Polished.com (POL) - 2021 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for 1847 Goedeker Inc ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements of 1847 Goedeker Inc. for the periods ended September 30, 2021, and December 31, 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial line items Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of September 30, 2021, and December 31, 2020 Key Balance Sheet Metrics | Metric | Sep 30, 2021 (unaudited) (in thousands) | Dec 31, 2020 (in thousands) | | :-------------------------------- | :------------------------------------- | :-------------------------- | | ASSETS | | | | Cash and cash equivalents | $27,175 | $935 | | Total Current Assets | $115,175 | $18,240 | | Goodwill | $183,768 | $4,726 | | Intangible assets, net | $47,858 | $1,382 | | TOTAL ASSETS | $361,984 | $26,217 | | LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | Total Current Liabilities | $95,176 | $35,695 | | TOTAL LIABILITIES | $159,939 | $39,533 | | Total Stockholders' Equity (Deficit) | $202,045 | $(13,316) | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $361,984 | $26,217 | - Total assets significantly increased from $26.2 million at December 31, 2020, to $362.0 million at September 30, 2021, primarily driven by the acquisition of Appliances Connection, which led to substantial increases in goodwill and intangible assets[12] - Stockholders' Equity shifted from a deficit of $(13.3) million at December 31, 2020, to a positive $202.0 million at September 30, 2021, largely due to additional paid-in capital from equity offerings[12] Condensed Consolidated Statements of Operations This section details the company's financial performance, including product sales, cost of goods sold, gross profit, operating expenses, and net income or loss for the reported periods Key Operating Results | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product sales, net | $141,867 | $13,435 | $219,637 | $38,397 | | Cost of goods sold | $110,495 | $11,265 | $172,581 | $32,061 | | Gross profit | $31,372 | $2,170 | $47,056 | $6,336 | | Total Operating Expenses | $24,870 | $5,714 | $45,097 | $13,456 | | INCOME (LOSS) FROM OPERATIONS | $6,502 | $(3,544) | $1,959 | $(7,120) | | NET INCOME (LOSS) BEFORE INCOME TAXES | $5,445 | $(5,065) | $(2,063) | $(13,349) | | NET INCOME (LOSS) | $3,316 | $(4,227) | $3,856 | $(11,387) | | NET INCOME (LOSS) PER COMMON SHARE (BASIC) | $0.03 | $(0.74) | $0.08 | $(2.17) | - Net product sales for the three months ended September 30, 2021, increased by 956.0% to $141.9 million (from $13.4 million in 2020), and for the nine months ended September 30, 2021, increased by 472.0% to $219.6 million (from $38.4 million in 2020), primarily due to the Appliances Connection acquisition[14] - The company reported a net income of $3.3 million for the three months ended September 30, 2021, a significant improvement from a net loss of $4.2 million in the prior year period, with net income for the nine months at $3.9 million, up from an $11.4 million net loss[14] Condensed Consolidated Statements of Stockholders' Equity (Deficit) This section outlines changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, from January 1, 2021, to September 30, 2021 Key Stockholders' Equity Metrics | Metric (in thousands) | Balance, January 1, 2021 | Balance, September 30, 2021 | | :-------------------------------- | :----------------------- | :-------------------------- | | Common Stock (Shares) | 6,111 | 106,387 | | Common Stock (Amount) | $1 | $11 | | Additional Paid-in Capital | $13,409 | $224,904 | | Accumulated Deficit | $(26,726) | $(22,870) | | Total Stockholders' Equity (Deficit) | $(13,316) | $202,045 | - Total Stockholders' Equity (Deficit) dramatically improved from a deficit of $(13.3) million at January 1, 2021, to a positive $202.0 million by September 30, 2021, primarily driven by significant share issuances related to acquisitions and public offerings[15] - Common stock shares outstanding increased from 6.1 million at January 1, 2021, to 106.4 million at September 30, 2021, reflecting issuances for acquisitions and public offerings[15] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2021, and 2020 Key Cash Flow Metrics | Metric (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(18,316) | $7,383 | | Net cash used in investing activities | $(203,628) | $(51) | | Net cash provided by financing activities | $247,218 | $4,983 | | NET CHANGE IN CASH AND RESTRICTED CASH | $25,274 | $12,315 | | CASH AND RESTRICTED CASH, END OF PERIOD | $35,186 | $12,379 | - Net cash used in operating activities was $(18.3) million for the nine months ended September 30, 2021, a significant change from $7.4 million provided in the prior year, primarily due to changes in customer deposits and merchandise inventory[18][224] - Investing activities used $203.6 million, largely driven by the $201.5 million cash paid for the Appliances Connection acquisition[18][225] - Financing activities provided $247.2 million, primarily from proceeds of equity offerings ($194.6 million) and term notes payable ($55.2 million)[18][226] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures regarding