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    EFSH   US28252B3096

1847 HOLDINGS LLC

(EFSH)
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06/141847 Holdings LLC announced a financing transaction
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05/191847 Holdings Announces First Quarter 2022 Financial Results with Revenue Up 153% to $12.1M
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05/161847 HOLDINGS LLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)
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1847 HOLDINGS LLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

05/16/2022 | 12:26pm EDT
The following management's discussion and analysis of financial condition and
results of operations provides information that management believes is relevant
to an assessment and understanding of our plans and financial condition. The
following financial information is derived from our financial statements and
should be read in conjunction with such financial statements and notes thereto
set forth elsewhere herein.



Use of Terms



Except as otherwise indicated by the context and for the purposes of this report
only, references in this report to "we," "us," "our" and the "Company" refer to
1847 Holdings LLC, a Delaware limited liability company, and its consolidated
subsidiaries. References to the "Manager" refer to 1847 Partners LLC, a Delaware
limited liability company.


Special Note Regarding Forward Looking Statements




This report contains forward-looking statements that are based on our
management's beliefs and assumptions and on information currently available to
us. All statements other than statements of historical facts are forward-looking
statements. These statements relate to future events or to our future financial
performance and involve known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:



? our ability to effectively integrate and operate the businesses that we

acquire;

? our ability to successfully identify and acquire additional businesses;

? our organizational structure, which may limit our ability to meet our dividend

and distribution policy;

? our ability to service and comply with the terms of indebtedness;

? our cash flow available for distribution and our ability to make distributions

to our common shareholders;

? our ability to pay the management fee, profit allocation and put price to the

Manager when due;

? labor disputes, strikes or other employee disputes or grievances;

? the regulatory environment in which our businesses operate under;

? trends in the industries in which our businesses operate;

? the competitive environment in which our businesses operate;

? changes in general economic or business conditions or economic or demographic

trends in the United States including changes in interest rates and inflation;

? our and the Manager's ability to retain or replace qualified employees of our

businesses and the Manager;

? casualties, condemnation or catastrophic failures with respect to any of our

business' facilities;

? costs and effects of legal and administrative proceedings, settlements,

investigations and claims; and

? extraordinary or force majeure events affecting the business or operations of

   our businesses.



In some cases, you can identify forward-looking statements by terms such as
"may," "could," "will," "should," "would," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "potential," "project" or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions. You should not place undue reliance on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which are, in some cases, beyond our control
and which could materially affect results. Factors that may cause actual results
to differ materially from current expectations include, among other things,
those listed under Item 1A "Risk Factors" included in our annual report on Form
10-K for the year ended December 31, 2021. If one or more of these risks or
uncertainties occur, or if our 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.



                                       20




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.



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. ("1847 Asien") acquired Asien's
Appliance, Inc., a California corporation ("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. ("1847 Cabinet")
acquired Kyle's Custom Wood Shop, Inc., an Idaho corporation ("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. ("1847 Wolo") acquired Wolo
Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a
New York corporation (together, "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 ("High Mountain"), and Sierra Homes, LLC d/b/a
Innovative Cabinets & Design, a Nevada limited liability company ("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. ("1847 Neese") acquired Neese, Inc., 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. ("1847 Goedeker") acquired
substantially all of the assets of Goedeker Television Co., 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.



                                       21





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.



Recent Developments



On April 20, 2022, we entered into a securities purchase agreement with Ellery
W. Roberts, our Chief Executive Officer, pursuant to which we sold 28,333 units,
at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. On May
12, 2022, we sold an additional 16,667 units to Mr. Roberts for aggregate gross
proceeds of $50,000. Each unit consists of one (1) series B senior convertible
preferred share and a three-year warrant to purchase one (1) common share at an
exercise price of $3.00 per share (subject to adjustment), which may be
exercised on a cashless basis under certain circumstances.



Impact of Coronavirus Pandemic




Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to
rapidly spread around the world and every state in the United States. Most
states and cities have at various times instituted quarantines, restrictions on
travel, "stay at home" rules, social distancing measures and restrictions on the
types of businesses that could continue to operate, as well as guidance in
response to the pandemic and the need to contain it. At this time, there
continues to be significant volatility and uncertainty relating to the full
extent to which the COVID-19 pandemic and the various responses to it will
impact our business, operations and financial results.



