PART I ITEM 1. BUSINESS 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 retailer2627 - 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 offerings272933 - 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 costs343536 - 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 20263941 - 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 20214344 - 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 202145 - Growth strategies include rebranding, strengthening the leadership team, securing B2B trade business, expanding product categories, and driving operational excellence56 - As of December 31, 2021, the Company employed 482 full-time employees and had 4 registered trademarks in the United States5960 ITEM 1A. RISK FACTORS 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 uncertainty6869707172 - Business success is highly dependent on general economic conditions, consumer discretionary spending, and the ability to acquire and retain customers cost-effectively77788082 - The Company faces intense competition from various retailers and marketplaces, requiring continuous efforts in product quality, pricing, and customer service9192 - Significant risks are associated with IT system failures and security breaches, which could disrupt business, harm reputation, and lead to financial and legal liabilities95969799100101 - Reliance on third-party suppliers and logistics providers exposes the Company to risks of shipping delays, product damage, and changes in business terms102103106108112113 - The continued integration of Appliances Connection presents operational, strategic, and financial risks, including potential difficulties in achieving anticipated synergies124125 - The Company has identified material weaknesses in internal control over financial reporting, which could lead to financial misstatements127128 - Future growth may require additional financing, and existing debt obligations could limit operating flexibility132133136 - The validity of a stockholder vote to increase authorized common stock shares has been questioned, potentially limiting future corporate flexibility155156 - The Company does not expect to declare or pay dividends in the foreseeable future, as earnings will be reinvested in the business163 ITEM 1B. UNRESOLVED STAFF COMMENTS The Company has no unresolved staff comments from the SEC - There are no unresolved staff comments176 ITEM 2. PROPERTIES 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 space178 ITEM 3. LEGAL PROCEEDINGS 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 shares179180 - 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 duties181 ITEM 4. MINE SAFETY DISCLOSURES The Company is not subject to the disclosure requirements related to mine safety - Mine safety disclosures are not applicable to the Company183 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 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 American186 - As of March 28, 2022, there were approximately 49 stockholders of record for common stock and 1 for warrants187 - The Company has never declared or paid cash dividends and does not expect to in the foreseeable future, with the Credit Agreement also restricting payments188 - 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, 2021190200 ITEM 6. [RESERVED] 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 301191 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 million195198 - 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 margins210 - Supply chain constraints led to order fulfillment delays and $34.0 million in customer deposit refunds in 2021, resulting in negative operating cash flow211237 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 issuances247248249 - 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 Loan236252 - Management believes sufficient funds will be generated from operations and available credit to fund operations for at least the next twelve months237240241 - Key accounting policies include revenue recognition (FOB shipping point or installation), goodwill impairment evaluations, and income tax accounting278279280286287289290 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 risk292 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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 report293 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company reports no changes in or disagreements with its accountants - There are no changes in or disagreements with accountants on accounting and financial disclosure294 ITEM 9A. CONTROLS AND PROCEDURES 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 reporting295 - Material weaknesses identified include a lack of structure, insufficient qualified resources, inadequate oversight, and ineffective risk assessment299307 - Management's remediation plans involve enhancing reporting structure, increasing qualified resources, and establishing formal risk assessment and control procedures300307 - The assessment of internal control over financial reporting excluded the Appliances Connection Acquisition, which represented approximately 32% of total assets and 87% of total revenue301 ITEM 9B. OTHER INFORMATION The Company has no other information to report under this item - There is no other information to report305 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This disclosure is not applicable to the Company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable306 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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 statement310 ITEM 11. EXECUTIVE COMPENSATION 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 statement311 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 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 statement312 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 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 statement313 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 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 statement314 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 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 Flows317 - All financial statement schedules have been omitted as the required information is included in the consolidated financial statements or their notes318 - A comprehensive list of exhibits is provided, detailing various agreements, certificates, and plans319320322323 ITEM 16. FORM 10-K SUMMARY The Company has not provided a summary for its Form 10-K - No Form 10-K summary is provided325 CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 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 GAAP329 - The audit was conducted in accordance with PCAOB standards, but did not include an audit of the Company's internal control over financial reporting331 Consolidated Balance Sheets 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)335427 - 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 offerings335340489 Consolidated Statements of Operations 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 sales217430 - Gross profit increased by $72.4 million (998.0%), and gross margin improved from 13.2% in 2020 to 22.0% in 2021221 - 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 benefit230231 Consolidated Statements of Stockholders' Equity (Deficit) 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 warrants340489 - 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 year340 Consolidated Statements of Cash Flows 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)245248 - 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 acquisitions245 - 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 issuances246247249 Notes to Consolidated Financial Statements 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 presence349 - Revenue is recognized when control of products transfers to customers, typically FOB shipping point or upon installation280361 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 acquisition421 - 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, 2026251252257 - Operating lease liabilities totaled $16.4 million as of December 31, 2021, with a weighted-average remaining lease term of 77 months468 - 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 board473475480481 - 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 shares483492 - 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 profitability230510512 - Legal proceedings include a challenge to the validity of a stockholder vote to increase authorized shares and a related class action lawsuit521522523
Polished.com (POL) - 2021 Q4 - Annual Report