Form 8-K/A - Current report: [Amend]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

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 9, 2024 (February 9, 2023)

1847 Holdings LLC

(Exact name of registrant as specified in its charter)

Delaware		001-41368		38-3922937
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

590 Madison Avenue, 21st Floor, New York, NY		10022
(Address of principal executive offices)		(Zip Code)

(212) 417-9800

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report.)

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:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares		EFSH		NYSE American LLC

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. ☐

EXPLANATORY NOTE

On February 9, 2023, 1847 ICU Holdings Inc. (“1847 ICU”), a subsidiary of 1847 Holdings LLC (the “Company”), acquired ICU Eyewear Holdings Inc. (“ICU Eyewear”), pursuant to an agreement and plan of merger, dated December 21, 2022, among 1847 ICU, 1847 ICU Acquisition Sub Inc., ICU Eyewear and San Francisco Equity Partners, as the stockholder representative, as amended on February 9, 2023.

On February 13, 2023, the Company filed a Current Report on Form 8-K announcing this acquisition, and on April 27, 2023, the Company filed Amendment No. 1 to the Current Report on Form 8-K to include the financial statements of the business acquired as required by Items 9.01(a) and 9.01(b) of Form 8-K.

This Amendment No. 2 to the Current Report on Form 8-K further amends the Current Report on Form 8-K that the Company filed on February 13, 2023 to restate the financial statements of the business acquired as more particularly described in the separate Current Report on Form 8-K filed by the Company on or about the date hereof.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The audited consolidated financial statements of ICU Eyewear Holdings Inc. for the years ended December 31, 2022 and 2021 and the accompanying notes thereto are filed as Exhibit 99.1 attached hereto and are incorporated by reference herein.

(b) Pro forma financial information

The unaudited pro forma combined financial information giving effect to the acquisition is filed as Exhibit 99.2 attached hereto and is incorporated herein by reference.

(d) Exhibits

Exhibit No.		Description of Exhibit
4.1		Common Share Purchase Warrant issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 13, 2023)
4.2		Common Share Purchase Warrant issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on February 13, 2023)
4.3		Common Share Purchase Warrant issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 9, 2023 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on February 13, 2023)
10.1		Agreement and Plan of Merger, dated December 21, 2022, among 1847 ICU Holdings Inc., 1847 ICU Acquisition Sub Inc., ICU Eyewear Holdings Inc. and San Francisco Equity Partners (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 13, 2023)
10.2		First Amendment to Agreement and Plan of Merger, dated February 9, 2023, among 1847 ICU Holdings Inc., 1847 ICU Acquisition Sub Inc., ICU Eyewear Holdings Inc. and San Francisco Equity Partners (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 13, 2023)
10.3		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Oceanus Investment Inc. on February 9, 2023 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 13, 2023)
10.4		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to San Francisco Equity Partners III, LP on February 9, 2023 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on February 13, 2023)
10.5		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Richard Conti on February 9, 2023 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on February 13, 2023)
10.6		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Kirk Hobbs on February 9, 2023 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on February 13, 2023)
10.7		Management Services Agreement, dated February 9, 2023, between 1847 ICU Holdings Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on February 13, 2023)
10.8		Loan and Security Agreement, dated February 9, 2023, among Industrial Funding Group, Inc., 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on February 13, 2023)
10.9		Secured Promissory Note issued by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. to Industrial Funding Group, Inc. on February 9, 2023 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on February 13, 2023)
10.10		Domain Name, URL and IP Address Agreement, dated February 9, 2023, by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. in favor of Industrial Funding Group, Inc. (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on February 13, 2023)
10.11		Trademark Security Agreement, dated February 9, 2023, by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. in favor of Industrial Funding Group, Inc. (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on February 13, 2023)
10.12		Indemnity and Release Letter, dated February 11, 2023, among GemCap Solutions, LLC, Industrial Funding Group, Inc., 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on February 13, 2023)
10.13		Securities Purchase Agreement, dated February 9, 2023, between 1847 Holdings LLC and Leonite Fund I, LP (incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on February 13, 2023)
10.14		Securities Purchase Agreement, dated February 9, 2023, between 1847 Holdings LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on February 13, 2023)
10.15		Promissory Note issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on February 13, 2023)
10.16		Promissory Note issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 9, 2023 (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on February 13, 2023)
99.1		Audited Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021
99.2		Unaudited Pro Forma Combined Financial Statements
99.3		Consent of Frank, Rimerman + Co. LLP
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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.

