following table summarizes accounts payable and other accrued liabilities as of December 31, 2018 and 2017: 2018 2017 Accounts payable $ 7,528,003 $ 1,094,310 Accrued payroll 877,180 79,288 State and local taxes 1,073,649 - Other accrued expenses 1,076,081 5,618 $ 10,554,913 $ 1,179,216 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable [Abstract] | |
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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | On January 9, 2017, the Company's Board of Directors approved, subject to stockholder approval, the adoption of the RumbleOn, Inc. 2017 Stock Incentive Plan (the "Plan"), On June 30, 2017, the Plan was approved by the Company's stockholders at the 2017 Annual Meeting of Stockholders. The purposes of the Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers ("Eligible Individuals") by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such persons and the stockholders of the Company. The Plan will allow the Company to grant a variety of stock-based and cash-based awards to Eligible Individuals. On June 25, 2018, the Board and stockholders holding 1,000,000 shares of Class A Common Stock and 8,902,319 shares of Class B Common Stock of the Company approved the 2018 Certificate of Amendment to provide for "blank check" preferred stock, which may be issued in one or more classes or series, with such rights, preferences, privileges and restrictions as will be fixed by the Board. The 2018 Certificate of Amendment became effective on June 25, 2018. As of December 31, 2018, there were 289,216 shares available for issuance under the Plan. As of December 31, 2018, the Company has granted 1,769,284 RSUs under the Plan to certain officers and employees of the Company. The aggregate fair value of the RSUs, net of expected forfeitures was $8,158,697. The RSUs generally vest over a three-year period as follows: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. The fair value of the grant is amortized over the period from the grant date through the vesting dates. Compensation expense recognized for these grants for the year ended December 31, 2018 is $1,657,680. As of December 31, 2018, the Company has approximately $5,997,994 in unrecognized stock-based compensation, with an average remaining vesting period of 2.25 years. On January 9, 2017, the Company's Board of Directors and stockholders holding 6,375,000 of the Company's issued and outstanding shares of common stock approved an amendment to the Company's Articles of Incorporation (the "Certificate of Amendment"), to change the name of the Company to RumbleOn, Inc. and to create an additional class of common stock of the Company, which was effective on February 13, 2017 (the "Effective Date"). Immediately before approving the Certificate of Amendment, the Company had authorized 100,000,000 shares of common stock, $0.001 par value (the "Authorized Common Stock"), including 6,400,000 issued and outstanding shares of common stock (the "Outstanding Common Stock, and together with the Authorized Common Stock, the "Common Stock"). Pursuant to the Certificate of Amendment, the Company designated 1,000,000 shares of Authorized Common Stock as Class A Common Stock (the "Class A Common Stock"), which Class A Common Stock ranks pari passu Also on January 9, 2017, the Company's Board of Directors and stockholders holding 6,375,000 of the Company's issued and outstanding shares of common stock approved the issuance to (i) Marshall Chesrown of 875,000 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Chesrown, and (ii) Steven R. Berrard of 125,000 shares of Class A Common Stock in exchange for an equal number of shares of Class B Common Stock held by Mr. Berrard, effective at the time the Certificate of Amendment was filed with the Secretary of State of Nevada. On February 13, 2017, the Effective Date, the Company filed the Certificate of Amendment with the Secretary of State of the State of Nevada changing the Company's name to RumbleOn, Inc. and creating the Class A and Class B Common Stock. Also, on the Effective Date, the Company issued an aggregate of 1,000,000 shares of Class A Common Stock to Messrs. Chesrown and Berrard in exchange for an aggregate of 1,000,000 shares of Class B Common Stock held by them. Also on the Effective Date, the Company amended its bylaws to reflect the name change to RumbleOn, Inc. and to reflect the Company's primary place of business as Charlotte, North Carolina. On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock, par value $0.001, at a price of $4.00 per share for aggregate proceeds of $2,480,000 in the private placement (the "2017 Private Placement"). Officers and directors of the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement. In May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. Proceeds from the 2017 Private Placement were used to complete the launch of the Company's website, acquire vehicle inventory, continue development of the Company's platform, and for working capital purposes. On June 30, 2017, the Company filed a Registration Statement on Form S-1 (the "Registration Statement") with the SEC covering the resale of 8,993,541 shares of Class B Common Stock issued in the NextGen acquisition and the 2017 Private Placement and other shares previously held by our stockholders, including our officers and directors. The SEC declared the Registration Statement effective on July 7, 2017. In connection with the filing of the Registration Statement, our officers and directors and certain stockholders entered into a lock-up agreement restricting, through December 31, 2017, the resale of an aggregate of 6,848,800 shares of our common stock held by them and subject to the Registration Statement. On October 23, 2017, the Company completed an underwritten public offering of 2,910,000 shares of Class B common stock at a public offering price of $5.50 per share for net proceeds to the Company of approximately $14,500,000 after deducting the underwriting discount and offering fees and expenses payable by the Company (the "Offering"). The Company also granted the underwriters a 30-day option, which expires on November 19, 2017, to purchase up to an additional 436,500 shares of Class B common stock to cover over-allotments. The Company used $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. The Company intends to use the remaining net proceeds of 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. Also, in connection with the Offering, on October 19, 2017, the Class B Common Stock uplisted from the OTCQB and began trading on The NASDAQ Capital Market under the symbol "RMBL." At December 31, 2016, the Company was authorized to issue 100,000,000 shares of common stock, $0.001 par value (the "Authorized Common Stock"), including 6,400,000 issued and outstanding shares of common stock (the "Outstanding Common Stock, and together with the Authorized Common Stock, the "Common Stock"). Pursuant to the Certificate of Amendment, the Company designated 1,000,000 shares of Authorized Common Stock as Class A Common Stock (the "Class A Common Stock"), which Class A Common Stock ranks pari passu — 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. 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 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. |
COMMON STOCK WARRANTS
COMMON STOCK WARRANTS | 12 Months Ended |
Dec. 31, 2018 | |
Common Stock Warrants | |