the company's financial statements, including accounting policies, specific line items, and significant events NOTE 1—ORGANIZATION AND NATURE OF BUSINESS This note describes the company's formation, strategic acquisitions, and its current operations as an e-commerce retailer of home goods - 1847 Goedeker Inc. was formed in January 2019 to acquire Goedeker Television Co. and has since expanded through key acquisitions[21][22] - In June 2021, the company acquired Appliances Connection, creating one of the largest pure-play online retailers of household appliances in the U.S., and in July 2021, acquired Appliance Gallery[23][24][25] - The company operates as an e-commerce destination for appliances, furniture, and home goods, offering national and luxury brands through warehouse fulfillment centers and showrooms[25] NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition, deferred taxes, and sales tax liabilities - The financial statements are prepared in accordance with GAAP, with all necessary adjustments included for fair presentation[26][27] - Revenue is recognized when control of goods transfers to customers, which varies by delivery method (Company Shipment, Drop Shipment, Local Delivery)[34][36] - The company reversed its allowance for deferred tax assets in Q2 2021, expecting future profitability due to the Appliances Connection acquisition[62] - Sales tax liability accrued for states adopting the Wayfair decision increased from $5.8 million at December 31, 2020, to $18.2 million at September 30, 2021, including $11.0 million from the Appliances Connection acquisition[63] - Management believes the company will generate sufficient funds from operations to fund its operations and service debt obligations for at least one year, despite the uncertainties of COVID-19[71][72][73] NOTE 3—RECEIVABLES This note provides a breakdown of the company's receivables, including trade receivables, vendor rebates, and credit cards in process of collection Receivables Breakdown | Receivables (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------- | :----------- | :----------- | | Trade receivables from customers | $12,551 | $- | | Vendor rebates receivable | $7,499 | $1,338 | | Credit cards in process of collection | $135 | $660 | | Other receivables | $3,833 | $- | | Total receivables | $24,018 | $1,998 | - Total receivables increased significantly from $2.0 million at December 31, 2020, to $24.0 million at September 30, 2021, primarily due to the introduction of trade receivables from customers and a substantial increase in vendor rebates receivable[79] NOTE 4—MERCHANDISE INVENTORY This note details the composition of the company's merchandise inventory, including appliances, furniture, and other items, along with the allowance for obsolescence Merchandise Inventory Breakdown | Merchandise Inventory (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--------------------------------- | :----------- | :----------- | | Appliances | $34,317 | $5,286 | | Furniture | $1,903 | $195 | | Other | $1,984 | $91 | | Total merchandise inventory | $38,204 | $5,572 | | Allowance for inventory obsolescence | $(425) | $(425) | | Merchandise inventory, net | $37,779 | $5,147 | - Net merchandise inventory increased substantially from $5.1 million at December 31, 2020, to $37.8 million at September 30, 2021, with appliances accounting for the largest portion of this increase[80] NOTE 5—VENDOR DEPOSITS This note explains the nature and amount of vendor deposits held by the company to secure purchases - Vendor deposits increased from $0.5 million at December 31, 2020, to $12.1 million at September 30, 2021, representing cash on deposit with a vendor to secure purchases, on which the company earns interest[82][83] NOTE 6—PROPERTY AND EQUIPMENT This note provides a breakdown of the company's property and equipment, including accumulated depreciation, and highlights that these assets are pledged as collateral for loans Property and Equipment Breakdown | Property and Equipment (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------ | :----------- | :----------- | | Total property and equipment | $2,797 | $332 | | Accumulated depreciation | $(277) | $(86) | | Property and equipment, net | $2,520 | $246 | - Net property and equipment increased significantly from $0.2 million at December 31, 2020, to $2.5 million at September 30, 2021, with notable increases in transportation equipment and construction in progress[84] - All property and equipment are pledged to secure the company's loans[85] NOTE 7—INTANGIBLE ASSETS AND GOODWILL This note details the company's intangible assets and goodwill, primarily resulting from the Appliances Connection acquisition, and their respective carrying amounts Intangible Assets Breakdown | Intangible Assets (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------- | :----------- | :----------- | | Customer relationships | $26,549 | $749 | | Marketing related - tradename | $25,704 | $1,368 | | Total intangible assets | $52,253 | $2,117 | | Accumulated amortization | $(4,395) | $(735) | | Intangible assets, net | $47,858 | $1,382 | - Net intangible assets surged from $1.4 million at December 