Date: February 9, 2024	1847 HOLDINGS LLC

	/s/ Ellery W. Roberts
	Name:	Ellery W. Roberts
	Title:	Chief Executive Officer

Exhibit 99.1

ICU EYEWEAR HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Board of Directors

ICU Eyewear Holdings, Inc.

Hollister, California

INDEPENDENT AUDITORS’ REPORT

Opinion

We have audited the accompanying consolidated financial statements of ICU Eyewear Holdings, Inc. (the Company), which comprise the consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter – Restatement of Financial Statements

As described in Note 2, the consolidated financial statements as of and for the years ended December 31, 2022 and 2021 presented herein have been restated to correct for certain errors related to revenue recognition and the impairment of an intangible asset. Our opinion is not modified with respect to this matter.

Emphasis of Matter – Acquisition of Company

As described in Note 11 to the consolidated financial statements, the Company completed a merger agreement in February 2023, whereby it became a wholly owned subsidiary of the acquiring entity. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

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In performing an audit in accordance with US GAAS, we:

●

Exercise professional judgment and maintain professional skepticism throughout the audit.

●

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

●

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

●

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ Frank, Rimerman + Co. LLP

San Jose, California

February 2, 2024

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ICU EYEWEAR HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2022			2021
	(as restated- Note 2)			(as restated- Note 2)
ASSETS

Current Assets
Cash and cash equivalents	$	907,651		$	1,955,303
Accounts receivable, net of allowance for doubtful accounts and returns of $564,000 ($430,000 at 2021)		1,441,686			1,128,256
Inventory, net		10,164,500			11,458,625
Prepaid expenses and other current assets		130,094			271,938
Total Current Assets		12,643,931			14,814,122
Property and equipment, net		578,204			859,878
Deposits		74,800			74,800
Intangible asset, net		642,000			724,000
Total Assets	$	13,938,935		$	16,472,800

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Line of credit	$	2,872,206		$	2,851,651
Accounts payable		5,685,743			6,898,561
Accrued liabilities		274,227			611,178
Total Current Liabilities		8,832,176			10,361,390

Commitments and Contingencies (Notes 5 and 6)

Stockholders’ Equity
Series A-2 convertible preferred stock, $0.001 par value, 2,000,000 shares authorized; 1,933,639 shares issued and outstanding (aggregate liquidation preference of $6,975,000)		1,934			1,934
Series A-1 convertible preferred stock, $0.001 par value, 3,200,000 shares authorized; 3,175,627 shares issued and outstanding (aggregate liquidation preference of $34,367,000)		3,175			3,175
Series A convertible preferred stock, $0.001 par value, 3,600,000 shares authorized; 3,299,640 shares issued and outstanding (aggregate liquidation preference of $16,266,000)		3,299			3,299
Common stock; $0.001 par value; 12,500,000 shares authorized; 925,106 shares issued and outstanding		925			925
Additional paid-in capital		37,535,504			37,535,504
Accumulated deficit		(32,438,078	)		(31,433,427	)
Total Stockholders’ Equity		5,106,759			6,111,410
Total Liabilities and Stockholders’ Equity	$	13,938,935		$	16,472,800

See Notes to Consolidated Financial Statements

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ICU EYEWEAR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2022			2021
	(as restated- Note 2)			(as restated- Note 2)

Revenue - eyewear, net	$	20,446,381		$	19,766,650
Revenue - personal protective equipment		-			2,266,004
Total Revenue		20,446,381			22,032,654
Cost of revenue - eyewear		14,053,642			12,564,687
Cost of revenue - personal protective equipment		-			2,164,412
Total Cost of Revenue		14,053,642			14,729,099
Gross profit		6,392,739			7,303,555
Selling, General and Administrative Expenses		7,272,615			6,833,698
Impairment of Intangible Asset		82,000			-
Income (loss) from Operations		(961,876	)		469,857
Interest and Other Expense
Interest expense		(262,743	)		(178,054	)
Other income (expense), net		237,329			(259,488	)
Income (Loss) before Income Tax Expense		(987,290	)		32,315
Income Tax Expense		(17,361	)		(37,800	)
Net Loss	$	(1,004,651	)	$	(5,485	)

See Notes to Consolidated Financial Statements

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ICU EYEWEAR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2022 AND 2021