COMMON STOCK WARRANTS | 2017 Offering In connection with the October 23, 2017 public offering of 2,910,000 shares of Class B common stock the Company issued to underwriters warrants to purchase 218,250 shares of Class B common stock, which was equal to 7.5% of the aggregate number of shares of Class B common stock sold in the Offering. The Warrants are exercisable at a per share price of $6.325, which was equal to 115% of the Offering price per share of the shares sold in the Offering. The Warrants are exercisable at any time and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the registration statement related to the Offering. The Company has classified the warrants as equity in accordance with ASC 815. The fair value of the warrants were valued at issuance using the Black-Scholes option pricing model with the following assumptions: Warrants exercise price $ 6.325 Fair value price per share of common stock $ 5.50 Warrants outstanding 218,250 Volatility 62.0 % Expected term remaining (years) 5.0 Risk-free interest rate 1.31 % Dividend yield - The dividend yield assumption of zero is based upon the fact that we have never paid cash dividends and presently have no intention to do so. The risk-free interest rate used for each warrant classified as a derivative is equal to the U.S. Treasury rate. The expected term is based on the remaining contractual lives of the warrants at the valuation date. Since the Company's stock was not traded frequently in the years before the valuation date the volatility may not reasonably reflect the Company's true volatility. Therefore, we relied on the average volatility of selected comparable companies. There were no warrants exercised or forfeited for the year ended December 31, 2018. There was no aggregate intrinsic value in the warrants at December 31, 2018. The fair value of the warrants at the initial valuation date was $505,273. April 2018 Loan Agreement - Hercules Under the Loan Agreement by and among Hercules Capital, the Company, and its wholly owned subsidiaries, 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 parties agreement) shares of the Company’s Class B Common Stock (the “Hercules April Warrant”) at an exercise price of $5.50 per share (the “Hercules April Warrant Price”). The Hercules April Warrant is immediately exercisable and expires on April 30, 2023. If at any time before April 30, 2019, the Company makes an April New Issuance (as defined below) for no consideration or for a consideration per share less than the Hercules April Warrant Price in effect immediately before the April New Issuance (an “April Dilutive Issuance”) or the consideration for an issuance is later adjusted downward with certain exceptions as set forth in the Hercules April Warrant, then the Hercules April Warrant Price will be reduced to an amount equal to the lower consideration price or adjusted exercise price or conversion price (the “April New Issuance Price”). If at any time after April 30, 2019, the Company makes an April Dilutive Issuance, then the April 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 April Warrant Price in effect immediately before the Dilutive Issuance, (ii) B represents the number of shares of common stock outstanding immediately after the April New Issuance (on a fully-diluted basis), (iii) C represents the number of shares of common stock outstanding immediately before the April 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 April New Issuance if the purchaser paid the Hercules April Warrant Price in effect immediately prior to the April New Issuance. April 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 Hercules April 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 Hercules April 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 Hercules April Warrant. The fair value of the warrants were valued at issuance using the Black-Scholes option pricing model with the following assumptions: Warrants exercise price $ 5.50 Fair value price per share of common stock $ 5.07 Warrants outstanding 81,818 Volatility 70.0 % Expected term remaining (years) 5.0 Risk-free interest rate 2.79 % Discount for Lack of Marketability 20.0 % Dividend yield - The dividend yield assumption of zero is based upon the fact that we have never paid cash dividends and presently have no intention to do so. The risk-free interest rate used for each warrant classified as a derivative is equal to the U.S. Treasury rate. The expected term is based on the remaining contractual lives of the warrants at the valuation date. Since the Company's stock was not traded frequently in the years before the valuation date the volatility may not reasonably reflect the Company's true volatility. Therefore, we relied on the average volatility of selected comparable companies. There were no warrants exercised or forfeited for the year ended December 31, 2018. There was no aggregate intrinsic value in the warrants at December 31, 2018. The fair value of the warrants at the initial valuation date was $208,369. October 2018 Loan Agreement - Hercules Pursuant to the Amendment to the Hercules Loan Agreement by and among Hercules Capital, the Company, and it wholly owned subsidiaries, on the closing date, the Company issued Hercules a warrant to purchase 20,950 shares of the Company’s Class B Common Stock (the “Hercules October Warrant”) at an exercise price of $7.16 per share (the “Hercules October Warrant Price”). The Hercules October Warrant is immediately exercisable and expires on October 30, 2023. If at any time before October 30, 2019, the Company makes an October New Issuance (as defined below) for no consideration or for a consideration per share less than the Hercules October Warrant Price in effect immediately before the October New Issuance (an “October Dilutive Issuance”) or the consideration for an issuance is later adjusted downward with certain exceptions as set forth in the Hercules October Warrant, then the Hercules October Warrant Price will be reduced to an amount equal to the lower consideration price or adjusted exercise price or conversion price (the “October New Issuance Price”). If at any time after October 30, 2019, the Company makes an October Dilutive Issuance, then the October 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 October Warrant Price in effect immediately before the October Dilutive Issuance, (ii) B represents the number of shares of common stock outstanding immediately after the October New Issuance (on a fully-diluted basis), (iii) C represents the number of shares of common stock outstanding immediately before the October 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 October New Issuance if the purchaser paid the Hercules October Warrant Price in effect immediately prior to the October New Issuance. October 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 Hercules October 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 Hercules October 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 Hercules October Warrant. The fair value of the warrants were valued at issuance using the Black-Scholes option pricing model with the following assumptions: Warrants exercise price $ 7.16 Fair value price per share of common stock $ 5.73 Warrants outstanding 20,950 Volatility 70.0 % Expected term remaining (years) 5.0 Risk-free interest rate 2.94 % Discount for Lack of Marketability 20.0 % Dividend yield - The dividend yield assumption of zero is based upon the fact that we have never paid cash dividends and presently have no intention to do so. The risk-free interest rate used for each warrant classified as a derivative is equal to the U.S. Treasury rate. The expected term is based on the remaining contractual lives of the warrants at the valuation date. Since the Company's stock was not traded frequently in the years before the valuation date the volatility may not reasonably reflect the Company's true volatility. Therefore, we relied on the average volatility of selected comparable companies. There were no warrants exercised or forfeited for the year ended December 31, 2018. There was no aggregate intrinsic value in the warrants at December 31, 2018. The fair value of the warrants at the initial valuation date was $59,292. |
