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Financial Performance Overview - The group experienced a decline in earnings, primarily due to weaker performance in the Swedish media houses and distribution operations[3,8] - Digital revenues increased, adjusted for currency effects, by 11.7%, while operating costs decreased by 0.5%[6] - Helthjem Netthandel contributed negatively to the earnings decline by MNOK 5[9] Digital Revenue and User Growth - Strong growth in digital user revenues was observed in both Norway and Sweden[7] - Digital advertising revenues also increased in both countries[7] - Revenues from purely digital products accounted for more than half of the media houses' total advertising and user revenues for the first time[7] Cost Management and Efficiency Measures - Measures implemented in 2023 and 2024 helped limit the group's underlying cost growth to 1%[7] - Further measures were implemented in the Swedish distribution business during the quarter, with savings expected from the third quarter of 2025[7] - A process was initiated to reduce staffing by approximately 60 full-time positions in the Swedish media houses, with savings expected from the fourth quarter of 2025[7] Distribution Performance - Distribution in Norway saw earnings growth driven by reduced costs and increased earnings contribution from Aktiv Norgesdistribusjon[37] - Distribution in Sweden experienced weak earnings development, with new measures implemented and expected to take effect from the next quarter[37] Stampen Media Initiatives - Measures in the distribution business of Stampen Media have been implemented, and further efficiency measures are being implemented in the media business, with an annual earnings effect of approximately MSEK 60[46] - The commenced staff reduction process is expected to result in annual cost savings of approximately MSEK 45[48] - Structural changes related to distribution geography and branch structure were implemented in the second quarter of 2025, with savings expected from the third quarter of 2025, resulting in an annual earnings effect of approximately MSEK 15[49] Financial Position and Cash Flow - The group paid out dividends of MNOK 1,095 in the quarter[52] - The group sold shares in FINN for MNOK 2,500, receiving payment in Vend shares[54]

Summary of Polymetals Resources (POL) 2025 Conference Company Overview - Polymetals Resources is identified as Australia's newest silver and zinc producer, having recently commenced production from the Endeavour Silver zinc mine [1] - The company emphasizes a cost-efficient management and an owner-operator approach [1][2] Key Developments - Acquisition of the Endeavour Silver Zinc mine occurred twelve months prior, followed by securing financing and beginning redevelopment in November [3] - Mining production commenced in May, with mill commissioning starting in June and first cash flow received in July [4][12] Project Details - The Endeavour project has a polymetallic ore body of 50 million tonnes, with historical production of 92 million ounces of silver, 2.6 million tonnes of zinc, and 1.6 million tonnes of lead [7] - The project was previously placed on care and maintenance due to an uneconomic 100% silver streaming royalty, which was restructured to a 4% NSR, recovering approximately 25% of lost revenues [5] Production and Financial Performance - In July, the company generated $15.5 million in cash flow and has $22 million in the bank [14] - The company is currently operating at about 60% of its steady-state production, with plans to ramp up to full capacity by October [14][20] Exploration and Future Plans - Continuous drilling programs are in place to extend mine life and explore new areas, particularly targeting a southern extension of the main ore body [15][16] - The company plans to spend approximately $7.5 million annually on exploration, aiming to be Australia's lowest-cost zinc producer [21] Infrastructure and Operational Efficiency - The mine is fully developed and serviced, with a processing plant capable of handling 1.2 million tonnes [6][10] - The company has agreements in place to mill ore from nearby operations, enhancing operational efficiency [20] Management and Strategic Goals - The management team has a strong commitment to the project, having invested significantly in its success [2] - The company aims to optimize existing assets and potentially introduce a second project in the future [22] Conclusion - Polymetals Resources has made significant strides in bringing the Endeavour project back to production, with a focus on cost management, exploration, and operational efficiency [22][23]

Company Overview - Polymetals is an Australian silver and zinc producer focused on the Endeavor Silver Zinc Mine in the Cobar Basin, NSW[1, 4, 10, 11] - Board and management hold approximately 35% of the company, representing an investment of over $10 million[6] Endeavor Mine Operations & Resources - The Endeavor mine has a 1.2 million tonnes per annum (1.2Mtpa) processing capacity and significant existing infrastructure[15] - The mine has a remaining mineral resource of 16.3 million tonnes (16.3Mt) containing 44.2 million ounces (44.2Moz) of silver, 1.3 million tonnes (1.3Mt) of zinc and 0.73 million tonnes (0.73Mt) of lead[16, 17, 61] - Initial 10-year mine plan targets early silver cash flow, projecting 21.4 million ounces (21.4Moz) of contained silver, 400,000 tonnes of contained zinc, and 172,000 tonnes of contained lead[19] - The first 2 years of the mine plan are projected to generate $250 million EBITDA from 5 million ounces (5Moz) of silver production[19] Financial Performance & Exploration - Concentrate prepayments for July 2025 totaled $11.6 million, with $15.5 million in operating cash flow generated to the end of July 2025[35] - As of August 4, 2025, the company had A$22 million cash at bank and A$7 million available from a finance facility[35, 48] - The company has a $7.5 million annual exploration budget to extend mine life and discover new deposits[37] - Polymetals owns 1,107 square kilometers (1,107km²) of exploration licenses in the Northern Cobar Basin, offering potential for new discoveries[39]

Group 1 - The company, Polished.com Inc., has acknowledged unusual market activity in its stock but is not aware of any undisclosed material changes in its business that would explain the recent increase in share price and trading volume [1] - Polished.com Inc. aims to provide a high-quality shopping experience for home appliances, offering a range of top brand products and exceptional customer service [2] - The company offers a "Love-It-Or-Return-It" 30-day policy, extended warranties, and convenient delivery and installation options to enhance customer satisfaction [2]

PART I FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) The company presents its unaudited condensed consolidated financial statements for the period ended September 30, 2023 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and stockholders' equity from December 31, 2022, to September 30, 2023 Balance Sheet Summary | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $9,811 | $19,549 | $(9,738) | -49.8% | | Restricted cash | $5,391 | $950 | $4,441 | 467.5% | | Receivables, net | $19,864 | $26,650 | $(6,786) | -25.5% | | Vendor deposits | $30,828 | $25,022 | $5,806 | 23.2% | | Merchandise inventory, net | $30,093 | $41,766 | $(11,673) | -27.9% | | Total Current Assets | $107,513 | $125,154 | $(17,641) | -14.1% | | Total Assets | $238,817 | $261,914 | $(23,097) | -8.8% | | Total Current Liabilities | $90,968 | $99,295 | $(8,327) | -8.4% | | Total Liabilities | $184,451 | $199,349 | $(14,898) | -7.5% | | Total Stockholders' Equity | $54,366 | $62,565 | $(8,199) | -13.1% | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company experienced significant declines in product sales but improved gross margin, with net loss increasing for both periods Three Months Ended September 30, 2023 vs 2022 | Metric (in thousands) | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Product sales, net | $77,818 | $143,566 | $(65,748) | -45.8% | | Cost of goods sold | $62,513 | $122,431 | $(59,918) | -48.9% | | Gross profit | $15,305 | $21,135 | $(5,830) | -27.6% | | Gross margin | 19.7% | 14.7% | 5.0 pp | | | Total Operating Expenses | $21,300 | $31,956 | $(10,656) | -33.3% | | LOSS FROM OPERATIONS | $(5,995) | $(10,821) | $4,826 | -44.6% | | Interest expense | $(1,886) | $(1,351) | $(535) | 39.6% | | NET LOSS | $(6,634) | $(5,184) | $(1,450) | 28.0% | | Basic EPS | $(3.14) | $(2.46) | $(0.68) | 27.6% | Nine Months Ended September 30, 2023 vs 2022 | Metric (in thousands) | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Product sales, net | $261,018 | $430,710 | $(169,692) | -39.4% | | Cost of goods sold | $204,987 | $355,788 | $(150,801) | -42.4% | | Gross profit | $56,031 | $74,922 | $(18,891) | -25.2% | | Gross margin | 21.5% | 17.4% | 4.1 pp | | | Total Operating Expenses | $61,826 | $79,658 | $(17,832) | -22.4% | | LOSS FROM OPERATIONS | $(5,795) | $(4,736) | $(1,059) | 22.4% | | Interest expense | $(4,821) | $(2,594) | $(2,227) | 85.8% | | NET LOSS | $(8,391) | $(3,657) | $(4,734) | 129.5% | | Basic EPS | $(3.98) | $(1.73) | $(2.25) | 130.1% | [Condensed Consolidated Statement of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders'%20Equity) Stockholders' equity decreased primarily due to net losses incurred during the period, partially offset by minor stock issuances | Metric (in thousands) | Jan 1, 2023 | Sep 30, 2023 | | :-------------------- | :---------- | :----------- | | Total Stockholders' Equity | $62,565 | $54,366 | | Net loss (9 months) | | $(8,391) | | Stock compensation expense | | $10 | - Total stockholders' equity **decreased by $8.199 million** from January 1, 2023, to September 30, 2023, primarily due to accumulated deficit from net losses[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operating activities was significantly reduced, but increased use of cash in financing activities led to a net decrease in cash Nine Months Ended September 30, 2023 vs 2022 | Metric (in thousands) | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Net cash used in operating activities | $(390) | $(38,693) | $38,303 | -99.0% | | Net cash used in investing activities | $(140) | $(1,318) | $1,178 | -89.4% | | Net cash (used in) provided by financing activities | $(4,767) | $36,386 | $(41,153) | -113.1% | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $(5,297) | $(3,625) | $(1,672) | 46.1% | | Cash, cash equivalents, and restricted cash, END OF PERIOD | $15,202 | $30,166 | $(14,964) | -49.6% | - Significant changes in operating activities for 9M 2023 include cash provided by receivables (**$7.0M**) and inventory (**$12.9M**), and cash used by vendor deposits (**$5.8M**), accounts payable (**$4.9M**), and customer deposits (**$2.8M**)[148](index=148&type=chunk) - Financing activities for 9M 2023 primarily involved repayments of notes payable (**$4.7M**), contrasting with 9M 2022 which saw **$43.0M cash received** from notes payable and **$2.0M in stock repurchases**[149](index=149&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, liquidity issues, revenue disaggregation, debt agreements, and other key financial disclosures [NOTE 1—BASIS OF PRESENTATION](index=13&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim financial reporting, reflecting normal recurring adjustments[28](index=28&type=chunk) - Interim results for the three and nine months ended September 30, 2023, are **not necessarily indicative of full-year or future period results**[28](index=28&type=chunk) [NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS](index=13&type=section&id=NOTE%202%E2%80%94RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - The Company adopted ASU 2016-13 (Credit Losses), ASU 2021-08 (Business Combinations), and ASU 2022-02 (Troubled Debt Restructurings) on January 1, 2023[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The adoption of these accounting updates **did not have a material impact** on the consolidated financial statements and related disclosures[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT](index=14&type=section&id=NOTE%203%E2%80%94LIQUIDITY%20AND%20GOING%20CONCERN%20ASSESSMENT) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $9,800 | $19,600 | | Restricted cash | $5,400 | $1,000 | | Vendor deposits | $30,800 | $25,000 | | Operating loss (9 months/full year) | $5,800 | $134,400 | | Cash flows used in operations (9 months/full year) | $400 | $46,700 | | Working capital | $15,900 | $25,900 | - **Substantial doubt exists** regarding the Company's ability to continue as a going concern based on initial assessment[37](index=37&type=chunk) - Management's plans to mitigate going concern uncertainty include: loan amendment with Bank of America, headcount reductions, warehouse consolidation, improving digital advertising, implementing new customer financing initiatives, and shifting sales focus to higher-margin luxury products[38](index=38&type=chunk)[39](index=39&type=chunk)[45](index=45&type=chunk) [NOTE 4—DISAGGREGATION OF REVENUES](index=15&type=section&id=NOTE%204%E2%80%94DISAGGREGATION%20OF%20REVENUES) Disaggregated Revenue by Product Type (in thousands) | Product Type | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Appliance sales | $70,620 | $136,044 | $234,797 | $402,835 | | Furniture and other sales | $7,198 | $7,522 | $26,221 | $27,875 | | Total | $77,818 | $141,566 | $261,018 | $430,710 | - Appliance sales **decreased by 48.1%** for the three months and **41.7% for the nine months** ended September 30, 2023, compared to the same periods in 2022[45](index=45&type=chunk) [NOTE 5—SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES](index=16&type=section&id=NOTE%205%E2%80%94SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20DISCLOSURES) [Receivables](index=16&type=section&id=Receivables) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Trade accounts receivable | $15,050 | $13,691 | | Vendor rebates receivable | $5,459 | $8,514 | | Other receivables | $637 | $5,951 | | Total receivables, net | $19,864 | $26,650 | - Total receivables, net, **decreased by $6.786 million (25.5%)** from December 31, 2022, to September 30, 2023, primarily due to a decrease in vendor rebates and other receivables[47](index=47&type=chunk) [Merchandise Inventory](index=16&type=section&id=Merchandise%20Inventory) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Appliances | $28,240 | $39,702 | | Furniture and other | $2,442 | $3,853 | | Total merchandise inventory, net | $30,093 | $41,766 | - Total merchandise inventory, net, **decreased by $11.673 million (27.9%)** from December 31, 2022, to September 30, 2023, with appliances accounting for the majority of the reduction[48](index=48&type=chunk) [Property and Equipment](index=16&type=section&id=Property%20and%20Equipment) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Total property and equipment | $5,903 | $6,764 | | Accumulated depreciation | $(2,628) | $(1,689) | | Property and equipment, net | $3,275 | $5,075 | - Property and equipment, net, **decreased by $1.8 million (35.5%)** from December 31, 2022, to September 30, 2023[49](index=49&type=chunk) Depreciation Expense (in thousands) | Period | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Three Months | $0.3 | $0.9 | | Nine Months | $0.9 | $2.9 | [Intangible Assets](index=18&type=section&id=Intangible%20Assets) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Total intangible assets | $10,296 | $10,296 | | Accumulated amortization | $(2,260) | $0 | | Intangible assets, net | $8,036 | $10,296 | Amortization Expense (in thousands) | Period | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Three Months | $0.8 | $2.6 | | Nine Months | $2.3 | $7.7 | Estimated Annual Amortization Expense (in thousands) | Year ending December 31, | Amount | | :----------------------- | :----- | | 2023 (Remainder of year) | $754 | | 2024 | $3,013 | | 2025 | $3,013 | | 2026 | $1,256 | | 2027 | $0 | | Total | $8,036 | [Accounts Payable and Accrued Expenses](index=18&type=section&id=Accounts%20Payable%20and%20Accrued%20Expenses) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Trade accounts payable | $38,002 | $34,345 | | Accrued sales tax | $32,039 | $36,196 | | Accrued payroll liabilities | $1,110 | $680 | | Accrued liability for sales returns | $1,916 | $3,916 | | Other accrued liabilities | $3,303 | $5,151 | | Total accounts payable and accrued expenses | $76,524 | $81,537 | - Total accounts payable and accrued expenses **decreased by $5.013 million (6.1%)** from December 31, 2022, to September 30, 2023, mainly due to reductions in accrued sales tax and sales returns liability[55](index=55&type=chunk) [NOTE 6—OPERATING LEASES](index=19&type=section&id=NOTE%206%E2%80%94OPERATING%20LEASES) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Operating lease right-of-use assets | $9,172 | $11,688 | | Lease liabilities, current portion | $1,945 | $3,726 | | Lease liabilities, long-term | $7,919 | $9,013 | | Total operating lease liabilities | $9,864 | $12,739 | - Operating lease right-of-use assets **decreased by $2.516 million (21.5%)** and total operating lease liabilities **decreased by $2.875 million (22.6%)** from December 31, 2022, to September 30, 2023[57](index=57&type=chunk) Operating Lease Expense (in thousands) | Period | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Three Months | $1.3 | $3.2 | | Nine Months | $3.2 | $8.6 | Maturities of Operating Lease Liabilities (in thousands) | Years Ending December 31, | Amount | | :------------------------ | :----- | | 2023 (Remainder of year) | $948 | | 2024 | $1,808 | | 2025 | $1,489 | | 2026 | $1,532 | | 2027 | $1,284 | | Thereafter | $4,158 | | Total | $11,219 | | Less: imputed interest | $(1,355) | | Total operating lease liabilities | $9,864 | [NOTE 7—RELATED PARTIES](index=20&type=section&id=NOTE%207%E2%80%94RELATED%20PARTIES) - The Company terminated a lease agreement with 8780 19 Ave LLC (an entity owned by former officers) on August 23, 2023, agreeing to pay **$100,000** and terminating claims for reimbursement of building improvements[61](index=61&type=chunk) - The Company is a member of DMI, an appliance purchasing cooperative, and approximately **65% of total purchases** during the nine months ended September 30, 2023, were from DMI, with vendor deposits totaling **$30.8 million**[62](index=62&type=chunk)[63](index=63&type=chunk)[96](index=96&type=chunk) - Total rent expense under related party leases was **$0.8 million** for the nine months ended September 30, 2023[64](index=64&type=chunk) [NOTE 8—NOTES PAYABLE](index=21&type=section&id=NOTE%208%E2%80%94NOTES%20PAYABLE) - The Bank of America Credit Agreement includes a **$100.0 million Term Loan** and a **$40.0 million Revolving Loan** (frozen due to non-compliance), with the Term Loan's carrying value at **$92.3 million** as of September 30, 2023[66](index=66&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - The Second Amendment (November 20, 2023) **waived events of default**, deferred a principal installment, and set a new maturity date of **November 30, 2024**, while increasing the applicable interest rate to **4.00%**[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - The Company is discussing with investment bankers to replace the existing credit agreement by August 31, 2024, due to the reduced term[76](index=76&type=chunk) Maturities of Notes Payable (in thousands) | For the years ended December 31, | Amount | | :------------------------------- | :----- | | 2023 (Remainder of year) | $1,033 | | 2024 | $92,531 | | 2025 | $201 | | 2026 | $29 | | 2027 | $21 | | Thereafter | $0 | | Total | $93,815 | | Less: Loan costs | $(796) | | Total | $93,019 | | Amount classified as a current liability | $7,859 | | Amount classified as long-term liability | $85,160 | [NOTE 9—DERIVATIVE INSTRUMENTS (INTEREST RATE SWAP)](index=23&type=section&id=NOTE%209%E2%80%94DERIVATIVE%20INSTRUMENTS%20(INTEREST%20RATE%20SWAP)) - The Company entered into an interest rate swap agreement with a notional amount of **$100 million** to reduce exposure to floating SOFR rates, paying a fixed rate of **2.93%**[79](index=79&type=chunk) Gain on Change in Fair Value of Derivative Instruments (in thousands) | Period | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Three Months | $446 | $4,476 | | Nine Months | $1,020 | $3,540 | - As of September 30, 2023, the fair value of the interest rate swap was **$4.2 million**, classified as a derivative asset[80](index=80&type=chunk) [NOTE 10—STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2010%E2%80%94STOCKHOLDERS'%20EQUITY) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :----- | :----------- | :----------- | | Common stock outstanding | 2,109,398 | 2,104,558 | Stock Options Activity (9 months ended Sep 30, 2023) | Activity | Options | Weighted Average Exercise Price | | :------- | :------ | :------------------------------ | | Outstanding at Dec 31, 2022 | 750 | $155.00 | | Granted | 1,731 | $28.89 | | Forfeited | (750) | $155.00 | | Outstanding at Sep 30, 2023 | 1,731 | $28.89 | | Exercisable at Sep 30, 2023 | 0 | $0 | - Stock-based compensation expense for the nine months ended September 30, 2023, was **$0.2 million**, with **$0.03 million** remaining unrecognized compensation cost[84](index=84&type=chunk) Warrants Outstanding (9 months ended Sep 30, 2023) | Activity | Warrants | Weighted Average Exercise Price | | :------- | :---------- | :------------------------------ | | Outstanding at Dec 31, 2022 | 1,871,333 | $114.85 | | Outstanding at Sep 30, 2023 | 1,871,333 | $114.85 | | Exercisable at Sep 30, 2023 | 1,871,333 | $114.85 | [NOTE 11—EARNINGS (LOSS) PER SHARE](index=24&type=section&id=NOTE%2011%E2%80%94EARNINGS%20(LOSS)%20PER%20SHARE) Basic and Diluted EPS (Three Months Ended Sep 30) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Net income (loss) | $(6,634) | $(5,184) | | Basic weighted average common shares outstanding | 2,109,398 | 2,104,558 | | Basic earnings (loss) per share | $(3.14) | $(2.46) | | Diluted earnings (loss) per share | $(3.14) | $(2.46) | Basic and Diluted EPS (Nine Months Ended Sep 30) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Net income (loss) | $(8,391) | $(3,657) | | Basic weighted average common shares outstanding | 2,108,811 | 2,115,846 | | Basic earnings (loss) per share | $(3.98) | $(1.73) | | Diluted earnings (loss) per share | $(3.98) | $(1.73) | - Potentially dilutive options and warrants (**1,852,015 for 2023** and **1,871,333 for 2022**) were excluded from diluted EPS calculations as their effect was anti-dilutive[87](index=87&type=chunk) [NOTE 12—COMMITMENTS AND CONTINGENCIES](index=25&type=section&id=NOTE%2012%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) - The Company resolved a legal action (205 Petition) regarding a share increase proposal, agreeing to pay **$475,000** for attorneys' fees to stockholders' counsel on June 28, 2023[91](index=91&type=chunk) - A putative shareholder class action (Maschhof v. Polished.com Inc.) was filed on October 31, 2022, alleging misstatements in SEC filings related to the 2020 IPO[92](index=92&type=chunk) - Two derivative stockholder complaints were filed in early 2023, alleging breaches of fiduciary duty and other claims related to IPO filings; these actions are currently stayed or awaiting consolidation[94](index=94&type=chunk)[95](index=95&type=chunk) [NOTE 13—SUPPLIER CONCENTRATION](index=26&type=section&id=NOTE%2013%E2%80%94SUPPLIER%20CONCENTRATION) - Approximately **65% of the Company's purchases** for the nine months ended September 30, 2023, were made from DMI, an appliance purchasing cooperative[96](index=96&type=chunk) - The Company believes numerous other suppliers could be substituted if DMI became unavailable or non-competitive[96](index=96&type=chunk) [NOTE 14—SUBSEQUENT EVENTS](index=26&type=section&id=NOTE%2014%E2%80%94SUBSEQUENT%20EVENTS) - The Company signed a letter of intent for a new warehouse sublease from DMI, aiming to consolidate operations into one new **232,640 sq ft facility** for seven years[97](index=97&type=chunk) - The Second Amendment to the Bank of America Credit Agreement (Nov 20, 2023) **waived events of default**, deferred a principal installment, and set a new maturity date of **November 30, 2024**[98](index=98&type=chunk)[99](index=99&type=chunk) - A **1-for-50 reverse stock split** became effective on October 20, 2023, approved by shareholders on October 19, 2023[100](index=100&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Management provides its perspective on the company's financial condition, results of operations, liquidity, and capital resources [Overview](index=27&type=section&id=Overview) - Polished.com Inc. operates as a content-driven and technology-enabled shopping destination for appliances, furniture, and home goods[103](index=103&type=chunk) - The Company offers a wide range of national, global, and luxury brands, as well as commercial appliances, through warehouse fulfillment centers and showrooms[103](index=103&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) Recent developments include significant amendments to the Bank of America Credit Agreement and the implementation of a 1-for-50 reverse stock split [Amendment of Bank of America Credit Agreement](index=27&type=section&id=Amendment%20of%20Bank%20of%20America%20Credit%20Agreement) - The First Amendment (July 25, 2023) required the Company to maintain **$8.0 million in liquidity**, including cash and qualifying receivables[104](index=104&type=chunk) - The Second Amendment (November 20, 2023) **waived events of default**, deferred a principal installment of **$937,500** until January 31, 2024, and set a new maturity date of **November 30, 2024**[105](index=105&type=chunk) - The applicable interest rate for the Term Loan and Revolving Loan **increased to 4.00%**, with an additional **2% increase** following an event of default[106](index=106&type=chunk) - The Company entered into an interest rate swap agreement, capping its interest rate at **2.9% plus applicable margins**[107](index=107&type=chunk) [Reverse Stock Split](index=29&type=section&id=Reverse%20Stock%20Split) - A **1-for-50 reverse stock split** became effective on October 20, 2023, converting every 50 shares of common stock into one share[110](index=110&type=chunk) - Proportionate adjustments were made to the exercise price and number of shares for outstanding stock options, warrants, and convertible securities[110](index=110&type=chunk) [Trends and Principal Factors Affecting Our Financial Performance](index=29&type=section&id=Trends%20and%20Principal%20Factors%20Affecting%20Our%20Financial%20Performance) - Key factors affecting financial performance include customer acquisition, competitive pricing, product offerings, industry demand, market conditions, and integration of Appliances Connection operations[112](index=112&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) The company experienced significant revenue declines due to economic slowdown and a strategic shift, but gross margin improved [Comparison of Three Months Ended September 30, 2023 and 2022](index=30&type=section&id=Comparison%20of%20Three%20Months%20Ended%20September%2030,%202023%20and%202022) Key Financials (Three Months Ended Sep 30, in thousands) | Metric | 2023 Amount | 2023 % of Sales | 2022 Amount | 2022 % of Sales | Change (Amount) | Change (%) | | :-------------------------- | :---------- | :-------------- | :---------- | :-------------- | :-------------- | :--------- | | Product sales, net | $77,818 | 100.0% | $143,566 | 100.0% | $(65,748) | -45.8% | | Cost of goods sold | $62,513 | 80.3% | $122,431 | 85.3% | $(59,918) | -48.9% | | Gross profit | $15,305 | 19.7% | $21,135 | 14.7% | $(5,830) | -27.6% | | Personnel | $5,874 | 7.5% | $8,348 | 5.8% | $(2,474) | -29.6% | | Advertising | $5,061 | 6.5% | $7,534 | 5.2% | $(2,473) | -32.8% | | Bank and credit card fees | $2,557 | 3.3% | $5,932 | 4.1% | $(3,375) | -56.9% | | Depreciation and amortization | $1,061 | 1.4% | $2,882 | 2.0% | $(1,821) | -63.2% | | General and administrative | $6,747 | 8.7% | $7,260 | 5.1% | $(513) | -7.1% | | LOSS FROM OPERATIONS | $(5,995) | -7.7% | $(10,821) | -7.5% | $4,826 | -44.6% | | Total Other Income (Expenses) | $(806) | -1.0% | $3,249 | 2.3% | $(4,055) | -124.8% | | NET LOSS | $(6,634) | -8.5% | $(5,184) | -3.6% | $(1,450) | 28.0% | - The decrease in sales is attributed to a general economic slowdown, inflation, increased interest rates, and a **strategic shift to emphasize higher-margin sales**[114](index=114&type=chunk) - **Gross margin improved from 14.7% to 19.7%** due to management's emphasis on profitability[116](index=116&type=chunk) - Personnel expenses **decreased by $2.5 million** due to a reduction in force, including **$0.2 million in severance costs**[117](index=117&type=chunk) - Depreciation and amortization decreased due to a 2022 impairment charge that reduced the amount of intangible assets to be amortized[120](index=120&type=chunk) - General and administrative expenses decreased due to lower insurance premiums and professional fees, partially offset by a write-off of fixed assets[121](index=121&type=chunk) [Comparison of the Nine Months ended September 30, 2023 and 2022](index=32&type=section&id=Comparison%20of%20the%20Nine%20Months%20ended%20September%2030,%202023%20and%202022) Key Financials (Nine Months Ended Sep 30, in thousands) | Metric | 2023 Amount | 2023 % of Sales | 2022 Amount | 2022 % of Sales | Change (Amount) | Change (%) | | :-------------------------- | :---------- | :-------------- | :---------- | :-------------- | :-------------- | :--------- | | Product sales, net | $261,018 | 100.0% | $430,710 | 100.0% | $(169,692) | -39.4% | | Cost of goods sold | $204,987 | 78.5% | $355,788 | 82.6% | $(150,801) | -42.4% | | Gross profit | $56,031 | 21.5% | $74,922 | 17.4% | $(18,891) | -25.2% | | Personnel | $18,379 | 7.0% | $22,396 | 5.2% | $(4,017) | -17.9% | | Advertising | $14,694 | 5.6% | $18,475 | 4.3% | $(3,781) | -20.5% | | Bank and credit card fees | $8,935 | 3.4% | $15,121 | 3.5% | $(6,186) | -40.9% | | Depreciation and amortization | $3,199 | 1.2% | $8,588 | 2.0% | $(5,389) | -62.7% | | General and administrative | $16,619 | 6.4% | $15,078 | 3.5% | $1,541 | 10.2% | | LOSS FROM OPERATIONS | $(5,795) | -2.2% | $(4,736) | -1.1% | $(1,059) | 22.4% | | Total Other Income (Expenses) | $(2,331) | -0.9% | $(2,155) | -0.5% | $(176) | 8.2% | | NET LOSS | $(8,391) | -3.2% | $(3,657) | -0.8% | $(4,734) | 129.5% | - Product sales **decreased by $169.7 million, or 39.4%**, due to a general economic slowdown, inflation, increased interest rates, and a focus on higher-margin sales[126](index=126&type=chunk) - **Gross margin improved from 17.4% to 21.5%** due to management's emphasis on profitability[129](index=129&type=chunk) - Personnel expenses **decreased by $4.0 million**, including **$0.3 million in severance costs** from a reduction in force[130](index=130&type=chunk)[131](index=131&type=chunk) - General