arcee-ai/sec-data-full · Datasets at Hugging Face

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underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the
forward-looking statements. No forward-looking statement is a guarantee of future performance. In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information
may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not
to unduly rely upon these statements. The forward-looking statements made in this report
relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by
the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result
of new information, future events, changed circumstances or any other reason. ii PART I ITEM 1. BUSINESS. OUR BUSINESS Overview We are an acquisition holding company focused
on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50
million, in a variety of different industries headquartered in North America. To date, we have completed six acquisitions and subsequently
spun off two of the acquired companies. On May 28, 2020, our subsidiary 1847 Asien Inc.,
or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s. Asien’s has been in business
since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales,
delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and
exceptional service to its customers at competitive prices. On September 30, 2020, our subsidiary 1847 Cabinet
Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading
custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses
on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders. On March 30, 2021, our subsidiary 1847 Wolo Inc.,
or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation (which
we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded in 1965, Wolo designs and sells horn and safety products
(electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning lights for cars,
trucks, industrial equipment and emergency vehicles. On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain
Door & Trim Inc., a Nevada corporation, or High Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited
liability company, or Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain specializes in all aspects
of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets,
bookcases, built-in closets, and fireplace mantles, among others, working primarily with large homebuilders of single-family homes and
commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in
custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as
commercial clients. Our first acquisition was on March 3, 2017, pursuant to which our subsidiary
1847 Neese Inc., or 1847 Neese, acquired Neese, Inc., or Neese, a business specializing in providing a wide range of land application
services and selling equipment and parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners. On April 5, 2019, our subsidiary 1847 Goedeker
Inc., or 1847 Goedeker, acquired substantially all of the assets of Goedeker Television Co., or Goedeker Television, a one-stop e-commerce
destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed
all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker. Through our structure, we offer investors an
opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by
private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management
and acquisition strategies will allow us to achieve our goals to grow regular distributions to our common shareholders and increasing
common shareholder value over time. We seek to acquire controlling interests in small
businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable
earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in
place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive
purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses.
We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements. 1 Our Market Opportunity We acquire and manage small businesses, which
we characterize as those that have an enterprise value of less than $50 million. We believe that the merger and acquisition market for
small businesses is highly fragmented and provides significant opportunities to purchase businesses at attractive prices. For example,
according to GF Data, platform acquisitions with enterprise values greater than $50.0 million commanded valuation premiums 30% higher
than platform acquisitions with enterprise values less than $50.0 million (8.2x trailing twelve month adjusted EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) versus 6.3x trailing twelve month adjusted EBITDA, respectively). We believe that the following factors contribute
to lower acquisition multiples for small business ● there
are typically fewer potential acquirers for these businesses; ● third-party
financing generally is less available for these acquisitions; ● sellers
of these businesses may consider non-economic factors, such as continuing board membership
or the effect of the sale on their employees; and ● these
businesses are generally less frequently sold pursuant to an auction process. We believe that our management team’s strong
relationships with business brokers, investment and commercial bankers, accountants, attorneys and other potential sources of acquisition
opportunities offers us substantial opportunities to purchase small businesses. See Item 10 “Directors, Executive Officers and
Corporate Governance ” for more information about our management team. We also believe that significant opportunities
exist to improve the performance of the businesses upon their acquisition. In the past, our manager has acquired businesses that are
often formerly owned by seasoned entrepreneurs or large corporate parents. In these cases, our manager has frequently found that there
have been opportunities to further build upon the management teams of acquired businesses. In addition, our manager has frequently found
that financial reporting and management information systems of acquired businesses may be improved, both of which can lead to substantial
improvements in earnings and cash flow. Finally, because these businesses tend to be too small to have their own corporate development
efforts, we believe opportunities exist to assist these businesses in meaningful ways as they pursue organic or external growth strategies
that were often not pursued by their previous owners. Our Strategy Our long-term goals are to grow regular distributions
to our common shareholders and to increase common shareholder value over the long-term. We plan to continue focusing on acquiring businesses.
Therefore, we intend to continue to identify, perform due diligence on, negotiate and consummate platform acquisitions of small businesses
in attractive industry sectors. Unlike buyers of small businesses that rely on significant leverage to consummate
acquisitions (as demonstrated by the data presented by total enterprise value, or TEV, below), we plan to limit the use of third-party
(i.e., external) acquisition leverage so that our debt will not exceed the market value of the assets we acquire and so that our debt
to EBITDA ratio will not exceed 1.25x to 1 for our operating subsidiaries. We believe that limiting leverage in this manner will avoid
the imposition on stringent lender controls on our operations that would otherwise potentially hamper the growth of our operating subsidiaries
and otherwise harm our business even during times when we have positive operating cash flows. Additionally, in our experience, leverage
rarely leads to “break-out” returns and often creates negative return outcomes that are not correlated with the profitability
of the business. Sour GF Data ® 2 Sour GF Data ® Management Strategy Our management strategy involves the identification,
performance of due diligence, negotiation and consummation of acquisitions. After acquiring businesses, we attempt to grow the businesses
both organically and through add-on or bolt-on acquisitions. Add-on or bolt-on acquisitions are acquisitions by a company of other companies
in the same industry. Following the acquisition of companies, we seek to grow the earnings and cash flow of acquired companies and, in
turn, grow regular distributions to our common shareholders and to increase common shareholder value over time. We believe we can increase
the cash flows of our businesses by applying our intellectual capital to improve and grow our businesses. We seek to acquire and manage small businesses.
We believe that the merger and acquisition market for small businesses is highly fragmented and provides opportunities to purchase businesses
at attractive prices. We believe we will be able to acquire small businesses for multiples ranging from three to six times EBITDA. We
also believe, and our manager has historically found, that significant opportunities exist to improve the performance of these businesses
upon their acquisition. In general, our manager oversees and supports
the management team of our businesses by, among other thi ● recruiting
and retaining managers to operate our businesses by using structured incentive compensation
programs, including minority equity ownership, tailored to each business; ● regularly
monitoring financial and operational performance, instilling consistent financial discipline,
and supporting management in the development and implementation of information systems; 3 ● assisting
the management teams of our businesses in their analysis and pursuit of prudent organic growth
strategies; ● identifying
and working with business management teams to execute on attractive external growth and acquisition
opportunities; ● identifying
and executing operational improvements and integration opportunities that will lead to lower
operating costs and operational optimization; ● providing
the management teams of our businesses the opportunity to leverage our experience and expertise
to develop and implement business and operational strategies; and ● forming
strong subsidiary level boards of directors to supplement management teams in their development
and implementation of strategic goals and objectives. We also believe that our long-term perspective

underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the

forward-looking statements. No forward-looking statement is a guarantee of future performance. In addition, statements that “we believe”

and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available

to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information

may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or

review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not

to unduly rely upon these statements. The forward-looking statements made in this report

relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by

the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result

of new information, future events, changed circumstances or any other reason. ii PART I ITEM 1. BUSINESS. OUR BUSINESS Overview We are an acquisition holding company focused

on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50

million, in a variety of different industries headquartered in North America. To date, we have completed six acquisitions and subsequently

spun off two of the acquired companies. On May 28, 2020, our subsidiary 1847 Asien Inc.,

or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s. Asien’s has been in business

since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales,

delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and

exceptional service to its customers at competitive prices. On September 30, 2020, our subsidiary 1847 Cabinet

Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading

custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses

on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders. On March 30, 2021, our subsidiary 1847 Wolo Inc.,

or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation (which

we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded in 1965, Wolo designs and sells horn and safety products

(electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning lights for cars,

trucks, industrial equipment and emergency vehicles. On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain

Door & Trim Inc., a Nevada corporation, or High Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited

liability company, or Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain specializes in all aspects

of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets,

bookcases, built-in closets, and fireplace mantles, among others, working primarily with large homebuilders of single-family homes and

commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in

custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as

commercial clients. Our first acquisition was on March 3, 2017, pursuant to which our subsidiary

1847 Neese Inc., or 1847 Neese, acquired Neese, Inc., or Neese, a business specializing in providing a wide range of land application

services and selling equipment and parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners. On April 5, 2019, our subsidiary 1847 Goedeker

Inc., or 1847 Goedeker, acquired substantially all of the assets of Goedeker Television Co., or Goedeker Television, a one-stop e-commerce

destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed

all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker. Through our structure, we offer investors an

opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by

private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management

and acquisition strategies will allow us to achieve our goals to grow regular distributions to our common shareholders and increasing

common shareholder value over time. We seek to acquire controlling interests in small

businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable

earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in

place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive

purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses.

