Attached files
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EX-99.1 - AUDITED FINANCIAL STATEMENTS - 1847 Holdings LLC | efsh_ex991.htm |
8-K/A - FORM 8-K/A - 1847 Holdings LLC | efsh_8ka.htm |
EXHIBIT 99.2
1847 HOLDINGS, LLC.
Pro Forma Combined Balance Sheet as of December 31, 2016
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1847 Holdings |
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Neese, Inc. |
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Pro-Forma Adjustments |
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JE# |
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Combined |
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ASSETS | ||||||||||||||||||||
Current Assets: |
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Cash |
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$ | - |
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$ | 612,710 |
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$ | (115,024 | ) |
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(c) |
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$ | 160,041 |
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(337,645 | ) |
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(b) |
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Accounts receivable |
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375,417 |
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- |
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375,417 |
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Inventory |
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1,026,495 |
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- |
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1,026,495 |
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Prepaid expenses and other assets |
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369 |
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- |
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- |
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369 |
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Total current assets |
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369 |
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2,014,622 |
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(452,669 |
) |
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1,562,322 |
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Investments |
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6 |
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- |
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6 |
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Property and equipment, net |
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- |
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3,286,204 |
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3,613,796 |
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(a) |
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6,900,000 |
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Total Assets |
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$ | 375 |
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$ | 5,300,826 |
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$ | 3,161,127 |
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$ | 8,462,328 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||||||
Current Liabilities: |
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Accounts payable and accrued expenses |
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$ | 561,378 |
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$ | 301,349 |
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$ | - |
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$ | 862,727 |
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Advances, related party |
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108,878 |
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- |
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- |
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108,878 |
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Floorplan notes payable |
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- |
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798,000 |
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(798,000 | ) |
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(d) |
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- |
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Short term promissory note |
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- |
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- |
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625,000 |
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(e) |
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625,000 |
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Promissory note |
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- |
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- |
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1,025,000 |
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(g) |
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1,025,000 |
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Capital lease payable |
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600,000 |
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(f) |
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600,000 |
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Deferred income tax payable |
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- |
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91,000 |
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- |
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91,000 |
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Total current liabilities |
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670,256 |
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1,190,349 |
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1,452,000 |
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3,312,605 |
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Notes payable |
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- |
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115,024 |
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(115,024 | ) |
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(c) |
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- |
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Deferred income tax payable |
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- |
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791,063 |
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- |
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791,063 |
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Capital lease payable |
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- |
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- |
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2,640,000 |
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(f) |
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2,640,000 |
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Long term promissory note |
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1,250,000 |
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(e) |
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1,250,000 |
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Total long-term liabilities |
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670,256 |
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906,087 |
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3,774,976 |
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4,681,063 |
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Total liabilities |
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670,256 |
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2,096,436 |
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5,226,976 |
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7,993,668 |
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Stockholders' deficit |
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Allocation shares, 1,000 shares issued and outstanding |
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1,000 |
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- |
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- |
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1,000 |
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Common stock, 500,000,000 authorized, 77,887,500 shares outstanding of 1847 Holdings, Inc. |
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7 |
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2,000 |
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(2,000 | ) |
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(i) |
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7 |
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Additional paid in capital |
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14,999 |
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- |
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- |
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14,999 |
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Retained earnings (deficit) |
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(685,887 | ) |
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3,202,390 |
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(3,075,899 | ) |
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(i) |
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1,012,050 |
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(h) |
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452,654 |
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Total stockholders' deficit |
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(669,881 | ) |
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3,402,390 |
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(2,065,849 | ) |
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468,660 |
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Total liabilities and stockholders' deficit |
