| Significant Accounting Policies | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States
of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).
Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for
complete financial statements. For additional information, these condensed consolidated financial statements should be read in conjunction
with Lazydays Holdings, Inc.’s consolidated financial statements and notes as of December 31, 2020 and 2019 and for the years then
ended, included in the Annual Report on Form 10-K filed with the SEC on March 19, 2021. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Principles of Consolidation The condensed consolidated financial statements include
the accounts of Holdings, Lazydays RV and its wholly owned subsidiary LDRV Holdings Corp. LDRV Holdings Corp is the sole owner of Lazydays
Land Holdings, LLC, Lazydays Tampa Land Holdings, LLC, Lazydays RV America, LLC, Lazydays RV Discount, LLC, Lazydays Mile Hi RV, LLC,
LDRV of Tennessee LLC, Lazydays of Minneapolis LLC, Lazydays of Central Florida, LLC, Lone Star Acquisition LLC, Lone Star Diversified
LLC, LDRV Acquisition Group of Nashville LLC, LDRV of Nashville LLC, Lazydays RV of Phoenix, LLC, Lazydays RV of Elkhart, LLC,
Lazydays Land of Elkhart, LLC, Lazydays Service of Elkhart, LLC, Lazydays RV of Chicagoland, LLC and Lazydays Land of Chicagoland, LLC
(collectively, the “Company”, “Lazydays” or “Successor”). All significant inter-company accounts and
transactions have been eliminated in consolidation. Restatement of Previously Reported
Financial Statements The notes included herein should
be read in conjunction with the Company’s restated audited consolidated financial statements included in the Company’s Annual
Report on Form 10-K/A filed with the SEC on June __, 2021 (the “2020 Form 10-K/A”). As previously disclosed in the 2020 Form
10-K/A, the Company restated its previously issued consolidated financial statements for the years ended December 31, 2020, 2019 and 2018
to make the necessary accounting adjustments related to warrant accounting. The Company has restated herein its condensed consolidated
financial statements for the quarter ended March 31, 2020 and related amounts within the accompanying footnotes to the condensed consolidated
financial statements. For the quarter ended March 31, 2020, restated net income is $3.4 million, an increase of $.4 million from
the previously disclosed net income of $3.0 million. The tables below set forth the
unaudited condensed consolidated balance sheet and condensed consolidated statement of operations originally reported, adjustments, and
the restated balances as of and for the three months ended March 31, 2020 and the condensed consolidated statement of cash flow amounts
originally reported, adjustments, and the restated balances for the three months ended March 31, 2020.
March 31, 2020 (unaudited)
As Previously Reported Restatement As Restated
Total Assets $ 428,130 $ - $ 428,130
Liabilities and Stockholder’ Equity
Total current liabilities $ 181,526 $ - 181,526
Financing liability, non-current portion, net of debt discount 68,158 - 68,158
Long term debt, non-current portion, net of debt discount 7,746 - 7,746
Operating lease liability, non-current portion 14,405 - 14,405
Deferred tax liability 16,450 - 16,450
Warrant liabilities - 335 335
Total liabilities 288,285 335 288,620
Commitments and Contingencies
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding as of December 31, 2020; liquidation preference of $60,000 as of December 31, 2020 62,537 - 62,537
Stockholders’ Equity
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized; - - -
Common stock, $0.0001 par value; 100,000,000 shares authorized; 8,506,666 shares issued and outstanding at March 31, 2020 - - -
Additional paid-in capital 78,222 (8,991 ) 69,231
Treasury Stock, at cost, 122,729 shares at March 31, 2020 (459 ) - (459 )
(Accumulated deficit) Retained earnings (455 ) 8,656 8,201
Total stockholders’ equity 77,308 (335 ) 76,973
Total liabilities and stockholders’ equity $ 428,130 $ - $ 428,130
Three months ended March 31, 2020 (Unaudited)
As Previously Reported Restatement As Restated
Income from Operations $ 6,784 $ - $ 6,784
Other income/expenses
Loss on sale of property and equipment (2 ) - (2 )
Interest expense (2,495 ) - (2,495 )
Change in fair value of warrant liabilities - 412 412
Total other expense (2,497 ) 412 (2,085 )
Income before income tax expense 4,287 412 4,699
Income tax expense (1,300 ) - (1,300 )
Net income $ 2,987 $ 412 $ 3,399
Dividends of Series A Convertible Preferred Stock (1,644 ) - (1,644 )
Net income attributable to common stock and participating securities $ 1,343 $ 412 $ 1,755
EPS:
Basic and diluted income per share $ 0.08 $ 0.04 $ 0.12
Weighted average shares outstanding basic and diluted 9,757,036 9,757,036 9,757,036
Three Months Ended March 31, 2020
As Previously Reported Restatement As Restated
Net Income $ 2,987 $ 412 $ 3,399
Adjustments to reconcile net income to net cash provided by operating activities: 13,140 13,140
Change in fair value of warrant liabilities - (412 ) (412 )
