Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 13, 2020 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | 1847 Goedeker Inc. | |
Entity Central Index Key | 0001810140 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2020 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-39418 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 6,111,200 | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Incorporation State Country Code | DE |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 3,466,981 | $ 64,470 |
Restricted cash | 8,912,367 | |
Receivables | 1,219,455 | 1,862,086 |
Vendor deposits | 547,648 | 294,960 |
Merchandise inventory, net | 3,086,873 | 1,380,090 |
Prepaid expenses and other current assets | 1,073,253 | 892,796 |
Total Current Assets | 18,306,577 | 4,494,402 |
Property and equipment, net | 202,402 | 185,606 |
Operating lease right-of-use assets | 1,686,423 | 2,000,755 |
Goodwill | 5,097,752 | 4,976,016 |
Intangible assets, net | 1,636,195 | 1,878,844 |
Deferred tax assets | 2,660,432 | 698,303 |
Other long-term assets | 45,000 | 45,000 |
TOTAL ASSETS | 29,634,781 | 14,278,926 |
Current Liabilities | ||
Accounts payable and accrued expenses | 4,371,204 | 2,465,220 |
Customer deposits | 17,089,826 | 4,164,296 |
Advances, related party | 137,500 | |
Lines of credit | 1,250,930 | |
Current portion of notes payable, related parties | 1,068,075 | |
Current portion of notes payable | 1,300,579 | 999,200 |
Convertible notes payable | 584,943 | |
Warrant liability | 122,344 | |
Current portion of operating lease liabilities | 443,469 | 422,520 |
Total Current Liabilities | 23,205,078 | 11,215,028 |
Notes payable, related parties, net of current portion | 2,232,369 | |
Notes payable, net of current portion | 2,684,623 | |
Operating lease liabilities, net of current portion | 1,242,954 | 1,578,235 |
Contingent note payable | 49,248 | 49,248 |
TOTAL LIABILITIES | 27,181,903 | 15,074,880 |
Stockholders' Equity (Deficit) | ||
Preferred stock, $.0001 par value, 20,000,000 shares authorized; none issued and outstanding at September 30, 2020 or December 31, 2019 | ||
Common stock, $.0001 par value, 200,000,000 shares authorized; 6,111,200 and 4,750,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively | 611 | 475 |
Additional paid-in capital | 13,484,156 | 1,271,721 |
Accumulated deficit | (11,031,889) | (2,068,150) |
Total Stockholders' Equity (Deficit) | 2,452,878 | (795,954) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 29,634,781 | $ 14,278,926 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .0001 | $ .0001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ .0001 | $ .0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 6,111,200 | 4,750,000 |
Common stock, shares outstanding | 6,111,200 | 4,750,000 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Apr. 05, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | |
Successor [Member] | |||||
Product sales, net | $ 13,435,095 | $ 12,202,271 | $ 22,748,151 | $ 38,397,304 | |
Cost of goods sold | 11,264,569 | 10,183,711 | 18,886,117 | 32,060,897 | |
Gross profit | 2,170,527 | 2,018,560 | 3,862,034 | 6,336,407 | |
Operating Expenses | |||||
Personnel | 2,161,929 | 989,318 | 1,875,543 | 4,513,602 | |
Advertising | 1,432,834 | 696,771 | 1,221,993 | 2,991,177 | |
Bank and credit card fees | 574,808 | 279,412 | 511,685 | 1,274,117 | |
Depreciation and amortization | 93,283 | 11,044 | 98,481 | 276,914 | |
General and administrative | 957,703 | 594,916 | 1,134,036 | 2,160,560 | |
Total Operating Expenses | 5,220,557 | 2,571,461 | 4,841,738 | 11,216,370 | |
LOSS FROM OPERATIONS | (3,050,031) | (552,901) | (979,704) | (4,879,963) | |
Other Income (Expense) | |||||
Interest income | 1,418 | 2,480 | |||
Financing costs | (488,460) | (165,097) | (324,352) | (757,646) | |
Interest expense | (157,312) | (182,772) | (387,794) | (604,908) | |
Loss on extinguishment of debt | (807,239) | (1,756,095) | |||
Write-off of acquisition receivable | (809,000) | ||||
Change in fair value of warrant liability | 54,500 | 57,100 | (2,127,656) | ||
Other income (expense) | 1,657 | (35,388) | 9,830 | 6,920 | |
Total Other Income (Expense) | (1,449,936) | (328,757) | (645,216) | (6,045,905) | |
NET LOSS BEFORE INCOME TAXES | (4,499,967) | (881,658) | (1,624,920) | (10,925,868) | |
INCOME TAX BENEFIT | 838,176 | 1,962,129 | |||
NET LOSS | $ (3,661,791) | $ (881,658) | $ (1,624,920) | $ (8,963,739) | |
LOSS PER COMMON SHARE - BASIC AND DILUTED | $ (0.65) | $ (0.19) | $ (0.34) | $ (1.77) | |
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 5,667,330 | 4,750,000 | 4,750,000 | 5,059,137 | |
Predecessor [Member] | |||||
Product sales, net | $ 12,946,901 | ||||
Cost of goods sold | 11,004,842 | ||||
Gross profit | 1,942,059 | ||||
Operating Expenses | |||||
Personnel | 913,919 | ||||
Advertising | 714,276 | ||||
Bank and credit card fees | 329,247 | ||||
Depreciation and amortization | 9,675 | ||||
General and administrative | 451,214 | ||||
Total Operating Expenses | 2,418,331 | ||||
LOSS FROM OPERATIONS | (476,272) | ||||
Other Income (Expense) | |||||
Interest income | 23,807 | ||||
Financing costs | |||||
Interest expense | |||||
Loss on extinguishment of debt | |||||
Write-off of acquisition receivable | |||||
Change in fair value of warrant liability | |||||
Other income (expense) | 7,200 | ||||
Total Other Income (Expense) | 31,007 | ||||
NET LOSS BEFORE INCOME TAXES | (445,265) | ||||
INCOME TAX BENEFIT | |||||
NET LOSS | $ (445,265) | ||||
LOSS PER COMMON SHARE - BASIC AND DILUTED | $ (63.61) | ||||
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 7,000 |
Condensed Statement of Stockhol
Condensed Statement of Stockholders' Equity (Deficit) (Unaudited) - USD ($) | Common StockPredecessor | Common StockSuccessor | Additional Paid-in CapitalPredecessor | Additional Paid-in CapitalSuccessor | Retained Earnings/Accumulated DeficitPredecessor | Retained Earnings/Accumulated DeficitSuccessor | Total | Predecessor | Successor |
Beginning Balance at Dec. 31, 2018 | $ 7,000 | $ 707,049 | $ 2,684,628 | $ 3,398,677 | |||||
Beginning Balance, Shares at Dec. 31, 2018 | 7,000 | ||||||||
Net loss | (445,265) | (445,265) | |||||||
Ending Balance at Apr. 05, 2019 | $ 7,000 | $ 707,049 | $ 2,239,263 | $ 2,953,412 | |||||
Ending Balance, Shares at Apr. 05, 2019 | 7,000 | ||||||||
Capital contribution by Holdco for the acquisition of Goedeker Television Co. | $ 475 | 979,048 | 979,523 | ||||||
Capital contribution by Holdco for the acquisition of Goedeker Television Co., Shares | 4,750,000 | ||||||||
Issuance of warrants in connection with notes payable | 292,673 | 292,673 | |||||||
Net loss for the period from April 6, 2019 through June 30, 2019 | (743,262) | (743,262) | |||||||
Ending Balance at Jun. 30, 2019 | $ 475 | 1,271,721 | (743,262) | 528,934 | |||||
Ending Balance, Shares at Jun. 30, 2019 | 4,750,000 | ||||||||
Net loss | (881,658) | (881,658) | |||||||
Ending Balance at Sep. 30, 2019 | $ 475 | 1,271,721 | (1,624,920) | (352,724) | |||||
Ending Balance, Shares at Sep. 30, 2019 | 4,750,000 | ||||||||
Beginning Balance at Dec. 31, 2019 | $ 475 | 1,271,721 | (2,068,150) | $ (795,954) | (795,954) | ||||
Beginning Balance, Shares at Dec. 31, 2019 | 4,750,000 | ||||||||
Net loss | (1,285,120) | (1,285,120) | |||||||
Ending Balance at Mar. 31, 2020 | $ 475 | 1,271,721 | (3,353,270) | (2,081,074) | |||||
Ending Balance, Shares at Mar. 31, 2020 | 4,750,000 | ||||||||
Issuance of 1847 Holdings shares in connection with conversion of notes payable | 275,000 | 275,000 | |||||||
Net loss | (4,016,828) | (4,016,828) | |||||||
Issuance of warrants in connection with notes payable | 566,711 | 566,711 | |||||||
Forgiveness of related party debt | 137,500 | 137,500 | |||||||
Ending Balance at Jun. 30, 2020 | $ 475 | 2,250,932 | (7,370,098) | (5,118,691) | |||||
Ending Balance, Shares at Jun. 30, 2020 | 4,750,000 | ||||||||
Issuance of common stock for cash | $ 111 | 8,602,055 | 8,602,166 | ||||||
Issuance of common stock for cash, Shares | 1,111,200 | ||||||||
Issuance of common stock in connection with exercise of warrant | $ 25 | 2,249,975 | 2,250,000 | ||||||
Issuance of common stock in connection with exercise of warrant, Shares | 250,000 | ||||||||
Issuance of options | 281,194 | 281,194 | |||||||
Issuance of 1847 Holdings shares in connection with conversion of notes payable | 100,000 | 100,000 | |||||||
Net loss | (3,661,791) | (3,661,791) | |||||||
Ending Balance at Sep. 30, 2020 | $ 611 | $ 13,484,156 | $ (11,031,889) | $ 2,452,878 | $ 2,452,878 | ||||
Ending Balance, Shares at Sep. 30, 2020 | 6,111,200 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Apr. 05, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | $ 64,470 | ||
CASH AND RESTRICTED CASH, END OF PERIOD | 3,466,981 | ||
Successor [Member] | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net loss | $ (1,624,920) | (8,963,739) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Depreciation and amortization | 98,481 | 276,912 | |
Amortization of finance costs | 324,351 | 676,711 | |
Loss on extinguishment of debt | 1,756,095 | ||
Write-off of acquisition receivable | 809,000 | ||
Stock-based compensation | 281,194 | ||
Change in fair value of warrant liability | (57,100) | 2,127,656 | |
Changes in operating assets and liabilities: | |||
Receivables | (778,536) | 520,895 | |
Vendor deposits | (252,688) | ||
Merchandise inventory | 190,569 | (1,706,783) | |
Prepaid expenses and other assets | (105,397) | (989,457) | |
Change in operating lease right-of-use assets | 197,936 | 314,332 | |
Deferred tax assets | (1,962,129) | ||
Accounts payable and accrued expenses | (85,192) | 1,884,781 | |
Customer deposits | 742,922 | 12,925,530 | |
Operating lease liabilities | (197,936) | (314,332) | |
Net cash provided by (used in) operating activities | (1,294,681) | 7,383,978 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Acquisition of Goedeker Television Co. | (1,232,132) | ||
Purchases of property and equipment | (11,874) | (51,060) | |
Net cash used in investing activities | (1,244,006) | (51,060) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from initial public offering, net | 8,602,166 | ||
Proceeds from note payable | 1,500,000 | 642,600 | |
Payments on notes payable | (263,457) | (2,046,667) | |
Proceeds from convertible notes payable | 650,000 | ||
Payments on convertible notes payable | (771,431) | ||
Net borrowings (payments) on lines of credit | 1,412,082 | (1,339,430) | |
Cash paid for financing costs | (575,000) | (105,279) | |
Net cash provided by financing activities | 2,723,625 | 4,981,959 | |
NET CHANGE IN CASH AND RESTRICTED CASH | 184,938 | 12,314,878 | |
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | 64,470 | ||
CASH AND RESTRICTED CASH, END OF PERIOD | 184,938 | 12,379,348 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |||
Cash paid for interest | 291,386 | 819,737 | |
Cash paid for taxes | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES | |||
Operating lease right-of-use asset | 2,200,000 | ||
Debt discounts on notes payable | 64,286 | ||
Warrants in 1847 Holdings contributed on notes payable | 229,244 | ||
Warrants in 1847 Holdings contributed on convertible notes payable | 292,673 | ||
1847 Holdings common shares contributed on note payable | 137,500 | ||
Conversion of debt through issuance of 1847 Holdings common shares | 375,000 | ||
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest | 118,500 | ||
Derecognition of related party debt | 137,500 | ||
Adjustment to fair value of goodwill based on final purchase price allocation | 121,736 | ||
Conversion of warrant liability into common stock | 2,250,000 | ||
Issuance of note payable to repay Seller note | $ 3,500,000 | ||
Predecessor [Member] | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net loss | $ (445,265) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Depreciation and amortization | 9,675 | ||
Amortization of finance costs | |||
Loss on extinguishment of debt | |||
Write-off of acquisition receivable | |||
Stock-based compensation | |||
Change in fair value of warrant liability | |||
Changes in operating assets and liabilities: | |||
Receivables | 1,730,079 | ||
Vendor deposits | (73,770) | ||
Merchandise inventory | 595,466 | ||
Prepaid expenses and other assets | 2,784 | ||
Change in operating lease right-of-use assets | |||
Deferred tax assets | |||
Accounts payable and accrued expenses | 196,565 | ||