Asien's was qualified as an essential business and remained open during the
pandemic, with certain occupancy restrictions at times, so it did not experience
any meaningful business interruption. However, Asien's is dependent upon
suppliers to provide it with all of the products that its sells. The pandemic
has impacted and may continue to impact suppliers and manufacturers of certain
of its products. As a result, Asien's has faced and may continue to face delays
or difficulty sourcing certain products, which could negatively affect its
business and financial results. Even if Asien's is able to find alternate
sources for such products, they may cost more, which could adversely impact
Asien's profitability and financial condition.



Kyle's was also qualified as an essential business and remained open during the
pandemic, with certain occupancy restrictions at times, so it did not experience
any meaningful business interruption. However, certain key customers of Kyle's
elected to either temporarily stop building homes or delayed their building
process, particularly during the second quarter of 2020, which adversely
affected Kyle's sales. Further, early on during the pandemic, several of Kyle's
employees had taken time off because of medical issues, and some of them did not
return to employment. Kyle's has been hiring and training new employees to
replace lost productivity because of the aforementioned loss of employees.
Kyle's did not experience any meaningful business interruption related to any of
its key suppliers; although recently, potentially as a result of the pandemic
and resulting impact, Kyle's has seen price increases in certain key raw
materials such as wood products and hardware. These increases may negatively
affect Kyle's profitability and financial condition. If the pace of the pandemic
does not continue to slow, it may continue to negatively affect Kyle's ability
to generate sales opportunities and to hire productive employees, as well as
impact the cost of raw materials. Therefore, Kyle's business operations may
experience further delays and experience lost sales opportunities and increased
costs, which could further adversely impact Kyle's profitability and financial
condition.



High Mountain was qualified as an essential business and remained open during
the pandemic. As it followed both federal and Nevada state guidelines regarding
occupancy restrictions, it did not experience significant business disruptions,
although it did experience some loss of productivity due to employee absences.
High Mountain continues to comply with Nevada state and CDC guidelines regarding
workplace safety.



Innovative Cabinets was also qualified as an essential business and thus
remained open during the pandemic, while complying with federal and Nevada state
guidelines regarding occupancy restrictions. However, since a substantive amount
of its materials come from Asia, where its manufacturing network is located,
Innovative Cabinets did experience longer supply chain lead-times and higher
logistics costs. It has been exploring alternative sourcing opportunities. Given
the prevailing market conditions for building supplies and materials, it may
continue to experience supply chain issues and higher supply costs, which could
adversely impact its profitability and financial condition.



                                       22





Wolo qualified as an essential business and remained open during the pandemic.
At no time during the pandemic did it experience an internal contamination
forcing it to stop its business. The pandemic has had a dramatic impact on
Wolo's supply chain as it has on others in the automotive aftermarket.
Approximately 90% of Wolo's vendor base is located in China. The pandemic issues
impacting ports in the U.S. due to lack of personnel has had a ripple effect on
Chinese suppliers. Containers are slow to be emptied in the U.S., causing a
backlog of ships waiting to get into ports and limiting containers and ships
returning to China. The lack of containers and available space on ships has
escalated shipping costs by over 300% from 2020. Costs for raw materials have
also started to increase due to availability. Wolo cannot absorb these increases
and began passing on a price increase to customers starting June 1, 2021,
although the effective date may be later for some customers. We believe that
this is an industry-wide issue and that it should not put Wolo in an unfavorable
pricing position.


The spread of COVID-19 has also adversely impacted global economic activity and
has contributed to significant volatility and negative pressure in financial
markets. The pandemic has resulted, and may continue to result, in a significant
disruption of global financial markets, which may reduce our ability to access
capital in the future, which could negatively affect our liquidity.