and administrative expenses **increased by $1.5 million, or 10.2%**, due to higher insurance premiums and a write-off of fixed assets[135](index=135&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces liquidity challenges, with substantial doubt about its ability to continue as a going concern | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $15,200 | $20,500 | | Operating loss (9 months/full year) | $8,400 | $128,300 | | Cash used in operations (9 months/full year) | $400 | $46,700 | | Working capital | $15,900 | $25,900 | - Management believes its forecasts indicate improved operations and **sufficient funds to continue as a going concern** for one year from the filing date[141](index=141&type=chunk)[142](index=142&type=chunk) [Summary of Cash Flow](index=36&type=section&id=Summary%20of%20Cash%20Flow) Net Cash Flow (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :------- | :--- | :--- | | Net cash used in operating activities | $(390) | $(38,693) | | Net cash used in investing activities | $(140) | $(1,318) | | Net cash (used in) provided by financing activities | $(4,767) | $36,386 | | Net change in cash, cash equivalents, and restricted cash | $(5,297) | $(3,625) | - Operating cash flow improved significantly, with a reduction in cash used from **$38.7 million in 2022 to $0.4 million in 2023**[145](index=145&type=chunk)[148](index=148&type=chunk) - Financing activities shifted from providing **$36.4 million in 2022** to using **$4.8 million in 2023** due to notes payable repayments[147](index=147&type=chunk)[149](index=149&type=chunk) [Credit Facilities](index=37&type=section&id=Credit%20Facilities) - The Company has a **$140.0 million senior secured credit facility** with Bank of America, though the **$40.0 million Revolving Loan was frozen** due to covenant non-compliance[150](index=150&type=chunk)[152](index=152&type=chunk) - Amendments to the Credit Agreement required maintaining **$8.0 million in liquidity**, waived events of default, and set a new maturity date of **November 30, 2024**[153](index=153&type=chunk)[154](index=154&type=chunk) - The applicable interest rate **increased to 4.00%**, with an additional **2% penalty rate** upon default[155](index=155&type=chunk) - The Company is seeking new financing to replace the existing credit agreement by August 31, 2024[157](index=157&type=chunk) [Management Services Agreement](index=38&type=section&id=Management%20Services%20Agreement) - The Company has a management services agreement with 1847 Partners LLC for a quarterly management fee of **$62,500**[158](index=158&type=chunk) Management Fees Expensed (in millions) | Period | Sep 30, 2023 | Sep 30, 2022 | | :----- | :----------- | :----------- | | Three Months | $0.06 | $0.18 | | Nine Months | $0.18 | $0.54 | [Leases](index=39&type=section&id=Leases) - The Company holds various lease agreements for office, warehouse, and showroom spaces, including related party leases[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - A lease for additional office space with a related party was terminated on August 23, 2023, with the Company agreeing to pay **$100,000**[168](index=168&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Information regarding the Company's Critical Accounting Policies and Estimates is referenced in the Annual Report on Form 10-K for the year ended December 31, 2022[169](index=169&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) As a smaller reporting company, the company is not required to provide these disclosures - The Company is not required to disclose information about market risk as it qualifies as a smaller reporting company[170](index=170&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) Management concluded disclosure controls were not effective due to material weaknesses, and remediation plans are underway [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of September 30, 2023, the Company's disclosure controls and procedures were determined to be **not effective** due to material weaknesses in internal control over financial reporting[172](index=172&type=chunk) [Material Weaknesses in Internal Control over Financial Reporting](index=41&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) - Material weaknesses include lack of structure, insufficient qualified resources, inadequate oversight, ineffective risk assessment, inadequate control activities, and the lack of an appropriate accounting system[173](index=173&type=chunk)[176](index=176&type=chunk) [Management's Remediation Plans](index=41&type=section&id=Management's%20Remediation%20Plans) - Remediation plans include enhancing reporting structure, increasing qualified resources, establishing formal risk assessment procedures, documenting policies, and implementing a new ERP system[174](index=174&type=chunk)[176](index=176&type=chunk) - Remediation will not be considered complete until controls operate for a sufficient period and are tested for effectiveness[174](index=174&type=chunk) [Changes in Internal Control Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023, other than those related to the identified material weaknesses[175](index=175&type=chunk) PART II OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) The company is involved in several legal proceedings, including derivative actions and actions against former employees [Derivative Actions](index=42&type=section&id=Derivative%20Actions) - The Company resolved a Section 205 Petition action regarding a share increase proposal, agreeing to pay **$475,000 in attorneys' fees**, and the action was dismissed on June 13, 2023[180](index=180&type=chunk) - A putative shareholder class action was filed on October 31, 2022, alleging violations of the Securities Act of 1933 and Securities Exchange Act of 1934 related to IPO filings[181](index=181&type=chunk) - Two derivative stockholder complaints were filed in early 2023, asserting claims for breach of fiduciary duty related to IPO filings; these actions are currently stayed or awaiting consolidation[182](index=182&type=chunk)[184](index=184&type=chunk) [Action Against Former Employee](index=44&type=section&id=Action%20Against%20Former%20Employee) - The Company filed an action against a former employee for conversion, with the court dismissing all counterclaims except for breach of implied contract[186](index=186&type=chunk) - Another action was filed against a former employee and related entities for fraud and misappropriation of Company inventory[187](index=187&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=ITEM%201A.%20RISK%20FACTORS.) The company refers to its Annual Report on Form 10-K for risk factors, with no material changes noted - Risk factors are detailed in the Company's Annual Report on Form 10-K filed on July 31, 2023[189](index=189&type=chunk) - As of the date of this report, there have been **no material changes** to the disclosed risk factors[189](index=189&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) No unregistered sales of equity securities or share repurchases occurred during the period - **No unregistered sales** of equity securities occurred during the nine months ended September 30, 2023[190](index=190&type=chunk) - The Company **did not repurchase any shares** of its common stock during the nine months ended September 30, 2023[191](index=191&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) No defaults upon senior securities occurred during the reporting period - **No defaults** upon senior securities[191](index=191&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=44&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are **not applicable**[192](index=192&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) No other information is reported under this item - **No other information** to disclose[193](index=193&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=ITEM%206.%20EXHIBITS.) This section lists all exhibits filed, including amendments, agreements, and officer certifications - Exhibits include the Certificate of Amendment for the reverse stock split, First and Second Amendments to the Credit Agreement, a Settlement and Termination Agreement, and officer certifications[195](index=195&type=chunk)

[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides Polished.com Inc.'s financial information, including unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) Polished.com Inc. presents unaudited condensed consolidated financial statements, highlighting Q2 2023 net income despite decreased sales and addressing liquidity concerns [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20%28Unaudited%29%20and%20December%2031%2C%202022) Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total Assets | $249,548 | $261,914 | -$12,366 | | Total Liabilities | $188,552 | $199,349 | -$10,797 | | Total Stockholders' Equity | $60,996 | $62,565 | -$1,569 | | Cash and cash equivalents | $8,977 | $19,549 | -$10,572 | | Restricted cash | $4,687 | $950 | +$3,737 | | Merchandise inventory, net | $39,448 | $41,766 | -$2,318 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022%20%28Unaudited%29) Three Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :----------------------------------------- | :----- | :------ | :----------- | | Product sales, net | $87,761 | $138,463 | -$50,702 (-36.6%) | | Gross profit | $19,580 | $23,025 | -$3,445 (-15.0%) | | Net income (loss) | $1,004 | $(4,292) | +$5,296 (+123.4%) | | Basic Income per common share | $0.01 | $(0.04) | +$0.05 | Six Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :----------------------------------------- | :----- | :------ | :----------- | | Product sales, net | $183,200 | $287,144 | -$103,944 (-36.2%) | | Gross profit | $40,726 | $53,787 | -$13,061 (-24.3%) | | Net income (loss) | $(1,757) | $1,527 | -$3,284 (-215.1%) | | Basic Income per common share | $(0.02) | $0.01 | -$0.03 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders%27%20Equity%20for%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022%20%28Unaudited%29) Stockholders' Equity (in thousands) | Metric | June 30, 2023 | January 1, 2023 | | :-------------------------------- | :------------ | :-------------- | | Total Stockholders' Equity | $60,996 | $62,565 | | Net income for Q2 2023 | $1,004 | N/A | | Net loss for Q1 2023 | $(2,761) | N/A | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022%20%28Unaudited%29) Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :------------------------------------------ | :------- | :------- | | Net cash used in operating activities | $(3,928) | $(22,190) | | Net cash used in investing activities | $(134) | $(256) | | Net cash (used in) provided by financing activities | $(2,773) | $37,774 | | Net change in cash, cash equivalents, and restricted cash | $(6,835) | $15,328 | | Cash, cash equivalents, and restricted cash, end of period | $13,664 | $49,119 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) [NOTE 1—BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim reporting[26](index=26&type=chunk) - Interim results for the three and six months ended June 30, 2023, are not necessarily indicative of full-year or future period results[26](index=26&type=chunk) [NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS](index=12&type=section&id=NOTE%202%E2%80%94RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - The Company adopted ASU 2016-13 (Credit Losses), ASU 2021-08 (Business Combinations), and ASU 2022-02 (Troubled Debt Restructurings) on January 1, 2023[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - The adoption of these accounting updates did not have a material impact on the consolidated financial statements and related disclosures[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) [NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT](index=13&type=section&id=NOTE%203%E2%80%94LIQUIDITY%20AND%20GOING%20CONCERN%20ASSESSMENT) - As of June 30, 2023, the Company had **$13.7 million** in cash and cash equivalents (including restricted cash) and **$22.9 million** in working capital[33](index=33&type=chunk) - An initial assessment indicated substantial doubt about the Company's ability to continue as a going concern[34](index=34&type=chunk) - Management believes its implemented cash preservation initiatives and improved operations will provide adequate liquidity for at least the next 12 months[38](index=38&type=chunk)[39](index=39&type=chunk) [NOTE 4—DISAGGREGATION OF REVENUES](index=14&type=section&id=NOTE%204%E2%80%94DISAGGREGATION%20OF%20REVENUES) Disaggregated Revenue by Product Type (in thousands) | Product Type | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :------------------------ | :------ | :------ | :------ | :------ | | Appliance sales | $77,505 | $128,242 | $164,177 | $266,791 | | Furniture and other sales | $10,256 | $10,221 | $19,023 | $20,353 | | Total | $87,761 | $138,463 | $183,200 | $287,144 | - The Company is shifting its sales focus to high-margin luxury products and negotiating improved terms with vendors[44](index=44&type=chunk) - New customer financing initiatives, including a store-branded credit card and leasing alternatives, are being implemented[44](index=44&type=chunk) [NOTE 5—SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES](index=16&type=section&id=NOTE%205%E2%80%94SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20DISCLOSURES) [Receivables](index=16&type=section&id=Recivables) Receivables, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Total receivables, net | $22,089 | $26,650 | | Trade accounts receivable | $13,325 | $13,691 | | Vendor rebates receivable | $8,046 | $8,514 | | Other receivables | $2,230 | $5,951 | [Merchandise Inventory](index=16&type=section&id=Merchandise%20Inventory) Merchandise Inventory, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Total merchandise inventory, net | $39,448 | $41,766 | | Appliances | $37,625 | $39,702 | | Furniture and other | $3,112 | $3,853 | | Less reserve for obsolescence | $(1,289) | $(1,789) | [Property and Equipment](index=16&type=section&id=Property%20and%20Equipment) Property and Equipment, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Property and equipment, net | $4,671 | $5,075 | | Total property and equipment | $6,992 | $6,764 | | Accumulated depreciation | $(2,321) | $(1,689) | | Depreciation expense (H1 2023) | $0.6 million | N/A | [Intangible Assets](index=18&type=section&id=Intangible%20Assets) Intangible Assets, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Intangible assets, net | $8,789 | $10,296 | | Amortization expense (H1 2023) | $1.5 million | N/A | | Amortization expense (H1 2022) | $5.1 million | N/A | - The decrease in amortization expense for H1 2023 is a result of the 2022 impairment charge that reduced the amount of intangible assets to be amortized[52](index=52&type=chunk) [Accounts Payable and Accrued Expenses](index=18&type=section&id=Accounts%20Payable%20and%20Accrued%20Expenses) Accounts Payable and Accrued Expenses (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Total accounts payable and accrued expenses | $78,176 | $81,537 | | Trade accounts payable | $38,945 | $34,345 | | Accrued sales tax | $30,397 | $36,196 | [NOTE 6—OPERATING LEASES](index=19&type=section&id=NOTE%206%E2%80%94OPERATING%20LEASES) Operating Lease Information (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $10,019 | $11,688 | | Total operating lease liabilities | $10,838 | $12,739 | | Weighted-average remaining lease term | 76 months | 73 months | | Weighted average discount rate | 3.9% | 3.9% | [NOTE 