Part I - Financial Information Item 1. Financial Statements The company's Q1 2020 unaudited financial statements reflect significant revenue growth to $10.4 million primarily from the Goedeker acquisition, alongside an increased net loss of $2.11 million Consolidated Balance Sheets As of March 31, 2020, total assets decreased to $18.18 million, while total liabilities increased to $24.29 million, leading to an increased shareholders' deficit of $6.11 million Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | March 31, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | Total Assets | $18,179,694 | $19,231,992 | | Total Current Assets | $4,556,292 | $5,726,093 | | Goodwill | $5,119,918 | $4,998,182 | | Total Liabilities | $24,288,970 | $23,230,786 | | Total Current Liabilities | $17,918,934 | $16,663,353 | | Total Shareholders' Deficit | ($6,109,276) | ($3,998,794) | Consolidated Statements of Operations For Q1 2020, total revenue surged to $10.41 million due to the Goedeker acquisition, but operating expenses also rose, widening the net loss attributable to shareholders to $1.37 million Consolidated Statements of Operations (Unaudited) | Financial Metric | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Total Revenue | $10,411,348 | $812,371 | | Furniture and appliances | $9,677,178 | - | | Total Operating Expenses | $12,485,677 | $1,573,881 | | Loss from Operations | ($2,074,329) | ($761,510) | | Net Loss Attributable to Shareholders | ($1,372,297) | ($368,579) | | Net Loss Per Share (Basic and diluted) | ($0.43) | ($0.12) | Consolidated Statements of Cash Flows In Q1 2020, net cash provided by operating activities significantly improved to $1.24 million, primarily due to increased customer deposits, resulting in a $63,657 increase in cash to $302,417 Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,236,777 | ($4,033) | | Net cash provided by (used in) investing activities | ($19,758) | $29,454 | | Net cash used in financing activities | ($1,153,362) | ($263,077) | | Net Change in Cash | $63,657 | ($237,656) | | Cash at End of Period | $302,417 | $96,224 | Notes to Unaudited Consolidated Financial Statements These notes detail the company's organization, accounting policies, and segment reporting, including the Goedeker acquisition, debt instruments, and subsequent events like PPP loans and convertible note amendments - The company operates in two segments: the Retail and Appliances Segment (operated by Goedeker) and the Land Management Segment (operated by Neese)343536 - The acquisition of Goedeker Television's assets was completed on April 5, 2019. A working capital dispute with the seller for $809,000 is currently in arbitration109113 - The company is in technical, non-payment default on loan agreements with Burnley and SBCC due to non-compliance with financial covenants. Neese also failed to comply with a debt coverage ratio covenant on its loan from Home State Bank140142157 - Subsequent to the quarter end, subsidiaries Goedeker and Neese received Payroll Protection Program (PPP) loans of $642,600 and $383,600, respectively. The company also amended its convertible note with Leonite, extending the maturity and issuing additional warrants231234237 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 performance, highlighting revenue growth from the Goedeker acquisition, the impact of COVID-19 on operations, and details on liquidity, capital resources, and debt obligations including covenant defaults and remediation plans Overview and Recent Developments This section outlines the company's two segments, Goedeker and Neese, detailing the impact of the COVID-19 pandemic on operations, the receipt of PPP loans, and subsequent amendments to a convertible note - The company's business is comprised of two segments: Goedeker (e-commerce for home furnishings) and Neese (agricultural services)246247 - The COVID-19 pandemic forced the closure of Goedeker's physical showroom, but its e-commerce, call center, and warehouse operations continued, as over 90% of its sales are online251 - In April 2020, subsidiaries Goedeker and Neese received Payroll Protection Program (PPP) loans of $642,600 and $383,600, respectively259 Results of Operations Q1 2020 total revenues increased substantially to $10.41 million, primarily from the Goedeker segment, while the land management segment's revenue decreased, leading to a consolidated net loss of $1.37 million Results of Operations Comparison (Unaudited) | Metric | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Total Revenues | $10,411,348 | $812,371 | | Cost of Sales | $8,366,438 | $213,750 | | Loss from Operations | ($2,074,329) | ($761,510) | | Net Loss Attributable to Shareholders | ($1,372,297) | ($368,579) | - The Retail and Appliances segment (Goedeker) generated $9,677,178 in revenue for Q1 2020275278 - The Land Management Services segment (Neese) revenue decreased 9.6% YoY to $734,170, primarily due to a decline in trucking revenue278 Liquidity and Capital Resources As of March 31, 2020, the company had $302,417 in cash, facing technical defaults on loan covenants, with remediation plans including a proposed public offering for Goedeker, and total outstanding debt of approximately $10.46 million - The company had cash and cash equivalents of $302,417 as of March 31, 2020290 - Goedeker was in technical, non-payment default on loan covenants with Burnley and SBCC. Remediation plans include a proposed public offering of Goedeker's common stock to repay the loans293296297 Total Debt Summary as of March 31, 2020 | Debt Category | Current Portion (USD) | Long-Term Portion (USD) | Total (USD) | | :--- | :--- | :--- | :--- | | Total Debt | $8,142,315 | $2,318,651 | $10,460,966 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the current report - Not applicable376 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2020, due to material weaknesses, with ongoing remediation efforts including new hires and training - Management concluded that disclosure controls and procedures were not effective as of March 31, 2020378 - Identified material weaknesses include a lack of appropriate policies for accounting/disclosure review and inadequate segregation of duties381 - Remediation efforts include hiring a permanent CFO (Robert D. Barry, CPA), providing GAAP training, and continuing to use outsourced accounting services382383384 Part II - Other Information Item 1. Legal Proceedings The company is not aware of any legal proceedings or claims expected to have a material adverse effect on its business or financial condition - The company is not aware of any legal proceedings expected to have a material adverse effect388 Item 1A. Risk Factors This section is not applicable for the current quarterly report - Not applicable389 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or repurchases of common shares during the quarter - No unregistered sales of equity securities were made during the quarter that were not previously disclosed390 - The company did not repurchase any of its common shares during the quarter391 Item 3. Defaults Upon Senior Securities The company reports no payment defaults upon senior securities - None reported393 Item 4. Mine Safety Disclosures This section is not applicable - Not applicable395 Item 5. Other Information No information required on Form 8-K was omitted, and there were no material changes to board nominee recommendation procedures - No information required to be reported on Form 8-K during the quarter was omitted396 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including a Stock Purchase Agreement for Asien's Appliance, Inc. acquisition and Sarbanes-Oxley certifications - Filed exhibits include a Stock Purchase Agreement for the planned acquisition of Asien's Appliance, Inc. and Sarbanes-Oxley certifications397
1847 LLC(EFSH) - 2020 Q1 - Quarterly Report