The extent to which the pandemic may impact our results will depend on future
developments, which are highly uncertain and cannot be predicted as of the date
of this report, including the effectiveness of vaccines and other treatments for
COVID-19, and other new information that may emerge concerning the severity of
the pandemic and steps taken to contain the pandemic or treat its impact, among
others. Nevertheless, the pandemic and the current financial, economic and
capital markets environment, and future developments in the global supply chain
and other areas present material uncertainty and risk with respect to our
performance, financial condition, results of operations and cash flows.



Management Fees



On April 15, 2013, the Company and the Manager entered into a management
services agreement, pursuant to which the Company is required to pay the Manager
a quarterly management fee equal to 0.5% of its adjusted net assets for services
performed (the "Parent Management Fee"). The amount of the Parent Management Fee
with respect to any fiscal quarter is (i) reduced by the aggregate amount of any
management fees received by the Manager under any offsetting management services
agreements with respect to such fiscal quarter, (ii) reduced (or increased) by
the amount of any over-paid (or under-paid) Parent Management Fees received by
(or owed to) the Manager as of the end of such fiscal quarter, and (iii)
increased by the amount of any outstanding accrued and unpaid Parent Management
Fees. The Company expensed $0 in Parent Management Fees for the three months
ended March 31, 2022 and 2021.



1847 Neese entered into an offsetting management services agreement with the
Manager on March 3, 2017, which is included in discontinued operations, 1847
Asien entered into an offsetting management services agreement with the Manager
on May 28, 2020, 1847 Cabinet entered into an offsetting management services
agreement with the Manager on August 21, 2020 (which was amended and restated on
October 8, 2021) and 1847 Wolo entered into an offsetting management services
agreement with the Manager on March 30, 2021. Pursuant to the offsetting
management services agreements, 1847 Neese appointed the Manager to provide
certain services to it for a quarterly management fee equal to $62,500, 1847
Asien appointed the Manager to provide certain services to it for a quarterly
management fee equal to the greater of $75,000 or 2% of adjusted net assets (as
defined in the management services agreement), 1847 Cabinet appointed the
Manager to provide certain services to it for a quarterly management fee equal
to the greater of $75,000 or 2% of adjusted net assets (as defined in the
management services agreement), which was increased to $125,000 or 2% of
adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to
provide certain services to it for a quarterly management fee equal to the
greater of $75,000 or 2% of adjusted net assets (as defined in the management
services agreement); provided, however, in each case that if the aggregate
amount of management fees paid or to be paid by such entities, together with all
other management fees paid or to be paid to the Manager under other offsetting
management services agreements, exceeds, or is expected to exceed, 9.5% of our
gross income in any fiscal year or the Parent Management Fee in any fiscal
quarter, then the management fee to be paid by such entities shall be reduced,
on a pro rata basis determined by reference to the other management fees to be
paid to the Manager under other offsetting management services agreements.


                                       23





Each of these subsidiaries shall also reimburse the Manager for all of their
costs and expenses which are specifically approved by their board of directors,
including all out-of-pocket costs and expenses, which are actually incurred by
the Manager or its affiliates on behalf of these subsidiaries in connection with
performing services under the offsetting management services agreements.



1847 Asien expensed management fees of $75,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Cabinet expensed management fees of $125,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively.

1847 Wolo expensed management fees of $75,000 for the three months ended March 31, 2022.

On a consolidated basis, the Company expensed total management fees of $275,000 and $260,000 for the three months ended March 31, 2022 and 2021, respectively.



Segments



The Financial Accounting Standards Board, or FASB, Accounting Standard
Codification, or ASC, Topic 280, Segment Reporting, requires that an enterprise
report selected information about reportable segments in its financial reports
issued to its shareholders. As of March 31, 2022, we have three reportable
segments - the retail and appliances segment, which is operated by Asien's, the
construction segment, which is operated by Kyle's, High Mountain and Innovative
Cabinets, and the automotive supplies segment, which is operated by Wolo.



The retail and appliances segment is comprised of the business of Asien's, which
is based in Santa Rosa, California, and provides a wide variety of appliance
services including sales, delivery, installation, service and repair, extended
warranties, and financing.