7—RELATED PARTIES](index=20&type=section&id=NOTE%207%E2%80%94RELATED%20PARTIES) - The Company is in dispute with 8780 19th Ave LLC (owned by former officers) over **$1.2 million** in building improvements and rent obligations[62](index=62&type=chunk) - Purchases from DMI, an appliance purchasing cooperative, represented approximately **65%** of total purchases for the six months ended June 30, 2023[64](index=64&type=chunk) - Total rent expense under related party leases was **$0.8 million** for the six months ended June 30, 2023[65](index=65&type=chunk) [NOTE 8—NOTES PAYABLE](index=21&type=section&id=NOTE%208%E2%80%94NOTES%20PAYABLE) - The Term Loan carrying value was **$94.1 million** as of June 30, 2023[70](index=70&type=chunk) - The Bank of America Revolving Loan commitment was reduced from **$40.0 million** to **$10.0 million** as of July 25, 2023, following an amendment that waived prior defaults[71](index=71&type=chunk)[73](index=73&type=chunk) - The maturity date for the Term Facility and Revolving Facility is August 31, 2024, and the Company is seeking new financing to replace the existing credit agreement[73](index=73&type=chunk)[77](index=77&type=chunk) [NOTE 9—DERIVATIVE INSTRUMENTS (INTEREST RATE SWAP)](index=23&type=section&id=NOTE%209%E2%80%94DERIVATIVE%20INSTRUMENTS%20%28INTEREST%20RATE%20SWAP%29%3A) - The Company entered into a **$100 million** notional interest rate swap to hedge against SOFR fluctuations, paying a fixed rate of **2.93%**[82](index=82&type=chunk) - As of June 30, 2023, the fair value of the interest rate swap was **$3.8 million** (derivative asset), resulting in a **$1.9 million** gain for Q2 2023 and a **$0.6 million** gain for H1 2023[83](index=83&type=chunk) [NOTE 10—STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2010%E2%80%94STOCKHOLDERS%27%20EQUITY) - As of June 30, 2023, there were **105,469,878** common shares outstanding[85](index=85&type=chunk) - Stock options outstanding totaled **86,550**, with **37,500** forfeited due to employee terminations during H1 2023[86](index=86&type=chunk)[89](index=89&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2023, was **$0.2 million**[90](index=90&type=chunk) - Warrants outstanding remained at **92,514,423** as of June 30, 2023[91](index=91&type=chunk) [NOTE 11—EARNINGS (LOSS) PER SHARE](index=25&type=section&id=NOTE%2011%E2%80%94EARNINGS%20%28LOSS%29%20PER%20SHARE) Basic and Diluted Earnings (Loss) Per Share | Period | Basic EPS | Diluted EPS | | :-------------------------------- | :-------- | :---------- | | Three Months Ended June 30, 2023 | $0.01 | $0.01 | | Three Months Ended June 30, 2022 | $(0.04) | $(0.04) | | Six Months Ended June 30, 2023 | $(0.02) | $(0.02) | | Six Months Ended June 30, 2022 | $0.01 | $0.01 | - Potentially dilutive options and warrants (**92,600,973** for Q2 2023 and **92,664,423** for Q2 2022) were excluded from diluted EPS calculations as their effect was anti-dilutive[92](index=92&type=chunk) [NOTE 12—COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=NOTE%2012%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) - The Company paid **$475,000** in attorneys' fees to resolve a dispute regarding a stock share increase proposal, leading to the dismissal of the action on June 13, 2023[96](index=96&type=chunk) - The Company is currently facing two putative shareholder class actions and derivative complaints related to alleged misstatements and omissions in IPO filings and breaches of fiduciary duty[97](index=97&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - The Company filed an action against a former employee for conversion, with the defendant asserting counterclaims for breach of contract, implied contract, defamation, and tortious interference[186](index=186&type=chunk) [NOTE 13—SUPPLIER CONCENTRATION](index=27&type=section&id=NOTE%2013%E2%80%94SUPPLIER%20CONCENTRATION) - DMI accounted for approximately **65%** of the Company's total purchases for the six months ended June 30, 2023[102](index=102&type=chunk) - The Company believes numerous other suppliers could be substituted if DMI becomes unavailable or non-competitive[102](index=102&type=chunk) [NOTE 14—SUBSEQUENT EVENTS](index=27&type=section&id=NOTE%2014%E2%80%94SUBSEQUENT%20EVENTS) - The Company signed a letter of intent for a new warehouse sublease from DMI to consolidate two existing New Jersey warehouses, expected to finalize in Q4 2023 or Q1 2025[103](index=103&type=chunk) - On July 25, 2023, the Bank of America Credit Agreement was amended, waiving defaults, reducing the Revolving Loan to **$10 million**, and setting a new maturity date of August 31, 2024[104](index=104&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=28&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Management discusses Polished.com Inc.'s financial condition and operations, noting decreased sales, improved gross margin, credit agreement developments, and liquidity efforts [Overview](index=28&type=section&id=Overview) - Polished.com Inc. operates as a content-driven and technology-enabled shopping destination for appliances, furniture, and home goods[108](index=108&type=chunk) - The Company offers national and luxury brands and operates through warehouse fulfillment centers and showrooms in the Northeast, Midwest, Brooklyn, NY, and Largo, FL[108](index=108&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) - On July 25, 2023, the Company amended its Credit Agreement with Bank of America, waiving events of default and reducing the Revolving Loan to **$10 million**[109](index=109&type=chunk) - The maturity date for the Term Facility and Revolving Facility was set to August 31, 2024, with the applicable interest rate increasing to **4.00%** plus Base Rate/Term SOFR[109](index=109&type=chunk)[110](index=110&type=chunk) - The Company has initiated discussions with investment bankers to secure new financing to replace the existing credit agreement by August 31, 2024[113](index=113&type=chunk) [Trends and Principal Factors Affecting Our Financial Performance](index=29&type=section&id=Trends%20and%20Principal%20Factors%20Affecting%20Our%20Financial%20Performance) - Key factors include the ability to acquire and retain customers, competitive product pricing, breadth of product offerings, industry demand, market conditions, and successful integration of Appliances Connection[114](index=114&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) [Comparison of Three Months Ended June 30, 2023 and 2022](index=30&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Key Financials (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :-------------------------------- | :----- | :------ | :----------- | | Product sales, net | $87,761 | $138,463 | -$50,702 (-36.6%) | | Gross profit | $19,580 | $23,025 | -$3,445 (-15.0%) | | Gross margin | 22.3% | 16.6% | +5.7 pp | | Net income (loss) | $1,004 | $(4,292) | +$5,296 (+123.4%) | | General and administrative expenses | $4,885 | $3,563 | +$1,322 (+37.1%) | - The improvement in gross margin is attributed to management's emphasis on profitability over revenue growth[118](index=118&type=chunk) - General and administrative expenses increased due to higher insurance premiums and professional fees, including costs for reauditing and restating 2021 financials[123](index=123&type=chunk) [Comparison of the six months ended June 30, 2023 and 2022](index=32&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Key Financials (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :-------------------------------- | :------- | :------- | :----------- | | Product sales, net | $183,200 | $287,144 | -$103,944 (-36.2%) | | Gross profit | $40,726 | $53,787 | -$13,061 (-24.3%) | | Gross margin | 22.2% | 18.7% | +3.5 pp | | Net income (loss) | $(1,757) | $1,527 | -$3,284 (-215.1%) | | General and administrative expenses | $9,872 | $7,818 | +$2,054 (+26.3%) | | Interest expense | $2,935 | $1,243 | +$1,692 (+136.1%) | - The decrease in sales is attributed to a general economic slowdown, inflation, increased interest rates, and a decline in the luxury remodeling market[128](index=128&type=chunk) - The increase in gross margin reflects management's strategic shift to emphasize profitability over revenue growth[131](index=131&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2023, the Company had **$13.7 million** in cash and cash equivalents (including restricted cash) and **$22.9 million** in working capital[140](index=140&type=chunk) Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :------------------------------------------ | :------- | :------- | | Net cash used in operating activities | $(3,928) | $(22,190) | | Net cash (used in) provided by financing activities | $(2,773) | $37,774 | - The Bank of America Credit Agreement amendment on July 25, 2023, reduced the Revolving Loan to **$10 million** and set a maturity date of August 31, 2024, prompting the Company to seek new financing[153](index=153&type=chunk)[157](index=157&type=chunk) [Management Services Agreement](index=38&type=section&id=Management%20Services%20Agreement) - The Company pays a quarterly management fee of **$62,500** to 1847 Partners LLC, an entity owned by its chairman, for management services[158](index=158&type=chunk) - Management fees expensed for the six months ended June 30, 2023, totaled **$0.06 million**[159](index=159&type=chunk) [Leases](index=39&type=section&id=Leases) - The Company has various lease agreements for office, warehouse, and showroom spaces, including related-party leases with entities owned by former officers[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - An ongoing dispute exists with a related-party landlord (8780 19th Ave LLC) regarding payment for building improvements and rent obligations[168](index=168&type=chunk) - A new warehouse sublease from DMI is planned to consolidate two existing New Jersey warehouses, with an expected finalization in Q4 2023 or Q1 2025[103](index=103&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Information regarding the Company's Critical Accounting Policies and Estimates is detailed in its Annual Report on Form 10-K for the year ended December 31, 2022[169](index=169&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Polished.com Inc. is not required to provide market risk disclosures in this quarterly report - The Company is not required to disclose information about market risk as a smaller reporting company[170](index=170&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) Management deemed disclosure controls ineffective due to material weaknesses in internal control, with remediation plans including enhanced structure, resources, and a new ERP system [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The Company's disclosure controls and procedures were determined to be not effective as of June 30, 2023[172](index=172&type=chunk) - This ineffectiveness is a result of material weaknesses in internal control over financial reporting[172](index=172&type=chunk) [Material Weaknesses in Internal Control over Financial Reporting](index=41&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) - Material weaknesses include a lack of structure and responsibility, insufficient qualified resources, and inadequate oversight over controls[173](index=173&type=chunk)[176](index=176&type=chunk) - Ineffective assessment and identification of changes in risk, and inadequate selection and development of effective control activities and policies[173](index=173&type=chunk)[176](index=176&type=chunk) - The Company also lacks an accounting system required for its size[173](index=173&type=chunk)[176](index=176&type=chunk) [Management's Remediation Plans](index=41&type=section&id=Management%27s%20Remediation%20Plans) - Remediation plans include enhancing reporting structure, increasing qualified resources, and establishing formal risk assessment procedures[174](index=174&type=chunk)[176](index=176&type=chunk) - The Company is developing and documenting policies and procedures, assessing their effectiveness, and implementing a new ERP system[174](index=174&type=chunk)[176](index=176&type=chunk) [Changes in Internal Control Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, other than the identified material weaknesses[175](index=175&type=chunk) [PART II OTHER INFORMATION](index=42&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers Polished.com Inc.'s legal proceedings, risk factors, equity security sales, defaults, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) Polished.com Inc. is involved in legal proceedings, including resolved shareholder actions, ongoing class actions, and a lawsuit against a former employee [Derivative Actions](index=42&type=section&id=Derivative%20Actions) - The Company paid **$475,000** in attorneys' fees to resolve a dispute over a stock share increase proposal, leading to the dismissal of the action on June 13, 2023[180](index=180&type=chunk) - Two putative shareholder class actions (Maschhof v. Polished.com Inc., et al.) and derivative complaints (Wong v. Moore et al., Gossett v. Moore, et al.) are ongoing, alleging misstatements in IPO filings and breaches of fiduciary duty[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk) [Action Against Former Employee](index=44&type=section&id=Action%20Against%20Former%20Employee) - The Company filed an action against a former employee for conversion, who subsequently filed counterclaims for breach of contract, implied contract, defamation, and tortious interference[186](index=186&type=chunk) - The Company has moved to dismiss the amended counterclaims[186](index=186&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=ITEM%201A.%20RISK%20FACTORS.) This section refers to risk factors from the Annual Report on Form 10-K, noting no material changes as of this report's date - No material changes to the risk factors disclosed in the Annual Report on Form 10-K filed on July 31, 2023, have occurred[188](index=188&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) Polished.com Inc. reported no unregistered equity security sales or common stock repurchases during the six months ended June 30, 2023 - No unregistered equity securities were sold during the six months ended June 30, 2023[189](index=189&type=chunk) - No shares of common stock were repurchased during the six months ended June 30, 2023[190](index=190&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[190](index=190&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=44&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) Mine safety disclosures are not applicable to Polished.com Inc.'s operations - Mine Safety Disclosures are not applicable to the Company[191](index=191&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) No other information was reported under this item - No other information was reported[192](index=192&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=ITEM%206.%20EXHIBITS.) This section lists all exhibits filed with the Form 10-Q, including the Credit Agreement amendment and officer certifications - Exhibits include the First Amendment to Credit Agreement, dated July 25, 2023[194](index=194&type=chunk) - Certifications of the Principal Executive Officer and Principal Financial and Accounting Officer are filed/furnished[194](index=194&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Documents are included[194](index=194&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File No. 001-39418 Polished.com Inc. (Exact name of registrant as specified in its charter) | Delaware | 83-3713938 | | --- | --- | | ( ...