Customer deposits | (1,404,266) | ||
Operating lease liabilities | |||
Net cash provided by (used in) operating activities | 611,268 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Acquisition of Goedeker Television Co. | |||
Purchases of property and equipment | |||
Net cash used in investing activities | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from initial public offering, net | |||
Proceeds from note payable | |||
Payments on notes payable | |||
Proceeds from convertible notes payable | |||
Payments on convertible notes payable | |||
Net borrowings (payments) on lines of credit | |||
Cash paid for financing costs | |||
Net cash provided by financing activities | |||
NET CHANGE IN CASH AND RESTRICTED CASH | (611,268) | ||
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | 1,525,693 | ||
CASH AND RESTRICTED CASH, END OF PERIOD | 2,136,961 | ||
SUPPLEMENTAL CASH FLOW INFORMATION | |||
Cash paid for interest | |||
Cash paid for taxes | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES | |||
Operating lease right-of-use asset | |||
Debt discounts on notes payable | |||
Warrants in 1847 Holdings contributed on notes payable | |||
Warrants in 1847 Holdings contributed on convertible notes payable | |||
1847 Holdings common shares contributed on note payable | |||
Conversion of debt through issuance of 1847 Holdings common shares | |||
Exercise of warrant liability through issuance of 1847 Holdings non-controlling interest | |||
Derecognition of related party debt | |||
Adjustment to fair value of goodwill based on final purchase price allocation | |||
Conversion of warrant liability into common stock | |||
Issuance of note payable to repay Seller note |
Organization and Nature of Busi
Organization and Nature of Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND NATURE OF BUSINESS | NOTE 1—ORGANIZATION AND NATURE OF BUSINESS 1847 Goedeker Inc. (the "Company") was formed under the laws of the State of Delaware on January 10, 2019 for the sole purpose of acquiring the business of Goedeker Television Co. Prior to the acquisition, the Company did not have any operations other than operations relating to its incorporation and organization. On April 5, 2019, the Company executed an asset purchase agreement with Goedeker Television Co., a Missouri corporation ("Goedeker"), pursuant to which the Company acquired substantially all the assets and assumed substantially all the liabilities of Goedeker. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and are presented in US dollars. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Management has analyzed the impact of the Coronavirus pandemic ("COVID-19") on its financial statements as of September 30, 2020 and has determined that the changes to its significant judgments and estimates did not have a material impact with respect to goodwill, intangible assets or long-lived assets. These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained elsewhere in this report. Accounting Basis The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end. Stock Split On July 30, 2020, the Company completed a 4,750-for-1 forward stock split of its outstanding common stock. As a result of this stock split, the Company's issued and outstanding common stock increased from 1,000 to 4,750,000 shares. Accordingly, all share and per share information has been restated to retroactively show the effect of this stock split. Predecessor and Successor Reporting The acquisition of Goedeker, as described in Note 1, was accounted for under the acquisition method of accounting in accordance with GAAP. For the purpose of financial reporting, Goedeker was deemed to be the predecessor company and the Company is deemed to be the successor company in accordance with the rules and regulations issued by the Securities and Exchange Commission. The assets and liabilities of Goedeker were recorded at their respective fair values as of the acquisition date. Fair value adjustments related to the transaction are reflected in the books of the Company, resulting in assets and liabilities of the Company being recorded at fair value at April 6, 2019. Therefore, the Company's financial information prior to the transaction is not comparable to its financial information subsequent to the transaction. As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company's presentations into two distinct periods, the period before the consummation of the transaction (labeled "Predecessor") and the period after that date (labeled "Successor"), to indicate the application of a different basis of accounting between the periods presented. Use of Estimates 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and equivalents include: (1) currency on hand, (2) demand deposits with banks or financial institutions, (3) other kinds of accounts that have the general characteristics of demand deposits, and (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Restricted cash includes $3,500,000 pledged to secure a note, $100,000 to secure a vendor letter of credit, and $5,312,367 withheld by credit card processors as security for the Company's customer refund claims and credit card chargebacks. The cash pledged to secure the note payable will be released as the note is repaid, the cash pledged to secure the letter of credit will be released when the vendor offers the Company credit terms, and the cash held by credit card processors will be released at the discretion of the credit card companies ($2,208,712 was released on October 5). Revenue Recognition and Cost of Revenue On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue Recognition The Company collects the full sales price from the customer at the time the order is placed, which is recorded as customer deposits on the accompanying condensed balance sheet. The Company does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from orders it receives from its customers. The Company's performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, the Company's products, which generally occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products through a third-party carrier from the Company's warehouse to the customer (a "Company Shipment"). The second way is through a shipment of the products through a third-party carrier from a warehouse other than the Company's warehouse to the customer (a "Drop Shipment") and the third way is where the Company itself delivers the products to the customer and often also installs the product (a "Local Delivery"). In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the customer's location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer's location. In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company's warehouse or a third party's warehouse). Therefore, risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company's warehouse or a third-party's warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer's control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company recognizes revenue. The Company agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company's contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing activities are excluded from revenue. If the Company continued to apply legacy revenue recognition guidance for the nine months ended September 30, 2020 and 2019, revenues, gross margin, and net loss would not have changed. Cost of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors. Substantially all the Company's sales are to individual retail consumers. Shipping and Handling ‒ The Company bills its customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales. Disaggregated Revenue The Company's disaggregated revenue by sales type is as follows: Successor Predecessor Three Months Ended Three Months Ended Nine Months Ended Period from April 6, 2019 through Period from January 1, 2019 Appliance sales $ 8,991,853 $ 10,086,490 $ 28,326,963 $ 18,535,800 $ 9,784,525 Furniture sales 3,554,704 1,398,843 7,604,867 2,969,389 2,456,085 Other sales 888,538 716,938 2,465,474 1,242,962 706,291 Total $ 13,435,095 $ 12,202,271 $ 38,397,304 $ 22,748,151 $ 12,946,901 Receivables Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufacturers from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company's assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible. Merchandise Inventory Inventory consists of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on an average item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. Reserves for slow-moving and potentially obsolete inventories was $425,000 as of September 30, 2020 and December 31, 2019. Property and Equipment Property and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Depreciation is computed using the straight-line method over estimated useful lives as follows: Category Useful Life (Years) Machinery and equipment 5 Office equipment 5 Vehicles 5 Goodwill The Company tests its goodwill for impairment at least annually on December 31 and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company's expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company's consolidated financial results. The Company tests goodwill by estimating fair value using a Discounted Cash Flow ("DCF") model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant's weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the three and nine months ended September 30, 2020 and 2019. Intangible Assets At September 30, 2020 and December 31, 2019, definite-lived intangible assets primarily consisted of tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 5 to 15 years. The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives. In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value. Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Fair Value of Financial Instruments The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. Derivative Instrument Liability The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging Income Taxes Under the Company's accounting policies, the Company initially recognizes a tax position in its financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although the Company believes its provisions for unrecognized tax positions are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which the Company has reflected in its income tax provisions and accruals. The tax law is subject to varied interpretations, and the Company has taken positions related to certain matters where the law is subject to interpretation. Such differences could have a material impact on the Company's income tax provisions and operating results in the period(s) in which the Company makes such determination. Basic Income (Loss) Per Share Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the three and nine months ended September 30, 2020, the potentially dilutive securities were (i) warrants for the purchase of 55,560 shares of common stock issued to affiliates of the underwriter in its initial public offering described below and (ii) options for the purchase of 483,158 shares of common stock. These potentially dilutive securities were excluded from diluted loss per share. Going Concern Assessment Management assesses going concern uncertainty in the Company's financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the financial statements are issued or available to be issued, which is referred to as the "look-forward period", as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. The Company has generated losses since its acquisition and has relied on cash on hand, external bank lines of credit, issuance of third party and related party debt and the sale of a note to support cashflow from operations. For the nine months ended September 30, 2020, the Company incurred operating losses of $4,879,963, cash flows from operations of $7,383,978, and negative working capital of $4,898,501. Management has prepared estimates of operations for fiscal year 2020 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of the financial statements in the Company's 10-Q. On August 4, 2020, the Company completed an initial public offering of its common stock, pursuant to which the Company sold 1,111,200 shares of its common stock, at a purchase price of $9.00 per share, for total gross proceeds of $10,000,800 (the "IPO"). After deducting the underwriting commission and offering expenses, the Company received net proceeds of. $8,602,166. The Company used a portion of the proceeds from this offering to pay off certain debt. The impact of COVID-19 on the Company's business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. The accompanying financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these financial statements, indicate improved operations and the Company's ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period. Recent Accounting Pronouncements Recently Adopted In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-02, Leases (Topic 842) In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Compensation - Stock Compensation In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement 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 The Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company's financial statements. Reclassifications Certain accounts have been reclassified to conform with classifications adopted in the period ended September 30, 2020. Such reclassifications had no effect on net earnings or financial position. |