SELLING, GENERAL AND ADMINISTRA
SELLING, GENERAL AND ADMINISTRATIVE | 12 Months Ended |
Dec. 31, 2018 | |
General and Administrative Expense [Abstract] | |
SELLING, GENERAL AND ADMINISTRATIVE | The following table summarizes the detail of selling, general and administrative expense for the years ended December 31, 2018 and 2017: 2018 2017 Selling, General and Administrative Compensation and related costs $ 10,656,107 $ 3,111,363 Advertising and marketing 11,457,572 1,731,028 Professional fees 1,788,425 890,580 Technology development 1,152,108 452,957 General and administrative 9,999,205 1,401,071 $ 35,053,417 $ 7,586,999 |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 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 years ended December 31, 2018 and 2017: 2018 2017 Cash paid for interest $ 1,226,292 $ 203,578 Note payable issued on acquisition $ - $ 1,333,334 Conversion of notes payable-related party $ - $ 206,209 Issuance of shares for acquisition $ 6,652,512 $ 2,666,666 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | U.S. Tax Reform On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Act, was signed in to 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 December 31, 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% including state income taxes. The remeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance. Deferred income taxes reflect the net tax effect of temporary difference between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows: 2018 2017 Deferred tax assets: Net operating loss carryforward $ 8,091,718 $ 2,281,369 Stock-based compensation 564,700 131,465 Total deferred income taxes 8,656,418 2,412,834 Deferred tax liabilities: Basis difference in property and equipment 15,045 114,150 Basis difference in goodwill 64,423 32,190 Debt discount-private placement 63,021 116,840 Debt issuance cost amortization 401,303 - Total deferred tax liabilities 543,792 263,180 Net deferred tax asset 8,112,626 2,149,654 Valuation allowance (8,112,626 ) (2,149,654 ) Net deferred tax asset (liability) $ - $ - A reconciliation of the statutory U.S. Federal income tax rate to the Company's effective income tax rate on income tax rate on continuing operations for the years ended December 31, 2018 and 2017. 2018 2017 U.S. Federal statutory rate 21.0 % 34.0 % Impact of tax reform on net deferred tax assets (13.0 )% State and local, net of Federal benefit 5.1 % 5.1 % Permanent difference (0.2 )% - % Valuation allowance (25.9 )% (26.1 )% Effective tax rate - % - % No current provision for Federal income taxes was required for the years ended December 31, 2018 and 2017 due to the Company's operating losses. At December 31, 2018 and 2017, the Company has operating loss carryforwards of $30,961,231 and $8,740,879, respectively, a portion of which begin to expire in 2033. We have provided a valuation allowance on the deferred tax assets of $8,112,626 and $2,149,654 for the periods ended December 31, 2018 and 2017, respectively. 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 | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
LOSS PER SHARE | The Company computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighed-average number of shares of common stock outstanding during the period. The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, 1,769,284 of unvested RSUs, and 321,018 or warrants to purchase shares of Class B Common Stock are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive. In connection with the Company’s acquisition of Wholesale, the Company issued 1,317,329 shares of Series B Non-Voting Convertible Preferred Stock. The rights of the holder of the Series B Preferred and Class A and Class B Common Stock are identical, except with respect to voting. The Series B Preferred automatically converts to Class B Common Stock 21 days after the mailing of a definitive information statement prepared in accordance with Regulation 14C of the Exchange Act, without further action on the part of the Company of the holders of Series B Preferred and has no expiration date. The conversion of Series B Preferred to Class B Common was effected on March 4, 2019. The Company applies the two-class method of calculating earnings per share, but as the rights of the Series B Non-Voting Convertible Preferred Stock and Class A and Class B Common Stock are identical, except in respect of voting, basic and diluted earnings per share are the same for all classes. Weighted average number of shares outstanding of Class A Common Stock, Class B Common Stock, and Series B Preferred Stock at December 31, 2018 were 1,000,000, 13,605,788, and 227,374, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | On March 31, 2017, the Company completed the sale of 620,000 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. In May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. For additional information, see Note 8 — A key component of the Company's business model is to regional partners in the acquisition of pre-owned vehicles as well as utilize these regional partners to provide inspection, reconditioning and distribution services. Correspondingly, the Company will earn fees and transaction income, and the regional partner may 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 to which Mr. Chesrown, the Company's Chief Executive Officer has provided financing in the form of a $400,000 convertible promissory note. The note matures on May 1, 2019, interest is payable monthly at 5% per annum and can be converted into a 25% ownership interest in the Dealer at any time. This financing arrangement was terminated in April 2018. Revenue recognized by the Company from the Dealer for the year ended December 31, 2017 was $1,618,958 or 22.1% of total Revenue. Included in cost of revenue for the Company at December 31, 2017 includes $1,451,712 or 20.6% of total cost of sales. Included in accounts receivable at December 31, 2017 is $449,119 owed to the Company by the Dealer. In addition, the Company presently subleases warehouse space from the Dealer that is separate and distinct from the location of the dealership, on the same terms as paid by the Dealer. This subleased facility serves as the northwestern regional distribution center for the Company. . The lease was terminated on 30, 2018. For the year ended December 31, 2018, the Company paid $90,000 in rent under the sublease In connection with the NextGen Acquisition, on February 8, 2017, we entered into a Consulting Agreement with Kartik Kakarala, who formerly served as the Chief Executive Officer of NextGen and now serves as a director on our Board. Under the Consulting Agreement, Mr. Kakarala serves as our consultant. The Consulting Agreement may be cancelled by either party, effective upon delivery of a written notice to the other party. . — In connection with the NextGen acquisition, the Company entered into a Services Agreement (the "Services Agreement") with Halcyon Consulting, LLC ("Halcyon"), to provide development and support services to the Company. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company will pay Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees may increase on an annual basis, provided that the rates may not be higher than 110% of the immediately preceding year's rates. The Company will reimburse 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 years ended December 31, 2018 and 2017, the Company paid $54,159 and $914,099, respectively under the Services Agreement. As of December 31, 2018, the Company had promissory notes of $370,556 and accrued interest of $23,644 due to an entity controlled by a director and to the director of the Company. The promissory notes were issued in connection with the completion of the 2016 Private Placement on March 31, 2017. Interest expense on the promissory notes for the years ended December 31, 2018 and 2017 was $143,987 and $158,740, respectively which included debt discount amortization of $88,229 and 126,076, respectively. The interest was charged to interest expense in the Consolidated Statements of Operations and included in accrued interest under long-term liabilities in the Consolidated Balance Sheets. On September 5, 2017, the Company executed $1,650,000 ("Principal Amount") of Senior Secured Promissory Notes (the "Notes") in favor of several investors, including certain executive officers and directors of the Company. The Notes included an aggregate of $150,000 in original issue discount. Officers and directors held $1,214,144 of the Notes. On October 23, 2017, the Company completed a public offering and used $1,661,075 of the net proceeds of the offering for the repayment of the Notes in the aggregate principal amount of $1,650,000, plus accrued interest, which resulted in the termination of the Notes. Officers and directors received in the aggregate principal amount of $1,218,122, plus accrued interest of $4,144. For the year ended December 31, 2017 interest on the officer and director Notes was $118,121, including $110,000 of debt discount amortization and is included in interest expense in the Consolidated Statements of Operations. — |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Lease Commitments As of December 31, 2018, the Company is a tenant under various operating leases related to certain of its offices, facilities and equipment. The initial terms expire at various dates between 2019 and 2021. Many of the leases include renewal options ranging from to . Rent is recognized on a straight-line basis over the lease term and includes scheduled rent increases. Rent expense for these operating leases was approximately $414,238 and $49,186 for years ended December 31, 2018 and 2017, respectively. The following table summarizes the future minimum payments for operating leases at December 31, 2018 due in each year ending December 31, 2019 $ 1,043,171 2020 976,252 2021 654,719 thereafter - $ 2,674,142 Legal Matters 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 December 31, 2018 and 2017 we were not aware of any threatened or pending litigation. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | The Company is dependent on third-party providers of wholesale vehicle auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of these principal providers or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationships with these providers are satisfactory. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | Based on the way the Company manages its business, the Company has determined that it currently operates two reportable segments: 1) vehicle distribution and 2) vehicle logistics and transportation services. Our vehicle distribution segment consists of the distribution of powersports and automotive and is anchored on a proprietary supply chain and distribution software platform that is supported with our mobile-first web and application strategy. Our technology platform enables efficient preowned vehicle acquisition and distribution, which allows us to maximize inventory value and reduce inventory risk by penetrating the entire vehicle supply chain in a faster and more cost-efficient manner. Our agnostic acquisition approach creates instant liquidity for both consumers and dealers and provides increased control over our inventory, enabling us to adjust our inventory in response to unforeseen market dynamics while allowing us to make swift decisions to benefit sales volume and margins. Our vehicle logistics and transportation services were added on the Acquisition Date in connection with the Express Acquisition. Our vehicle logistics and transportation service segment provide nationwide automotive transportation services between dealerships and auctions. In the normal course of operations, our vehicle logistics and transportation services business provide transportation services to our vehicle distribution business, which is a related party. Billings for such services are based on negotiated rates, which approximates fair value, and are reflected as revenue of the billing segment. Revenue and cost of revenue is eliminated in the consolidated financial statements for the year ended December 31, 2018. Our Chief Executive Officer focuses on results in assessing operating performance and allocating resources for each of our segments. Furthermore, the Company offers similar products and services and uses similar processes to sell those products and services to similar classes of customers throughout the United States. Vehicle Distribution Vehicle Logistics and Transportation Eliminations Total Year Ended December 31, 2018 Total assets $ 106,461,181 $ 5,555,397 $ (3,090,197 ) $ 108,926,381 Revenue $ 152,574,412 $ 4,931,558 $ (1,107,739 ) $ 156,398,231 Operating income (loss) $ (23,438,928 ) $ 37,796 $ - $ (23,401,132 ) Depreciation and amortization $ 982,772 $ 1,234 $ - $ 984,006 Interest expense $ 1,780,685 $ - $ - $ 1,780,685 Year Ended December 31, 2017 Total assets $ 18,152,830 $ - $ - $ 18,152,830 Revenue $ 7,305,902 $ - $ - $ 7,305,902 Operating income (loss) $ (7,977,359 ) $ - $ - $ (7,977,359 ) Depreciation and amortization $ 668,467 $ - $ - $ 668,467 Interest expense $ 595,966 $ - $ - $ 595,966 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Acquisition of Autosport On February 3, 2019 (the “Closing Date”), the Company completed the acquisition (the “Acquisition”) of all of the equity interests of Autosport USA, Inc. (“Autosport”), an independent pre-owned vehicle distributor, The Promissory Note has a term of fifteen months and will accrue interest at a simple rate of 5% per annum. Interest under the Promissory Note is payable upon maturity. Any interest and principal due under the Promissory Note is convertible, at the Buyer’s option into shares of the Company’s Class B Common Stock at a conversion price equal to the weighted average trading price of the Company’s Class B Common Stock on the Nasdaq Stock Exchange for the twenty (20) consecutive trading days preceding the conversion date. The number of shares of the Company’s Class B Common Stock issuable pursuant to the Promissory Note is indeterminate at this time. The Convertible Note has a term of three years and will accrue interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company’s Class B Common Stock at a conversion price of $5.75 per share, (i) at the Seller’s option, or (ii) at the Buyer’s option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company’s Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $7.00 