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and results [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including core statements and detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the Company's condensed consolidated balance sheets, detailing assets, liabilities, and equity at period-end Condensed Consolidated Balance Sheets (in thousands) | ASSETS/LIABILITIES & EQUITY | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $25,821 | $25,724 | | Restricted cash | $2,583 | $8,067 | | Receivables, net | $26,288 | $24,594 | | Merchandise inventory, net | $52,963 | $44,754 | | Total Current Assets | $134,010 | $121,318 | | Goodwill | $191,614 | $191,614 | | Intangible assets, net | $41,658 | $44,212 | | TOTAL ASSETS | $386,581 | $375,984 | | **LIABILITIES** | | | | Accounts payable & accrued expenses | $83,959 | $72,592 | | Customer deposits | $13,080 | $20,702 | | Total Current Liabilities | $109,111 | $105,341 | | TOTAL LIABILITIES | $175,037 | $170,381 | | **STOCKHOLDERS' EQUITY** | | | | TOTAL STOCKHOLDERS' EQUITY | $211,544 | $205,603 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $386,581 | $375,984 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the Company's condensed consolidated statements of operations, detailing revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Product sales, net | $152,752 | $13,697 | | Cost of goods sold | $116,883 | $11,069 | | Gross profit | $35,869 | $2,628 | | Total Operating Expenses | $25,802 | $5,909 | | INCOME (LOSS) FROM OPERATIONS | $10,067 | $(3,281) | | Total Other Income (Expenses) | $(762) | $(212) | | NET INCOME (LOSS) BEFORE INCOME TAXES | $9,305 | $(3,493) | | INCOME TAX EXPENSE | $(3,383) | $- | | NET INCOME (LOSS) | $5,922 | $(3,493) | | NET INCOME (LOSS) PER COMMON SHARE – BASIC AND DILUTED | $0.06 | $(0.57) | | WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED | 106,387,332 | 6,111,200 | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section presents changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Item | Balance at Dec 31, 2021 | Stock-based compensation | Net income (loss) | Balance at Mar 31, 2022 | | :-------------------------- | :---------------------- | :----------------------- | :---------------- | :---------------------- | | Common Stock Amount | $11 | $- | $- | $11 | | Additional Paid-in Capital | $224,648 | $19 | $- | $224,667 | | Accumulated Deficit | $(19,056) | $- | $5,922 | $(13,134) | | Stockholders' Equity | $205,603 | $19 | $5,922 | $211,544 | | Item | Balance at Dec 31, 2020 | Issuance of warrants with debt | Stock-based compensation | Net loss | Balance at Mar 31, 2021 | | :-------------------------- | :---------------------- | :----------------------------- | :----------------------- | :---------------- | :---------------------- | | Common Stock Amount | $1 | $- | $- | $- | $1 | | Additional Paid-in Capital | $13,409 | $1,340 | $125 | $- | $14,874 | | Accumulated Deficit | $(26,726) | $- | $- | $(3,493) | $(30,219) | | Stockholders' Equity (Deficit) | $(13,316) | $1,340 | $125 | $(3,493) | $(15,344) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Company's condensed consolidated statements of cash flows, categorizing cash movements by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(3,747) | $(2,808) | | Net cash used in investing activities | $(6) | $(126) | | Net cash (used in) provided by financing activities | $(1,634) | $4,426 | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $(5,387) | $1,492 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | $33,791 | $9,912 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $28,404 | $11,404 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the condensed consolidated financial statements, covering various accounting policies and disclosures [NOTE 1—BASIS OF PRESENTATION](index=11&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) The financial statements are unaudited, prepared in accordance with GAAP and SEC rules for interim reporting, and include normal recurring adjustments. They should be read with the 2021 Annual Report on Form 10-K, and interim results are not indicative of full-year performance - Unaudited condensed consolidated financial statements prepared in accordance with **GAAP** and **SEC rules** for interim financial reporting[26](index=26&type=chunk) - Interim results for the three months ended **March 31, 2022**, are not necessarily indicative of the results for the full year ending **December 31, 2022**, or future periods[26](index=26&type=chunk) [NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS](index=11&type=section&id=NOTE%202%E2%80%94RECENT%20ACCOUNTING%20PRONOUNCEMENTS) The Company has elected an extension for ASU 2016-13 (Credit Losses) until fiscal years beginning after December 15, 2022, and does not expect a material impact. Similarly, ASU 2021-08 (Business Combinations) is effective after December 15, 2022, and is not expected to have a material impact - The Company has elected an extension for **ASU 2016-13 (Credit Losses)** and the effective date will be for fiscal years beginning after **December 15, 2022**. No material impact is expected[28](index=28&type=chunk) - **ASU 2021-08 (Business Combinations)** is effective for public entities for fiscal years beginning after **December 15, 2022**. No material impact is expected[29](index=29&type=chunk) [NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT](index=11&type=section&id=NOTE%203%E2%80%94LIQUIDITY%20AND%20GOING%20CONCERN%20ASSESSMENT) Management believes the Company has sufficient funds from operations to fund its activities and service debt for one year from the filing date, despite the ongoing impact of COVID-19. The financial statements are prepared on a going concern basis, anticipating improved operations Liquidity and Financial Position (in millions) | Metric | March 31, 2022 | | :---------------------- | :------------- | | Cash and cash equivalents | $25.8 | | Restricted cash | $2.6 | | Operating income | $10.1 | | Cash flows used in operations | $(3.7) | | Working capital | $24.9 | - Management believes **sufficient funds** will be generated from operations to fund activities and service debt obligations for **one year** from the filing date[33](index=33&type=chunk) - The Company's financial statements are prepared on a **going concern basis**, with management forecasting improved operations[34](index=34&type=chunk) [NOTE 4—REVENUES](index=12&type=section&id=NOTE%204%E2%80%94REVENUES) The Company generates revenue from selling household appliances, furniture, and other home goods. Revenue is recognized upon transfer of goods, with each customer order typically representing a single performance obligation. Appliance sales significantly increased due to the Appliances Connection Acquisition - Revenue is recognized upon the **transfer of goods or services** to customers, with each order generally containing **one performance obligation**[36](index=36&type=chunk) Disaggregated Revenue by Product Type (in thousands) | Product Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------- | :-------------------------------- | :-------------------------------- | | Appliance sales | $140,975 | $10,273 | | Furniture sales | $4,155 | $2,328 | | Other sales | $7,622 | $1,096 | | Total | $152,752 | $13,697 | [NOTE 5—SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES](index=13&type=section&id=NOTE%205%E2%80%94SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20DISCLOSURES) This note provides detailed breakdowns of receivables, merchandise inventory, property and equipment, and intangible assets, as well as accounts payable and accrued expenses. Intangible assets, primarily customer relationships and tradename, are amortized over 5 years Receivables, net (in thousands) | Receivables | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Trade accounts receivable | $15,295 | $10,694 | | Vendor rebates receivable | $9,125 | $11,633 | | Other receivables | $2,261 | $2,660 | | Total receivables, net | $26,288 | $24,594 | Merchandise Inventory, net (in thousands) | Inventory Type | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Appliances | $50,856 | $41,922 | | Furniture | $986 | $1,166 | | Other | $1,964 | $2,439 | | Total merchandise inventory, net | $52,963 | $44,754 | Intangible Assets, net (in thousands) | Intangible Asset | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Customer relationships | $24,148 | $24,148 | | Marketing related - tradename | $26,935 | $26,935 | | Total intangible assets | $51,083 | $51,083 | | Accumulated amortization | $(9,425) | $(6,871) | | Intangible assets, net | $41,658 | $44,212 | - Intangible assets are amortized on a **straight-line basis** over a weighted average estimated useful life of **5.0 years**[41](index=41&type=chunk) Accounts Payable and Accrued Expenses (in thousands) | Accounts Payable & Accrued Expenses | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Trade accounts payable | $51,660 | $41,166 | | Accrued sales tax | $24,812 | $23,628 | | Accrued payroll liabilities | $1,707 | $984 | | Accrued income taxes | $1,933 | $334 | | Total accounts payable and accrued expenses | $83,959 | $72,592 | [NOTE 6—LEASES](index=15&type=section&id=NOTE%206%E2%80%94LEASES) The Company entered into a new operating lease for office space in Brooklyn, NY, with an initial ROU asset and liability of $1.1 million. Operating lease right-of-use assets totaled $15.3 million as of March 31, 2022, with total operating lease liabilities of $16.6 million. Finance lease liabilities were $0.4 million - Entered into a new operating lease for office space in **Brooklyn, NY**, commencing **March 1, 2022**, with an initial **ROU asset and liability of $1.1 million**[44](index=44&type=chunk) Operating Lease Information (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------------ | :------------- | :---------------- | | Operating lease right-of-use assets | $15,262 | $14,937 | | Total operating lease liabilities | $16,631 | $16,367 | | Weighted-average remaining lease term (months) | 73 | 77 | | Weighted average discount rate | 3.90% | 4.00% | Operating Lease Expense (in thousands) | Period | Operating Lease Expense | | :------------------------------ | :---------------------- | | Three months ended March 31, 2022 | $1.0 million | | Three months ended December 31, 2021 | $0.2 million | - Outstanding balance of finance leases was **$0.4 million** as of **March 31, 2022**[49](index=49&type=chunk) [NOTE 7—RELATED PARTIES](index=16&type=section&id=NOTE%207%E2%80%94RELATED%20PARTIES) The Company has ongoing related party transactions, including a management services agreement with 1847 Partners LLC, purchases from DMI (an appliance purchasing cooperative where the CEO is a director), and lease agreements with entities owned by the CEO and COO - Expensed management fees of **$0.1 million** for the three months ended **March 31, 2022 and 2021**, to **1847 Partners LLC**, a company owned by the Company's chairman[53](index=53&type=chunk) - Purchased **$73.4 million** of finished goods from **DMI**, an appliance purchasing cooperative in which the Company owns a **5% interest** and its CEO is on the board, during the three months ended **March 31, 2022**[55](index=55&type=chunk) - Total rent expense under related party leases was **$0.5 million** for the three months ended **March 31, 2022**, with entities owned by the CEO and COO[56](index=56&type=chunk) [NOTE 8—STOCKHOLDERS' EQUITY](index=17&type=section&id=NOTE%208%E2%80%94STOCKHOLDERS'%20EQUITY) The Company's authorized common stock increased to 250,000,000 shares. Stock options decreased due to forfeitures from employee terminations, while warrants outstanding remained unchanged - Authorized common stock increased from **200,000,000 to 250,000,000 shares** as of **December 21, 2021**[57](index=57&type=chunk) Stock Options Activity (Three Months Ended March 31, 2022) | Item | Options | Weighted-Average Exercise Price | | :-------------------------- | :-------- | :------------------------------ | | Outstanding at Dec 31, 2021 | 312,960 | $6.17 | | Forfeited | (132,960) | $9.00 | | Outstanding at Mar 31, 2022 | 180,000 | $4.08 | | Exercisable at Mar 31, 2022 | 30,000 | $9.00 | - Stock-based compensation expense was **$0.02 million** for the three months ended **March 31, 2022**, down from **$0.1 million** in the prior year[61](index=61&type=chunk) Warrants Activity (Three Months Ended March 31, 2022) | Item | Warrants | Weighted-Average Exercise Price | | :-------------------------- | :--------- | :------------------------------ | | Outstanding at Dec 31, 2021 | 92,514,423 | $2.30 | | Outstanding at Mar 31, 2022 | 92,514,423 | $2.30 | | Exercisable at Mar 31, 2022 | 92,514,423 | $2.30 | [NOTE 9—BUSINESS COMBINATIONS](index=18&type=section&id=NOTE%209%E2%80%94BUSINESS%20COMBINATIONS) The Company completed the Appliances Connection Acquisition in June 2021 for $224.7 million and the AC Gallery Acquisition in July 2021 for $1.4 million. Pro forma results show significant increases in net sales and net income for the three months ended March 31, 2022, compared to 2021, reflecting the impact of these acquisitions - **Appliances Connection Acquisition** completed on **June 2, 2021**, for an aggregate purchase price of **$224.7 million**[63](index=63&type=chunk)[64](index=64&type=chunk) - **AC Gallery Acquisition** completed on **July 29, 2021**, for a purchase price of **$1.4 million**[68](index=68&type=chunk)[69](index=69&type=chunk) Unaudited Pro Forma Results (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $152,752 | $123,711 | | Net income | $5,922 | $10,899 | | Basic and Diluted EPS | $0.06 | $1.78 | [NOTE 10—NOTES PAYABLE](index=19&type=section&id=NOTE%2010%E2%80%94NOTES%20PAYABLE) The Company had a $60.0 million M&T Term Loan with a carrying value of $53.9 million as of March 31, 2022, which was subsequently paid in full on May 9, 2022, as part of a refinancing with a new credit agreement - As of **March 31, 2022**, the carrying value of the **M&T Term Loan** was **$53.9 million**, with **$7.5 million** classified as a current liability[73](index=73&type=chunk) - The **M&T Term Loan** was repaid in quarterly installments of **$1.5 million**, with the remaining unpaid principal due on **June 2, 2026**[76](index=76&type=chunk) - The **M&T Loan** was paid in full on **May 9, 2022**, as disclosed in subsequent events[80](index=80&type=chunk) [NOTE 11—EARNINGS (LOSS) PER SHARE](index=21&type=section&id=NOTE%2011%E2%80%94EARNINGS%20(LOSS)%20PER%20SHARE) Basic and diluted earnings per share for the three months ended March 31, 2022, was $0.06, a significant improvement from a loss of $0.57 in the prior year, driven by net income and a higher weighted average common shares outstanding Basic and Diluted Earnings (Loss) Per Share (in thousands, except per share amounts) | Metric | March 31, 2022 | March 31, 2021 | | :-------------------------------------- | :------------- | :------------- | | Net income (loss) | $5,922 | $(3,493) | | Weighted average common shares outstanding | 106,387,332 | 6,111,200 | | Basic and diluted earnings (loss) per share | $0.06 | $(0.57) | - **92,694,423 potential common share equivalents** from stock options and warrants were excluded from diluted EPS calculations for **March 31, 2022**, as their effect was anti-dilutive[82](index=82&type=chunk) [NOTE 12—COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%2012%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) The Company is involved in legal proceedings concerning a stockholder-approved amendment to increase authorized common stock. Three beneficial owners questioned the vote tabulation, leading the Company to seek validation from the Delaware Court of Chancery, which has been consolidated with a class action lawsuit alleging improper tabulation and breach of fiduciary duties - Stockholders approved an amendment to increase authorized common stock by **50,000,000 shares** on **December 21, 2021**[84](index=84&type=chunk) - Three beneficial owners raised concerns about the vote tabulation for the **Share Increase Proposal**, leading the Company to file a **Section 205 Petition** with the **Delaware Court of Chancery** to validate the amendment[85](index=85&type=chunk) - A **class action lawsuit (Scot T. Boden v. 1847 Goedeker Inc., et al.)