Receivables
Receivables | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
RECEIVABLES | NOTE 3—RECEIVABLES At September 30, 2020 and December 31, 2019, receivables consisted of the following: September 30, December 31, Credit card payments in process of settlement $ 274,179 $ 406,838 Vendor rebates receivable 945,276 1,455,248 Total $ 1,219,455 $ 1,862,086 |
Merchandise Inventory
Merchandise Inventory | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
MERCHANDISE INVENTORY | NOTE 4—MERCHANDISE INVENTORY At September 30, 2020 and December 31, 2019, the inventory balances are composed of: September 30, December 31, Appliances $ 3,205,699 $ 1,538,552 Furniture 191,310 184,755 Other 114,864 81,783 Total merchandise inventory 3,511,873 1,805,090 Allowance for inventory obsolescence (425,000 ) (425,000 ) Merchandise inventory, net $ 3,086,873 $ 1,380,090 |
Vendor Deposits
Vendor Deposits | 9 Months Ended |
Sep. 30, 2020 | |
Vendor Deposits [Abstract] | |
VENDOR DEPOSITS | NOTE 5—VENDOR DEPOSITS Deposits with vendors represent cash on deposit with one vendor arising from accumulated rebates paid by the vendor. The deposits are used by the vendor to seek to secure the Company's purchases. The deposit can be withdrawn at any time up to the amount of the Company's credit line with the vendor. Alternatively, the Company could secure their credit line with a floor plan line from a lender and withdraw all its deposits. The Company has elected to leave the deposits with the vendor on which it earns interest income. Prior to obtaining an open line of credit with a major vendor, the Company paid in advance for its purchases. The vendor did not ship product to the Company until an order was complete. As a result, the vendor held Company funds. A second vendor uses the Company's vendor deposit account as collateral. Orders from this vendor exceeded the deposit account and the Company prepaid for some orders. Vendor deposits as of September 30, 2020 and December 31, 2019 were $547,648 and $294,960, respectively. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 6—PROPERTY AND EQUIPMENT Property and equipment consist of the following at September 30, 2020 and December 31, 2019: September 30, 2020 December 31, Equipment $ 14,976 $ 7,376 Warehouse equipment 61,070 29,188 Furniture and fixtures 512 512 Transportation equipment 63,784 63,784 Leasehold improvements 129,203 117,626 Total property and equipment 269,545 218,486 Accumulated depreciation (67,143 ) (32,880 ) Property and equipment, net $ 202,402 $ 185,606 Depreciation expense for the nine months ended September 30, 2020, the period April 6, 2019 to September 30, 2019 and the period January 1, 2019 to April 5, 2019 was $34,264, $22,578, and $9,675, respectively. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 7—INTANGIBLE ASSETS The following provides a breakdown of identifiable intangible assets as of September 30, 2020 and December 31, 2019: September 30, December 31, Customer relationships $ 749,00 $ 749,000 Marketing related 1,368,000 1,368,000 Total intangible assets 2,117,000 2,117,000 Accumulated amortization (480,805 ) (238,156 ) Intangible assets, net $ 1,636,195 $ 1,878,844 In connection with the acquisition of Goedeker, the Company identified intangible assets of $2,117,000, representing trade names and customer relationships. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 8.5 years. Amortization expense for the nine months ended September 30, 2020, the period April 6, 2019 to September 30, 2019 and the period January 1, 2019 to April 5, 2019 was $242,649, $76,390 and $-0-, respectively. As of September 30, 2020, the estimated annual amortization expense for each of the next five years is as follows: 2020 (remainder of year) $ 80,883 2021 323,532 2022 323,532 2023 323,532 2024 122,132 Thereafter 462,584 Total $ 1,636,195 |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATION | NOTE 8—BUSINESS COMBINATION On January 18, 2019, the Company entered into an asset purchase agreement with Goedeker and Steve Goedeker and Mike Goedeker (the "Stockholders"), pursuant to which the Company agreed to acquire substantially all of the assets of Goedeker used in its retail appliance and furniture business (the "Goedeker Business"). On April 5, 2019, the Company, Goedeker and the Stockholders entered into an amendment to the asset purchase agreement and closing of the acquisition of substantially all of the assets of Goedeker was completed. The aggregate purchase price, recorded as a capital contribution from Holdco, was $4,483,418 consisting of: (i) the issuance of a promissory note in the principal amount of $4,100,000 and a deemed fair value of $3,422,398; (ii) up to $600,000 in earn out payments (as described below) with a deemed fair value of $81,494; and (iii) a 22.5% ownership interest in Holdco transferred to the sellers with a deemed fair value of $979,523. The asset purchase agreement provided for an adjustment to the purchase price based on the difference between actual working capital at closing and the seller's preliminary estimate of closing date working capital. In accordance with the asset purchase agreement, an independent CPA firm was retained by the Company and Goedeker to resolve differences in the working capital amounts. The report issued by that CPA firm determined that Goedeker owed the Company $809,000, which Goedeker has not paid. On or about March 23, 2020, the Company submitted a claim for arbitration to the American Arbitration Association relating to Goedeker's failure to pay. The claim alleged, inter alia On June 2, 2020, the Company entered into a settlement agreement with Goedeker, Steve Goedeker, Mike Goedeker and 1847 Holdings LLC, the Company's parent company at such time ("1847 Holdings"). The settlement agreement and the related transaction documents that are exhibits to the settlement agreement were all signed on June 2, 2020 only became effective upon the closing of the IPO on August 4, 2020. Pursuant to the settlement agreement, the parties entered into an amendment and restatement of the 9% subordinated promissory note described below (see Note 11). In addition, the parties agreed that the arbitration action described above would be settled effective upon the closing of the IPO and that each party to such arbitration action would release all claims that it has against the other parties to such action. As part of the settlement of the arbitration action, the Company agreed that the sellers will not have to pay the $809,000 working capital adjustment amount, which resulted in a loss on write-off of acquisition receivable during the nine months ended September 30, 2020. Goedeker is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets: 1. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater; 2. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and 3. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater. To the extent the EBITDA of the Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, the Company must pay a partial earn out payment to Goedeker in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the "Achievement Percentage" is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA for the Goedeker Business was ($2,825,000) so Goedeker is not entitled to an earn our payment for that period. To the extent Goedeker is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed. The Company determined the fair value of the earnout on the date of acquisition was $81,494. Such amount was recorded as a contingent consideration liability within the accounts payable and accrued expense line item on the balance sheet and is revalued to fair value each reporting period until settled. The year 1 contingent liability of $32,246 was written-off in the year ending December 31, 2019 as the target was not met and the balance of the liability at December 31, 2019 is $49,248. Management reviewed the contingent consideration due at September 30, 2020 and does not believe any adjustments are required at September 30, 2020 or for the nine months then ended. The fair value of the purchase consideration issued to Goedeker was allocated to the net tangible assets acquired. The Company accounted for the acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net liabilities assumed was approximately $614,337. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill. Provisional goodwill was estimated at $4,976,106 at December 31, 2019 due to the preliminary valuation. During the period ending September 30, 2020, the Company subsequently adjusted the value of goodwill by $121,736 to $5,097,752 based on the finalized purchase price allocation. The table below shows the analysis of the Goedeker asset purchase: Purchase consideration at fair value: Note payable, net of $462,102 debt discount and $215,500 of capitalized financing costs $ 3,422,398 Contingent note payable 81,494 Fair value of ownership interest in Holdco transferred to seller 979,523 Amount of consideration $ 4,483,415 Assets acquired and liabilities assumed at fair value Accounts receivable $ 334,446 Inventories 1,851,251 Working capital adjustment receivable and other assets 1,104,863 Property and equipment 216,286 Customer related intangibles 749,000 Marketing related intangibles 1,368,000 Accounts payable and accrued expenses (3,929,876 ) Customer deposits (2,308,307 ) Net tangible assets acquired (liabilities assumed) $ (614,337 ) Total net assets acquired (liabilities assumed) $ (614,337 ) Consideration paid 4,483,415 Goodwill $ 5,097,752 |
Lines of Credit
Lines of Credit | 9 Months Ended |
Sep. 30, 2020 | |
Lines of Credit [Abstract] | |
LINES OF CREDIT | NOTE 9—LINES OF CREDIT Burnley Capital LLC On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Burnley Capital LLC ("Burnley") for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker on April 5, 2019, the Company borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was $571,997. On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the revolving note in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350, interest of $42 and prepayment, legal, and other fees of $85,802. Northpoint Commercial Finance LLC On June 24, 2019, the Company, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by the Company of inventory at an interest rate of LIBOR plus 7.99%. As of December 31, 2019, the balance of the line of credit was $678,993. The Company terminated the loan and security agreement on May 18, 2020 and there is no outstanding balance as of September 30, 2020. |
Notes Payable and Warrant Liabi
