| 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, 2021 and 2020 included in the Annual Report on Form 10-K filed with the SEC on March 11, 2022. 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, Lazy Days R.V. Center, Inc. and its wholly owned subsidiary
LDRV Holdings Corp. LDRV Holdings Corp is the sole owner of Lazydays 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; Lazydays Land of
Chicagoland, LLC; Lazydays Land of Phoenix, LLC; LDL of Fort Pierce, LLC; Lazydays RV of Iowa, LLC; Lazydays land of Minneapolis, LLC;
Lazydays RV of Reno, LLC; Lazydays RV of Ohio, LLC; Airstream of Knoxville at Lazydays RV, LLC; Lazydays of Maryville, LLC; Lazydays
RV of Oregon, LLC; and Lazydays RV of Wisconsin, LLC (collectively, the “Company”, “Lazydays” or “Successor”).
All significant inter-company accounts and transactions have been eliminated in consolidation. 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, 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: SCHEDULE OF DISAGGREGATION OF REVENUE
March 31, 2022 March 31, 2021
Three months ended
March 31, 2022 March 31, 2021
New vehicle revenue $ 217,436 $ 167,411
Pre-owned vehicle revenue 123,024 77,470
Parts, accessories, and related services 12,666 10,261
Finance and insurance revenue 21,635 14,608
Campground and other revenue 1,400 1,243
Total $ 376,161 $ 270,993 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
charge-backs 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): SCHEDULE OF REVENUE RECOGNIZED OF FINANCE AND INSURANCE REVENUES
March 31, 2022 March 31, 2021
Three months ended
March 31, 2022 March 31, 2021
Gross finance and insurance revenues $ 23,748 $ 16,054
Additions to charge-back allowance (2,113 ) (1,446 )
Net Finance Revenue $ 21,635 $ 14,608 The
Company has an accrual for charge-backs, which totaled $ 8,706 8,243 Deposits
on vehicles received in advance are accounted for as a liability and recognized into revenue upon satisfaction of each respective performance
obligation. 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, 2022, $ 5,277 of contract liabilities as of December 31,
2021 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. Other inventory includes parts and accessories as
well as retail travel and leisure specialty merchandise. The current replacement costs of LIFO inventories exceeded their recorded values
by $ 10,897 8,437 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 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. We
record excess tax benefits and tax deficiencies resulting from the settlement of stock-based awards as a benefit or expense within income
taxes in the consolidated statements of operations in the period in which they occur. 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 an earnings
allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common
shareholders but does not require the presentation of basic and diluted EPS for securities other than common shares. 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 as if such holder of the Series A Preferred Stock had been converted to common stock. Under
the two-class method, earnings for the period are allocated to the common and preferred stockholders taking into consideration Series
A Preferred Stockholders participation in dividends on an as converted basis. 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. Diluted EPS is computed in the same manner
as basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding
if certain shares issuable upon exercise of common share options or warrants were included unless those additional shares would have
been anti-dilutive. For the diluted EPS computation, the treasury stock method is applied and compared to the two-class method and whichever
method results in a more dilutive impact is utilized to calculate diluted EPS. 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 per common
share: SUMMARY OF NET INCOME (LOSS) ATTRIBUTE TO COMMON STOCKHOLDERS
2022 2021
Three months ended March 31,
2022 2021
(Dollars in thousands - except share and per share amounts)
Distributed earning allocated to common stock $ - $ -
Undistributed earnings allocated to common stock 18,411 4,928
Net earnings allocated to common stock 18,411 4,928
Net earnings allocated to participating securities 8,689 2,732
Net earnings allocated to common stock and participating securities $ 27,100 $ 7,660
Weighted average shares outstanding for basic earning per common share 12,497,743 10,596,846
Dilutive effect of warrants and options 300,357 300,357
Weighted average shares outstanding for diluted earnings per share computation 12,798,100 10,897,203
Basic income per common share $ 1.44 $ 0.45
Diluted income per common share $ 1.17 $ 0.35 During
the three months ended March 31, 2022 and 2021, respectively, the denominator of the basic EPS was calculated as follow: SCHEDULE OF DENOMINATOR OF BASIC EARNINGS PER SHARE
2022 2021
Three months ended March 31,
2022 2021
Weighted average outstanding common shares 12,497,743 10,596,846
Weighted average prefunded warrants 300,357 300,357
Weighted shares outstanding - basic $ 12,798,100 $ 10,897,203 During
the three months ended March 31, 2022 and 2021, respectively, the denominator of the dilutive EPS was calculated as follows: SCHEDULE OF DENOMINATOR OF DILUTIVE EARNINGS PER SHARE
2022 2021
Three months ended March 31,
2022 2021
Weighted average outstanding common shares 12,497,743 10,596,846
Weighted average prefunded warrants 300,357 300,357
Weighted average warrants 1,244,495 1,475,444
Weighted average options 438,143 1,844,714
Weighted average convertible preferred stock 6,080,398 6,080,354
Weighted shares outstanding - diluted 20,561,136 20,297,715 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: SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
2022 2021
Three months ended March 31,
2022 2021
Shares underlying Series A Convertible Preferred Stock - -
Shares underlying warrants - -
Stock options 270,032 -
Shares issuable under the Employee Stock Purchase Plan 31,874 -
Share equivalents excluded from EPS 301,906 - As
of March 31, 2022, the Company had declared dividends of $ 1,184 5,962,733 Prior
Period Financial Statement Correction of an Immaterial Misstatement During
the fourth quarter of 2021, the Company identified adjustments required to correct earnings per share for the first two quarters of 2021.
The errors discovered resulted an overstatement of $ 0.09 0.03 0.27 0.16 0.36 0.25 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
are being corrected prospectively in this Form 10-Q for the quarter ended March 31, 2022 and in the Form 10-Q for the second quarter
of 2022. Advertising
Costs Advertising
and promotion costs are charged to operations in the period incurred. Advertising and promotion costs totaled approximately $ 7,677 4,412 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 our Florida and Arizona locations. In addition, the
northern locations in Colorado, Tennessee, Minnesota, Indiana, Oregon, Washington and Wisconsin 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, 2022, three major
manufacturers accounted for 49.8 29.1 17.2 During
the three months ended March 31, 2021, three major manufacturers accounted for 45.9 27.7 21.8 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): SCHEDULE OF GEOGRAPHIC CONCENTRATION RISK PERCENTAGE
Three months ended
March 31, 2022 March 31, 2021
Florida 52 % 61 %
Tennessee 13 % 12 %
Arizona < 10 % 12 %
Colorado < 10 % 11 % 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 disease COVID-19 a 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 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 6,626 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 Our
operations also depend on the continued health and productivity of our employees at our dealership
and service locations and corporate headquarters throughout this 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 in response by individuals, businesses
and federal, state and local governments. Even after the COVID-19 pandemic has subsided,
we may experience significant adverse effects to our 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,
credit availability and any long term disruptions in supply chain. 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. In
October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers (“ASU 2021-08”). This standard requires contract assets and contract liabilities, such as certain
receivables and deferred revenue, acquired in a business combination to be recognized and measured by the acquirer on the acquisition
date in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Generally,
this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the
acquiree instead of recording those balances at fair value. This standard should be applied prospectively to acquisitions occurring after
the effective date. The standard will be effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2022, with early adoption permitted. The Company is currently evaluating the impact that this new standard will have on our 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 was 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. 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. Leases that are determined to be finance leases are recorded as financing liabilities. Subsequent
Events Management
of the Company has analyzed the activities and transactions subsequent to March 31, 2022 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. |