31, 2020, to $47.9 million at September 30, 2021, primarily due to the Appliances Connection acquisition, which added significant customer relationships and tradenames[86] Goodwill Breakdown | Goodwill (in thousands) | Amount | | :---------------------- | :----- | | Balance December 31, 2020 | $4,726 | | Preliminary goodwill from acquisition of Appliances Connection | $177,875 | | Preliminary goodwill from acquisition of Appliances Gallery | $1,167 | | Balance September 30, 2021 | $183,768 | - Goodwill increased from $4.7 million at December 31, 2020, to $183.8 million at September 30, 2021, predominantly from the preliminary goodwill recognized in the Appliances Connection acquisition ($177.9 million)[88] NOTE 8—ACCOUNTS PAYABLE AND ACCRUED EXPENSES This note provides a detailed breakdown of the company's accounts payable and accrued expenses, including trade payables, sales tax, and payroll liabilities Accounts Payable and Accrued Expenses Breakdown | Accounts Payable and Accrued Expenses (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------------------- | :----------- | :----------- | | Trade accounts payable | $37,845 | $5,975 | | Sales tax | $23,836 | $5,804 | | Accrued payroll liabilities | $1,527 | $493 | | Other accrued liabilities | $4,395 | $220 | | Total accounts payable and accrued expenses | $68,013 | $12,702 | - Total accounts payable and accrued expenses increased from $12.7 million at December 31, 2020, to $68.0 million at September 30, 2021, primarily due to significant increases in trade accounts payable and sales tax liabilities[89] NOTE 9—BUSINESS COMBINATIONS This note details the company's acquisitions of Appliances Connection and Appliance Gallery, including purchase prices, preliminary goodwill, and the impact on pro forma financial results - On June 2, 2021, the company completed the acquisition of Appliances Connection for an aggregate purchase price of $222.0 million, consisting of $180.0 million in cash and $42.0 million in common stock[90][91] - The Appliances Connection acquisition resulted in preliminary goodwill of $177.9 million and acquired net assets of $47.0 million, including $25.8 million in customer relationships and $24.3 million in tradenames[95][97] - On July 29, 2021, the company acquired Appliance Gallery for $1.4 million in cash, resulting in preliminary goodwill of $1.2 million[98][99][102][104] Pro Forma Results | Pro Forma Results (in thousands, except per share data) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product sales, net | $141,867 | $102,201 | $404,953 | $260,443 | | Net income (loss) | $3,946 | $(657) | $31,128 | $(3,196) | | Basic earnings per share | $0.04 | $(0.01) | $0.31 | $(0.03) | NOTE 10—NOTES PAYABLE This note details the company's debt obligations, including a senior secured credit facility, term loan maturities, and the repayment of previous loans - On June 2, 2021, the company entered into a $70.0 million senior secured credit facility, including a $60.0 million Term Loan and a $10.0 million Revolving Loan, maturing on June 2, 2026[110] - The Term Loan bears interest at LIBOR Rate plus 3.9% and requires quarterly principal repayments of $1.5 million, with an outstanding balance of $55.0 million as of September 30, 2021[111][112] Term Loan Maturities | Term Loan Maturities (in thousands) | Amount | | :---------------------------------- | :----- | | 2021 (remainder of year) | $1,500 | | 2022 | $6,000 | | 2023 | $6,000 | | 2024 | $6,000 | | 2025 | $6,000 | | Thereafter | $33,000 | | Total | $58,500 | | Less: Loan costs | $(3,501) | | Total | $54,999 | - The company repaid a $3.5 million Arvest Loan in May 2021 and fully repaid $5.6 million in 10% OID Senior Promissory Notes in June 2021, incurring a $1.7 million loss on extinguishment of debt[120][122] NOTE 11—LEASES This note outlines the company's lease obligations, including finance leases for equipment and operating leases for properties, along with related assets and liabilities - The company has three finance leases for forklifts with a total amount due of $0.2 million as of September 30, 2021[125] Operating Lease Liabilities | Operating Lease Liabilities (in thousands) | Amount | | :--------------------------------------- | :----- | | Operating lease right-of-use assets | $12,319 | | Lease liabilities, current portion | $2,127 | | Lease liabilities, long-term | $11,628 | | Total operating lease liabilities | $13,755 | | Weighted average remaining lease term (months) | 91 | | Weighted average discount rate | 4.4% | - Operating lease right-of-use assets totaled $12.3 million and total operating lease liabilities were $13.8 million as of September 30, 2021, with a weighted average remaining lease term of 91 months[136] - The company incurred a $1.4 million loss on abandonment of a right-of-use asset due to closing an old warehouse and showroom in June 2021[138] NOTE 12—SUPPLIER CONCENTRATION This note highlights the company's significant reliance on a single supplier, DMI, for a substantial portion of its finished goods purchases - For the three and nine months ended September 30, 2021, the company purchased a substantial portion of finished goods from DMI, accounting