per share. The maximum number of shares issuable pursuant to the Convertible Note is 319,221 shares of the Company’s Class B Common Stock. The Second Convertible Note has a term of one year and will accrue interest at a simple rate of 5% per annum. Monthly payments of amortized principal and interest will be due under the Second Convertible Note. Any interest and principal due under the Second Convertible Note is convertible into shares of the Company’s Class B Common Stock at a conversion price of $5.75 per share, (i) at the Seller’s option, or (ii) at the Buyer’s option, on any day that (a) any portion of the principal of the Second Convertible Note remains unpaid and (b) the weighted average trading price of the Company’s Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $7.00 per share. The maximum number of shares issuable pursuant to the Second Convertible Note is 47,101 shares of the Company’s Class B Common Stock. February 2019 Public Offering On February 11, 2019, the Company completed an underwritten public offering of 1,276,500 shares of its Class B Common Stock at a price of $5.55 per share for net proceeds to the Company of approximately $6.5 million. The completed offering included 166,500 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option. The Company intends to 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. |
DESCRIPTION OF BUSINESS AND S_2
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
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 | 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. On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with 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 Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company (the "Wholesale Transaction"). 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 Transaction," and together with the Wholesale Transaction, the "Transactions") in Wholesale Express, LLC, a Tennessee limited liability company . The Transactions were both completed on October 30, 2018. As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Wholesale 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 consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Wholesale Inc. is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express, LLC is a related logistics company. 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. |
Use of Estimates | The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management's experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company's assets and liabilities and the results of operations. |
Earnings (Loss) Per Share | The Company follows the FASB Accounting Standards Codification ("ASC") Topic 260- Earnings per share |
Revenue Recognition | Revenue for our vehicle distribution segment is derived primarily from our online marketplace and auctions which include: (i) the sale of pre-owned vehicles to consumer and dealers; (ii) vehicle financing; (iii) vehicle service contracts; and (iv) subscription fees paid by dealers for access to the RumbleOn software solution. Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States. We adopted ASC 606, Revenue from Contracts with Customers For vehicles sold at wholesale to dealers we satisfy our performance obligation for vehicles sales when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle. For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers. Vehicle finance fee revenue is recognized upon delivery of the vehicle to the customer, when the sales contract is signed, and the financing has been arranged. We may be charged back for a fee in the event a contract is prepaid, defaulted upon, or terminated. Our risk related to contract cancellations is limited to the commissions that we receive. Cancellations will fluctuate depending on the customer financing default or prepayment rates and shifts in customer behavior. To the extent that actual experience differs from historical trends, there could be adjustments to our finance contract cancellation reserves. Commission revenue on vehicle service contracts is recognized at the time of sale, net of a reserve for estimated contract cancellations. The reserve for cancellations is estimated based on historical experience and recent trends. Our risk related to contract cancellations is limited to the commissions that we receive. Cancellations will fluctuate depending on the customer financing default or prepayment rates, and shifts in customer behavior, including those related to changes in the coverage or term of the product. To the extent that actual experience differs from historical trends, there could be adjustments to our contract cancellation reserves. Subscription fees for access to the RumbleOn software solution are paid monthly and revenue recognition commences when the installation of the software is complete, acceptance has occurred, and collectability of a determinable amount is probable. Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. freight brokerage Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. |
Purchase Accounting for Business Combinations | The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. |
Goodwill | Goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged. Goodwill is not amortized but tested for impairment at least annually, and more frequently if events or circumstances indicate the carrying amount of the reporting unit more likely than not exceeds fair value. We have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill using a qualitative assessment process. Goodwill is tested for impairment at the reporting unit level. Our reporting units are individual stores as this is the level at which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance. We test our goodwill for impairment in December of each year. In 2018, we evaluated our goodwill using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired. If the qualitative assessment determines it is more likely than not the fair value is less than the carrying amount, we would further evaluate for potential impairment. No impairment charges related to intangible assets were recognized during the years ended December 31, 2018 and 2017 |
Other Assets | Included in "Other assets" on the Company's Consolidated Balance Sheets are amounts related to acquired internet domain names which are considered to be an indefinite lived intangible assets. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. There was no impairment of indefinite lived assets as of December 31, 2018. |
Long-Lived Assets | Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. |
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 |
Valuation Allowance for Accounts Receivable | The Company estimates the allowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from these assumptions. |
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 December 31, 2018 and 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. In connection with the inventory financing contract (the "NextGear Facility"), entered into by the Company, its wholly owned subsidiary RMBL Tennessee, Inc, Wholesale, Inc. and NextGear Capital, Inc. ("NextGear"), dated October 30, 2018, Wholesale, Inc and NextGear entered into a Reserve Agreement requiring Wholesale, Inc to pay to NextGear $5.5 million (the "Reserve") to be collateral and security for Wholesale Inc.'s liability under the NextGear Facility as well as any amounts owed by Wholesale, Inc. to NextGear and its Affiliates, and each of their respective directors, officers, principals, trustees, partners, shareholders or other holders of any ownership interest, as the case may be, employees, representatives, attorneys and agents. NextGear is not required to pay Wholesale Inc. interest on the Reserve balance. Upon the satisfaction of all obligations and the termination by NextGear of the NextGear Facility, NextGear will return to Wholesale, Inc., upon its written request to NextGear no earlier than ten (10 business days from the date the obligations were indefeasibly paid and satisfied in full and the NextGear Facility and terminated by Lender. |