Notes Payable and Warrant Liability | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE AND WARRANT LIABILITY | NOTE 10—NOTES PAYABLE AND WARRANT LIABILITY Arvest Loan On August 25, 2020, the Company entered into a promissory note and security agreement with Arvest Bank for a loan in the principal amount of $3,500,000. As of September 30, 2020, the outstanding balance of this loan is $3,340,602, comprised of principal of $3,446,126, net of unamortized loan costs of $103,524. The Company classified $657,979 as a current liability and the balance as a long-term liability. The loan matures on August 25, 2025 and bears interest at 3.250% per annum; provided that, upon an event of default, the interest rate shall increase by 6% until paid in full. Pursuant to the terms of the loan agreement, the Company is required to make monthly payments of $63,353 beginning on September 25, 2020 and until the maturity date, at which time all unpaid principal and interest will be due. The Company may prepay the loan in full or in part at any time without penalty. The loan agreement contains customary events of default and affirmative and negative covenants for a loan of this type. The loan is secured by all financial assets credited to the Company's securities account held by Arvest Investments, Inc. Maturities of the debt are as follows: For the years ended December 31, 2020 (remainder of year) $ 162,498 2021 663,339 2022 685,222 2023 707,826 2024 731,177 2025 496,064 Total $ 3,446,126 Less: Loan costs (103,524 ) Total $ 3,342,602 . PPP Loan On April 8, 2020, the Company received a $642,600 Paycheck Protection Program (the "PPP") loan from the United States Small Business Administration under provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). The PPP loan has an 18-month term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP loan contains events of default and other provisions customary for a loan of this type. The PPP provides that the loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability in the accompanying balance sheet. On November 2, 2020, the Company repaid the PPP loan. Small Business Community Capital II, L.P. On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. ("SBCC") for a term loan in the principal amount of $1,500,000, pursuant to which the Company issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. As of December 31, 2019, the balance of the note was $999,201. On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999. The Company classified the warrant as a derivative liability on the balance sheet at June 30, 2020 of $2,250,000 based on the estimated value of the warrant in the IPO. The increase in the value of the warrant from the estimated value of $122,344 at December 31, 2019 resulted in a charge of $2,127,656 during the nine months ended September 30, 2020. Immediately prior to the closing of the IPO on August 4, 2020, SBCC converted the warrant into 250,000 shares of common stock. |
Notes Payable, Related Parties
Notes Payable, Related Parties | 9 Months Ended |
Sep. 30, 2020 | |
Notes Payable, Related Parties [Abstract] | |
NOTES PAYABLE, RELATED PARTIES | NOTE 11—NOTES PAYABLE, RELATED PARTIES As noted in Note 8, a portion of the purchase price for the acquisition was paid by the issuance by the Company to Steve Goedeker, as representative of Goedeker, of a 9% subordinated promissory note in the principal amount of $4,100,000. As of December 31, 2019, the balance of the note was $3,300,444. Pursuant to the settlement agreement described above (see Note 8), the parties entered into an amendment and restatement of the note that became effective as of the closing of the IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the IPO, the Company agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638. The Company refinanced this note payable with proceeds from the Arvest Loan. In connection with the refinance, the Company recorded a $757,239 loss on extinguishment of debt consisting of a $250,000 forbearance fee, write-off of unamortized loan discount of $338,873, and write-off of unamortized debt costs of $168,366. |
Convertible Promissory Note
Convertible Promissory Note | 9 Months Ended |
Sep. 30, 2020 | |
Convertible Promissory Note [Abstract] | |
CONVERTIBLE PROMISSORY NOTE | NOTE 12—CONVERTIBLE PROMISSORY NOTE On April 5, 2019, 1847 Holdings, Holdco and the Company (collectively, "1847") entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company ("Leonite"), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco. As of December 31, 2019, the balance of the note was $584,943. On May 11, 2020, 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the note to October 5, 2020, (ii) that 1847's failure to repay the note on the original maturity date of April 5, 2020 shall not constitute and event of default under the note and (iii) to increase the principal amount of the note by $207,145, as a forbearance fee. The Company accounted for this transaction as a loss on extinguishment of debt. In connection with the amendment, (i) 1847 Holdings issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings' acquisition of Asien's Appliance, Inc., 1847 Holdings' wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien Inc. The Company accounted for the issuance of the 200,000 additional warrants as a $566,711 loss on debt restructuring and an increase in additional paid-in-capital, representing the estimated fair value of the 200,000 additional warrants for a five-year period. 1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the nine months ended September 30, 2020. Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of 1847 Holdings into which such common shares may be changed or reclassified. On May 4, 2020, Leonite converted $100,000 of the outstanding balance of the note into 100,000 common shares of 1847 Holdings. The Company accounted for this transaction as a $100,000 reduction in the principal amount of the debt, a $175,000 loss on extinguishment of debt, and a $275,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date. On July 24, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares of 1847 Holdings. The Company accounted for this transaction as a $50,000 reduction in the principal amount of the debt, a $50,000 loss on extinguishment of debt, and a $100,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date. As a result of the activity on this note, $50,000 and $998,856 were recorded as loss on extinguishment of debt for the three and nine months ended September 30, 2020, respectively. On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222. On September 2, 2020, 1847 Holdings and Leonite entered into an amendment to the warrant issued on April 5, 2019, pursuant to which the warrant was amended to allow for the exercise of the warrant for 180,000 common shares of 1847 Holdings in exchange for Leonite's surrender of the remaining 20,000 common shares underlying that warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September 18, 2020, Leonite exercised the warrant in accordance with the foregoing for 180,000 common shares of 1847 Holdings. As a result, both warrants have terminated. |
Operating Lease
Operating Lease | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
OPERATING LEASE | NOTE 13—OPERATING LEASE On April 5, 2019, the Company entered into a lease agreement with S.H.J., L.L.C., a Missouri limited liability company and affiliate of the Company at that time. The lease is for a term five (5) years and provides for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term. In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum. The lease contains customary events of default, including if: (i) the Company shall fail to pay rent within five (5) days after the due date; (ii) any insurance required to be maintained by the Company pursuant to the lease shall be canceled, terminated, expire, reduced, or materially changed; (iii) the Company shall fail to comply with any term, provision, or covenant of the lease and shall not begin and pursue with reasonable diligence the cure of such failure within fifteen (15) days after written notice thereof to the Company; (iv) the Company shall become insolvent, make an assignment for the benefit of creditors, or file a petition under any section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States of America or any State thereof; or (v) a receiver or trustee shall be appointed for the leased premises or for all or substantially all of the assets of the Company. During the three and nine months ended September 30, 2020, the Company paid and expensed rent payments of $135,000 and $405,000, respectively. Supplemental balance sheet information related to leases was as follows: Operating lease right-of-use asset $ 2,300,000 Accumulated amortization (613,577 ) Net balance $ 1,686,423 Lease liability, current portion $ 443,469 Lease liability, long-term 1,242,954 Total operating lease liability $ 1,686,423 Weighted average remaining lease term (months) 42 Weighted average discount rate 6.5 % Maturities of the lease liability for each of the next five years is as follows: 2020 (remainder of year) $ 135,000 2021 540,000 2022 540,000 2023 540,000 2024 135,000 Total lease payments $ 1,890,000 Less imputed interest (203,577 ) Total lease liability $ 1,686,423 |
Related Parties
Related Parties | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES | NOTE 14—RELATED PARTIES Offsetting Management Services Agreement On April 5, 2019, the Company entered into an offsetting management services agreement with 1847 Partners LLC (the "Manager"), a company owned and controlled by Ellery W. Roberts, the Company's chairman and controlling shareholder of 1847 Holdings. This agreement was amended on April 21, 2020 with the amendment becoming effective at the closing of IPO on August 4, 2020. Pursuant to the offsetting management services agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500; provided, however, that, (i) pro-rated payments shall be made in the first quarter and the last quarter of the term, (ii) if the aggregate amount of management fees paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of 1847 Holdings' gross income with respect to such fiscal year, then the management fee to be paid by the Company for any remaining fiscal quarters in such fiscal year shall be reduced, on a pro rata basis determined by reference to the management fees to be paid to the Manager by all of the subsidiaries of 1847 Holdings, until the aggregate amount of the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to such fiscal year, does not exceed 9.5% of 1847 Holdings' gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the aggregate amount of the parent management fee (as defined in the offsetting management services agreement) with respect to such fiscal quarter, then the management fee to be paid by the Company for such fiscal quarter shall be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid by the Company, together with all other management fees paid or to be paid by all other subsidiaries of 1847 Holdings to the Manager, in each case, with respect to such fiscal quarter, does not exceed the parent management fee calculated and payable with respect to such fiscal quarter. The Company shall also reimburse the Manager for all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of Goedeker in connection with performing services under the offsetting management services agreement. The Company expensed $187,500 and $121,290 in management fees for the nine months ended September 30, 2020 and 2019, respectively. Advances As discussed in Note 12, on April 5, 2019, 1847 Holdings issued 50,000 common shares and 200,000 warrants to Leonite in order to induce Leonite to extend credit to the Company. The common shares of 1847 Holdings were valued at $137,500. As part of the modification to this convertible note payable, 1847 Holdings also granted an additional 200,000 warrants to purchase 1847 Holdings' common shares to Leonite. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS' DEFICIT | NOTE 15—STOCKHOLDERS' DEFICIT As of September 30, 2020, the Company was authorized to issue 200,000,000 shares of common stock, $0.0001 par value per share, and 20,000,000 shares of "blank check" preferred stock, 0.0001 par value per share. To date, the Company has not issued any shares of preferred stock. Common Stock As of September 30, 2020 and December 31, 2019, the Company had 6,111,200 and 4,750,000 shares of common stock issued and outstanding, respectively. Each share entitles the holder thereof to one vote per share on all matters coming before the stockholders of the Company for a vote. Upon the Company's inception on January 10, 2019, the Company issued 4,750,000 shares of common stock for a total purchase price of $1.00. On August 4, 2020, the Company sold 1,111,200 shares of common stock for total gross proceeds of $10,000,800. After deducting the underwriting commission and expenses, the Company received net proceeds of $8,602,166. On August 4, 2020, the Company issued 250,000 shares of common stock to SBCC upon conversion of its warrant (see Note 16). Equity Incentive Plan Effective as of July 30, 2020, the Company established the 1847 Goedeker Inc. 2020 Equity Incentive Plan ("Plan"). The Plan was approved by the Company's board of directors and stockholders on April 21, 2020. The Plan is administered by compensation committee of the board of directors. The Plan permits the grant of restricted stock, stock options and other forms of incentive compensation to the Company's officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 555,000 shares. As of September 30, 2020, there were 483,158 shares granted and 71,842 shares remaining available under the Plan. During the three months ended September 30, 2020, the Company issued options for the purchase of 483,158 shares of common stock with a total compensation expense of $1,601,064. The Company recorded stock option expense of $281,194 and for the nine months ended September 30, 2020. The remaining compensation expense of $1,319,870 will be recognized over the remaining vesting periods. The following table presents activity relating to stock options for the nine months ended September 30, 2020: Shares Weighted Average Exercise Price Weighted Average Outstanding at December 31, 2019 - $ - - Granted 483,158 9.00 6.25 Exercised - - - Forfeited / Cancelled / Expired - - - Outstanding at September 30, 2020 483,158 $ 9.00 6.25 Exercisable at September 30, 2020 65,790 $ 9.00 6.25 As of September 30, 2020, vested outstanding stock options had no intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate stock-based compensation expense for the nine months ended September 30, 2020: Volatility 46.6 % Risk-free interest rate 0.47 % Dividend yield 0.0 % Expected term 10 years The following table sets forth stock-based compensation expense for the three months ended September 30, 2020, the remainder of 2020, and the four succeeding years: Three months ended September 30, 2020 $ 281,194 Remainder of 2020 117,714 2021 483,185 2022 462,024 2023 367,198 2024 136,742 Total stock-based compensation $ 1,848,056 Warrants On August 4, 2020, the Company issued warrants for the purchase of 55,560 shares of common stock to affiliates of the representative in the IPO. The warrants are exercisable at any time and from time to time, in whole or in part, beginning on January 26, 2021 until July 30, 2025, at a per share exercise price equal to $11.25. The warrants will result in a total compensation expense of $168,736 to be recognized over the vesting period. As of the period ended September 30, 2020, the Company had recognized compensation expense of $54,960. The remaining compensation expense of $113,774 will be recognized over the remaining vesting period. On April 5, 2019, the Company issued to SBCC a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. SBCC exercised this warrant for the purchase of 250,000 shares of common stock on August 4, 2020. The following table presents activity relating to the warrants for the nine months ended September 30, 2020: Shares Weighted Average Exercise Price Weighted Average Outstanding at December 31, 2019 - $ - - Granted 55,560 11.25 4.83 Exercised - - - Cancelled / Expired - - - Outstanding at September 30, 2020 55,560 $ 11.25 4.83 Exercisable at September 30, 2020 - $ - - The Company recognizes stock issuance expense for the warrants on a straight-line basis over the term of the warrants. The service period is generally the vesting period. The following assumptions were used to calculate stock issuance expense for the nine months ended September 30, 2020: Volatility 46.5 % Risk-free interest rate 0.47 % Dividend yield 0.0 % Expected term 5 years |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16—SUBSEQUENT EVENTS In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2020 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements, except as set forth below. Securities Purchase Agreement On October 20, 2020, the Company entered into a securities purchase agreement with Appliances Connection Inc., a newly-formed wholly owned subsidiary of the Company (the "Buyer"), 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe's Appliances LLC and YF Logistics LLC (collectively, the "Companies") and the other parties signatory thereto (the "Sellers"), pursuant to which the Buyer agreed to acquire all of the issued and outstanding capital stock or other equity securities of the Companies from the Sellers for an aggregate purchase price of $210,000,000, subject to adjustment as described below. The purchase price consists of (i) $168,000,000 in cash, (ii) 1,222,239 shares of the Company's common stock, and 1,111,094 shares of the Company's series A preferred stock, collectively having a stated value that is equal to $21,000,000, and (iii) a number of shares of the Company's series A-1 preferred stock that is equal to (A) $21,000,000 divided by (B) the average of the closing price of the shares of the Company's common stock (as reported on NYSE American) for the 20 trading days immediately preceding the 3rd trading day prior to the closing date of the securities purchase agreement. The terms of the series A preferred stock and series A-1 preferred stock have not yet been determined. The purchase price is subject to a closing net working capital adjustment provision. Under this provision, the Sellers shall deliver to the Buyer at least one day prior to the closing of the securities purchase agreement a statement setting forth their good faith estimate of the net working capital of the Companies. If such estimated net working capital exceeds a target net working capital of -$15,476,941, then within five (5) days the Buyer shall make a cash payment to the Sellers that is equal to such excess. If such target net working capital exceeds such estimated net working capital, then either (i) if finally determined at the closing, the cash portion of the purchase price shall be decreased by such excess or (ii) within 5 days of the closing, the Sellers shall make a cash payment to the Buyer that is equal to such excess. The purchase price is also subject to a post-closing net working capital adjustment provision. On or before the 75 th The cash portion of the purchase price will also be (i) decreased by (A) the amount of any outstanding unpaid indebtedness of the Companies (other than trade debt) existing as of the closing date and (B) any transaction expenses, and (ii) increased by the amount of cash or cash equivalents held by, or on the books of, the Companies as of the closing date, if any, that is in excess of $850,000. Upon execution of the securities purchase agreement, the Buyer paid a deposit in the amount of $100,000, which will be credited towards the cash portion of the purchase price at closing. The securities purchase agreement contains customary representations, warranties and covenants, including a covenant that the Sellers will not compete with the business of 1 Stop Electronics Center, Inc. as of the closing date for a period of two (2) years following closing, as well as customary closing conditions, including, without limitation, the expiration or termination of any waiting period applicable to the consummation of the transaction under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended; the receipt of all authorizations, consents and approvals of all governmental authorities or agencies; the release of any security interests; the Buyer obtaining the requisite acquisition financing; and delivery of all opinions and documents required for the transfer of the securities of the Companies to the Buyer. Repayment of PPP Loan On November 2, 2020, the Company repaid the balance of the PPP loan (see Note 10). |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and are presented in US dollars. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Management has analyzed the impact of the Coronavirus pandemic ("COVID-19") on its financial statements as of September 30, 2020 and has determined that the changes to its significant judgments and estimates did not have a material impact with respect to goodwill, intangible assets or long-lived assets. These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained elsewhere in this report. |
Accounting Basis | Accounting Basis The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end. |
Stock Splits | Stock Split On July 30, 2020, the Company completed a 4,750-for-1 forward stock split of its outstanding common stock. As a result of this stock split, the Company's issued and outstanding common stock increased from 1,000 to 4,750,000 shares. Accordingly, all share and per share information has been restated to retroactively show the effect of this stock split. |
Predecessor and Successor Reporting | Predecessor and Successor Reporting The acquisition of Goedeker, as described in Note 1, was accounted for under the acquisition method of accounting in accordance with GAAP. For the purpose of financial reporting, Goedeker was deemed to be the predecessor company and the Company is deemed to be the successor company in accordance with the rules and regulations issued by the Securities and Exchange Commission. The assets and liabilities of Goedeker were recorded at their respective fair values as of the acquisition date. Fair value adjustments related to the transaction are reflected in the books of the Company, resulting in assets and liabilities of the Company being recorded at fair value at April 6, 2019. Therefore, the Company's financial information prior to the transaction is not comparable to its financial information subsequent to the transaction. As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company's presentations into two distinct periods, the period before the consummation of the transaction (labeled "Predecessor") and the period after that date (labeled "Successor"), to indicate the application of a different basis of accounting between the periods presented. |
Use of Estimates | Use of Estimates 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and equivalents include: (1) currency on hand, (2) demand deposits with banks or financial institutions, (3) other kinds of accounts that have the general characteristics of demand deposits, and (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Restricted cash includes $3,500,000 pledged to secure a note, $100,000 to secure a vendor letter of credit, and $5,312,367 withheld by credit card processors as security for the Company's customer refund claims and credit card chargebacks. The cash pledged to secure the note payable will be released as the note is repaid, the cash pledged to secure the letter of credit will be released when the vendor offers the Company credit terms, and the cash held by credit card processors will be released at the discretion of the credit card companies ($2,208,712 was released on October 5). |
Revenue Recognition and Cost of Revenue | Revenue Recognition and Cost of Revenue On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue Recognition The Company collects the full sales price from the customer at the time the order is placed, which is recorded as customer deposits on the accompanying condensed balance sheet. The Company does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from orders it receives from its customers. The Company's performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, the Company's products, which generally occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products through a third-party carrier from the Company's warehouse to the customer (a "Company Shipment"). The second way is through a shipment of the products through a third-party carrier from a warehouse other than the Company's warehouse to the customer (a "Drop Shipment") and the third way is where the Company itself delivers the products to the customer and often also installs the product (a "Local Delivery"). In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the customer's location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer's location. In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company's warehouse or a third party's warehouse). Therefore, risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company's warehouse or a third-party's warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer's control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company recognizes revenue. The Company agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company's contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing activities are excluded from revenue. If the Company continued to apply legacy revenue recognition guidance for the nine months ended September 30, 2020 and 2019, revenues, gross margin, and net loss would not have changed. Cost of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors. Substantially all the Company's sales are to individual retail consumers. Shipping and Handling ‒ The Company bills its customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales. Disaggregated Revenue The Company's disaggregated revenue by sales type is as follows: Successor Predecessor Three Months Ended Three Months Ended Nine Months Ended Period from April 6, 2019 through Period from January 1, 2019 Appliance sales $ 8,991,853 $ 10,086,490 $ 28,326,963 $ 18,535,800 $ 9,784,525 Furniture sales 3,554,704 1,398,843 7,604,867 2,969,389 2,456,085 Other sales 888,538 716,938 2,465,474 1,242,962 706,291 Total $ 13,435,095 $ 12,202,271 $ 38,397,304 $ 22,748,151 $ 12,946,901 |