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholde ’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balances, December 31, 2020		8,408,906	$	8,408		925,106	$	925	$	37,535,504	$	(27,740,269	)	$	9,804,568
Restatements (Note 2)		-		-		-		-		-		(3,687,673	)		(3,687,673	)
Balances, January 1, 2021, as restated (Note 2)		8,408,906		8,408		925,106		925		37,535,504		(31,427,942	)		6,116,895
Net loss		-		-		-		-		-		(5,485	)		(5,485	)
Balances, December 31, 2021, as restated (Note 2)		8,408,906		8,408		925,106		925		37,535,504		(31,433,427	)		6,111,410
Net loss		-		-		-		-		-		(1,004,651	)		(1,004,651	)
Balances, December 31, 2022, as restated (Note 2)		8,408,906	$	8,408		925,106	$	925	$	37,535,504	$	(32,438,078	)	$	5,106,759

See Notes to Consolidated Financial Statements

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ICU EYEWEAR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2022			2021
	(as restated- Note 2)			(as restated- Note 2)
Cash Flows from Operating Activities
Net loss	$	(1,004,651	)	$	(5,485	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		482,659			550,782
Allowance for doubtful accounts		-			792,459
Reserve for inventory obsolescence		-			154,000
Impairment of intangible assets		82,000			-
Changes in operating assets and liabilities:
Accounts receivable		(313,430	)		558,014
Inventory		1,294,125			13,608
Prepaid expenses and other current assets		141,844			(220,206	)
Other receivable		-			5,577,234
Accounts payable		(1,212,818	)		(9,208,499	)
Accrued liabilities		(336,951	)		(602,249	)
Net cash used in operating activities		(867,222	)		(2,390,342	)

Cash Flows from Investing Activities
Purchases of property and equipment		(200,985	)		(742,727	)
Net cash used in investing activities		(200,985	)		(742,727	)

Cash Flows from Financing Activities
Change in line of credit, net		20,555			-
Net cash provided by financing activities		20,555			-

Net Decrease in Cash and Cash Equivalents		(1,047,652	)		(3,133,069	)
Cash and Cash Equivalents, beginning of year		1,955,303			5,088,372
Cash and Cash Equivalents, end of year	$	907,651		$	1,955,303

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	262,743		$	178,054
Cash paid for income taxes	$	17,361		$	37,800

See Notes to Consolidated Financial Statements

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ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nature of Business and Management’s Plans Regarding the Financing of Future Operations

Nature of Business

ICU Eyewear Holdings, Inc. (ICU Holdings or Parent) was incorporated in the state of Idaho in September 1997. In October 1997, ICU Holdings acquired all of the outstanding stock in ICU Eyewear, Inc. (Eyewear) (collectively, the Company). On October 20, 2003, the Company was reincorporated as a California Corporation. The Company was acquired by a collaborative group of investors on August 27, 2010 and is headquartered in Hollister, California. In February 2023, the Company was acquired by 1847 Holdings LLC (1847 Holdings) and became a wholly owned subsidiary of 1847 Holdings (Note 11).

ICU Holdings’ operations consist of managing the operations of Eyewear. Eyewear sells reading glasses, sunglasses and related eyewear under several brand names to retailers primarily located in the United States of America (U.S.) and, to a lesser extent, abroad. Customers include major drugstore chains, mass merchants, independent retailers, and sporting goods stores. The Company's products are manufactured primarily in China.

In March 2020, as a response to the global outbreak of the novel coronavirus, the Company entered into a distribution and supply agreement (the distribution and supply agreement) with a supplier, which is a related-party company owned by a Company stockholder, to distribute personal protective equipment (PPE). The PPE products include face masks, exam gloves, hair nets, beard nets, isolation suits, face shields and goggles manufactured in China. Distribution of PPE products ceased in 2021 and the Company does not intend to continue these product sales in the future.

Management’s Plans Regarding the Financing of Future Operations

The Company has an accumulated deficit of $32,438,000 at December 31, 2022. In February 2023, the Company was acquired by 1847 Holdings (Note 11), a publicly traded partnership with access to capital resources. The Company also continues to focus on increasing revenue and managing expenditures. Management believes given the acquisition by 1847 Holdings, the forecast of increasing revenue, and the management of operating expenditures will provide sufficient resources to sustain working capital needs through at least February 2, 2025. However, over the longer term, if the Company does not generate sufficient revenue from new and existing products and services, additional debt or equity financing may be required. There is no assurance if the Company requires additional future financing, that financing will be available on terms which are acceptable to the Company, or at all.