Net cash provided by operating activities 16,127 - 16,127
Net cash provided by investing activities 3,158 - 3,158
Net cash used in financing activities (7,474 ) - (7,474 )
Net change in cash and cash equivalents 11,811 - 11,811
Cash - Beginning 31,458 - 31,458
Cash - Ending $ 43,269 $ - $ 43,269 Use of Estimates in the Preparation
of Financial Statements The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include
the assumptions used in the valuation of the net assets acquired in business combinations, goodwill and other intangible assets, provision
for charge-backs, inventory write-downs, allowance for doubtful accounts and stock-based compensation and fair value of warrant liabilities. Revenue Recognition The core principle of revenue recognition is
that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies a
five-step model for revenue measurement and recognition. Revenues are recognized when control
of the promised goods or services is transferred to the customers at the expected amount the Company is entitled to for such goods and
services. Taxes collected on revenue producing transactions are excluded from revenue in the condensed consolidated statements of income.
The following table represents the Company’s disaggregation of revenue:
Three months ended
March 31, 2021 March 31, 2020
New vehicle revenue $ 167,411 $ 102,444
Preowned vehicle revenue 77,470 64,744
Parts, accessories, and related services 10,261 10,765
Finance and insurance revenue 14,608 11,272
Campground and other revenue 1,243 1,629
Total $ 270,993 $ 190,854 Revenue from the sale of vehicles is
recognized at a point in time on delivery, transfer of title and completion of financing arrangements. Revenue from the sale of parts,
accessories and related service is recognized as services and parts are delivered or as a customer approves elements of the completion
of service. Revenue from the sale of parts, accessories and related service is recognized in other revenue in the accompanying condensed
consolidated statements of income. The Company receives commissions
from the sale of insurance and vehicle service contracts to customers. In addition, the Company arranges financing for customers through
various financial institutions and receives commissions. The Company may be charged back (“charge-backs”) for financing fees,
insurance or vehicle service contract commissions in the event of early termination of some contracts by its customers. The revenues from
financing fees and commissions are recorded at the time of the sale of the vehicles and an allowance for future charge-backs is established
based on historical operating results and the termination provision of the applicable contracts. The estimates for future chargebacks
require judgment by management, and as a result there is an element of risk associated with these revenue streams. The Company recognized
finance and insurance revenues, less the additions to the charge-back allowance, which is included in other revenue as follows (unaudited):
Three months ended
March 31, 2021 March 31, 2020
Gross finance and insurance revenues $ 16,054 $ 12,583
Additions to charge-back allowance (1,446 ) (1,311 )
Net Finance Revenue $ 14,608 $ 11,272 The Company has an accrual for
charge-backs, which totaled $5,965 and $5,553 at March 31, 2021 and December 31, 2020, respectively, and is included in “Accounts
payable, accrued expenses and other current liabilities” in the accompanying condensed consolidated balance sheets. Deposits on vehicles received
in advance are accounted for as a liability and recognized into revenue upon completion of each respective transaction. These contract
liabilities are included in Note 5 – Accounts Payable, Accrued Expenses, and Other Current Liabilities as customer deposits. During
the three months ended March 31, 2021, $2,917 of contract liabilities as of December 31, 2020 were recognized in revenue. Inventories Vehicle
and parts inventories are recorded at the lower of cost or net realizable value, with cost determined by the last-in, first-out (“LIFO”)
method. Cost includes purchase costs, reconditioning costs, dealer-installed accessories and freight. For vehicles accepted in trades,
the cost is the fair value of such pre-owned vehicles at the time of the trade-in. Retail parts, accessories and other inventories primarily
consist of retail travel and leisure specialty merchandise. The current replacement costs of LIFO inventories exceeded their recorded
values by $5,514 and $3,627 as of March 31, 2021 and December 31, 2020, respectively. Cumulative Redeemable Convertible
Preferred Stock The Company’s Series A Preferred
Stock (See Note 10 – Preferred Stock) is cumulative redeemable convertible preferred stock. Accordingly, it is classified as temporary
equity and is shown net of issuance costs and the relative fair value of warrants issued in conjunction with the issuance of the Series
A Preferred Stock. Unpaid preferred dividends are accumulated, compounded at each quarterly dividend date and presented within the carrying