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. |
Fair Value of Financial Instruments | Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018 and December 31, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820-10-30-2 -Fair Value Measurement Level 1: The preferred inputs to valuation efforts are "quoted prices in active markets for identical assets or liabilities," with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as "unobservable," and limits their use by saying they "shall be used to measure fair value to the extent that observable inputs are not available." This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date". Earlier in the standard, FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. |
Beneficial Conversion Feature | From time to time, the Company has issued convertible notes that have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20, Debt with Conversion and Other Options The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the conversion feature, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model, or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. |
Common Stock Warrants | The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in Accounting Standards Codification (ASC) 815, Derivatives and Hedging – Contracts in Entity's Own Equity 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. |
Debt Issuance Costs | Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , “Simplifying the Presentation of Debt Issuance Costs” |
Cost of Revenue | Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of revenue also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value. Cost of subscription and other fee revenue includes the (i) various data feeds from third parties; (ii) hosting of the customer facing website; (iii) commissions for new sales; and (iv) implementation and training of new and existing customers. These costs and expenses are charged to cost of revenue as incurred. |
Selling, General and Administrative Expenses | Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, transportation cost associated with selling vehicles, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. |
Advertising and Marketing Costs | Advertising and marketing costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Advertising and marketing expenses was $11,457,572 and $1,731,028 for the years ended December 31, 2018 and 2017, respectively. |
Stock-based Compensation | On June 30, 2017 the Company's shareholders approved a 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. Twelve percent (12%) of the Company's issued and outstanding shares of Class B Common Stock from time to time are reserved for issuance under the Plan. The Company estimates the fair value of awards granted under the Plan on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company's Class B Common Stock on the date of grant and is recognized as an expense on a straight-line basis over its vesting period; to date, substantially all the RSUs issued vest over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. During the year ended December 31, 2018 the Company granted 1,028,284 RSUs under the Plan to members of the Board of Directors, officers and employees. 1,657,680 and is included in selling, general and administrative expenses in the consolidated statements of operations. |
Income Taxes | The Company follows ASC Topic 740, Income Taxes, The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2018, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a fifty percent likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months. |
Recent Pronouncements | Adoption of New Accounting Standards . In January 2017, the FASB issued new guidance, ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the test for Goodwill Impairment The Company adopted ASU 2017-04 on January 1, 2018 and it did not have a material effect on its consolidated financial statements. In August 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-15) related to the classification of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, settlement of zero-coupon debt, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We adopted this pronouncement for our fiscal year beginning January 1, 2018, and it did not have a material effect on its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard (ASC Topic 606) that amends the accounting guidance on revenue recognition. The new accounting standard is intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard’s guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract. The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). The Company adopted ASC 606, Revenue from Contracts with Customers Accounting Standards Issued But Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments 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. 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 have not yet made a final determination whether this standard will have a material effect on our Consolidated balance sheets. |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable, Net [Abstract] | |
Schedule of accounts receivable | 2018 2017 Trade $ 8,264,045 $ 577,107 Finance 148,378 - Other 229,577 - 8,642,000 577,107 Less: allowance for doubtful accounts 176,190 - $ 8,465,810 $ 577,107 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | 2018 2017 Pre-owned vehicles: Powersport vehicles $ 9,783,093 $ 3,019,965 Automobiles and trucks 43,081,136 - 52,864,229 3,019,965 Less: Valuation allowance 672,706 185,299 $ 52,191,523 $ 2,834,666 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of identifiable assets acquired and liabilities assumed | Wholesale Express Issuance of shares $ 6,652,512 $ - Cash paid 12,353,941 4,000,000 Total purchase price $ 19,006,453 $ 4,000,000 Estimated fair value of assets: Cash 183,846 774,844 Accounts receivable 5,130,788 2,328,214 Inventory 47,639,354 - Prepaid expenses 186,659 59,377 Property & equipment 617,422 14,702 Due from Related party - 720,000 Other Assets 1,026,203 - 54,784,272 3,897,137 Estimated fair value of liabilities assumed: Accounts payable and other 8,144,040 1,079,509 Floor plan liability 49,988,553 - Due to related party 720,000 - 58,852,593 1,079,509 Excess of (liabilities over assets) assets over liabilities (4,068,321 ) 2,817,628 Goodwill 23,074,774 1,182,372 $ 19,006,453 $ 4,000,000 |
Schedule of pro forma information | Year Ended December 31, 2018 2017 Pro forma revenue $ 727,313,174 $ 626,995,714 Pro forma net loss $ (24,402,816 ) $ (7,228,917 ) Loss per share - basic and fully diluted $ (1.32 ) $ (0.51 ) Weighted-average common shares and common stock equivalents outstanding basic and fully diluted 18,455,936 14,189,121 |
Schedule of 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) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment, Net [Abstract] | |