Significant Accounting Policies

Financial Statement Restatement:

In 2023, in connection with the preparation of the 2022 consolidated financial statements, the Company’s management determined certain adjustments to the 2021 consolidated financial statements were required. The Company determined it improperly applied certain principles in its method of recognition of revenue under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606). The errors primarily related to understatements of customer sales allowances and chargebacks. These adjustments were included in the restated consolidated financial statements issued on April 25, 2023.

Subsequent to the issuance of the 2022 consolidated financial statements, the Company’s management determined the impairment of an intangible asset recorded in 2022 was overstated based on a formal third-party asset valuation report. As a result, these financial statements have been restatement to reflect the correction of the impairment loss overstatement.

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ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details the impact of the restatement identified in 2024 on the 2022 consolidated financial statements:

	As Reported April 25, 2023			Adjustments		As Restated February 2, 2024
Current assets	$	12,643,931		$	-	$	12,643,931
Total assets		13,296,935			642,000		13,938,935
Current liabilities		8,832,176			-		8,832,176
Accumulated deficit		(33,080,078	)		642,000		(32,438,078	)
Income from operations		(4,579,876	)		3,618,000		(961,876	)
Net income (loss)		(4,622,651	)		3,618,000		(1,004,651	)

The following table details the impact of the restatement on the previously issued 2021 consolidated financial statements:

	As Reported as Previously Restated April 25, 2023			Adjustments			As Restated February 2, 2024
Current assets	$	14,814,122		$	-		$	14,814,122
Total assets		19,448,800			(2,976,000	)		16,472,800
Current liabilities		10,361,390			-			10,361,390
Accumulated deficit		(28,457,427	)		(2,976,000	)		(31,433,427	)
Income from operations		469,857			-			469,857
Net income (loss)		(5,485	)		-			(5,485	)

Principles of Consolidation:

The consolidated financial statements include the accounts of ICU Holdings and Eyewear. All intercompany transactions and balances have been eliminated in consolidation.

Distribution and Supply Agreement:

Under the distribution and supply agreement with a related-party supplier, the Company earned a fixed percentage of the gross PPE product sales, less any shipping, tariff or duty costs. The Company took legal title to the inventory prior to delivery to customers; however, inventory risk was mitigated as it had a right to return unsold product to the supplier. Additionally, the related contracts for PPE purchases were between the customer and the Company and the Company was responsible for all related sales, support, marketing, accounting, information technology, order processing and logistics expenses for products sold under the distribution and supply agreement. As a result, the Company recognized revenue for PPE product sales on a gross basis as the principal in the transactions because it controlled the products prior to transfer to the customer.

Revenue Recognition:

The Company recognizes revenue in accordance with Topic 606. The Company determines revenue recognition through the following steps:

●

Identification of the contract, or contracts, with a customer

●

Identification of the performance obligations in the contract

●

Determination of the transaction price

●

Allocation of the transaction price to the performance obligations in the contract

●

Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company records revenue on the sale of its eyewear and PPE products upon shipment to retailers, net of contractually obligated returns and other additional required rebate and pricing reserves. The Company maintains the practice of accepting returned eyewear goods if they are slow moving or become damaged, although there is no legal requirement to do so under certain contracts. Therefore, in addition to the contractually obligated reserves, the Company provides an additional reserve for expected eyewear-related returns based on historical trends and current expectations when eyewear products are shipped to retailers. For new accounts, management estimates the expected returns based on historical experience from similar customers.

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ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Customer agreements for purchases of eyewear generally require payment by the Company of marketing development funds, co-operative advertising fees, rebates and similar charges. The Company accounts for these fees as a reduction in revenue, unless there is an identifiable benefit and the fair value of the charges can be reasonably estimated, in which case the Company records these transactions as sales and marketing expense.

Revenue earned from distribution of PPE products under the distribution and supply agreement was recorded on a gross basis upon shipment of goods to the customer.

Cash and Cash Equivalents:

Cash and cash equivalents include all cash and highly liquid investments purchased with a remaining maturity of three months or less. The recorded carrying value amount of cash and cash equivalents approximates their fair value.

Concentration of Credit Risk:

Financial instruments, which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents at one U.S. financial institution. Cash and cash equivalent balances exceeded the Federal Deposit Insurance Corporation (FDIC) insurable limit of $250,000 at December 31, 2022 and 2021. The Company has not experienced any losses on its cash and cash equivalent deposits through December 31, 2022.