** was filed, alleging **improper vote tabulation** and **breach of fiduciary duties**, which has been consolidated with the 205 Petition[87](index=87&type=chunk) [NOTE 13—SUBSEQUENT EVENTS](index=22&type=section&id=NOTE%2013%E2%80%94SUBSEQUENT%20EVENTS) On May 9, 2022, the Company entered into a new $140 million senior secured credit facility with Bank of America, N.A., consisting of a $100 million term loan and a $40 million revolving credit facility. The proceeds from the new term loan were used to fully prepay and terminate the existing M&T Credit Agreement - On **May 9, 2022**, the Company entered into a new Credit Agreement for **$140 million senior secured credit facilities**, including a **$100 million New Term Loan** and a **$40 million New Revolving Loan**[88](index=88&type=chunk) - The proceeds from the **New Term Loan** were used to prepay and terminate the existing **M&T Credit Agreement** in full on **May 9, 2022**[89](index=89&type=chunk) [NOTE 14—SUPPLIER CONCENTRATION](index=22&type=section&id=NOTE%2014%E2%80%94SUPPLIER%20CONCENTRATION) For the three months ended March 31, 2022, the Company purchased 77% of its finished goods from DMI, a significant supplier. However, the Company believes alternative suppliers are available if needed - The Company purchased **77% of finished goods** from **DMI** for the three months ended **March 31, 2022**[91](index=91&type=chunk) - The Company believes numerous other suppliers could be substituted if **DMI** becomes unavailable or non-competitive[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, operating results, liquidity, and cash flows, highlighting acquisition impacts and challenges [Overview](index=23&type=section&id=Overview) The Company operates as a content-driven, technology-enabled shopping destination for appliances, furniture, and home goods, offering a wide range of national, global, and luxury brands through warehouse fulfillment centers and showrooms - Operates a **content-driven and technology-enabled shopping destination** for appliances, furniture, and home goods[95](index=95&type=chunk) - Offers **national, global, and luxury brands**, including Bosch, Miele, Thermador, and Viking, across various product categories[95](index=95&type=chunk) [Recent Developments](index=23&type=section&id=Recent%20Developments) Recent developments include securing a new $140 million credit facility, transitioning corporate headquarters to Brooklyn, NY, and approving a $25.0 million share repurchase program, though no shares have been repurchased as of March 31, 2022 - Entered into a new **$140 million senior secured credit facility** on **May 9, 2022**, comprising a **$100 million term loan** and a **$40 million revolving credit facility**[96](index=96&type=chunk) - Transitioned corporate headquarters to **Brooklyn, New York**, and expanded office space with a new lease agreement[98](index=98&type=chunk) - Approved a new share repurchase program of up to **$25.0 million of common stock** on **December 17, 2021**; no shares repurchased as of **March 31, 2022**[99](index=99&type=chunk)[100](index=100&type=chunk) [Ongoing Impact of Coronavirus Pandemic](index=25&type=section&id=Ongoing%20Impact%20of%20Coronavirus%20Pandemic) The COVID-19 pandemic continues to impact the Company's business, particularly through supply chain delays and disruptions, increased freight costs, and potential negative effects on consumer spending due to macroeconomic conditions like inflation and decreased confidence - **COVID-19 pandemic** continues to cause **supply chain delays and disruptions**, negatively impacting product sourcing and potentially increasing costs[101](index=101&type=chunk) - Global economic deterioration, including **rising unemployment, increased inflation, and decreased consumer confidence**, could negatively impact discretionary consumer spending[102](index=102&type=chunk) [Trends and Principal Factors Affecting Our Financial Performance](index=25&type=section&id=Trends%20and%20Principal%20Factors%20Affecting%20Our%20Financial%20Performance) Key factors affecting financial performance include the ability to acquire and retain customers, competitive pricing, product offerings, industry demand, market position, and successful integration of acquisitions. Freight costs have increased significantly as a proportion of sales due to the pandemic and fuel costs, impacting gross margins - Freight costs as a percentage of sales increased by **220 basis points** from **Q1 2021** on a consolidated proforma basis, putting downward pressure on gross margins[104](index=104&type=chunk) - Management believes increased freight costs are **temporary** and margins will improve as supply chain stabilizes and fuel costs normalize[104](index=104&type=chunk) - Supply chain constraints have amplified **order cancellations and refunds**[105](index=105&type=chunk) [Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations](index=26&type=section&id=Factors%20Affecting%20Comparability%20of%20Our%20Future%20Results%20of%20Operations%20to%20Our%20Historical%20Results%20of%20Operations) The comparability of financial results is significantly affected by recent acquisitions, particularly the Appliances Connection Acquisition and AC Gallery Acquisition, which introduce materially different characteristics and economics compared to historical operations - The **Appliances Connection Acquisition (June 2, 2021)** and **AC Gallery Acquisition (July 29, 2021)** significantly impact the comparability of current and future financial results to historical periods[106](index=106&type=chunk)[110](index=110&type=chunk) - Future acquisitions may further impact comparability due to potentially **different economic characteristics**[106](index=106&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) The Company experienced substantial growth in product sales and gross profit for the three months ended March 31, 2022, primarily due to the Appliances Connection Acquisition. This led to a significant increase in net income compared to a net loss in the prior year, despite higher operating expenses [Product sales, net](index=27&type=section&id=Product%20sales,%20net) Net product sales significantly increased, primarily driven by the Appliances Connection Acquisition Product Sales, Net (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :---------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Product sales, net | $152,752 | $13,697 | $139,055 | 1,015.2% | - Increase primarily due to the impact of the **Appliances Connection Acquisition**[111](index=111&type=chunk) Product Sales, Net by Type (in thousands) | Product Type | March 31, 2022 ($) | March 31, 2022 (%) | March 31, 2021 ($) | March 31, 2021 (%) | | :-------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Appliance sales | $140,975 | 92.3% | $10,273 | 75.0% | | Furniture sales | $4,155 | 2.7% | $2,328 | 17.0% | | Other sales | $7,622 | 5.0% | $1,096 | 8.0% | | Total | $152,752 | 100.0% | $13,697 | 100.0% | [Cost of goods sold](index=27&type=section&id=Cost%20of%20goods%20sold) Cost of goods sold increased substantially, primarily due to the Appliances Connection Acquisition Cost of Goods Sold (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :---------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Cost of goods sold | $116,883 | $11,069 | $105,814 | 956.0% | - Increase driven by the impact of the **Appliances Connection Acquisition**[113](index=113&type=chunk) Cost of Goods Sold by Type (in thousands) | Cost Type | March 31, 2022 ($) | March 31, 2022 (% of Net Sales) | March 31, 2021 ($) | March 31, 2021 (% of Net Sales) | | :---------------------------- | :----------------- | :------------------------------ | :----------------- | :------------------------------ | | Product costs, net of vendor rebates | $102,293 | 67.0% | $9,193 | 67.1% | | Freight costs | $14,590 | 9.6% | $1,876 | 13.7% | | Total | $116,883 | 76.5% | $11,069 | 80.8% | [Gross profit and gross margin](index=28&type=section&id=Gross%20profit%20and%20gross%20margin) Gross profit and gross margin significantly improved, primarily due to the Appliances Connection Acquisition Gross Profit and Gross Margin (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Gross profit | $35,869 | $2,628 | $33,241 | 1,264.6% | | Gross margin | 23.5% | 19.2% | 4.3 pp | | - Increases primarily due to the impact of the **Appliances Connection Acquisition**[115](index=115&type=chunk) [Personnel expenses](index=28&type=section&id=Personnel%20expenses) Personnel expenses increased due to the Appliances Connection Acquisition, but decreased as a percentage of net sales Personnel Expenses (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :---------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Personnel expenses | $7,046 | $1,931 | $5,115 | 264.9% |\ | % of net sales | 4.6% | 14.1% | -9.5 pp | | - Changes primarily due to the impact of the **Appliances Connection Acquisition**[116](index=116&type=chunk) [Advertising expenses](index=28&type=section&id=Advertising%20expenses) Advertising expenses increased due to the Appliances Connection Acquisition, but decreased as a percentage of net sales Advertising Expenses (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :----------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Advertising expenses | $4,288 | $1,083 | $3,205 | 295.9% |\ | % of net sales | 2.8% | 7.9% | -5.1 pp | | - Changes primarily due to the impact of the **Appliances Connection Acquisition**[117](index=117&type=chunk) [Bank and credit card fees](index=28&type=section&id=Bank%20and%20credit%20card%20fees) Bank and credit card fees increased significantly, driven by higher customer orders from the Appliances Connection Acquisition Bank and Credit Card Fees (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :---------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Bank and credit card fees | $6,167 | $533 | $5,634 | 1,057.0% |\ | % of net sales | 4.0% | 3.9% | 0.1 pp | | - Increase largely due to the increase in customer orders associated with the **Appliances Connection Acquisition**[118](index=118&type=chunk) [Depreciation and amortization](index=28&type=section&id=Depreciation%20and%20amortization) Depreciation and amortization expenses increased substantially due to intangible assets acquired in the Appliances Connection Acquisition Depreciation and Amortization (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Depreciation and amortization | $2,734 | $122 | $2,612 | 2,141.0% |\ | % of net sales | 1.8% | 0.9% | 0.9 pp | | - Increase is the result of amortizing intangible assets acquired in the **Appliances Connection Acquisition**[119](index=119&type=chunk) [General and administrative expenses](index=28&type=section&id=General%20and%20administrative%20expenses) General and administrative expenses increased due to the Appliances Connection Acquisition, but decreased as a percentage of net sales General and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | General and administrative expenses | $5,567 | $2,240 | $3,327 | 148.5% |\ | % of net sales | 3.6% | 16.4% | -12.8 pp | | - Changes primarily due to the impact of the **Appliances Connection Acquisition**[120](index=120&type=chunk) [Total other income (expense)](index=29&type=section&id=Total%20other%20income%20(expense)) Total other expense increased, primarily due to higher interest and financing costs Total Other Income (Expense) (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Total other expense, net | $(762) | $(212) | $(550) | - Primarily consisted of **interest expense of $0.7 million** and **financing costs of $0.2 million** in 2022[122](index=122&type=chunk) [Income tax benefit (expense)](index=29&type=section&id=Income%20tax%20benefit%20(expense)) The Company recorded an income tax expense due to its profitability, primarily driven by the Appliances Connection Acquisition Income Tax Benefit (Expense) (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | | :---------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Income tax net expense | $(3,383) | $- | $(3,383) | - Change due to the Company's profitability, primarily driven by the **Appliances Connection Acquisition**[123](index=123&type=chunk) [Net income (loss)](index=29&type=section&id=Net%20income%20(loss)) The Company reported a significant net income, a substantial improvement from a net loss in the prior year Net Income (Loss) (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net income (loss) | $5,922 | $(3,493) | $9,415 | 270.0% | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the Company had $25.8 million in cash and equivalents and $24.9 million in working capital. A new $140 million credit facility was secured in May 2022, with proceeds used to repay previous debt. Management believes current and projected cash flows, along with available credit, will be sufficient to fund operations and debt obligations for the next twelve months Liquidity Metrics (in millions) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $25.8 | $25.7 | | Restricted cash | $2.6 | $8.1 | | Operating income | $10.1 | N/A | | Cash flows used in operations | $(3.7) | N/A | | Working capital | $24.9 | $16.0 | - On **May 9, 2022**, the Company secured a new **$140 million credit facility**, using **$55.9 million** to pay off the **M&T Credit Agreement**[126](index=126&type=chunk) - Management believes **adequate cash flow from operations**, external bank lines of credit, and proceeds from future debt/equity issuances will fund operations and service debt for at least the **next twelve months**[127](index=127&type=chunk) [Summary of Cash Flow](index=30&type=section&id=Summary%20of%20Cash%20Flow) Net cash used in operating activities increased to $3.7 million for the three months ended March 31, 2022, primarily due to increases in receivables, inventories, and customer deposit refunds related to the Appliances Connection Acquisition and supply chain issues. Net cash used in investing activities remained minimal, while financing activities shifted from a net cash provided to a net cash used, mainly due to higher debt repayments Summary of Cash Flow (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(3,747) | $(2,808) | | Net cash used in investing activities | $(6) | $(126) | | Net cash (used in) provided by financing activities | $(1,634) | $4,426 | | Net change in cash, cash equivalents, and restricted cash | $(5,387) | $1,492 | - Operating cash flow was negatively impacted by increases in **receivables ($1.7M used)**, **inventories ($8.2M used)**, and **customer deposits ($7.6M used)** due to sales growth from the **Appliances Connection Acquisition** and supply chain delays[135](index=135&type=chunk) - Financing activities shifted to net cash used due to **$1.6 million in notes payable repayments** in 2022, compared to **$4.6 million in proceeds from notes payable** in 2021[135](index=135&type=chunk) [Debt](index=31&type=section&id=Debt) The Company refinanced its M&T Credit Agreement with a new $140 million senior secured credit facility from Bank of America, N.A., on May 9, 2022. This new facility includes a $100 million term loan and a $40 million revolving credit facility, maturing on May 9, 2027, with quarterly principal repayments commencing September 30, 2022. Other debt includes a Northpoint inventory loan and vehicle loans [New Credit Agreement](index=31&type=section&id=New%20Credit%20Agreement) The Company secured a new $140 million senior secured credit facility, including a term loan and revolving credit, maturing in May 2027 - On **May 9, 2022**, the Company entered into a new **$140 million senior secured credit facility** with **Bank of America, N.A.