Schedule of property and equipment | 2018 2017 Vehicles $ 417,666 $ 472,870 Furniture and equipment 474,546 149,643 Technology development and software 5,777,504 3,406,786 Leasehold improvements 136,386 - Total property and equipment 6,806,102 4,029,299 Less: accumulated depreciation and amortization 1,628,225 668,467 $ 5,177,877 $ 3,360,832 |
ACCOUNTS PAYABLE AND OTHER AC_2
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and other accrued liabilities | 2018 2017 Accounts payable $ 7,528,003 $ 1,094,310 Accrued payroll 877,180 79,288 State and local taxes 1,073,649 - Other accrued expenses 1,076,081 5,618 $ 10,554,913 $ 1,179,216 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable [Abstract] | |
Schedule of notes payable | 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 |
COMMON STOCK WARRANTS (Tables)
COMMON STOCK WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Common Stock Warrants | |
Schedule of common stock warrants | 2017 Offering Warrants exercise price $ 6.325 Fair value price per share of common stock $ 5.50 Warrants outstanding 218,250 Volatility 62.0 % Expected term remaining (years) 5.0 Risk-free interest rate 1.31 % Dividend yield - April 2018 Loan Agreement - Hercules Warrants exercise price $ 5.50 Fair value price per share of common stock $ 5.07 Warrants outstanding 81,818 Volatility 70.0 % Expected term remaining (years) 5.0 Risk-free interest rate 2.79 % Discount for Lack of Marketability 20.0 % Dividend yield - October 2018 Loan Agreement - Hercules Warrants exercise price $ 7.16 Fair value price per share of common stock $ 5.73 Warrants outstanding 20,950 Volatility 70.0 % Expected term remaining (years) 5.0 Risk-free interest rate 2.94 % Discount for Lack of Marketability 20.0 % Dividend yield - |
SELLING, GENERAL AND ADMINIST_2
SELLING, GENERAL AND ADMINISTRATIVE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
General and Administrative Expense [Abstract] | |
Schedule of selling, general and administrative expense | 2018 2017 Selling, General and Administrative Compensation and related costs $ 10,656,107 $ 3,111,363 Advertising and marketing 11,457,572 1,731,028 Professional fees 1,788,425 890,580 Technology development 1,152,108 452,957 General and administrative 9,999,205 1,401,071 $ 35,053,417 $ 7,586,999 |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule of supplemental cash flow information | 2018 2017 Cash paid for interest $ 1,226,292 $ 203,578 Note payable issued on acquisition $ - $ 1,333,334 Conversion of notes payable-related party $ - $ 206,209 Issuance of shares for acquisition $ 6,652,512 $ 2,666,666 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | 2018 2017 Deferred tax assets: Net operating loss carryforward $ 8,091,718 $ 2,281,369 Stock-based compensation 564,700 131,465 Total deferred income taxes 8,656,418 2,412,834 Deferred tax liabilities: Basis difference in property and equipment 15,045 114,150 Basis difference in goodwill 64,423 32,190 Debt discount-private placement 63,021 116,840 Debt issuance cost amortization 401,303 - Total deferred tax liabilities 543,792 263,180 Net deferred tax asset 8,112,626 2,149,654 Valuation allowance (8,112,626 ) (2,149,654 ) Net deferred tax asset (liability) $ - $ - |
Schedule of reconciliation of U.S. federal income | 2018 2017 U.S. Federal statutory rate 21.0 % 34.0 % Impact of tax reform on net deferred tax assets (13.0 )% State and local, net of Federal benefit 5.1 % 5.1 % Permanent difference (0.2 )% - % Valuation allowance (25.9 )% (26.1 )% Effective tax rate - % - % |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum operating lease payments | 2019 $ 1,043,171 2020 976,252 2021 654,719 thereafter - $ 2,674,142 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment information | Vehicle Distribution Vehicle Logistics and Transportation Eliminations Total Year Ended December 31, 2018 Total assets $ 106,461,181 $ 5,555,397 $ (3,090,197 ) $ 108,926,381 Revenue $ 152,574,412 $ 4,931,558 $ (1,107,739 ) $ 156,398,231 Operating income (loss) $ (23,438,928 ) $ 37,796 $ - $ (23,401,132 ) Depreciation and amortization $ 982,772 $ 1,234 $ - $ 984,006 Interest expense $ 1,780,685 $ - $ - $ 1,780,685 Year Ended December 31, 2017 Total assets $ 18,152,830 $ - $ - $ 18,152,830 Revenue $ 7,305,902 $ - $ - $ 7,305,902 Operating income (loss) $ (7,977,359 ) $ - $ - $ (7,977,359 ) Depreciation and amortization $ 668,467 $ - $ - $ 668,467 Interest expense $ 595,966 $ - $ - $ 595,966 |
DESCRIPTION OF BUSINESS AND S_3
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Advertising and marketing expense | $ 11,457,572 | $ 1,731,028 |
Number of shares granted under plan | 1,028,284 | 741,000 |
Compensation expense | $ 1,657,680 | $ 503,023 |
Unrecognized stock-based compensation expense | $ 5,997,994 | |
Unrecognized stock-based compensation expense remaining weighted-average period | 2 years 3 months |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Accounts Receivable, Net [Abstract] | ||
Trade | $ 8,264,045 | $ 577,107 |
Finance | 148,378 | 0 |
Other | 229,577 | 0 |
Accounts receivable, gross | 8,642,000 | 577,107 |
Less: allowance for doubtful accounts | 176,190 | 0 |
Accounts receivable, net | $ 8,465,810 | $ 577,107 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Powersport vehicles | $ 9,783,093 | $ 3,019,965 |
Automobiles and trucks | 43,081,136 | 0 |
Inventory, gross | 52,864,229 | 3,019,965 |
Less: valuation allowance | 672,706 | 185,299 |
Inventory, net | $ 52,191,523 | $ 2,834,666 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | $ 26,107,146 | $ 1,850,000 |
Wholesale | ||
Issuance of shares | 6,652,512 | |
Cash paid | 12,353,941 | |
Total purchase price | 19,006,453 | |
Cash | 183,846 | |
Accounts receivable | 5,130,788 | |
Inventory | 47,639,354 | |
Prepaid expenses | 186,659 | |
Property & equipment | 617,422 | |
Due from Related party | 0 | |
Other Assets | 1,026,203 | |
Estimated fair value of assets | 54,784,272 | |
Accounts payable and other | 8,144,040 | |
Floor plan liability | 49,988,553 | |
Due to related party | 720,000 | |
Estimated fair value of liabilities assumed | 58,852,593 | |
Excess of (liabilities over assets) assets over liabilities | (4,068,321) | |
Goodwill | 23,074,774 | |
Total | 19,006,453 | |
Express | ||
Issuance of shares | 0 | |
Cash paid | 4,000,000 | |
Total purchase price | 4,000,000 | |
Cash | 774,844 | |
Accounts receivable | 2,328,214 | |
Inventory | 0 | |
Prepaid expenses | 59,377 | |
Property & equipment | 14,702 | |
Due from Related party | 720,000 | |
Other Assets | 0 | |
Estimated fair value of assets | 3,897,137 | |
Accounts payable and other | 1,079,509 | |
Floor plan liability | 0 | |
Due to related party | 0 | |
Estimated fair value of liabilities assumed | 1,079,509 | |
Excess of (liabilities over assets) assets over liabilities | 2,817,628 | |
Goodwill | 1,182,372 | |
Total | $ 4,000,000 |
ACQUISITIONS (Details 1)
ACQUISITIONS (Details 1) - NextGen Dealer Solutions, LLC [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Pro forma revenue | $ 727,313,174 | $ 626,995,714 |
Pro forma net loss | $ (24,402,816) | $ (7,228,917) |
Loss per share - basic and fully diluted | $ (1.32) | $ (0.51) |
Weighted average common shares and common stock equivalents | 18,455,936 | 14,189,121 |
ACQUISITIONS (Details 2)
ACQUISITIONS (Details 2) | 12 Months Ended |
Dec. 31, 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 ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 6,806,102 | $ 4,029,299 |
Less: accumulated depreciation and amortization | 1,628,225 | 668,467 |