value of the Series A Preferred Stock until a dividend is declared by the Company’s board of directors (the “Board”). Stock Based Compensation The Company accounts for stock-based
compensation for employees and directors in accordance with ASC 718, Compensation. ASC 718 requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the statement of income based on their fair values. Under the provisions
of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as
expense over the employee’s requisite or derived service period. In accordance with ASC 718, excess tax benefits realized from the
exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including
tax benefits of dividends on share-based payment awards) are recognized as income tax expenses or benefits in the condensed consolidated
statements of income. Earnings Per Share The Company computes basic and
diluted earnings/(loss) per share (“EPS”) by dividing net earnings/(loss) by the weighted average number of shares of common
stock outstanding during the period. The Company is required, in periods
in which it has net income, to calculate EPS using the two-class method. The two-class method is required because the Company’s
Series A Preferred Stock have the right to receive dividends or dividend equivalents should the Company declare dividends on its common
stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders.
The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each
class of shares. In periods in which the Company
has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number
of common shares outstanding during the period. The two-class method is not used, because the preferred stock does not participate in
losses. The following table summarizes
net income attributable to common stockholders used in the calculation of basic and diluted income (loss) per common share:
For the three months ended
For the three months ended March 31, 2020
March 31, 2021 (Restated)
(Dollars in thousands - except share and per share amounts)
Distributed earning allocated to common stock $ - $ -
Undistributed earnings allocated to common stock 5,859 1,200
Net earnings allocated to common stock 5,859 1,200
Net earnings allocated to participating securities 1,801 555
Net earnings allocated to common stock and participating securities $ 7,660 $ 1,755
Weighted average shares outstanding for basic earning per common share 10,596,846 9,757,036
Dilutive effect of warrants and options 300,357 -
Weighted average shares outstanding for diluted earnings per share computation 10,897,203 9,757,036
Basic income per common share $ 0.54 $ 0.12
Diluted income per common share $ 0.32 $ 0.12 During the three months ended
March 31, 2021 and 2020, respectively, the denominator of the basic EPS was calculated as follow:
For the For the
March 31, 2021 March 31, 2020
Weighted average outstanding common shares 10,596,846 8,417,537
Weighted average prefunded warrants 300,357 1,339,499
Weighted shares outstanding - basic $ 10,897,203 $ 9,757,036 During the three months ended
March 31, 2021 and 2020, respectively, the denominator of the dilutive EPS was calculated as follows:
For the For the
March 31, 2021 March 31, 2020
Weighted average outstanding common shares 10,596,846 8,417,537
Weighted average prefunded warrants 300,357 1,339,499
Weighted average warrants 1,475,444 -
Weighted average options 1,844,714 -
Weighted average convertible preferred stock 6,080,354 6,126,112
Weighted shares outstanding - basic and diluted 20,297,715 15,883,148 The following common stock equivalent
shares were excluded from the computation of the diluted income per share, since their inclusion would have been anti-dilutive:
For the For the
March 31, 2021 March 31, 2020
Shares underlying Series A Convertible Preferred Stock - -
Shares underlying warrants - 4,677,458
Stock options - 3,798,818
Share equivalents excluded from EPS - 8,476,276 As of March 31, 2021, the Company
had declared dividends of $1,184 on its Series A Convertible Preferred Stock, which are included in dividends payable on the accompanying
Condensed Consolidated Balance Sheets. The dividend was paid on April 1, 2021. As a result, the Series A Convertible Preferred Stock was
convertible into 5,962,733 shares of common stock as of March 31, 2021. Upon conversion, the Company has the option to pay accrued dividends
in cash or allow conversion into common stock. Prior Period Financial Statement
Correction of an Immaterial Misstatemen During the fourth quarter of 2020,
the Company identified adjustments required to correct earnings per share for the first three quarters of 2020. The errors discovered
resulted in an understatement in earning per share of $0.01 for the three months ended March 31, 2020. Based on an analysis of “Accounting
Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 – “Materiality” (“SAB
99”) and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements
in Current Year Financial Statements” (“SAB 108”), the Company determined that these errors were immaterial to the previously
issued condensed consolidated financial statements, and as such, no restatement was necessary. Correcting prior period financial statements