**, consisting of a **$100 million term loan** and a **$40 million revolving credit facility**[136](index=136&type=chunk) - The **New Term Loan** proceeds were used to fully prepay and terminate the **M&T Credit Agreement**[137](index=137&type=chunk) - New Loans mature on **May 9, 2027**, with quarterly principal repayments for the term loan starting **September 30, 2022**[138](index=138&type=chunk)[139](index=139&type=chunk) [M&T Credit Agreement - Refinanced](index=32&type=section&id=M%26T%20Credit%20Agreement%20-%20Refinanced) The previous M&T Credit Agreement, with a $53.9 million carrying value, was fully repaid and terminated as part of the new credit facility - The **M&T Credit Agreement**, totaling **$70.0 million ($60.0 million term loan, $10.0 million revolving credit)**, was entered into on **June 2, 2021**[146](index=146&type=chunk) - As of **March 31, 2022**, the **M&T Term Loan** had a carrying value of **$53.9 million**[147](index=147&type=chunk) - The **M&T Credit Agreement** was fully prepaid and terminated on **May 9, 2022**, as part of the new credit facility[153](index=153&type=chunk) [Northpoint Loan](index=33&type=section&id=Northpoint%20Loan) The Company maintains a $2.0 million inventory financing loan with Northpoint Commercial Finance LLC, with $0.3 million outstanding - The Company has a loan and security agreement with **Northpoint Commercial Finance LLC** for inventory financing, with a credit limit of **$2.0 million**[154](index=154&type=chunk) - As of **March 31, 2022**, **$0.3 million** was owed under the Northpoint loan[154](index=154&type=chunk) [Vehicle Loans](index=33&type=section&id=Vehicle%20Loans) Outstanding vehicle loans totaled $1.2 million, with five-year terms and interest rates ranging from 3.59% to 5.74% - Outstanding balance of vehicle loans was **$1.2 million** as of **March 31, 2022**, with **five-year terms** and interest rates from **3.59% to 5.74%**[156](index=156&type=chunk) [Management Services Agreement](index=33&type=section&id=Management%20Services%20Agreement) The Company has a management services agreement with 1847 Partners LLC, incurring quarterly management fees of $62,500 - The Company has a management services agreement with **1847 Partners LLC**, paying a quarterly management fee of **$62,500**[157](index=157&type=chunk) - Management fees expensed were **$0.1 million** for each of the three months ended **March 31, 2022 and 2021**[159](index=159&type=chunk) [Leases](index=34&type=section&id=Leases) The Company holds various lease agreements for office, warehouse, and showroom spaces, including new facilities in Brooklyn and Somerset - The Company has various lease agreements for **office, warehouse, and showroom spaces**, including related party leases[163](index=163&type=chunk)[164](index=164&type=chunk)[169](index=169&type=chunk) - A new office lease in **Brooklyn, NY**, commenced **March 1, 2022**, with a monthly rate of **$22,000** for the first year[169](index=169&type=chunk) - A warehouse agreement for a new facility in **Somerset, New Jersey**, commenced **October 1, 2021**, with a monthly storage fee of **$136,274** for the first year[168](index=168&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section refers to the Company's Annual Report on Form 10-K for the year ended December 31, 2021, for information regarding critical accounting policies and estimates - Information on **Critical Accounting Policies and Estimates** is available in the Company's **Annual Report on Form 10-K** for the year ended **December 31, 2021**[170](index=170&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, 1847 Goedeker Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a **smaller reporting company**, the registrant is not required to disclose information under this item[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's disclosure controls and procedures were deemed ineffective as of March 31, 2022, due to material weaknesses in internal control over financial reporting. These weaknesses stem from inadequate control design, risk assessment, and control activities. Management is actively implementing remediation plans, including enhancing reporting structure, increasing qualified resources, and establishing formal risk assessment procedures [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective due to identified material weaknesses in internal control over financial reporting - Disclosure controls and procedures were determined to be **ineffective** as of **March 31, 2022**, due to **material weaknesses** in internal control over financial reporting[173](index=173&type=chunk) [Material Weaknesses in Internal Control over Financial Reporting](index=36&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) Material weaknesses include inadequate control design, insufficient resources, and ineffective risk assessment and control activities - Material weaknesses identified include **lack of structure and responsibility**, **insufficient qualified resources**, **inadequate oversight**, **ineffective assessment of risk changes**, and **inadequate selection and development of effective control activities**[175](index=175&type=chunk) [Management's Remediation Plans](index=36&type=section&id=Management's%20Remediation%20Plans) Management is implementing remediation plans to enhance reporting, increase qualified resources, and establish formal risk assessment procedures - Remediation plans include **enhancing reporting structure**, **increasing qualified resources**, **establishing formal risk assessment procedures**, and **developing/documenting policies and procedures**[176](index=176&type=chunk) - Remediation will be considered complete only after controls operate for a **sufficient period** and are tested for effectiveness[176](index=176&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred, apart from identified weaknesses and ongoing remediation efforts - No material changes in internal control over financial reporting occurred during the quarter ended **March 31, 2022**, other than those related to the identified material weaknesses and remediation efforts[177](index=177&type=chunk) [PART II OTHER INFORMATION](index=37&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures and exhibits [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in legal proceedings regarding a stockholder-approved amendment to increase authorized common stock. This includes a Section 205 Petition filed by the Company to validate the amendment and a consolidated class action lawsuit alleging improper vote tabulation and breach of fiduciary duties by the Board of Directors - Stockholders approved an amendment to increase authorized common stock by **50,000,000 shares** on **December 21, 2021**[180](index=180&type=chunk) - The Company filed a **Section 205 Petition** with the **Delaware Court of Chancery** to validate the Certificate of Amendment after concerns were raised about vote tabulation[181](index=181&type=chunk) - A **class action lawsuit (Scot T. Boden v. 1847 Goedeker Inc., et al.)** was filed, alleging **improper vote tabulation** and **breach of fiduciary duties**, which has been consolidated with the 205 Petition[182](index=182&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) The Company highlights new risk factors, including the negative impact of increasing tensions between the United States and Russia and the conflict in Ukraine on commodity pricing, supply chains, and consumer demand. Additionally, various economic factors such as inflation, exposure to the U.S. housing industry, and potential decreases in consumer spending pose significant risks - Increasing tensions between the **United States and Russia** and the **conflict in Ukraine** could negatively impact business through **higher fuel/energy costs, supply chain disruptions, and reduced consumer demand**[186](index=186&type=chunk) - Numerous economic factors, including **inflation, weakness in the U.S. housing industry, and decreased consumer discretionary spending**, could adversely affect financial performance[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not sell any previously undisclosed unregistered equity securities or repurchase any shares of common stock during the three months ended March 31, 2022 - No unregistered equity securities were sold during the three months ended **March 31, 2022**, that were not previously disclosed[188](index=188&type=chunk) - No shares of common stock were repurchased during the three months ended **March 31, 2022**[189](index=189&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon **senior securities**[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[190](index=190&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - None[191](index=191&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, recent credit agreements, security and pledge agreements, and certifications required by the Sarbanes-Oxley Act - Includes **Amended and Restated Certificate of Incorporation** and its amendment, **Bylaws** and its amendment[192](index=192&type=chunk) - Lists the **Lease Agreement dated March 15, 2022**, the **Credit Agreement dated May 9, 2022**, and the **Security and Pledge Agreement dated May 9, 2022**[192](index=192&type=chunk) - Contains **Certifications of Principal Executive Officer and Principal Financial and Accounting Officer** pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[192](index=192&type=chunk)

PART I [ITEM 1. BUSINESS](index=8&type=section&id=ITEM%201.%20BUSINESS.) The company is a technology-enabled omnichannel retailer of home goods that expanded significantly through key 2021 acquisitions - The Company is a content-driven and technology-enabled shopping destination for appliances, furniture, and home goods, operating as a nationwide omnichannel retailer[26](index=26&type=chunk)[27](index=27&type=chunk) - Key acquisitions in 2021 include Appliances Connection for **$224.7 million** and Appliances Gallery for **$1.4 million**, significantly expanding its e-commerce platform and product offerings[27](index=27&type=chunk)[29](index=29&type=chunk)[33](index=33&type=chunk) - The COVID-19 pandemic has not materially negatively impacted online sales, call center, warehouse, and distribution operations, but has caused **supply chain disruptions** and increased sourcing costs[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - The U.S. major home appliances market is projected to reach **$23.2 billion in 2022**, with an annual growth rate of 3.08% from 2022 to 2026[39](index=39&type=chunk)[41](index=41&type=chunk) - The Company offers over **500,000 SKUs** from more than 700 vendors, with Frigidaire and GE brands accounting for 12% and 11% of product purchases, respectively, in 2021[43](index=43&type=chunk)[44](index=44&type=chunk) - The Company holds a 5% equity interest in Dynamic Marketing, Inc (DMI), an appliance purchasing cooperative, from which it purchased **72.1% of finished goods in 2021**[45](index=45&type=chunk) - Growth strategies include rebranding, strengthening the leadership team, securing B2B trade business, expanding product categories, and driving operational excellence[56](index=56&type=chunk) - As of December 31, 2021, the Company employed **482 full-time employees** and had 4 registered trademarks in the United States[59](index=59&type=chunk)[60](index=60&type=chunk) [ITEM 1A. RISK FACTORS](index=15&type=section&id=ITEM%201A.%20RISK%20FACTORS.) The company faces significant risks from the COVID-19 pandemic, supply chain disruptions, intense competition, and internal control weaknesses - The COVID-19 pandemic continues to pose risks, including **global supply chain disruptions**, staffing shortages, increased shipping costs, and economic uncertainty[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Business success is highly dependent on general economic conditions, consumer discretionary spending, and the ability to acquire and retain customers cost-effectively[77](index=77&type=chunk)[78](index=78&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) - The Company faces **intense competition** from various retailers and marketplaces, requiring continuous efforts in product quality, pricing, and customer service[91](index=91&type=chunk)[92](index=92&type=chunk) - Significant risks are associated with **IT system failures and security breaches**, which could disrupt business, harm reputation, and lead to financial and legal liabilities[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Reliance on third-party suppliers and logistics providers exposes the Company to risks of shipping delays, product damage, and changes in business terms[102](index=102&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - The continued integration of Appliances Connection presents operational, strategic, and financial risks, including potential difficulties in achieving anticipated synergies[124](index=124&type=chunk)[125](index=125&type=chunk) - The Company has identified **material weaknesses in internal control over financial reporting**, which could lead to financial misstatements[127](index=127&type=chunk)[128](index=128&type=chunk) - Future growth may require additional financing, and existing debt obligations could limit operating flexibility[132](index=132&type=chunk)[133](index=133&type=chunk)[136](index=136&type=chunk) - The validity of a stockholder vote to increase authorized common stock shares has been questioned, potentially limiting future corporate flexibility[155](index=155&type=chunk)[156](index=156&type=chunk) - The Company **does not expect to declare or pay dividends** in the foreseeable future, as earnings will be reinvested in the business[163](index=163&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=40&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS.) The Company has no unresolved staff comments from the SEC - There are no unresolved staff comments[176](index=176&type=chunk) [ITEM 2. PROPERTIES](index=40&type=section&id=ITEM%202.%20PROPERTIES.) The company operates over 438,000 square feet of leased headquarters, showrooms, and warehouses across multiple states Company Facilities (as of December 31, 2021) | Property Location | Description of Use | Leased Square Footage | | :---------------- | :----------------- | :-------------------- | | Brooklyn, New York | Headquarters; Office Space; Showroom | 21,000 | | Brooklyn, New York | Office Space | 5,835 | | Brooklyn, New York | Showroom | 3,800 | | Somerset, New Jersey | Warehouse | 129,785 | | Hamilton, New Jersey | Warehouse | 135,000 | | St. Charles, Missouri | Office Space; Showroom; Warehouse | 86,800 | | Baldwin, Missouri (2) | Office Space; Showroom; Warehouse | 50,000 | | Largo, Florida | Showroom; Warehouse | 5,800 | | **Total** | | **438,020** | - The Baldwin, Missouri warehouse and retail showroom was closed on June 30, 2021, in anticipation of relocating to a new facility, with plans to sublease the space[178](index=178&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=41&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS.) The company is involved in legal proceedings concerning the validity of a stockholder vote to increase its authorized common stock - The Company is seeking validation from the Delaware Court of Chancery regarding a stockholder vote to increase authorized common stock by **50,000,000 shares**[179](index=179&type=chunk)[180](index=180&type=chunk) - A class action lawsuit has been filed against the Company and its Board of Directors, alleging improper tabulation of the stockholder vote and breach of fiduciary duties[181](index=181&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=41&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) The Company is not subject to the disclosure requirements related to mine safety - Mine safety disclosures are not applicable to the Company[183](index=183&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=42&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock (GOED) trades on the NYSE American, with no dividends anticipated and a $25 million share repurchase program authorized - The Company's common stock (GOED) and warrants (GOED WS) are listed on the **NYSE American**[186](index=186&type=chunk) - As of March 28, 2022, there were approximately **49 stockholders of record** for common stock and 1 for warrants[187](index=187&type=chunk) - The Company has never declared or paid cash dividends and does not expect to in the foreseeable future, with the Credit Agreement also restricting payments[188](index=188&type=chunk) - On December 17, 2021, the board authorized a share repurchase program of up to **$25.0 million**; however, no shares were repurchased as of December 31, 2021[190](index=190&type=chunk)[200](index=200&type=chunk) [ITEM 6. [RESERVED]](index=42&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved due to amendments to Regulation S-K - Item 6 is reserved due to amendments to Regulation S-K that eliminated Item 301[191](index=191&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=43&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Acquisitions drove significant revenue growth and a return to profitability in 2021, despite supply chain pressures and negative operating cash flow - The Company completed the Appliances Connection Acquisition on June 2, 2021, for **$224.7 million** and the Appliance Gallery Acquisition on July 29, 2021, for **$1.4 million**[195](index=195&type=chunk)[198](index=198&type=chunk) - Freight