for 79% and 66% of total purchases, respectively[140] NOTE 13—RELATED PARTIES This note discloses transactions and agreements with related parties, including management services, purchasing cooperatives, and lease agreements with entities owned by company executives - The company has a management services agreement with 1847 Partners LLC, owned by its chairman, incurring quarterly management fees of $62,500[141][143] - The company is a member of DMI, an appliance purchasing cooperative, and a related party due to common board membership, with vendor rebate deposits due from DMI of $3.7 million and total purchases from DMI of $91.4 million for the nine months ended September 30, 2021[145][146] - Several subsidiaries have lease agreements with entities owned by Albert Fouerti (CEO) and Elie Fouerti, resulting in total related party rent expense of $0.6 million for the period June 2 to September 30, 2021[147] NOTE 14—STOCKHOLDERS' EQUITY (DEFICIT) This note details changes in stockholders' equity, including common stock issuances, public offerings, stock option expenses, and warrant activity - As of September 30, 2021, the company had 106.4 million shares of common stock issued and outstanding, a significant increase from 6.1 million shares at December 31, 2020[149] - In June 2021, the company completed a public offering, selling 93.1 million shares of common stock and warrants for total net proceeds of approximately $194.6 million, used to fund the Appliances Connection acquisition[151] - The company's 2020 Equity Incentive Plan was amended to increase reserved shares to 1.0 million, with stock option expense at $0.9 million for the nine months ended September 30, 2021[157][158] Warrants Activity | Warrants Activity (Shares) | Outstanding at Jan 1, 2021 | Granted | Exercised | Outstanding at Sep 30, 2021 | | :------------------------- | :------------------------- | :------ | :-------- | :-------------------------- | | Shares | 55,560 | 93,511,111 | (1,052,248) | 92,514,423 | | Weighted Average Exercise Price | $11.25 | $25.29 | $2.25 | $2.30 | NOTE 15—COMMITMENTS AND CONTINGENCIES This note outlines the company's commitments and potential liabilities, specifically an earn-out payment related to a prior acquisition - The company is subject to an earn-out payment of $0.2 million related to the Goedeker Business acquisition if EBITDA targets are met by April 5, 2022, and expects to meet this target[168][169] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, highlighting the significant impact of the Appliances Connection acquisition, the ongoing challenges from the COVID-19 pandemic on supply chains and freight costs, and the company's liquidity position and capital resources Overview This section provides a general description of the company's business, its market position, and its operational structure - The company operates as a leading e-commerce destination for appliances, furniture, and home goods, significantly expanding its market position through the June 2021 acquisition of Appliances Connection[177] - It offers a wide range of national and luxury brands, supported by warehouse fulfillment centers and showrooms across multiple states[177] Impact of Coronavirus Pandemic This section discusses the effects of the COVID-19 pandemic on the company's operations, including supply chain disruptions, increased costs, and potential risks to consumer spending - While online sales and call center operations were not materially negatively impacted, the pandemic caused delays and difficulties in sourcing products from manufacturers due to supply chain issues[178][179] - The global deterioration in economic conditions and potential impact on discretionary consumer spending, along with significant volatility in financial markets, pose ongoing risks to the company's business and liquidity[180][181][182] Emerging Growth Company This section explains the company's status as an "emerging growth company" under the JOBS Act and the associated exemptions from certain disclosure requirements - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to rely on exemptions from certain disclosure requirements, including auditor reports on internal controls and executive compensation advisory votes[183] - It has elected to use the extended transition period for complying with new or revised accounting standards, which may affect comparability with other companies[183] Principal Factors Affecting Our Financial Performance This section identifies the key internal and external factors that influence the company's financial results, such as customer dynamics, market competition, and operational costs - Key factors affecting financial performance include customer acquisition and retention, competitive pricing, product offerings, industry demand, market conditions, and the successful integration of Appliances Connection[186] - Freight costs as a percentage of sales increased materially in 2021, from 7.4% to 8.9% on a consolidated proforma basis, and from 13.7% to 16.6% excluding Appliances Connection, due to the global pandemic and supply chain crisis, putting downward pressure on gross margins[185] Results of Operations This