Item 1.01 Entry into a Material Definitive Agreement.
On July 8, 2022, 1847 Holdings LLC (the “Company”)
entered into a securities purchase agreement (the “Purchase Agreement”) with Mast Hill Fund, L.P. (the “Purchaser”),
pursuant to which the Company issued to the Purchaser a promissory note in the principal amount of $600,000, which includes an original
issue discount in the amount of $60,000 (the “Note”), and a five-year warrant for the purchase of 400,000 common shares
of the Company at an exercise price of $1.50 per share (subject to adjustment), which may be exercised on a cashless basis if the market
price of the Company’s common shares is greater than the exercise price (the “Warrant”), for a total purchase
price of $540,000.
The Note bears interest at a rate of 12% per annum
and matures on July 8, 2023; provided that any principal amount or interest which is not paid when due shall bear interest at a rate of
the lesser of 16% per annum or the maximum amount permitted by law from the due date thereof until the same is paid. The Note requires
monthly payments of $60,000, plus accrued interest, commencing on October 6, 2022. The Company may voluntarily prepay the outstanding
principal amount and accrued interest in whole upon payment of a fee of $750. In addition, if at any time the Company receives cash proceeds
of more than $1 million in the aggregate from any source or series of related or unrelated sources, including, but not limited to, the
issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities pursuant to an equity line of credit (as
defined in the Note) or the sale of assets outside of the ordinary course of business, the holder shall have the right in its sole discretion
to require the Company to immediately apply up to 50% of such proceeds in excess of $1 million to repay all or any portion of the outstanding
principal amount and interest then due under the Note. The Note is convertible into common shares at the option of the holder at any time
on or following the date that an event of default (as defined in the Note) occurs under the Note at a conversion price of $1.30 (subject
to adjustment). The Note is unsecured and has priority over all other unsecured indebtedness of
the Company. The Note contains customary affirmative and negative covenants and events of default for a loan of this type.
The conversion price of the Note and the exercise
price of the Warrant are subject to standard adjustments, including a price-based adjustment in the event that the Company issues any
common shares or other securities convertible into or exercisable for common shares at an effective price per share that is lower than
the conversion or exercise price, subject to certain exceptions. In addition, the Note and the Warrant contain an ownership limitation,
such that the Company shall not effect any conversion or exercise, and the holder shall not have the right to convert or exercise, or
any portion of the Note or the Warrant to the extent that after giving effect to the issuance of common shares upon conversion or exercise,
the holder, together with its affiliates and any other persons acting as a group together with the holder or any of its affiliates, would
beneficially own in excess of 4.99% of the number of common shares outstanding immediately after giving effect to the issuance of common
shares upon conversion or exercise.
The Purchase
Agreement contains a participation right, which provides that, subject to certain exceptions, until the Note is extinguished in its entirety,
if the Company directly or indirectly offers, sells, grants any option to purchase, or otherwise disposes of (or announces any offer,
sale, grant or any option to purchase or other disposition of) any of its debt, equity, or equity equivalent securities, or enters into
any definitive agreement with regard to the foregoing, it must offer to issue and sell to or exchange with the Purchaser securities in
such transaction in an amount up to the original principal amount of the Note. The Purchase Agreement also provides the Purchaser with
customary piggy-back registration rights for the common shares underlying the Note and the Warrant, and contains other customary representations
and warranties and covenants for a transaction of this type.
As a result of the issuance of the Note, the exercise price of certain
of the Company’s outstanding warrants and the conversion price of the Company’s outstanding convertible notes were adjusted
to $1.30 pursuant to certain antidilution provisions of such warrants and convertible notes. In addition, certain of the Company’s
outstanding warrants include an “exploding” feature, whereby the exercise price was
reset to $1.30 and the number of shares underlying the warrants was increased in the same proportion as the exercise price decrease.
The foregoing description of the Purchase Agreement,
the Note and the Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of those documents
filed as Exhibits 10.1, 10.2 and 4.1, respectively, to this report, which are incorporated herein by reference.