costs as a percentage of sales **increased from 8.0% in 2020 to 9.1% in 2021** (consolidated proforma), putting downward pressure on gross margins[210](index=210&type=chunk) - Supply chain constraints led to order fulfillment delays and **$34.0 million in customer deposit refunds** in 2021, resulting in negative operating cash flow[211](index=211&type=chunk)[237](index=237&type=chunk) Key Financial Highlights (Years Ended December 31, 2021 vs 2020) | Metric | 2021 (Amount in thousands) | 2021 (% of Net Sales) | 2020 (Amount in thousands) | 2020 (% of Net Sales) | Change (YoY) | | :---------------------- | :------------------------- | :-------------------- | :------------------------- | :-------------------- | :----------- | | Product sales, net | $362,314 | 100.0% | $55,134 | 100.0% | +557.2% | | Cost of goods sold | $282,655 | 78.0% | $47,879 | 86.8% | +490.4% | | Gross profit | $79,659 | 22.0% | $7,255 | 13.2% | +998.0% | | Total Operating Expenses| $71,339 | 19.7% | $21,688 | 39.3% | +228.0% | | Income (Loss) from Operations | $8,320 | 2.3% | $(14,433) | (26.2)% | N/A | | Net Income (Loss) | $7,670 | 2.1% | $(21,568) | (39.1)% | +135.6% | | Basic EPS | $0.12 | | $(3.95) | | N/A | | Diluted EPS | $0.10 | | $(3.95) | | N/A | Cash Flow Summary (Years Ended December 31, 2021 vs 2020) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :----------------------------- | :------------------ | :------------------ | | Net cash (used in) provided by operating activities | $(18,328) | $5,409 | | Net cash used in investing activities | $(204,834) | $(113) | | Net cash provided by financing activities | $247,041 | $4,145 | - Financing activities in 2021 included **$196.8 million from public offerings** (including warrant exercises) and **$60.8 million from debt issuances**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - As of December 31, 2021, the Company had **$25.7 million in cash** and cash equivalents and $8.1 million in restricted cash, with $58.5 million outstanding under the Term Loan[236](index=236&type=chunk)[252](index=252&type=chunk) - Management believes sufficient funds will be generated from operations and available credit to fund operations for at least the next twelve months[237](index=237&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - Key accounting policies include revenue recognition (FOB shipping point or installation), goodwill impairment evaluations, and income tax accounting[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=61&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, these disclosures are not required - As a smaller reporting company, the Company is not required to disclose quantitative and qualitative information about market risk[292](index=292&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=61&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA.) This item refers to the full text of the Company's audited consolidated financial statements - The full text of the audited consolidated financial statements is included starting on page F-1 of this annual report[293](index=293&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=62&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE.) The Company reports no changes in or disagreements with its accountants - There are no changes in or disagreements with accountants on accounting and financial disclosure[294](index=294&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=62&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES.) Disclosure controls were deemed not effective as of December 31, 2021, due to identified material weaknesses in internal control - The Company's disclosure controls and procedures were deemed **not effective** as of December 31, 2021, due to material weaknesses in internal control over financial reporting[295](index=295&type=chunk) - Material weaknesses identified include a lack of structure, insufficient qualified resources, inadequate oversight, and ineffective risk assessment[299](index=299&type=chunk)[307](index=307&type=chunk) - Management's remediation plans involve enhancing reporting structure, increasing qualified resources, and establishing formal risk assessment and control procedures[300](index=300&type=chunk)[307](index=307&type=chunk) - The assessment of internal control over financial reporting **excluded the Appliances Connection Acquisition**, which represented approximately 32% of total assets and 87% of total revenue[301](index=301&type=chunk) [ITEM 9B. OTHER INFORMATION](index=63&type=section&id=ITEM%209B.%20OTHER%20INFORMATION.) The Company has no other information to report under this item - There is no other information to report[305](index=305&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=63&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS.) This disclosure is not applicable to the Company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[306](index=306&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=65&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE.) Required information will be provided via an amendment or incorporated by reference from the 2022 proxy statement - Information for this item will be filed by amendment or incorporated by reference to the 2022 proxy statement[310](index=310&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=65&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION.) Required information will be provided via an amendment or incorporated by reference from the 2022 proxy statement - Information for this item will be filed by amendment or incorporated by reference to the 2022 proxy statement[311](index=311&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=65&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS.) Required information will be provided via an amendment or incorporated by reference from the 2022 proxy statement - Information for this item will be filed by amendment or incorporated by reference to the 2022 proxy statement[312](index=312&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=65&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE.) Required information will be provided via an amendment or incorporated by reference from the 2022 proxy statement - Information for this item will be filed by amendment or incorporated by reference to the 2022 proxy statement[313](index=313&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=65&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES.) Required information will be provided via an amendment or incorporated by reference from the 2022 proxy statement - Information for this item will be filed by amendment or incorporated by reference to the 2022 proxy statement[314](index=314&type=chunk) PART IV [ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES](index=66&type=section&id=ITEM%2015.%20EXHIBIT%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES.) This section lists the consolidated financial statements and provides an index to all exhibits filed with the report - The report includes an index to consolidated financial statements, such as Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows[317](index=317&type=chunk) - All financial statement schedules have been omitted as the required information is included in the consolidated financial statements or their notes[318](index=318&type=chunk) - A comprehensive list of exhibits is provided, detailing various agreements, certificates, and plans[319](index=319&type=chunk)[320](index=320&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=72&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY.) The Company has not provided a summary for its Form 10-K - No Form 10-K summary is provided[325](index=325&type=chunk) CONSOLIDATED FINANCIAL STATEMENTS [Report of Independent Registered Public Accounting Firm](index=74&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(PCAOB%20Firm%20ID%20%23711)) The independent auditor issued an unqualified opinion on the 2021 and 2020 financial statements - Friedman LLP issued an **unqualified opinion** on the consolidated financial statements for the years ended December 31, 2021 and 2020, stating they present fairly the Company's financial position in conformity with GAAP[329](index=329&type=chunk) - The audit was conducted in accordance with PCAOB standards, but **did not include an audit of the Company's internal control** over financial reporting[331](index=331&type=chunk) [Consolidated Balance Sheets](index=75&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20December%2031%2C%202021%20and%202020) Total assets grew substantially to $376.0 million in 2021, driven by acquisitions that also turned stockholders' deficit into positive equity Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--------------------------- | :---------------- | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $25,724 | $935 | | Total Current Assets | $121,318 | $18,240 | | Goodwill | $191,614 | $4,726 | | Intangible assets, net | $44,212 | $1,382 | | **TOTAL ASSETS** | **$375,984** | **$26,217** | | **LIABILITIES** | | | | Total Current Liabilities | $105,341 | $35,695 | | **TOTAL LIABILITIES** | **$170,381** | **$39,533** | | **STOCKHOLDERS' EQUITY (DEFICIT)** | | | | **TOTAL STOCKHOLDERS' EQUITY (DEFICIT)** | **$205,603** | **$(13,316)** | - Total assets increased significantly by **$349.8 million**, primarily due to the Appliances Connection acquisition, which added substantial goodwill ($185.7 million) and intangible assets ($42.8 million)[335](index=335&type=chunk)[427](index=427&type=chunk) - Stockholders' Equity improved from a **deficit of $13.3 million** in 2020 to a **positive $205.6 million** in 2021, driven by $194.4 million in net proceeds from public equity offerings[335](index=335&type=chunk)[340](index=340&type=chunk)[489](index=489&type=chunk) [Consolidated Statements of Operations](index=77&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20Years%20Ended%20December%2031%2C%202021%20and%202020) The company achieved net income of $7.7 million in 2021, a major turnaround from a $21.6 million loss in 2020, fueled by a 557% sales increase Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 2021 | 2020 | | :---------------------- | :---------- | :---------- | | Product sales, net | $362,314 | $55,134 | | Gross profit | $79,659 | $7,255 | | INCOME (LOSS) FROM OPERATIONS | $8,320 | $(14,433) | | NET INCOME (LOSS) | $7,670 | $(21,568) | | NET INCOME (LOSS) PER COMMON SHARE | $0.12 | $(3.95) | | DILUTED NET INCOME (LOSS) PER COMMON SHARE | $0.10 | $(3.95) | - Net product sales **increased by $307.2 million (557.2%)** in 2021, primarily due to the Appliances Connection Acquisition, which contributed $314.5 million in sales[217](index=217&type=chunk)[430](index=430&type=chunk) - Gross profit **increased by $72.4 million (998.0%)**, and gross margin improved from 13.2% in 2020 to 22.0% in 2021[221](index=221&type=chunk) - The Company recorded a **net income of $7.7 million** in 2021, a significant improvement from a net loss of $21.6 million in 2020, partly due to a $4.4 million income tax benefit[230](index=230&type=chunk)[231](index=231&type=chunk) [Consolidated Statements of Stockholders' Equity (Deficit)](index=78&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)%20for%20the%20Years%20Ended%20December%2031%2C%202021%20and%202020) Stockholders' equity shifted from a $13.3 million deficit to a $205.6 million surplus, driven by public offerings and acquisition-related stock issuance Stockholders' Equity (Deficit) Summary (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--------------------------- | :---------------- | :---------------- | | Additional Paid-in Capital | $224,648 | $13,409 | | Accumulated Deficit | $(19,056) | $(26,726) | | Total Stockholders' Equity (Deficit) | $205,603 | $(13,316) | - Additional paid-in capital increased significantly by **$211.2 million**, primarily from **$194.4 million in net proceeds** from a public offering of common stock and warrants[340](index=340&type=chunk)[489](index=489&type=chunk) - The accumulated deficit decreased from $26.7 million in 2020 to $19.1 million in 2021, reflecting the Company's **net income of $7.7 million** for the year[340](index=340&type=chunk) [Consolidated Statements of Cash Flows](index=79&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Years%20Ended%20December%2031%2C%202021%20and%202020) The company had negative operating cash flow of $18.3 million, used $204.8 million for acquisitions, and raised $247.0 million from financing activities Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | 2021 | 2020 | | :----------------------------- | :---------- | :---------- | | Net cash (used in) provided by operating activities | $(18,328) | $5,409 | | Net cash used in investing activities | $(204,834) | $(113) | | Net cash provided by financing activities | $247,041 | $4,145 | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $23,879 | $9,441 | - Net cash used in operating activities was **$18.3 million** in 2021, a decrease from $5.4 million provided in 2020, primarily due to a **$19.0 million decrease in customer deposits** (refunds)[245](index=245&type=chunk)[248](index=248&type=chunk) - Net cash used in investing activities significantly increased to **$204.8 million** in 2021, mainly driven by **$202.9 million in net cash paid for acquisitions**[245](index=245&type=chunk) - Net cash provided by financing activities was **$247.0 million** in 2021, largely from **$194.4 million in net proceeds from public equity offerings** and $60.8 million from debt issuances[246](index=246&type=chunk)[247](index=247&type=chunk)[249](index=249&type=chunk) [Notes to Consolidated Financial Statements](index=81&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the financial impact of acquisitions, revenue recognition policies, debt structure, and material weaknesses in internal controls - The Company's business model involves selling appliances, furniture, and home goods, with key 2021 acquisitions expanding its market presence[349](index=349&type=chunk) - Revenue is recognized when control of products transfers to customers, typically **FOB shipping point** or upon installation[280](index=280&type=chunk)[361](index=361&type=chunk) Disaggregated Revenue by Product Type (in thousands) | Product Type | 2021 | 2020 | | :-------------- | :---------- | :---------- | | Appliance sales | $328,496 | $40,114 | | Furniture sales | $19,457 | $11,800 | | Other sales | $14,361 | $3,220 | | **Total** | **$362,314**| **$55,134** | Receivables (in thousands) | Type of Receivable | December 31, 2021 | December 31, 2020 | | :------------------------------ | :---------------- | :---------------- | | Trade accounts receivable | $10,694 | $- | | Vendor rebates receivable | $11,633 | $1,338 | | Other receivables | $2,660 | $- | | Credit cards in process of collection | $- | $660 | | Total receivables | $24,987 | $1,998 | | Less allowance for doubtful accounts | $(393) | $- | | **Total receivables, net** | **$24,594** | **$1,998** | - Goodwill increased from $4.7 million in 2020 to **$191.6 million in 2021**, primarily due to **$185.7 million from the Appliances Connection acquisition**[421](index=421&type=chunk) - The Company's debt structure includes a **$60.0 million Term Loan** and a $10.0 million Revolving Loan (unused), both maturing on June 2, 2026[251](index=251&type=chunk)[252](index=252&type=chunk)[257](index=257&type=chunk) - Operating lease liabilities totaled **$16.4 million** as of December 31, 2021, with a weighted-average remaining lease term of 77 months[468](index=468&type=chunk) - Related party transactions include significant purchases from DMI (**$177.8 million in 2021**), where the Company holds a 5% interest and its CEO is on the board[473](index=473&type=chunk)[475](index=475&type=chunk)[480](index=480&type=chunk)[481](index=481&type=chunk) - The Company's authorized common stock increased to **250,000,000 shares** in 2021, and an Equity Incentive Plan was amended to reserve 11,000,000 shares[483](index=483&type=chunk)[492](index=492&type=chunk) - The Company recognized an **income tax benefit of $4.4 million** in 2021, reversing a valuation allowance on deferred tax assets due to expected future profitability[230](index=230&type=chunk)[510](index=510&type=chunk)[512](index=512&type=chunk) - Legal proceedings include a challenge to the validity of a stockholder vote to increase authorized shares and a related class action lawsuit[521](index=521&type=chunk)[522](index=522&type=chunk)[523](index=523&type=chunk)