Receivables | Receivables Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufacturers from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company's assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible. |
Merchandise Inventory | Merchandise Inventory Inventory consists of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on an average item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. Reserves for slow-moving and potentially obsolete inventories was $425,000 as of September 30, 2020 and December 31, 2019. |
Property and Equipment | Property and Equipment Property and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Depreciation is computed using the straight-line method over estimated useful lives as follows: Category Useful Life (Years) Machinery and equipment 5 Office equipment 5 Vehicles 5 |
Goodwill | Goodwill The Company tests its goodwill for impairment at least annually on December 31 and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company's expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company's consolidated financial results. The Company tests goodwill by estimating fair value using a Discounted Cash Flow ("DCF") model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant's weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the three and nine months ended September 30, 2020 and 2019. |
Intangible Assets | Intangible Assets At September 30, 2020 and December 31, 2019, definite-lived intangible assets primarily consisted of tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 5 to 15 years. The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives. In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value. |
Long-Lived Assets | Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. |
Derivative Instrument Liability | Derivative Instrument Liability The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging |
Income Taxes | Income Taxes Under the Company's accounting policies, the Company initially recognizes a tax position in its financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although the Company believes its provisions for unrecognized tax positions are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which the Company has reflected in its income tax provisions and accruals. The tax law is subject to varied interpretations, and the Company has taken positions related to certain matters where the law is subject to interpretation. Such differences could have a material impact on the Company's income tax provisions and operating results in the period(s) in which the Company makes such determination. |
Basic Income (Loss) Per Share | Basic Income (Loss) Per Share Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the three and nine months ended September 30, 2020, the potentially dilutive securities were (i) warrants for the purchase of 55,560 shares of common stock issued to affiliates of the underwriter in its initial public offering described below and (ii) options for the purchase of 483,158 shares of common stock. These potentially dilutive securities were excluded from diluted loss per share. |
Going Concern Assessment | Going Concern Assessment Management assesses going concern uncertainty in the Company's financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the financial statements are issued or available to be issued, which is referred to as the "look-forward period", as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. The Company has generated losses since its acquisition and has relied on cash on hand, external bank lines of credit, issuance of third party and related party debt and the sale of a note to support cashflow from operations. For the nine months ended September 30, 2020, the Company incurred operating losses of $4,879,963, cash flows from operations of $7,383,978, and negative working capital of $4,898,501. Management has prepared estimates of operations for fiscal year 2020 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of the financial statements in the Company's 10-Q. On August 4, 2020, the Company completed an initial public offering of its common stock, pursuant to which the Company sold 1,111,200 shares of its common stock, at a purchase price of $9.00 per share, for total gross proceeds of $10,000,800 (the "IPO"). After deducting the underwriting commission and offering expenses, the Company received net proceeds of. $8,602,166. The Company used a portion of the proceeds from this offering to pay off certain debt. The impact of COVID-19 on the Company's business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal operations. The accompanying financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these financial statements, indicate improved operations and the Company's ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-02, Leases (Topic 842) In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Compensation - Stock Compensation In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement 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 The Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company's financial statements. |
Reclassifications | Reclassifications Certain accounts have been reclassified to conform with classifications adopted in the period ended September 30, 2020. Such reclassifications had no effect on net earnings or financial position. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of disaggregated revenue | Successor Predecessor Three Months Ended Three Months Ended Nine Months Ended Period from April 6, 2019 through Period from January 1, 2019 Appliance sales $ 8,991,853 $ 10,086,490 $ 28,326,963 $ 18,535,800 $ 9,784,525 Furniture sales 3,554,704 1,398,843 7,604,867 2,969,389 2,456,085 Other sales 888,538 716,938 2,465,474 1,242,962 706,291 Total $ 13,435,095 $ 12,202,271 $ 38,397,304 $ 22,748,151 $ 12,946,901 |
Schedule of property and equipment useful lives | Category Useful Life (Years) Machinery and equipment 5 Office equipment 5 Vehicles 5 |
Receivables (Tables)
Receivables (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of receivables | September 30, December 31, Credit card payments in process of settlement $ 274,179 $ 406,838 Vendor rebates receivable 945,276 1,455,248 Total $ 1,219,455 $ 1,862,086 |
Merchandise Inventory (Tables)
Merchandise Inventory (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | September 30, December 31, Appliances $ 3,205,699 $ 1,538,552 Furniture 191,310 184,755 Other 114,864 81,783 Total merchandise inventory 3,511,873 1,805,090 Allowance for inventory obsolescence (425,000 ) (425,000 ) Merchandise inventory, net $ 3,086,873 $ 1,380,090 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | September 30, 2020 December 31, Equipment $ 14,976 $ 7,376 Warehouse equipment 61,070 29,188 Furniture and fixtures 512 512 Transportation equipment 63,784 63,784 Leasehold improvements 129,203 117,626 Total property and equipment 269,545 218,486 Accumulated depreciation (67,143 ) (32,880 ) Property and equipment, net $ 202,402 $ 185,606 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | September 30, December 31, Customer relationships $ 749,00 $ 749,000 Marketing related 1,368,000 1,368,000 Total intangible assets 2,117,000 2,117,000 Accumulated amortization (480,805 ) (238,156 ) Intangible assets, net $ 1,636,195 $ 1,878,844 |
Schedule of annual amortization expense | 2020 (remainder of year) $ 80,883 2021 323,532 2022 323,532 2023 323,532 2024 122,132 Thereafter 462,584 Total $ 1,636,195 |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Schedule of preliminary analysis for the Goedeker asset purchase | Purchase consideration at fair value: Note payable, net of $462,102 debt discount and $215,500 of capitalized financing costs $ 3,422,398 Contingent note payable 81,494 Fair value of ownership interest in Holdco transferred to seller 979,523 Amount of consideration $ 4,483,415 Assets acquired and liabilities assumed at fair value Accounts receivable $ 334,446 Inventories 1,851,251 Working capital adjustment receivable and other assets 1,104,863 Property and equipment 216,286 Customer related intangibles 749,000 Marketing related intangibles 1,368,000 Accounts payable and accrued expenses (3,929,876 ) Customer deposits (2,308,307 ) Net tangible assets acquired (liabilities assumed) $ (614,337 ) Total net assets acquired (liabilities assumed) $ (614,337 ) Consideration paid 4,483,415 Goodwill $ 5,097,752 |
Notes Payable and Warrant Lia_2
Notes Payable and Warrant Liability (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of maturities of debt | For the years ended December 31, 2020 (remainder of year) $ 162,498 2021 663,339 2022 685,222 2023 707,826 2024 731,177 2025 496,064 Total $ 3,446,126 Less: Loan costs (103,524 ) Total $ 3,342,602 |
Operating Lease (Tables)
Operating Lease (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of supplemental balance sheet information related to leases | Operating lease right-of-use asset $ 2,300,000 Accumulated amortization (613,577 ) Net balance $ 1,686,423 Lease liability, current portion $ 443,469 Lease liability, long-term 1,242,954 Total operating lease liability $ 1,686,423 Weighted average remaining lease term (months) 42 Weighted average discount rate 6.5 % |
Schedule of maturities of the lease liability | 2020 (remainder of year) $ 135,000 2021 540,000 2022 540,000 2023 540,000 2024 135,000 Total lease payments $ 1,890,000 Less imputed interest (203,577 ) Total lease liability $ 1,686,423 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Schedule of date of grant and terminate | Shares Weighted Average Exercise Price Weighted Average Outstanding at December 31, 2019 - $ - - Granted 483,158 9.00 6.25 Exercised - - - Forfeited / Cancelled / Expired - - - Outstanding at September 30, 2020 483,158 $ 9.00 6.25 Exercisable at September 30, 2020 65,790 $ 9.00 6.25 Shares Weighted Average Exercise Price Weighted Average Outstanding at December 31, 2019 - $ - - Granted 55,560 11.25 4.83 Exercised - - - Cancelled / Expired - - - Outstanding at September 30, 2020 55,560 $ 11.25 4.83 Exercisable at September 30, 2020 - $ - - |
Schedule of share-based compensation expense | Volatility 46.6 % Risk-free interest rate 0.47 % Dividend yield 0.0 % Expected term 10 years Volatility 46.5 % Risk-free interest rate 0.47 % Dividend yield 0.0 % Expected term 5 years |
Schedule of stock-based compensation expense | Three months ended September 30, 2020 $ 281,194 Remainder of 2020 117,714 2021 483,185 2022 462,024 2023 367,198 2024 136,742 Total stock-based compensation $ 1,848,056 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Apr. 05, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | |
Successor [Member] | |||||
Appliance sales | $ 8,991,853 | $ 10,086,490 | $ 18,535,800 | $ 28,326,963 | |
Furniture sales | 3,554,704 | 1,398,843 | 2,969,389 | 7,604,867 | |
Other sales | 888,538 | 716,938 | 1,242,962 | 2,465,474 | |
Total revenue | $ 13,435,095 | $ 12,202,271 | $ 22,748,151 | $ 38,397,304 | |
Predecessor [Member] | |||||
Appliance sales | $ 9,784,525 | ||||
Furniture sales | 2,456,085 | ||||
Other sales | 706,291 | ||||
Total revenue | $ 12,946,901 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) | 9 Months Ended |
Sep. 30, 2020 | |
Machinery and equipment [Member] | |
Estimated useful lives of property and equipment | 5 years |
Office equipment [Member] | |
Estimated useful lives of property and equipment | 5 years |
Vehicles [Member] | |
Estimated useful lives of property and equipment | 5 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details Textual) - USD ($) | Aug. 04, 2020 | Jul. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 |