section analyzes the company's financial performance by comparing key operating metrics for the three and nine months ended September 30, 2021, and 2020 Comparison of Three Months Ended September 30, 2021 and 2020 This section compares the company's financial performance for the three months ended September 30, 2021, against the same period in 2020, highlighting significant changes in sales, gross profit, and net income Key Operating Results (Three Months) | Metric (in thousands) | Sep 30, 2021 | Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Product sales, net | $141,867 | $13,435 | $128,432 | 956.0% | | Cost of goods sold | $110,495 | $11,265 | $99,230 | 880.9% | | Gross profit | $31,372 | $2,170 | $29,202 | 1345.7% | | Total operating expenses | $24,870 | $5,714 | $19,156 | 335.3% | | Income (loss) from operations | $6,502 | $(3,544) | $10,046 | - | | Net income (loss) | $3,316 | $(4,227) | $7,543 | 178.5% | - Product sales, net, increased by 956.0% to $141.9 million, primarily due to the Appliances Connection acquisition, while excluding the acquisition, sales decreased by 6.7% due to reduced advertising spend[188] - Gross profit increased by 1,345.7% to $31.4 million, with gross margin improving from 16.2% to 22.1%, largely driven by the Appliances Connection acquisition, though excluding the acquisition, gross profit decreased by 50.4% and gross margin declined to 8.6% due to reduced vendor rebates and increased shipping costs[192] - Net income was $3.3 million, a $7.5 million improvement from a net loss of $4.2 million in the prior year, primarily attributable to the Appliances Connection acquisition[202] Comparison of Nine Months Ended September 30, 2021 and 2020 This section compares the company's financial performance for the nine months ended September 30, 2021, against the same period in 2020, focusing on sales growth, gross profit, and net income Key Operating Results (Nine Months) | Metric (in thousands) | Sep 30, 2021 | Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Product sales, net | $219,637 | $38,397 | $181,240 | 472.0% | | Cost of goods sold | $172,581 | $32,061 | $140,520 | 438.3% | | Gross profit | $47,056 | $6,336 | $40,720 | 642.7% | | Total operating expenses | $45,097 | $13,456 | $31,641 | 235.1% | | Income (loss) from operations | $1,959 | $(7,120) | $9,079 | - | | Net income (loss) | $3,856 | $(11,387) | $15,243 | 133.9% | - Product sales, net, increased by 472.0% to $219.6 million, including $177.1 million from Appliances Connection, while excluding the acquisition, sales increased by 10.8% due to increased advertising in the first six months[204] - Gross profit increased by 642.7% to $47.1 million, with gross margin improving from 16.5% to 21.4%, primarily due to the Appliances Connection acquisition, though excluding the acquisition, gross margin declined by 90 bps to 15.6% due to increased shipping costs[208] - Net income was $3.9 million, a $15.2 million improvement from a net loss of $11.4 million in the prior year, largely driven by the Appliances Connection acquisition and the elimination of the allowance for deferred tax assets[217][218] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, including cash flow activities, public offerings, debt obligations, and contractual commitments Summary of Cash Flow This section provides a summary of the company's cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021, and 2020 Key Cash Flow Metrics | Cash Flow (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(18,316) | $7,383 | | Net cash used in investing activities | $(203,628) | $(51) | | Net cash provided by financing activities | $247,218 | $4,983 | | Net change in cash and restricted cash | $25,274 | $12,315 | | Cash and restricted cash, end of period | $35,186 | $12,379 | - Net cash used in operating activities was $18.3 million, a shift from $7.4 million provided in the prior year, primarily due to changes in customer deposits and merchandise inventory[224] - Net cash used in investing activities dramatically increased to $203.6 million, mainly due to the $201.5 million cash paid for the Appliances Connection acquisition[225] - Net cash provided by financing activities surged to $247.2 million, driven by $194.6 million from public offerings and $55.2 million from term loan proceeds[226] Public Offerings This section details the company's equity fundraising activities, including an initial public offering in 2020 and a subsequent public offering in 2021 to fund acquisitions - In August 2020, the company completed an initial public offering, selling 1.1 million shares of common stock for net proceeds of approximately $8.6 million[227] - In June 2021, the company conducted another public offering, selling 93.1 million shares of common stock and warrants, generating approximately $194.6 million in net proceeds, primarily to fund the Appliances Connection acquisition[228][229][231] Debt This section outlines the company's debt structure, including a senior secured credit facility, term loans, and other vehicle and finance leases - The company secured a $70.0 million senior secured credit facility in June 2021, comprising a $60.0 million Term Loan and