We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements. 1 Our Market Opportunity We acquire and manage small businesses, which

we characterize as those that have an enterprise value of less than $50 million. We believe that the merger and acquisition market for

small businesses is highly fragmented and provides significant opportunities to purchase businesses at attractive prices. For example,

according to GF Data, platform acquisitions with enterprise values greater than $50.0 million commanded valuation premiums 30% higher

than platform acquisitions with enterprise values less than $50.0 million (8.2x trailing twelve month adjusted EBITDA (Earnings Before

Interest, Taxes, Depreciation and Amortization) versus 6.3x trailing twelve month adjusted EBITDA, respectively). We believe that the following factors contribute

to lower acquisition multiples for small business ● there

are typically fewer potential acquirers for these businesses; ● third-party

financing generally is less available for these acquisitions; ● sellers

of these businesses may consider non-economic factors, such as continuing board membership

or the effect of the sale on their employees; and ● these

businesses are generally less frequently sold pursuant to an auction process. We believe that our management team’s strong

relationships with business brokers, investment and commercial bankers, accountants, attorneys and other potential sources of acquisition

opportunities offers us substantial opportunities to purchase small businesses. See Item 10 “Directors, Executive Officers and

Corporate Governance ” for more information about our management team. We also believe that significant opportunities

exist to improve the performance of the businesses upon their acquisition. In the past, our manager has acquired businesses that are

often formerly owned by seasoned entrepreneurs or large corporate parents. In these cases, our manager has frequently found that there

have been opportunities to further build upon the management teams of acquired businesses. In addition, our manager has frequently found

that financial reporting and management information systems of acquired businesses may be improved, both of which can lead to substantial

improvements in earnings and cash flow. Finally, because these businesses tend to be too small to have their own corporate development

efforts, we believe opportunities exist to assist these businesses in meaningful ways as they pursue organic or external growth strategies

that were often not pursued by their previous owners. Our Strategy Our long-term goals are to grow regular distributions

to our common shareholders and to increase common shareholder value over the long-term. We plan to continue focusing on acquiring businesses.

Therefore, we intend to continue to identify, perform due diligence on, negotiate and consummate platform acquisitions of small businesses

in attractive industry sectors. Unlike buyers of small businesses that rely on significant leverage to consummate

acquisitions (as demonstrated by the data presented by total enterprise value, or TEV, below), we plan to limit the use of third-party

(i.e., external) acquisition leverage so that our debt will not exceed the market value of the assets we acquire and so that our debt

to EBITDA ratio will not exceed 1.25x to 1 for our operating subsidiaries. We believe that limiting leverage in this manner will avoid

the imposition on stringent lender controls on our operations that would otherwise potentially hamper the growth of our operating subsidiaries

and otherwise harm our business even during times when we have positive operating cash flows. Additionally, in our experience, leverage

rarely leads to “break-out” returns and often creates negative return outcomes that are not correlated with the profitability

of the business. Sour GF Data ® 2 Sour GF Data ® Management Strategy Our management strategy involves the identification,

performance of due diligence, negotiation and consummation of acquisitions. After acquiring businesses, we attempt to grow the businesses

both organically and through add-on or bolt-on acquisitions. Add-on or bolt-on acquisitions are acquisitions by a company of other companies

in the same industry. Following the acquisition of companies, we seek to grow the earnings and cash flow of acquired companies and, in

turn, grow regular distributions to our common shareholders and to increase common shareholder value over time. We believe we can increase

the cash flows of our businesses by applying our intellectual capital to improve and grow our businesses. We seek to acquire and manage small businesses.

We believe that the merger and acquisition market for small businesses is highly fragmented and provides opportunities to purchase businesses

at attractive prices. We believe we will be able to acquire small businesses for multiples ranging from three to six times EBITDA. We

also believe, and our manager has historically found, that significant opportunities exist to improve the performance of these businesses

upon their acquisition. In general, our manager oversees and supports

the management team of our businesses by, among other thi ● recruiting

and retaining managers to operate our businesses by using structured incentive compensation

programs, including minority equity ownership, tailored to each business; ● regularly

monitoring financial and operational performance, instilling consistent financial discipline,

and supporting management in the development and implementation of information systems; 3 ● assisting

the management teams of our businesses in their analysis and pursuit of prudent organic growth

strategies; ● identifying

and working with business management teams to execute on attractive external growth and acquisition

opportunities; ● identifying

and executing operational improvements and integration opportunities that will lead to lower

operating costs and operational optimization; ● providing

the management teams of our businesses the opportunity to leverage our experience and expertise

to develop and implement business and operational strategies; and ● forming

strong subsidiary level boards of directors to supplement management teams in their development

and implementation of strategic goals and objectives. We also believe that our long-term perspective