The construction segment is comprised of the businesses of Kyle's, High Mountain
and Innovative Cabinets. Kyle's, which is based in Boise, Idaho, provides a wide
variety of construction services including custom design and build of kitchen
and bathroom cabinetry, delivery, installation, service and repair, extended
warranties, and financing. High Mountain, which is based in Reno, Nevada,
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, as well as window installation. Innovative Cabinets, also based in Reno,
Nevada, specializes in custom cabinetry and countertops.



The automotive supplies segment is comprised of the business of Wolo, which is
based in Deer Park, New York, and 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.



We provide general corporate services to our segments; however, these services
are not considered when making operating decisions and assessing segment
performance. These services are reported under "Corporate Services" below and
these include costs associated with executive management, financing activities
and public company compliance.



Discontinued Operations



On April 19, 2021, we entered into a stock purchase agreement with Alan Neese
and Katherine Neese, pursuant to which they purchased our 55% ownership interest
in 1847 Neese for a purchase price of $325,000 in cash. As a result of this
transaction, 1847 Neese is no longer a subsidiary of the Company. All financial
information of 1847 Neese previously presented as part of land management
services operations are classified as discontinued operations and not presented
as part of continuing operations for the three months ended March 31, 2021.


                                       24





Results of Operations


Comparison of the Three Months Ended March 31, 2022 and 2021

The following table sets forth key components of our results of operations during the three months ended March 31, 2022 and 2021, both in dollars and as a percentage of our revenues.



                                                          Three Months Ended March 31,
                                                      2022                             2021
                                                               % of                            % of
                                              Amount         Revenues         Amount         Revenues
Revenues                                   $ 12,073,878          100.0 %    $ 4,780,275          100.0 %
Operating expenses
Cost of sales                                 7,749,130           64.2 %      3,260,682           68.2 %
Personnel                                     1,577,700           13.1 %        484,672           10.1 %
Depreciation and amortization                   511,371            4.2 %        122,106            2.6 %
General and administrative                    2,166,207           17.9 %      1,324,196           27.7 %
Total operating expenses                     12,004,408           99.4 %      5,191,656          108.6 %
Income (loss) from operations                    69,470            0.6 %       (411,381 )         (8.6 )%
Other income (expenses)
Other income                                        318            0.0 %              -              -
Interest expense                               (906,743 )         (7.5 )%       (45,121 )         (0.9 )%
Gain on forgiveness of debt                           -              -          360,302            7.5 %
Gain on sale of property and equipment           32,747            0.3 %   
          -              -
Loss on adjustment shares                             -              -         (757,792 )        (15.9 )%
Total other income (expense)                   (873,678 )         (7.2 )%      (442,611 )         (9.3 )%
Net loss before income taxes                   (804,208 )         (6.7 )%      (853,992 )        (17.9 )%
Income expense                                 (123,000 )         (1.0 )%             -              -

Net loss from continuing operations $ (927,208 ) (7.7 )% $ (853,992 ) (17.9 )%

Revenues. Our total revenues were $12,073,878 for the three months ended March 31, 2022, as compared to $4,780,275 for the three months ended March 31, 2021.




The retail and appliances segment generates revenue through the sales of home
furnishings, including appliances and related products. Revenues from the retail
and appliances segment decreased by $743,582, or 22.8%, to $2,520,784 for the
three months ended March 31, 2022 from $3,264,366 for the three months ended
March 31, 2021. Such decrease was primarily due to ongoing supply chain delays
with appliance manufactures and the increased time it takes to receive products.



The construction segment generates revenue through the sale 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, as well as kitchen countertops.
Revenues from the construction segment increased by $6,395,194, or 421.9%, to
$7,911,103 for the three months ended March 31, 2022 from $1,515,909 for the
three months ended March 31, 2021. Such increase was primarily due to the
acquisitions of High Mountain and Innovative Cabinets, which were acquired in
the fourth quarter of 2021. Excluding these acquisitions, revenues from the
construction segment increased by $145,845, or 9.6%. Such increase was primarily
due to increases in the average customer contract in the construction segment.