Accounts receivable are contract assets derived from providing goods to customers. The Company generally does not require collateral on its accounts receivable. The Company mitigates the potential credit risk in accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and maintains allowances for estimated sales returns and credit losses. Credit losses have been within management’s expectations.

Major Customers:

In 2022 and 2021, the Company had one major eyewear customer, defined as an eyewear customer generating net sales in excess of 10% of the Company’s annual net revenue of eyewear products. Sales to the major customer accounted for 65% of net eyewear sales in 2022 (65% in 2021). The Company had a receivable of $1,184,000 from the major customer at December 31, 2022 ($1,908,000 at December 31, 2021).

Major suppliers are defined as vendors representing greater than 10% of annual non-payroll related disbursements related to eyewear products. The Company had one major supplier in 2022 and 2021, which is a related-party company owned by a stockholder of the Company. Disbursements to the major supplier accounted for 28% of non-payroll related disbursements in 2022 (28% in 2021). Disbursements are generally for the purchase of eyewear-related inventory. There was $1,461,000 payable to the major vendor at December 31, 2022 ($2,426,000 at December 31, 2021).

Inventory:

Inventory consists of purchased goods held for resale and an allocated amount of freight, duty, purchasing, handling and storage costs. Inventory is reflected net of a reserve for obsolescence and is valued at the lower of cost basis or market. Market represents the lower of replacement cost or estimated net realizable value.

Shipping and Handling Costs:

Amounts billed to customers for shipping are recorded as net revenue. Shipping and handling costs including outbound freight costs incurred in the delivery of products to customers are charged to cost of revenue in the period incurred.

Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful life of the asset, generally two to five years. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the remaining lease term.

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ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leases:

Effective January 1, 2022 (the Adoption Date), the Company adopted the requirements of (FASB ASC Topic 842, Leases (Topic 842), which requires all entities that lease assets with terms of greater than twelve months to capitalize the assets and related liabilities on the balance sheet, which had not previously required capitalization. Leases are classified as either an operating or finance lease under Topic 842, with classification affecting the pattern of expense recognition in operations.

The Company elected the short-term lease recognition exemption for all applicable classes of leased assets. Leases with an initial term of twelve months or less that do not include an option to purchase the underlying asset or an option to extend the lease, which the Company is reasonably certain to exercise, are not recorded on the consolidated balance sheet. As a result, the Company did not have any leases at the Adoption Date requiring capitalization under Topic 842.

For future operating leases meeting the requirements of capitalization, the Company will record an operating lease right of use asset and an operating lease liability at the lease commencement date. An operating lease right-of-use asset represents the right to use a specified asset for a stated lease term, and a lease liability represents the legal obligation to make lease payments.

Intangible Assets:

The intangible asset at December 31, 2022 and 2021 relates to a trademark from the acquisition of the Company on August 27, 2010. All other acquired intangible assets in the transaction were fully amortized in 2018. The Company determined the trademark had an indefinite life and was not subject to amortization but was subject to impairment.

Accounting for Impairment of Long-Lived Assets:

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparing the carrying amount of an asset to future net cash flows expected to be generated by the asset. If assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. In 2022, the Company recorded an impairment loss of $82,000 related to the trademark (no impairment loss in 2021).

Income Taxes:

The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. Deferred income tax assets and liabilities are recorded net and classified as noncurrent on the consolidated balance sheet. A valuation allowance is provided against the Company’s deferred income tax assets when realization is not reasonably assured.

Advertising Costs:

The Company expenses the cost of producing advertisements at the time of production and expenses the cost of placing the advertisements over the period in which the advertisements are run. Advertising costs were $419,000 in 2022 ($328,000 in 2021).

Stock-Based Compensation:

The Company generally grants stock options for a fixed number of shares with an exercise price equal to the fair value of the underlying shares at the date of grant. Fair value is determined by the Board of Directors (the Board). The Company accounts for stock option grants using the fair value method and stock-based compensation is recognized as the underlying options vest.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses in the consolidated financial statements and related disclosures. Actual results could differ from those estimates.

-11-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Risks and Uncertainties:

The global outbreak of the novel coronavirus continues to be an evolving situation. The virus has disrupted much of society, impacted global travel and supply chains, and adversely impacted global commercial activity in most industries. The rapid development and fluidity of this situation precludes any prediction as to its ultimate impact, which may have a continued adverse effect on economic and market conditions and extend the period of global economic uncertainty. These conditions, which may be across industries, sectors or geographies, may impact the Company’s operating performance in the near term.

