| Item 1.01 | Entry into a Material Definitive Agreement. |
On February 3, 2022, 1847 Holdings LLC (the “Company”)
entered into securities purchase agreements (the “Purchase Agreements”) with two accredited investors (the “Purchasers”),
pursuant to which the Company issued to the Purchasers (i) promissory notes in the aggregate principal amount of $604,000, which include
an original issue discount in the amount of $60,400 (the “Notes”), (ii) five-year warrants for the purchase of an aggregate
of 125,833 common shares of the Company at an exercise price of $4.20 per share (subject to adjustment), which may be exercised on a cashless
basis if the market price of the common shares is greater than the exercise price (the “Warrants”), and (iii) an aggregate
of 125,833 common shares (the “Shares”) for a total purchase price of $543,600.
The Notes bear interest at a rate of 12% per annum
and mature on February 3, 2024; 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 Notes require
monthly payments of $60,400, plus accrued interest, commencing on May 3, 2023. The Company may voluntarily prepay the outstanding principal
amount and accrued interest of each Note in whole upon payment of a fee of $750. In addition, if at any time the Company receives cash
proceeds 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 Notes) or the sale
of assets outside of the ordinary course of business, each holder shall have the right in its sole discretion to require the Company to
immediately apply up to 50% of such proceeds to repay all or any portion of the outstanding principal amount and interest then due under
the Notes. The Notes are unsecured and have priority over all other unsecured indebtedness of the Company. The Notes contains customary
affirmative and negative covenants and events of default for a loan of this type.
The Notes are convertible into common shares at
the option of the holders at any time on or following the date that an event of default (as defined in the Notes) occurs under the Notes
at a conversion price equal the lower of (i) $4.20 (subject to adjustments) and (ii) 80% of the lowest volume weighted average price of
the Company’s common shares on any trading day during the five (5) trading days prior to the conversion date; provided that such
conversion price shall not be less than $0.03 (subject to adjustments). If an event of default occurs, the Company is required to hold
a special meeting of shareholders within sixty (60) calendar days for the purpose of obtaining shareholder approval of the issuance of
all common shares underlying the Notes. Prior to such shareholder approval, the maximum number of common shares that the Company may issue
to the Purchasers in connection with the foregoing transactions is 835,311, equal to 19.99% of the Company’s outstanding common
shares prior to the transactions, including the Shares and the common shares underlying the Warrants.
The conversion price of the Notes and the exercise
price of the Warrants 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 Notes and the Warrants contain an ownership limitation,
such that the Company shall not effect any conversion or exercise, and the holders shall not have the right to convert or exercise, any
portion of the Notes or the Warrants to the extent that after giving effect to the issuance of common shares upon conversion or exercise,
such holder, together with its affiliates and any other persons acting as a group together with such 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
Agreements contain a participation right, which provides that, subject to certain exceptions, until the Notes are extinguished in their
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 Purchasers the securities
in such transaction. The Purchase Agreements also provide the Purchasers with customary piggy-back registration rights for the Shares
and the common shares underlying the Notes and the Warrants, and contain other customary representations and warranties and covenants
for a transaction of this type.
The foregoing description of the Purchase Agreements,
the Notes and the Warrants does not purport to be complete and is qualified in its entirety by reference to the full text of those documents
filed as exhibits to this report, which are incorporated herein by reference.