The automotive supplies segment generates revenue through the design and sale of
horn and safety products (electric, air, truck, marine, motorcycle and
industrial equipment), including vehicle emergency and safety warning lights for
cars, trucks, industrial equipment and emergency vehicles. Revenues from the
automotive supplies segment were $1,641,991 for the three months ended March 31,
2022.



                                       25




Cost of sales. Our total cost of sales was $7,749,130 for the three months ended
March 31, 2022, as compared to $3,260,682 for the three months ended March
31,
2021.


Cost of sales for the retail and appliances segment consists of the cost of
purchased merchandise plus the cost of delivering merchandise and where
applicable installation, net of promotional rebates and other incentives
received from vendors. Cost of sales for the retail and appliances segment
decreased by $635,202, or 25.3%, to $1,871,450 for the three months ended March
31, 2022 from $2,506,652 for the three months ended March 31, 2021. Such
decrease was primarily due to corresponding the decrease in revenues from the
retail and appliance segment. As a percentage of retail and appliances revenues,
cost of sales for the retail and appliances segment was 74.2% and 76.8% for the
three months ended March 31, 2022 and 2021, respectively.



Cost of sales for the construction segment consists of finished goods, lumber,
hardware and materials and plus direct labor and related costs, net of any
material discounts from vendors. Cost of sales for the construction segment
increased by $4,125,561, or 547.1%, to $4,879,591 for the three months ended
March 31, 2022 from $754,030 for the three months ended March 31, 2021. Such
increase was primarily due to the acquisitions of High Mountain and Innovative
Cabinets, which were acquired in the fourth quarter of 2021. Excluding these
acquisitions, cost of sales for the construction segment increased by $151,350,
or 20.1%. Such increase was primarily due to corresponding the increase in
revenues from the construction segment, as well as increased product and
delivery costs. As a percentage of construction revenues, cost of sales for the
construction segment was 54.5% and 49.7% for the three months ended March 31,
2022 and 2021, respectively.


Cost of sales for the automotive supplies segment consists of the costs of
purchased finished goods plus freight and tariff costs. Cost of sales for the
automotive supplies segment was $998,089 for the three months ended March 31,
2022. As a percentage of automotive supplies revenues, cost of sales for the
automotive supplies segment was 60.8% for the three months ended March 31, 2022.



Personnel costs. Personnel costs include employee salaries and bonuses plus
related payroll taxes. It also includes health insurance premiums, 401(k)
contributions, and training costs. Our total personnel costs were $1,577,700 for
the three months ended March 31, 2021, as compared to $484,672 for the three
months ended March 31, 2021.



Personnel costs for the retail and appliances segment decreased by $22,695, or
9.0%, to $230,388 for the three months ended March 31, 2022 from $253,083 for
the three months ended March 31, 2021. Such decrease was primarily due to
decreased employee headcount as a result of decreased operations from the retail
and appliances segment. As a percentage of retail and appliances revenue,
personnel costs for the retail and appliances segment were 9.1% and 7.8% for the
three months ended March 31, 2022 and 2021, respectively.



Personnel costs for the construction segment increased by $902,621, or 389.8%,
to $1,134,210 for the three months ended March 31, 2022 from $231,589 for the
three months ended March 31, 2021. Such increase was primarily due to the
acquisitions of High Mountain and Innovative Cabinets, which were acquired in
the fourth quarter of 2021. Excluding these acquisitions, personnel costs for
the construction segment decreased by $26,290, or 11.4%. Such decrease was
primarily due to decreased office personnel headcount in the construction
segment. As a percentage of construction revenue, personnel costs for the
construction segment were 12.4% and 15.3% for the three months ended March
31,
2022 and 2021, respectively.



Personnel costs for the automotive supplies segment were $300,328 for the three
months ended March 31, 2022. As a percentage of automotive supplies revenue,
personnel costs for the automotive supplies segment were 18.3% for the three
months ended March 31, 2022.



Depreciation and amortization. Our total depreciation and amortization expense
was $511,371 for the three months ended March 31, 2022, as compared to $122,106
for the three months ended March 31, 2022.



