UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 16, 2021 (February 9, 2021)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act: None 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities Purchase Agreement

On February 9, 2021, 1847 Hydroponic Inc. (“1847 Hydroponic”), a subsidiary of 1847 Holdings LLC, entered into a Securities Purchase Agreement (the “Purchase Agreement”) among GSH One Enterprises, Inc., Hone Brothers Retail, LLC, Hone Brothers Retail Tulsa LLC (collectively, the “Companies”), 1847 Hydroponic, and the other parties set forth in Exhibit A of the Purchase Agreement (together, the “Sellers”), pursuant to which 1847 Hydroponic agreed to acquire from the Sellers all of the issued and outstanding capital stock or other equity securities of the Companies for an aggregate cash purchase price of $100,000,000, subject to adjustment as described below. The purchase price consists of (i) $90,000,000 in cash (the “Cash Portion”), and (ii) a three-year 8% secured subordinated convertible promissory note in the aggregate principal amount of $10,000,000 (the “Buyer Note,” and together with the Cash Portion, the “Purchase Price”).

The Purchase Price is subject to a closing net working capital adjustment and a post-closing net working capital adjustment. The Purchase Price is also subject to adjustments based on closing EBITDA and post-closing EBITDA. In addition, the Cash Portion will be (A) decreased by (i) the amount of any outstanding unpaid indebtedness of the Companies existing as of the closing date and (ii) any unpaid transaction expenses, and (B) increased by the amount of cash or cash equivalents held by, or on the books of, the Companies as of the closing date, if any.

The Purchase Agreement contains customary representations, warranties and covenants, including a covenant that the Sellers will not compete with the business of 1847 Hydroponic for a period of three (3) years following closing. The Purchase Agreement also contains mutual indemnification for breaches of representations or warranties and failure to perform covenants or obligations contained in the Purchase Agreement. In the case of the indemnification provided by the Sellers with respect to breaches of certain non-fundamental representations and warranties, the Sellers will only become liable for indemnified losses if the amount exceeds an aggregate of $350,000, whereupon the Sellers will be liable for all losses that exceed the $350,000 threshold, provided that the liability of the Sellers for breaches of certain non-fundamental representations and warranties shall not exceed $2,800,000. The Sellers’ aggregate liability for fraud or for the breach of fundamental representations shall be limited to the Purchase Price.

The closing of the Purchase Agreement is subject to customary closing conditions, including, without limitation, the completion of accounting and legal due diligence investigations; the receipt of all authorizations, consents and approvals of all governmental authorities or agencies; the receipt of any required consents of any third parties; the release of any security interests; and 1847 Hydroponic obtaining the requisite acquisition financing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.