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$ | 375 |
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$ | 5,300,826 |
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$ | 3,161,127 |
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$ | 8,462,328 |
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1 |
1847 HOLDINGS, LLC.
Pro Forma Combined Statement of Operations the year ended December 31, 2016
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1847 Holdings (1) |
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Neese, Inc. (2) |
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Pro-Forma Adjustments |
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JE# |
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Combined |
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Net sales |
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$ | - |
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$ | 8,024,603 |
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$ | - |
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$ | 8,204,603 |
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Cost of sales |
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- |
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4,590,862 |
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- |
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4,590,862 |
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Gross profit |
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- |
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3,433,741 |
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- |
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3,433,741 |
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Operating Expenses |
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269,844 |
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3,196,250 |
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- |
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3,466,094 |
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Total operating expenses |
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269,844 |
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3,196,250 |
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- |
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3,466,094 |
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Income (loss) before taxes and other income |
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(269,844 | ) |
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237,491 |
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- |
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(32,353 | ) |
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Other Income |
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Gain on bargain purchase option |
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- |
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- |
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1,012,050 |
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(h) |
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1,012,050 |
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Total Other income |
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- |
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- |
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1,012,050 |
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1,012,050 |
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Income (loss) before taxes |
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(269,844 | ) |
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237,491 |
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1,012,050 |
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979,697 |
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Provision for income taxes |
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- |
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111,000 |
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- |
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111,000 |
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Net income (loss) |
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$ | (269,844 | ) |
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$ | 126,491 |
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$ | 1,012,050 |
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$ | 868,697 |
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Basic and Diluted Loss per Share - Common Stock |
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$ | (0.00 | ) |
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$ | 63.24 |
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$ | 0.01 |
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Weighted Average Number of Shares Outstanding: |
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Basic and Diluted Common Stock |
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77,887,500 |
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2,000 |
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77,887,500 |
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2 |
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1 – DESCRIPTION OF THE TRANSACTION
On March 3, 2017, our wholly-owned subsidiary 1847 Neese Inc., or 1847 Neese, entered into a stock purchase agreement with Neese, and Alan Neese and Katherine Neese, pursuant to which 1847 Neese acquired all of the issued and outstanding capital stock of Neese, which we refer to as the Neese acquisition, for an aggregate purchase price of (i) $2,225,000 in cash (subject to certain adjustments), (ii) 450 shares of the common stock of 1847 Neese, constituting 45% of its capital stock, which we refer to as the purchase price shares, (iii) the issuance of a vesting promissory note in the principal amount of $1,875,000, and (iv) the issuance of a short term promissory note in the principal amount of $1,025,000.
The cash portion of the purchase price will be adjusted upward if Neese’s final certified balance sheet, as of a date on or about the closing date did not reflect a cash balance of at least $200,000. The cash balance on the closing date of March 3, 2017 amounted to approximately $338,000.
NOTE 2 – BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma combined balance sheet as of December 31, 2016 combines the historical balance sheet of 1847 Holdings, LLC. with the historical balance sheet of Neese, Inc. and has been prepared as if the Neese, Inc. Acquisition had occurred on December 31, 2016. The unaudited pro forma combined statement of operations for the year ended December 31, 2016 combines the historical statement of operations of 1847 Holdings, LLC. with the historical statement of operations of Neese, Inc. and was prepared as if the Neese, Inc. Acquisition had occurred on January 1, 2016. The historical financial information is adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the combined statement of operations, expected to have a continuing impact on the combined results.
1847 Holdings, LLC. accounted for the acquisition in the unaudited pro forma combined financial information using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the Acquisition Date. Gain on Bargain Purchase as of the Acquisition Date is measured as the excess of fair value of the net tangible assets and identifiable assets acquired over the purchase consideration.
The pro forma adjustments described below were developed based on 1847 Holdings, LLC. management’s assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Neese, Inc. based on preliminary estimates to fair value. The final purchase consideration and allocation of the purchase consideration will differ from that reflected in the unaudited pro forma combined financial information after the final valuation procedures are performed and the amounts are finalized.
The unaudited pro forma combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the acquisition occurred on the dates assumed, nor are the necessarily indicative of future consolidated results of operations or financial position.
1847 Holdings, LLC. expects to incur costs and realize benefits associated with integrating the operations of 1847 Holdings, LLC. and Neese, Inc. The unaudited pro forma combined financial statements do not reflect the costs of any integration activities or any benefits that may result from operating efficiencies or revenue synergies. The unaudited pro forma combined statement of operations does not reflect any non-recurring charges directly related to the acquisition that the combined companies incurred upon completion of the Neese, Inc. acquisition.
3 |
NOTE 3 – ESTIMATED PRELIMINARY PURCHASE PRICE CONSIDERATION
The preliminary fair value of the purchase consideration issued to the sellers of Neese was allocated to the net tangible assets acquired on March 3, 2017. The Company accounted for the 1847 Neese acquisition as the purchase of a business under GAAP under the acquisition method of accounting, the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $6.0 million. The excess of the aggregate fair value of the net tangible assets has been treated as a gain on bargain purchase in accordance with ASC 805. The purchase price allocation was based, in part, on management’s knowledge of Neese's business. and is preliminary. Once the Company completes its analysis to finalize the purchase price allocation, which includes finalizing the valuation report from a third-party appraiser and a review of potential intangible assets, it is reasonably possible that, there could be significant changes to the preliminary values below.