General and administrative expenses. Our general and administrative expenses
consist primarily of professional advisor fees, stock-based compensation, bad
debts reserve, rent expense, advertising, bank fees, and other expenses incurred
in connection with general operations. Our total general and administrative
expenses were $2,166,207 for the three months ended March 31, 2022, as compared
to $1,324,196 for the three months ended March 31, 2021.



                                       26





General and administrative expenses for the retail and appliances segment
increased by $14,907, or 3.4%, to $449,494 for the three months ended March 31,
2022 from $434,587 for the three months ended March 31, 2021. Such increase was
primarily due to increased marketing and professional fees. As a percentage of
retail and appliances revenue, general and administrative expenses for the
retail and appliances segment were 17.8% and 13.3% for the three months ended
March 31, 2022 and 2021, respectively.



General and administrative expenses for the construction segment increased by
$901,247, or 418.6%, to $1,116,558 for the three months ended March 31, 2022
from $215,311 for the three months ended March 31, 2021. Such increase was
primarily due to the acquisitions of High Mountain and Innovative Cabinets,
which were acquired in the fourth quarter of 2021. Excluding these acquisitions,
general and administrative expenses for the construction segment increased by
$45,097, or 20.9%. Such increase was primarily due to increased rent from a new
facility lease, as well as increased professional fees in the construction
segment. As a percentage of construction revenue, general and administrative
expenses for the construction segment were 15.7% and 14.2% for the three months
ended March 31, 2022 and 2021, respectively.



General and administrative expenses for the automotive supplies segment were $386,781 for the three months ended March 31, 2022. As a percentage of automotive supplies revenue, general and administrative expenses for the automotive supplies segment were 23.6% for the three months ended March 31, 2022.




General and administrative expenses for our holding company increased by
$137,371, or 180.7%, to $213,374 for the three months ended March 31, 2022 from
$76,003 for the three months ended March 31, 2021. Such increase was primarily
due to increased corporate costs and professional fees.



Total other income (expense). We had $873,678 in total other expense, net, for
the three months ended March 31, 2022, as compared to other expense, net, of
$442,611 for the three months ended March 31, 2021. Other expense, net, for the
three months ended March 31, 2022 consisted of $906,743 of interest expense,
offset by a gain on disposal of property of equipment of $32,747 and other
income of $318, while other expense, net, for the three months ended March 31,
2021 consisted of loss on adjustment shares of $757,792 and interest expense of
$45,121, offset by a gain on forgiveness of debt of $360,302.



Income tax expense. We had an income tax expense of $123,000 for the three months ended March 31, 2022, as compared to $0 for the three months ended March 31, 2021.




Net loss from continuing operations. As a result of the cumulative effect of the
factors described above, our net loss from continuing operations was $927,208
for the three months ended March 31, 2022, as compared to a net loss of $853,992
for the three months ended March 31, 2021.



Liquidity and Capital Resources

As of March 31, 2021, we had cash and cash equivalents of $1,638,924. To date, we have financed our operations primarily through revenue generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders.

Although we do not believe that we will require additional cash to continue our
operations over the next twelve months, we do believe additional funds are
required to execute our business plan and our strategy of acquiring additional
businesses. The funds required to execute our business plan will depend on the
size, capital structure and purchase price consideration that the seller of a
target business deems acceptable in a given transaction. The amount of funds
needed to execute our business plan also depends on what portion of the purchase
price of a target business the seller of that business is willing to take in the
form of seller notes or our equity or equity in one of our subsidiaries. Given
these factors, we believe that the amount of outside additional capital
necessary to execute our business plan on the low end (assuming target company
sellers accept a significant portion of the purchase price in the form of seller
notes or our equity or equity in one of our subsidiaries) ranges between
$100,000 to $250,000. If, and to the extent, that sellers are unwilling to
accept a significant portion of the purchase price in seller notes and equity,
then the cash required to execute our business plan could be as much as
$5,000,000 . We will seek growth as funds become available from cash flow,
borrowings, additional capital raised privately or publicly, or seller retained
financing.