Summary of Significant Accounting Policies (Textual) | ||||
Stock split, description | The Company completed a 4,750-for-1 forward stock split of its outstanding common stock. As a result of this stock split, the Company’s issued and outstanding common stock increased from 1,000 to 4,750,000 shares. Accordingly, all share and per share information has been restated to retroactively show the effect of this stock split. | |||
Reserves for obsolete inventories | $ 425,000 | $ 425,000 | ||
Income tax positions, description | The largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. | |||
Options to purchase common stock | 483,158 | |||
Incurred operating losses | $ 4,879,963 | |||
Cash flows from operations | 7,383,978 | |||
Negative working capital | $ 4,898,501 | |||
Warrants to purchase shares | 55,560 | |||
Maximum [Member] | ||||
Summary of Significant Accounting Policies (Textual) | ||||
Intangible assets estimated useful lives | 15 years | 15 years | ||
Minimum [Member] | ||||
Summary of Significant Accounting Policies (Textual) | ||||
Intangible assets estimated useful lives | 5 years | 5 years | ||
Intial Public Offering [Member] | ||||
Summary of Significant Accounting Policies (Textual) | ||||
Initial public offering, description | The Company completed an initial public offering of its common stock, pursuant to which the Company sold 1,111,200 shares of its common stock, at a purchase price of $9.00 per share, for total gross proceeds of $10,000,800 (the "IPO"). After deducting the underwriting commission and offering expenses, the Company received net proceeds of. $8,602,166. The Company used a portion of the proceeds from this offering to pay off certain debt. |
Receivables (Details)
Receivables (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Credit card payments in process of settlement | $ 274,179 | $ 406,838 |
Vendor rebates receivable | 945,276 | 1,455,248 |
Total | $ 1,219,455 | $ 1,862,086 |
Merchandise Inventory (Details)
Merchandise Inventory (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total merchandise inventory | $ 3,511,873 | $ 1,805,090 |
Allowance for inventory obsolescence | (425,000) | (425,000) |
Merchandise inventory, net | 3,086,873 | 1,380,090 |
Appliances [Member] | ||
Total merchandise inventory | 3,205,699 | 1,538,552 |
Furniture [Member] | ||
Total merchandise inventory | 191,310 | 184,755 |
Other [Member] | ||
Total merchandise inventory | $ 114,864 | $ 81,783 |
Vendor Deposits (Details)
Vendor Deposits (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Vendor Deposits (Textaul) | ||
Vendor deposits | $ 547,648 | $ 294,960 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total property and equipment | $ 269,545 | $ 218,486 |
Accumulated depreciation | (67,143) | (32,880) |
Property and equipment, net | 202,402 | 185,606 |
Equipment [Member] | ||
Total property and equipment | 14,976 | 7,376 |
Warehouse equipment [Member] | ||
Total property and equipment | 61,070 | 29,188 |
Furniture and fixtures [Member] | ||
Total property and equipment | 512 | 512 |
Transportation equipment [Member] | ||
Total property and equipment | 63,784 | 63,784 |
Leasehold improvements[Member] | ||
Total property and equipment | $ 129,203 | $ 117,626 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Apr. 05, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | |
Property and Equipment (Textual) | |||
Depreciation expense | $ 9,675 | $ 22,578 | $ 34,264 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Customer relationships | $ 74,900 | $ 749,000 |
Marketing related | 1,368,000 | 1,368,000 |
Total intangible assets | 2,117,000 | 2,117,000 |
Accumulated amortization | (480,805) | (238,156) |
Intangible assets, net | $ 1,636,195 | $ 1,878,844 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) | Sep. 30, 2020USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 (remainder of year) | $ 80,883 |
2021 | 323,532 |
2022 | 323,532 |
2023 | 323,532 |
2024 | 122,132 |
Thereafter | 462,584 |
Total | $ 1,636,195 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Apr. 05, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | |
Intangible Assets (Textual) | ||||
Identifiable intangible assets | $ 2,117,000 | $ 2,117,000 | ||
Weighted average estimated useful life | 8 years 6 months | |||
Amortization expense | $ 76,390 | $ 0 | $ 242,649 |
Business Combination (Details)
Business Combination (Details) - Goedeker [Member] | Sep. 30, 2020USD ($) |
Purchase consideration at fair value: | |
Note payable, net of $462,102 debt discount and $215,500 of capitalized financing costs | $ 3,422,398 |
Contingent note payable | 81,494 |
Fair value of ownership interest in Holdco transferred to seller | 979,523 |
Amount of consideration | 4,483,415 |
Assets acquired and liabilities assumed at fair value | |
Accounts receivable | 334,446 |
Inventories | 1,851,251 |
Working capital adjustment receivable and other assets | 1,104,863 |
Property and equipment | 216,286 |
Customer related intangibles | 749,000 |
Marketing related intangibles | 1,368,000 |
Accounts payable and accrued expenses | (3,929,876) |
Customer deposits | (2,308,307) |
Net tangible assets acquired (liabilities assumed) | (614,337) |
Total net assets acquired (liabilities assumed) | (614,337) |
Consideration paid | 4,483,415 |
Goodwill | $ 5,097,752 |
Business Combination (Details T
Business Combination (Details Textual) - USD ($) | Jun. 02, 2020 | Apr. 05, 2019 | Sep. 30, 2020 | Dec. 31, 2019 |
Business Combination (Textual) | ||||
Write-off contingent liability | $ 32,246 | |||
Net liabilities assumed | 614,337 | |||
Adjusted value of goodwill | 121,736 | |||
Goodwill | 5,097,752 | $ 4,976,016 | ||
Goedeker [Member] | ||||
Business Combination (Textual) | ||||
Business acquisition purchase price | $ 4,483,418 | |||
Business acquisition purchase price in cash | 4,100,000 | |||
Deemed fair value | $ 3,422,398 | |||
Description of promissory note | (i) the issuance of a promissory note in the principal amount of $4,100,000 and a deemed fair value of $3,422,398; (ii) up to $600,000 in earn out payments (as described below) with a deemed fair value of $81,494; and (iii) a 22.5% ownership interest in Holdco transferred to the sellers with a deemed fair value of $979,523. | |||
Business acquisition purchase price in cash description | The report issued by that CPA firm determined that Goedeker owed the Company $809,000, which Goedeker has not paid. On or about March 23, 2020, the Company submitted a claim for arbitration to the American Arbitration Association relating to Goedeker's failure to pay. The claim alleged, inter alia, breach of contract, fraud, indemnification and the breach of the covenant of good faith and fair dealing. The Company alleged damages in the amount of $809,000, plus attorneys' fees and costs. The $809,000 is included in other assets in the accompanying balance sheet as of December 31, 2019. | |||
Goedeker Television [Member] | ||||
Business Combination (Textual) | ||||
Business acquisition purchase price payable earn out payments | $ 81,494 | |||
Business acquisition purchase price in cash description | Pursuant to the settlement agreement, the parties entered into an amendment and restatement of the 9% subordinated promissory note described below (see Note 11). In addition, the parties agreed that the arbitration action described above would be settled effective upon the closing of the IPO and that each party to such arbitration action would release all claims that it has against the other parties to such action. As part of the settlement of the arbitration action, the Company agreed that the sellers will not have to pay the $809,000 working capital adjustment amount. | Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, the Company must pay a partial earn out payment to Goedeker in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the "Achievement Percentage" is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA for the Goedeker Business was ($2,825,000) so Goedeker is not entitled to an earn our payment for that period. | ||
Earn out payments description | Goedeker is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets:  1. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;  2. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and  3. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater. | |||
Additional consideration description | The applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed. | |||
Note payable, net of debt discount | $ 462,102 | |||
Note payable, net of capitalized financing costs | $ 215,500 |
Lines of Credit (Details)
Lines of Credit (Details) - USD ($) | Aug. 04, 2020 | Apr. 05, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Jun. 24, 2019 |
Line of credit principal amount | $ 678,993 | ||||
Unamortized debt discount | $ 338,873 | ||||
Line of credit | 571,997 | ||||
Burnley [Member] | |||||
Loan and security agreement, description | (i)Â the borrowing base (as defined in the loan and security agreement) or (ii)Â $1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. | ||||
Borrowed amount | $ 744,000 | ||||
Line of credit principal amount | $ 32,350 | $ 571,997 | |||
Issuance of revolving note | $ 1,500,000 | ||||
Payoff of principal amount | 118,194 | ||||
Interest of Line of credit | 42 | ||||
Prepayment legal of other fees | $ 85,802 | ||||
Northpoint Commercial Finance LLC [Member] | |||||
Line of credit outstanding | $ 1,000,000 | ||||
Interest rate | 7.99% |
Notes Payable and Warrant Lia_3
Notes Payable and Warrant Liability (Details) | Sep. 30, 2020USD ($) |
Debt Disclosure [Abstract] | |
2020 (remainder of year) | $ 162,498 |
2021 | 663,339 |
2022 | 685,222 |
2023 | 707,826 |
2024 | 731,177 |
2025 | 496,064 |
Total | 3,446,126 |
Less: Loan costs | (103,524) |
Total | $ 3,342,602 |
Notes Payable and Warrant Lia_4
Notes Payable and Warrant Liability (Details Textual) - USD ($) | Sep. 25, 2020 | Aug. 25, 2020 | Aug. 04, 2020 | Apr. 08, 2020 | Apr. 05, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 |
Notes Payable and Warrant Liability (Textual) | ||||||||
Term loan principal amount | $ 714,286 | |||||||
Loan and security agreement, description | The Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222. | (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco. As of December 31, 2019, the balance of the note was $584,943. | ||||||
Derivative liability | $ 2,250,000 | |||||||
Increase in estimated value of warrants | $ 122,344 | |||||||
Warrant estimated charge | $ 2,127,656 | |||||||
Balance of notes amount | $ 999,201 | |||||||
Long-term liability | 3,446,126 | |||||||
Written-off | 32,246 | |||||||
Small Business Community Capital [Member] | ||||||||
Notes Payable and Warrant Liability (Textual) | ||||||||
Term loan principal amount | $ 1,500,000 | |||||||
Loan and security agreement, description | The Company used a portion of the proceeds from the IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999. | Pursuant to which the Company issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. | ||||||
Small Business Community Capital [Member] | Common Stock [Member] | ||||||||
Notes Payable and Warrant Liability (Textual) | ||||||||
Converted to stock | 250,000 | |||||||
Payroll Protection Program [Member] | ||||||||
Notes Payable and Warrant Liability (Textual) | ||||||||
Received loan | $ 642,600 | |||||||
Loan bears interest rate | 1.00% | |||||||
Term of loan | 18 months | |||||||
PPP loan current liability | $ 642,600 | |||||||
Long-term liability | $ 642,600 | |||||||
Arvest Loan [Member] | ||||||||
Notes Payable and Warrant Liability (Textual) | ||||||||
Term loan principal amount | $ 3,500,000 | |||||||
Outstanding balance of loan | 3,340,602 | |||||||
Comprised of principal | 3,446,126 | |||||||
Unamortized loan costs | $ 103,524 | |||||||
Loan bears interest rate | 3.25% | |||||||
Increase by interest rate | 6.00% | |||||||
Long-term liability | $ 657,979 | |||||||
Notes payable maturity date | Aug. 25, 2025 | |||||||
Payment of monthly loan amount | $ 63,353 |
Notes Payable, Related Parties
Notes Payable, Related Parties (Details) - USD ($) | Aug. 04, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Apr. 05, 2019 |
Notes Payable, Related Parties (Textual) | ||||
Principal amount | $ 714,286 | |||
Net unamortized debt discount | $ 338,873 | |||
Write-off of unamortized debt costs | 168,366 | |||