for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant
files the prior period financial statements. Accordingly, the misstatements were corrected prospectively in the Form 10-Q for the quarter
ended March 31, 2021. Advertising Costs Advertising and promotion costs
are charged to operations in the period incurred. Advertising and promotion costs totaled approximately $4,412 and $4,359 for the three
months ended March 31, 2021 and March 31, 2020, respectively. Income Taxes The Company recognizes deferred
tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed consolidated financial
statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability
by tax jurisdiction. In its interim condensed
consolidated financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income
Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim
periods. Seasonality The Company’s operations
generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to consumer buying trends and
the hospitable warm climate during the winter months at the Company’s Florida and Arizona locations. In addition, the northern locations
in Colorado, Tennessee, Minnesota and Indiana generally experience moderately higher vehicle sales during the spring months. Vendor Concentrations The Company purchases its new
RVs and replacement parts from various manufacturers. During the three months ended March 31, 2021, three major manufacturers
accounted for 45.9%, 27.7% and 21.8% of RV purchases. During the three months ended
March 31, 2020, four major manufacturers accounted for 28.8%, 23.7%, 18.4% and 17.1% of RV purchases. The Company is subject to dealer
agreements with each manufacturer. The manufacturer is entitled to terminate the dealer agreement if the Company is in material breach
of the agreement’s terms. Geographic Concentrations The percent of revenues generated
by the Florida locations, Colorado locations, Arizona locations and Tennessee locations, which generate greater than 10% of revenues,
were as follows (unaudited):
Three months ended
March 31, 2021 March 31, 2020
Florida 61 % 75 %
Colorado 11 % 11 %
Arizona 12 % <10 %
Tennessee 12 % <10 % These geographic concentrations
increase the exposure to adverse developments related to competition, as well as economic, demographic and weather. Impact of COVID-19 In March 2020, the World Health
Organization declared the outbreak of the novel coronavirus (“COVID-19”) pandemic, which continues to spread throughout the
United States and globally. Beginning in mid-to-late March of 2020, the COVID-19 pandemic led to severe disruptions in general economic
activity as businesses and federal, state and local governments took increasingly broad actions to mitigate the impact of the COVID-19
pandemic on public health, including through “shelter in place” or “stay at home” orders in the states in which
we operate. As we modified our business practices to conform to government guidelines and best practices to ensure the health and safety
of our customers, employees and the communities we serve, we saw significant early declines in new and pre-owned vehicle unit sales, sales
of parts, accessories and related services, including finance and insurance revenues as well as campground and miscellaneous revenues. We took a number of actions in
April 2020 to adjust resources and costs to align with reduced demand caused by the COVID-19 pandemic. These actions included:
● Reduction of our workforce by 25%;
● Temporary reduction of senior management salaries (April 2020 through May 2020);
● Suspension of 2020 annual pay increases;
● Temporary suspension of 401k match (April 2020 through May 2020);
● Delay of non-critical capital projects; and
● Focus of resources on core sales and service operations. As described under Note 7 - Debt below, to further
protect our liquidity and cash position, we negotiated with our lenders for the temporary suspension of scheduled principal and interest
payments on our term and mortgage loans from April 15, 2020 through June 15, 2020 and for the temporary suspension of scheduled floorplan
curtailment payments from April 1, 2020 through June 15, 2020. We also received $8,704 in loans (the “PPP Loans”) under the
Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). We applied for loan forgiveness
under the PPP Loans. As of March 31, 2021, one of the PPP Loans had been forgiven for $478. In June 2021, four additional
loans were forgiven for $2,136. We are expecting a response to our forgiveness application on the remaining loan during
the second quarter of 2021. The improvement in sales beginning in May 2020 likely
relates, at least in part, to an increase in consumer demand as consumers seek outdoor travel and leisure activities that permit appropriate
social distancing. However, we can provide no assurances that such growth in sales will continue at the same rate that occurred between
May 2020 and March 2021, or at all, over any time period, and sales may ultimately decline. Furthermore, our improved sales and cost savings