                                       27





Our primary use of funds will be for future acquisitions, public company
expenses including regular distributions to our shareholders, investments in
future acquisitions, payments to the Manager pursuant to the management services
agreement, potential payment of profit allocation to the Manager and potential
put price to the Manager in respect of the allocation shares it owns. The
management fee, expenses, potential profit allocation and potential put price
are paid before distributions to shareholders and may be significant and exceed
the funds we hold, which may require us to dispose of assets or incur debt to
fund such expenditures. See Item 1. "Business-Our Manager" included in our
Annual Report on Form 10-K for the year ended December 31, 2021 for more
information concerning the management fee, the profit allocation and put price.



The amount of management fee paid to the Manager by us is reduced by the
aggregate amount of any offsetting management fees, if any, received by the
Manager from any of our businesses. As a result, the management fee paid to the
Manager may fluctuate from quarter to quarter. The amount of management fee paid
to the Manager may represent a significant cash obligation. In this respect, the
payment of the management fee will reduce the amount of cash available for
distribution to shareholders.



The Manager, as holder of 100% of our allocation shares, is entitled to receive
a twenty percent (20%) profit allocation as a form of preferred equity
distribution, subject to an annual hurdle rate of eight percent (8%), as
follows. Upon the sale of a company subsidiary, the Manager will be paid a
profit allocation if the sum of (i) the excess of the gain on the sale of such
subsidiary over a high water mark plus (ii) the subsidiary's net income since
its acquisition by the Company exceeds the 8% hurdle rate. The 8% hurdle rate is
the product of (i) a 2% rate per quarter, multiplied by (ii) the number of
quarters such subsidiary was held by the Company, multiplied by (iii) the
subsidiary's average share (determined based on gross assets, generally) of our
consolidated net equity (determined according to United States generally
accepted accounting principles with certain adjustments). In certain
circumstances, after a subsidiary has been held for at least 5 years, the
Manager may also trigger a profit allocation with respect to such subsidiary
(determined based solely on the subsidiary's net income since its acquisition).
The amount of profit allocation may represent a significant cash payment and is
senior in right to payments of distributions to our shareholders. Therefore, the
amount of profit allocation paid, when paid, will reduce the amount of cash
available to us for our operating and investing activities, including future
acquisitions. See Item 1. "Business-Our Manager-Our Manager as an Equity
Holder-Manager's Profit Allocation" included in our Annual Report on Form 10-K
for the year ended December 31, 2021 for more information on the calculation of
the profit allocation.



Our operating agreement also contains a supplemental put provision, which gives
the Manager the right, subject to certain conditions, to cause us to purchase
the allocation shares then owned by the Manager upon termination of the
management services agreement. The amount of put price under the supplemental
put provision is determined by assuming all of our subsidiaries are sold at that
time for their fair market value and then calculating the amount of profit
allocation would be payable in such a case. If the management services agreement
is terminated for any reason other than the Manager's resignation, the payment
to the Manager could be as much as twice the amount of such hypothetical profit
allocation. As is the case with profit allocation, the calculation of the put
price is complex and based on many factors that cannot be predicted with any
certainty at this time. See Item 1. "Business-Our Manager-Our Manager as an
Equity Holder-Supplemental Put Provision" included in our Annual Report on Form
10-K for the year ended December 31, 2021 for more information on the
calculation of the put price. The put price obligation, if the Manager exercises
its put right, will represent a significant cash payment and is senior in right
to payments of distributions to our shareholders. Therefore, the amount of put
price will reduce the amount of cash available to us for our operating and
investing activities, including future acquisitions.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 30,7 M - -
Net income 2021 -3,30 M - -
Net Debt 2021 31,0 M - -
P/E ratio 2021 -1,68x
Yield 2021 2,43%
Capitalization 9,44 M 9,44 M -
EV / Sales 2020 1,03x
EV / Sales 2021 1,34x
Nbr of Employees 185
Free-Float 14,5%
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Managers and Directors
Ellery W. Roberts Chairman, President & Chief Executive Officer
Vernice L. Howard Chief Financial Officer
Eric VanDam Chief Operating Officer
Gayle Harris Chief Administrative Officer
Paul A. Froning Independent Director
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