a $10.0 million Revolving Loan, with the Term Loan having an outstanding balance of $55.0 million as of September 30, 2021[232] - The Term Loan matures on June 2, 2026, and requires quarterly principal payments of $1.5 million, bearing interest at LIBOR plus 3.9%[233][234] - The company also has $1.4 million in vehicle loans and $0.2 million in finance leases for forklifts as of September 30, 2021[236][237] Contractual Obligations This section details the company's principal commitments, including loan obligations, management fees, earn-out payments, and various lease agreements - Principal commitments include obligations under various loans and contractual commitments such as a management services agreement, an earn-out payment, and multiple lease agreements[238] - The company pays a quarterly management fee of $62,500 to 1847 Partners LLC and expects to make a $0.2 million earn-out payment related to the Goedeker Business acquisition[239][241][242] - Significant lease agreements include a new principal office lease in St. Charles, MO (terminating April 2027), and related-party leases for premises in Brooklyn, NY, and a warehouse in Hamilton, NJ[244][245][246][247] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements that could materially impact the company's financial condition or results of operations - The company has no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources[250] Critical Accounting Policies and Estimates This section discusses the significant accounting policies and estimates that require management judgment and can materially affect the reported financial amounts - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, which are regularly evaluated based on historical industry experience and reasonable assumptions[251] - There were no significant changes in accounting policies and estimates during the three and nine months ended September 30, 2021, other than newly adopted accounting standards disclosed in Note 2[253] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reported period - The company has no applicable quantitative and qualitative disclosures about market risk for the period[254] ITEM 4. CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and procedures were ineffective as of September 30, 2021, due to identified deficiencies. The company plans to retain additional resources to remedy these issues, following recent changes in executive leadership - As of September 30, 2021, the company's disclosure controls and procedures were deemed ineffective due to identified deficiencies[255][256] - The company intends to retain additional individuals and resources to remedy the ineffective controls, subject to additional financing[256] - During the three months ended September 30, 2021, a new Chief Executive Officer and Chief Financial Officer were hired, but no other material changes in internal control over financial reporting occurred[257][258] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits ITEM 1. LEGAL PROCEEDINGS The company is not currently aware of any legal proceedings or claims that are expected to have a material adverse effect on its business, financial condition, or operating results - The company is not aware of any legal proceedings or claims that are expected to materially adversely affect its business, financial condition, or operating results[261] ITEM 1A. RISK FACTORS This section indicates that there are no new material risk factors to report for the current period, referring readers to the Annual Report on Form 10-K for a comprehensive discussion of risks - No new material risk factors are applicable for this reporting period[262] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company did not engage in any unregistered sales of equity securities during the three months ended September 30, 2021, that were not previously disclosed, nor did it repurchase any common stock - No unregistered sales of equity securities occurred during the three months ended September 30, 2021, that were not previously disclosed[263] - The company did not repurchase any shares of its common stock during the three months ended September 30, 2021[264] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[265] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Mine safety disclosures are not applicable to the company[266] ITEM 5. OTHER INFORMATION The company has no other information to disclose that was required in a Form 8-K during the quarter but was not reported, and there have been no material changes to procedures for recommending board nominees - No other information required in a Form 8-K during the quarter was left unreported[267] - There have been no material changes to the procedures by which security holders may recommend nominees to the board of directors[267] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant agreements, employment agreements, and certifications, indicating which are filed or furnished herewith - The exhibits include organizational documents (Certificate of Incorporation, Bylaws), warrant agreements, employment and separation agreements, warehouse agreements, and certifications (Sarbanes-Oxley Act Section 302 and 906)[269]