Balance of notes amount | $ 3,300,444 | |||
Loss on extinguishment of debt | 757,239 | |||
Forbearance fee | $ 250,000 | |||
Goedeker [Member] | ||||
Notes Payable, Related Parties (Textual) | ||||
Subordinated promissory note percentage | 9.00% | |||
Principal amount | $ 4,100,000 | |||
Goedeker [Member] | Initial Public Offering [Member] | ||||
Notes Payable, Related Parties (Textual) | ||||
Settlement agreement, description | (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the IPO, the Company agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638. |
Convertible Promissory Note (De
Convertible Promissory Note (Details) - USD ($) | Sep. 02, 2020 | Aug. 04, 2020 | May 11, 2020 | Apr. 05, 2019 | Jul. 24, 2020 | May 04, 2020 | Sep. 30, 2020 | Sep. 30, 2020 |
Convertible Promissory Note (Textual) | ||||||||
Aggregate principal amount | $ 714,286 | |||||||
Additional purchase of note, description | The Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222. | (i) 1847 Holdings issued to Leonite 50,000 common shares, (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco. As of December 31, 2019, the balance of the note was $584,943. | ||||||
Secured convertible promissory note description | 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the note to October 5, 2020, (ii) that 1847's failure to repay the note on the original maturity date of April 5, 2020 shall not constitute and event of default under the note and (iii) to increase the principal amount of the note by $207,145, as a forbearance fee. The Company accounted for this transaction as a loss on extinguishment of debt. | The amendment, (i) 1847 Holdings issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings' acquisition of Asien's Appliance, Inc., 1847 Holdings' wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien Inc. The Company accounted for the issuance of the 200,000 additional warrants as a $566,711 loss on debt restructuring and an increase in additional paid-in-capital, representing the estimated fair value of the 200,000 additional warrants for a five-year period. | ||||||
Forbearance fee | $ 250,000 | $ 250,000 | ||||||
Purchase of warrant description | Pursuant to which the warrant was amended to allow for the exercise of the warrant for 180,000 common shares of 1847 Holdings in exchange for Leonite's surrender of the remaining 20,000 common shares underlying that warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September 18, 2020, Leonite exercised the warrant in accordance with the foregoing for 180,000 common shares of 1847 Holdings. As a result, both warrants have terminated. | 1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the nine months ended September 30, 2020. | ||||||
Outstanding balance | $ 50,000 | $ 100,000 | ||||||
Shares of common stock | 50,000 | 100,000 | ||||||
Transaction cost | $ 50,000 | $ 100,000 | ||||||
Loss on conversion of debt | 50,000 | 175,000 | ||||||
Increase in additional paid-in-capital | $ 100,000 | $ 275,000 | ||||||
Loss on extinguishment of debt | $ 998,856 | $ 757,239 |
Operating Lease (Details)
Operating Lease (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Operating lease right-of-use asset | $ 1,686,423 | $ 2,000,755 |
Accumulated amortization | (613,577) | |
Net balance | 1,686,423 | |
Lease liability, current portion | 1,242,954 | $ 1,578,235 |
Lease liability, long-term | 1,242,954 | |
Total operating lease liability | $ 1,686,423 | |
Weighted average remaining lease term (months) | 42 days | |
Weighted average discount rate | 6.50% |
Operating Lease (Details 1)
Operating Lease (Details 1) | Sep. 30, 2020USD ($) |
Leases [Abstract] | |
2020 (remainder of year) | $ 135,000 |
2021 | 540,000 |
2022 | 540,000 |
2023 | 540,000 |
2024 | 135,000 |
Total lease payments | 1,890,000 |
Less imputed interest | (203,577) |
Total lease liability | $ 1,686,423 |
Operating Lease (Details Textua
Operating Lease (Details Textual) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating Lease (Textual) | ||
Term of lease | 5 years | |
Interest rate on unpaid amount | 18.00% | |
Base rent peer month | $ 45,000 | |
Expensed rent payments | $ 135,000 | $ 405,000 |
Related Parties (Details)
Related Parties (Details) - USD ($) | Apr. 05, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Related Parties (Textual) | |||
Management fee | $ 187,500 | $ 121,290 | |
Service fee to manager | $ 62,500 | ||
Warrants issued | 200,000 | ||
Shares issued | 50,000 | ||
Common shares value | $ 137,500 | ||
Warrants to purchase of common stock | 200,000 | ||
Management Services Agreement [Member] | |||
Related Parties (Textual) | |||
Description of gross income | Expected to exceed, 9.5% of 1847 Holdings' gross income with respect to such fiscal year. |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) | 9 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of Warrants Outstanding, beginning balance | shares | 55,560 |
Number of Warrants, Granted | shares | 55,560 |
Number of Warrants Outstanding, ending balance | shares | 55,560 |
Number of Warrants, Exercisable | shares | |
Weighted Average Exercise Price, Outstanding beginning balance | $ 11.25 |
Weighted Average Exercise Price, Granted | |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price Forfeited | |
Weighted Average Exercise Price, Cancelled | |
Weighted Average Exercise Price, Expired | |
Weighted Average Exercise Price, Outstanding ending balance | $ 11.25 |
Weighted Average Contractual Term in Years, Outstanding beginning balance | 4 years 9 months 29 days |
Options [Member] | |
Number of Warrants Outstanding, beginning balance | shares | 483,158 |
Number of Warrants, Granted | shares | 483,158 |
Number of Warrants, Exercised | shares | |
Number of Options, Forfeited | shares | |
Number of Warrants, Cancelled | shares | |
Number of Warrants Outstanding, ending balance | shares | 483,158 |
Number of Warrants, Exercisable | shares | 65,790 |
Weighted Average Exercise Price, Granted | $ 9 |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price Forfeited | |
Weighted Average Exercise Price, Cancelled | |
Weighted Average Exercise Price, Expired | |
Weighted Average Exercise Price, Outstanding ending balance | $ 9 |
Weighted Average Contractual Term in Years, Granted | 6 years 2 months 30 days |
Stockholders' Deficit (Details
Stockholders' Deficit (Details 1) | 9 Months Ended |
Sep. 30, 2020 | |
Volatility | 46.50% |
Risk-free interest rate | 0.47% |
Dividend yield | 0.00% |
Expected term | 5 years |
Options [Member] | |
Volatility | 46.60% |
Risk-free interest rate | 0.47% |
Dividend yield | 0.00% |
Expected term | 10 years |
Stockholders' Deficit (Detail_2
Stockholders' Deficit (Details 2) | Sep. 30, 2020USD ($) |
Equity [Abstract] | |
Three months ended September 30, 2020 | $ 281,194 |
Remainder of 2020 | 117,714 |
2021 | 483,185 |
2022 | 462,024 |
2023 | 367,198 |
2024 | 136,742 |
Total stock-based compensation | $ 1,848,056 |
Stockholders' Deficit (Detail_3
Stockholders' Deficit (Details Textual) - USD ($) | Aug. 04, 2020 | Jul. 30, 2020 | Apr. 05, 2019 | Sep. 30, 2020 | Sep. 30, 2020 | Jan. 10, 2020 | Dec. 31, 2019 |
Stockholders' Deficit (Textual) | |||||||
Common stock ,authorized | 200,000,000 | 200,000,000 | 200,000,000 | ||||
Common stock, par value | $ .0001 | $ .0001 | $ .0001 | ||||
Blank check preferred stock | 20,000,000 | 20,000,000 | |||||
Preferred stock, par value | $ .0001 | $ .0001 | $ .0001 | ||||
Certificate of incorporation, description | The Company established the 1847 Goedeker Inc. 2020 Equity Incentive Plan ("Plan"). The Plan was approved by the Company's board of directors and stockholders on April 21, 2020. The Plan is administered by compensation committee of the board of directors. The Plan permits the grant of restricted stock, stock options and other forms of incentive compensation to the Company's officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 555,000 shares. As of September 30, 2020, there were 483,158 shares granted and 71,842 shares remaining available under the Plan. | ||||||
Common stock, shares outstanding | 6,111,200 | 6,111,200 | 4,750,000 | ||||
Options issued to purchase of common stock | 483,158 | ||||||
Total compensation expense | $ 1,601,064 | ||||||
Option expense | $ 281,194 | ||||||
Remaining compensation expense | $ 1,319,870 | ||||||
Common stock, shares issued | 250,000 | 6,111,200 | 6,111,200 | 4,750,000 | |||
Shares issued during the period, shares | 1,111,200 | ||||||
Shares issued during the period | $ 10,000,800 | ||||||
Underwriting commission and expenses | $ 8,602,166 | ||||||
Warrants [Member] | |||||||
Stockholders' Deficit (Textual) | |||||||
Certificate of incorporation, description | The Company issued warrants for the purchase of 55,560 shares of common stock to affiliates of the representative in the IPO. The warrants are exercisable at any time and from time to time, in whole or in part, beginning on January 26, 2021 until July 30, 2025, at a per share exercise price equal to $11.25. The warrants will result in a total compensation expense of $168,736 to be recognized over the vesting period. As of the period ended September 30, 2020, the Company had recognized compensation expense of $54,960. The remaining compensation expense of $113,774 will be recognized over the remaining vesting period. | The Company issued to SBCC a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. SBCC exercised this warrant for the purchase of 250,000 shares of common stock on August 4, 2020. | |||||
Common Stock | |||||||
Stockholders' Deficit (Textual) | |||||||
Common stock, shares issued | 4,750,000 | ||||||
Share price per share | $ 1 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | 1 Months Ended | 9 Months Ended |
Oct. 20, 2020 | Sep. 30, 2020 | |
Subsequent Event (Textual) | ||
Purchase price, description | The cash portion of the purchase price will also be (i) decreased by (A) the amount of any outstanding unpaid indebtedness of the Companies (other than trade debt) existing as of the closing date and (B) any transaction expenses, and (ii) increased by the amount of cash or cash equivalents held by, or on the books of, the Companies as of the closing date, if any, that is in excess of $850,000. | |
Securities purchase agreement, description | Under this provision, the Sellers shall deliver to the Buyer at least one day prior to the closing of the securities purchase agreement a statement setting forth their good faith estimate of the net working capital of the Companies. If such estimated net working capital exceeds a target net working capital of -$15,476,941, then within five (5) days the Buyer shall make a cash payment to the Sellers that is equal to such excess. If such target net working capital exceeds such estimated net working capital, then either (i) if finally determined at the closing, the cash portion of the purchase price shall be decreased by such excess or (ii) within 5 days of the closing, the Sellers shall make a cash payment to the Buyer that is equal to such excess. | |
Buyer paid a deposit | $ 100,000 | |
Subsequent Event [Member] | ||
Subsequent Event (Textual) | ||
Securities purchase agreement, description | The Company entered into a securities purchase agreement with Appliances Connection Inc., a newly-formed wholly owned subsidiary of the Company (the "Buyer"), 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe's Appliances LLC and YF Logistics LLC (collectively, the "Companies") and the other parties signatory thereto (the "Sellers"), pursuant to which the Buyer agreed to acquire all of the issued and outstanding capital stock or other equity securities of the Companies from the Sellers for an aggregate purchase price of $210,000,000, subject to adjustment as described below. The purchase price consists of (i) $168,000,000 in cash, (ii) 1,222,239 shares of the Company's common stock, and 1,111,094 shares of the Company's series A preferred stock, collectively having a stated value that is equal to $21,000,000, and (iii) a number of shares of the Company's series A-1 preferred stock that is equal to (A) $21,000,000 divided by (B) the average of the closing price of the shares of the Company's common stock (as reported on NYSE American) for the 20 trading days immediately preceding the 3rd trading day prior to the closing date of the securities purchase agreement. The terms of the series A preferred stock and series A-1 preferred stock have not yet been determined. |