Purchase Consideration |
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Amount of consideration: |
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$ | 6,140,000 |
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Assets acquired and liabilities assumed at preliminary fair value |
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Cash |
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$ | 338,000 |
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Accounts receivable |
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157,000 |
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Inventories |
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1,246,000 |
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Financing costs |
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52,000 |
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Property and equipment |
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6,900,000 |
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Other assets |
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85,000 |
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Accounts payable and accrued expenses |
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(175,000 | ) |
Other liabilities |
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(28,000 | ) |
Net tangible assets acquired |
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$ | 8,575,000 |
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Total net assets acquired |
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$ | 8,575,000 |
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Consideration paid |
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6,140,000 |
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Preliminary gain on bargain purchase |
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$ | 2,435,000 |
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NOTE 4 – ESTIMATED PRELIMINARY PURCHASE PRICE ALLOCATION
The table below represents the estimated preliminary purchase price allocation to the net assets acquired based on their estimated fair values, as well as the associated estimated useful lives of the acquired intangible assets. Such amounts were estimated using the most recent audited financial statements of Neese, Inc. as of December 31, 2016. 1847 Holdings, LLC. does not believe that using Neese, Inc.’s balances as of December 31, 2016 instead of March 30, 2017 will result in a materially different allocation, however, certain amounts, such as the balances of cash, accounts receivable, other assets, the net balance of property, equipment and leasehold improvements, accounts payable, bank loan, note payable and other liabilities will vary based upon changes in Neese, Inc.’s balances between December 31, 2016 and March 30, 2017, with offsetting changes to goodwill. As the final valuations are being performed, increases or decreases in the fair value of relevant balance sheet accounts will result in adjustments, which may result in material differences from the information presented herein.
Purchase Consideration ~ Estimated December 31, 2016 |
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Amount of consideration: |
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$ | 6,266,491 |
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Assets acquired and liabilities assumed at preliminary fair value |
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Cash |
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$ | 160,041 |
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Accounts receivable |
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375,417 |
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Inventories |
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1,026,495 |
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Property and equipment |
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6,900,000 |
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Accounts payable and accrued expenses |
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(301,349 | ) |
Deferred income taxes |
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(882,063 | ) |
Net tangible assets acquired |
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$ | 7,278,541 |
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Total net assets acquired |
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$ | 7,278,541 |
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Consideration paid |
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6,266,491 |
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Preliminary gain on bargain purchase |
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$ | 1,012,050 |
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4 |
NOTE 5 – PRO FORMA ADJUSTMENTS
The following is a description of the unaudited pro forma adjustments reflected in the unaudited pro forma combined financial statements:
(a)
The addition of property and equipment assets as a result of the estimated preliminary purchase price allocation amounted to $6,900,000.
(b)
Cash distribution of $337,645 to Alan Neese and Katherine Neese was made in March 2017.
(c)
Note payable was repaid in conjunction with the acquisition agreement.
(d)
Floor plan payable in the amount of $798,000 was repaid in conjunction with the acquisition agreement.
(e)
A portion of the purchase price under the Purchase Agreement was paid by the issuance of a vesting promissory note in the principal amount of $1,875,000 by 1847 Neese and Neese to the sellers (the “Vesting Note”). Payment of the principal and accrued interest on the Vesting Note is subject to vesting.
(f)
The cash portion of the purchase price was financed under a capital lease transaction for Neese’s equipment with Utica Lease Co, LLC, pursuant to a Master Lease Agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees. Under the Master Lease, the Lessor loaned an aggregate of $3,240,000 for certain of Neese’s equipment. The term of the Master Lease is for 51 months.
(g)
A portion of the purchase price under the Purchase Price was paid by the issuance of a short-term promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the sellers (the “Short Term Note”). The Short Term Note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and is due and payable in full on March 3, 2018; provided, however, that the unpaid principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time, the cash on hand of 1847 Neese and Neese exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid principal and accrued, but unpaid, interest thereon is fully prepaid.
(h)
The estimated gain of bargain purchase option for the acquisition of Neese, Inc.
(i)
Reclassification of Neese, Inc. equity assuming a January 1, 2016 acquisition date.
5 |