Property and equipment, net | 5,177,877 | 3,360,832 |
Vehicles [Member] | ||
Property and equipment, gross | 417,666 | 472,870 |
Furniture And Equipment [Member] | ||
Property and equipment, gross | 474,546 | 149,643 |
Technology Development [Member] | ||
Property and equipment, gross | 5,777,504 | 3,406,786 |
Leasehold improvements | ||
Property and equipment, gross | $ 136,386 | $ 0 |
PROPERTY AND EQUIPMENT, NET (_2
PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment, Net [Abstract] | ||
Capitalized cost technology development costs | $ 5,569,493 | $ 3,406,786 |
Technology development costs | 3,314,815 | |
Technology development costs capitalized | 2,162,707 | |
Depreciation expense | 958,282 | 668,467 |
Capitalized cost amortization | $ 825,782 | $ 588,519 |
ACCOUNTS PAYABLE AND OTHER AC_3
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 7,528,003 | $ 1,094,310 |
Accrued payroll | 877,180 | 79,288 |
State and local taxes | 1,073,649 | 0 |
Other accrued expenses | 1,076,081 | 5,618 |
Total accounts payable and accrued liabilities | $ 10,554,913 | $ 1,179,216 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Less: debt discount | $ (1,882,410) | $ (540,924) |
Notes payable, net | 67,347,925 | 2,541,003 |
Current portion | 58,555,006 | 1,081,593 |
Long-term portion | 8,792,919 | 1,459,410 |
Notes Payable 1 | ||
Notes payable, gross | 1,333,334 | 1,333,334 |
Notes Payable 2 | ||
Notes payable, gross | 667,000 | 667,000 |
Notes Payable 3 | ||
Notes payable, gross | 8,866,894 | 0 |
Notes Payable 4 | ||
Notes payable, gross | 10,857,500 | 0 |
Notes Payable 5 | ||
Notes payable, gross | 47,505,607 | 0 |
Notes Payable 6 | ||
Notes payable, gross | $ 0 | $ 1,081,593 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Interest expense | $ 1,780,685 | $ 595,966 |
Note Payable-Hercules [Member] | ||
Interest expense | 770,810 | |
Debt discount amortization | 304,213 | |
Line of Credit-Floor Plans | ||
Interest expense | 513,306 | |
Line of Credit-Ally | ||
Interest expense | 147,256 | |
Note Payable-NextGen [Member] | ||
Interest expense | 87,617 | 54,849 |
Notes Payable-Private Placement [Member] | ||
Interest expense | 259,177 | 158,740 |
Debt discount amortization | $ 205,926 | $ 81,603 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stockholders' Equity Note [Abstract] | ||
Number of shares available for issuance | 289,216 | |
Share based compensation expense | $ 1,657,680 | $ 503,023 |
Unrecognized stock-based compensation | $ 5,997,994 | |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
COMMON STOCK WARRANTS (Details)
COMMON STOCK WARRANTS (Details) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
2017 Offering | |
Warrants exercise price | $ 6.325 |
Fair value price per share of common stock | $ 5.50 |
Warrants outstanding | shares | 218,250 |
Volatility | 62.00% |
Expected term remaining (years) | 5 years |
Risk-free interest rate | 1.31% |
Dividend yield | 0.00% |
April 2018 Loan Agreement - Hercules | |
Warrants exercise price | $ 5.50 |
Fair value price per share of common stock | $ 5.07 |
Warrants outstanding | shares | 81,818 |
Volatility | 70.00% |
Expected term remaining (years) | 5 years |
Risk-free interest rate | 2.79% |
Discount for Lack of Marketability | 20.00% |
Dividend yield | 0.00% |
October 30 Loan Agreement - Hercules | |
Warrants exercise price | $ 7.16 |
Fair value price per share of common stock | $ 5.73 |
Warrants outstanding | shares | 20,950 |
Volatility | 70.00% |
Expected term remaining (years) | 5 years |
Risk-free interest rate | 2.94% |
Discount for Lack of Marketability | 20.00% |
Dividend yield | 0.00% |
SELLING, GENERAL AND ADMINIST_3
SELLING, GENERAL AND ADMINISTRATIVE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Selling, General and Administrative | ||
Compensation and related costs | $ 10,656,107 | $ 3,111,363 |
Advertising and marketing | 11,457,572 | 1,731,028 |
Professional fees | 1,788,425 | 890,580 |
Technology development | 1,152,108 | 452,957 |
General and administrative | 9,999,205 | 1,401,071 |
Total | $ 35,053,417 | $ 7,586,999 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Supplemental Cash Flow Information [Abstract] | ||
Cash paid for interest | $ 1,226,292 | $ 203,578 |
Note payable issued on acquisition | 0 | 1,333,334 |
Conversion of notes payable-related party | $ 0 | 206,209 |
Issuance of shares for acquisition | $ 2,666,666 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred tax assets: | ||
Net operating loss carryforward | $ 8,091,718 | $ 2,281,369 |
Stock-based compensation | 564,700 | 131,465 |
Total deferred income taxes | 8,656,418 | 2,412,834 |
Deferred tax liabilities: | ||
Basis difference in property and equipment | 15,045 | 114,150 |
Basis difference in goodwill | 64,423 | 32,190 |
Debt discount-private placement | 63,021 | 116,840 |
Debt issuance cost amortization | 401,303 | 0 |
Total deferred tax liabilities | 543,792 | 263,180 |
Net deferred tax asset | 8,112,626 | 2,149,654 |
Valuation allowance | (8,112,626) | (2,149,654) |
Net deferred tax asset (liability) | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
U.S. Federal statutory rate | 21.00% | 34.00% |
Impact of tax reform on net deferred tax assets | 0.00% | (13.00%) |
State and local, net of Federal benefit | 5.10% | 5.10% |
Permanent difference | (0.20%) | 0.00% |
Valuation allowance | (25.90%) | (26.10%) |
Effective tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Operating loss carryforwards | $ 30,961,231 | $ 8,740,879 |
Valuation allowance on the deferred tax assets | $ 8,112,626 | $ 2,149,654 |
LOSS PER SHARE (Details Narrati
LOSS PER SHARE (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Class B Preferred stock, outstanding | 1,317,329 | 0 |
Class A Common Stock [Member] | ||
Common stock, outstanding | 1,000,000 | 1,000,000 |
Class B Common Stock [Member] | ||
Common stock, outstanding | 17,486,291 | 11,928,541 |
Warrant [Member] | ||
Antidilutive shares excluded from computation | 321,018 | |
Restricted Stock [Member] | ||
Antidilutive shares excluded from computation | 1,769,284 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Related Party Transactions [Abstract] | ||
Revenue generated | $ 619,193 | $ 1,618,958 |
Cost of revenue | 549,813 | 1,451,712 |
Accounts receivable | 40,175 | 449,119 |
Services agreement | 54,159 | 914,099 |
Interest expense on promissory notes | $ 143,987 | $ 158,740 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 1,043,171 |
2020 | 976,252 |
2021 | 654,719 |
Thereafter | 0 |
Total | $ 2,674,142 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 414,238 | $ 49,186 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total assets | $ 108,926,381 | $ 18,152,830 |
Revenue | 156,398,231 | 7,305,902 |
Operating income (loss) | (23,401,132) | (7,977,357) |
Depreciation and amortization | 984,006 | 668,467 |
Interest expense | 1,780,685 | 595,966 |
Vehicle Distribution | ||
Total assets | 106,461,181 | 18,152,830 |
Revenue | 152,574,412 | 7,305,902 |
Operating income (loss) | (23,438,928) | (7,977,359) |
Depreciation and amortization | 982,772 | 668,467 |
Interest expense | 1,780,685 | 595,966 |
Vehicle Logistics and Transportation | ||
Total assets | 5,555,397 | 0 |
Revenue | 4,931,558 | 0 |
Operating income (loss) | 37,796 | 0 |
Depreciation and amortization | 1,234 | 0 |
Interest expense | 0 | 0 |
Eliminations | ||
Total assets | (3,090,197) | 0 |
Revenue | (1,107,739) | 0 |
Operating income (loss) | 0 | 0 |
Depreciation and amortization | 0 | 0 |
Interest expense | $ 0 | $ 0 |