measures to date may not be sufficient to offset any later impacts of the COVID-19 pandemic, and our liquidity could be negatively impacted,
if prior sales trends from May 2020 through March 31, 2021 are reversed, which may occur, for example, if the cruise line, air travel
and hotel industries begin to recover. Our operations also depend on the continued health
and productivity of our employees at our dealerships service locations and corporate headquarters throughout the COVID-19 pandemic. The
extent to which the COVID-19 pandemic ultimately impacts our business, results of operations and financial condition will depend on future
developments, which are highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic, the efficacy
and availability of vaccines, and further actions that may be taken by individuals, businesses and federal, state and local governments
in response. Even after the COVID-19 pandemic has subsided, the Company may experience significant adverse effects to its business as
a result of its global economic impact, including any economic recession or downturn and the impact of such a recession or downturn on
unemployment levels, consumer confidence, levels of personal discretionary spending and credit availability. Reclassifications Certain amounts in prior periods
have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported
net income. Recently Issued Accounting
Standards In March 2020, the FASB issued
ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). This standard, effective for reporting periods through
December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform
(e.g., London Interbank Offered Rate (“LIBOR”)) with a new alternative reference rate. The guidance is applicable to investment
securities, receivables, loans, debt, leases, derivatives and hedge accounting elections and other contractual arrangements. The new standard
provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting. Specifically,
a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment
of a previous accounting treatment. The standard is generally effective for all contract modifications made and hedging relationships
evaluated through December 31, 2022, as a result of reference rate reform. The Company is currently evaluating the impact that this new
standard will have on our condensed consolidated financial statements. Recently Adopted Accounting
Pronouncements In June 2016, the FASB issued
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). This standard requires the use of a forward-looking
expected loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard
also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises
certain disclosure requirements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements, which provides guidance on accounting
for credit losses on accrued interest receivable balances and guidance on including recoveries when estimating the allowance. In May 2019,
the FASB issued ASU 2019-05, Targeted Transition Relief, which allows entities with an option to elect fair value for certain instruments
upon adoption of Topic 326. The standard is effective for the Company for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2020. The Company adopted ASU 2016-13 on January 1, 2021 and the adoption did not materially impact its condensed
consolidated financial statements. Leases Lease recognition At the inception of a contract,
we determine whether an arrangement is or contains a lease. For all leases, we determine the classification as either operating or financing. Operating lease assets represent
our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments under the
lease. Lease recognition occurs at the commencement date and lease liability amounts are based on the present value of lease payments
over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise
that option. Because most of our leases do not provide information to determine an implicit interest rate, we use our incremental borrowing
rate in determining the present value of lease payments. Operating lease assets also include any lease payments made prior to the commencement
date and exclude lease incentives received. Operating lease expense is recognized on a straight-line basis over the lease term. We have
lease agreements with both lease and non-lease components, which are generally accounted for together as a single lease component. Subsequent Events Management of the Company has
analyzed the activities and transactions subsequent to March 31, 2021 through the date these condensed consolidated financial statements
were issued to determine the need for any adjustments to or disclosures within the condensed consolidated financial statements.
The Company did not identify any recognized or non-recognized subsequent events that would require disclosure in the condensed consolidated
financial statements other than the following items. On June 10, 2021, the Company
was granted forgiveness on four PPP Loans in the amount of $2,136. On June 14, 2021, the Company
signed an agreement with M&T Bank to extend the maturity date of the credit facility to September 15, 2021. |