Property and Equipment

Property and equipment consist of the following at December 31:

	2022			2021
Displays	$	9,047,238		$	8,846,041
Office furniture and equipment		701,888			702,100
Leasehold improvements		386,281			386,281
Computer software		208,844			208,844
Automobiles		6,000			6,000
		10,350,251			10,149,266
Less accumulated depreciation and amortization		(9,772,047	)		(9,289,388	)
	$	578,204		$	859,878

Income Taxes

The Company applies the provisions set forth in FASB ASC Topic 740, Income Taxes, to account for the uncertainty in income taxes. In the preparation of income tax returns in federal and state jurisdictions, the Company asserts certain income tax positions based on its understanding and interpretation of income tax laws. The taxing authorities may challenge these positions, and the resolution of the matters could result in recognition of income tax expense in the Company’s consolidated financial statements. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns.

The Company uses the “more likely than not” criterion for recognizing the income tax benefit of uncertain income tax positions and establishing measurement criteria for income tax benefits. The Company has evaluated the impact of these positions and believes its income tax filing positions and deductions will be sustained upon examination. Accordingly, no reserve for uncertain income tax positions or related accruals for interest and penalties have been recorded at December 31, 2022 or 2021. In the event the Company should need to recognize interest and penalties related to unrecognized income tax liabilities, this amount will be recorded as an accrued liability and an increase to income tax expense.

Deferred income taxes result from the tax effect of transactions recognized in different periods for financial statement and income tax reporting purposes. The Company’s net deferred income tax assets at December 31, 2022 were $3,643,000 ($3,448,000 at December 31, 2021) and have been fully offset by a valuation allowance, as their realization is not reasonably assured. The deferred income tax assets consist primarily of net operating losses that may be carried forward to offset future income tax liabilities and timing differences related to allowances, certain accruals, and depreciation and amortization.

At December 31, 2022, the Company has net operating loss carryforwards of $12,954,000 ($12,410,000 at December 31, 2021). The federal net operating loss carryforwards generated prior to December 31, 2017 of $900,000 will begin to expire in 2034. Federal net operating losses generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. The state net operating losses may be carried forward indefinitely.

Section 382 of the Internal Revenue Code limits the annual use of net operating loss carryforwards and further limits their use in certain situations where changes occur in stock ownership of a company. If the Company should have an ownership change of more than 50% of the value of the Company’s capital stock, utilization of the carryforwards could be restricted. In 2020, given the profitability of the Company, a formal Section 382 study was performed and the Company determined the utilization of the carryforwards had not been restricted.

-12-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company believes all tax years since the acquisition in August 2010 remain open to examinations by the appropriate government agencies in the federal and state jurisdictions.

Commitments and Contingencies

Royalties:

The Company has license agreements with copyright, trademark and other intellectual property holders for certain products. In 2022 and 2021, the Company recorded expenses of $7,000 and $20,000, respectively, related to royalties owed under the license agreements. At December 31, 2022 and 2021 the Company did not have any royalties payable.

Litigation:

From time to time, the Company may become party to various disputes and legal matters considered routine and in the ordinary course of its activities. The Company is not aware of any legal claims at December 31, 2022. In the opinion of management, any liabilities for future legal claims will not have a material adverse effect on the Company’s consolidated financial statements. As a result, no liability for potential legal claims has been recorded at December 31, 2022.

Indemnification Agreements:

In the ordinary course of business, the Company enters into agreements with, among others, customers, consultants and resellers. Some of these agreements require the Company to indemnify the other party against third party claims alleging a Company product infringes upon a patent and/or copyright. Agreements in which trademarks are licensed to another party normally require the Company to indemnify the other party against third party claims alleging that one of the Company’s products infringes a trademark. Certain of these agreements require the Company to indemnify the other party against certain claims relating to property damage, personal injury or the acts or omissions of the Company, its employees, agents or representatives.

The Company has also indemnified its Board and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which the individual may be involved by reason of being or having been a director or executive officer.

The Company believes the estimated fair value of any future obligations from these indemnification agreements is minimal. Therefore, the consolidated financial statements do not include liabilities for any potential indemnification obligations at December 31, 2022.

Customer Contracts:

The Company has entered into various agreements with customers that guarantee certain gross margin improvements, gross margins, and store sales volume during the contract periods. The Company has also guaranteed updates and refreshes to the displays at customer stores. Any amounts due to customers related to margin and sales guarantees are recorded as a reduction of revenue and accounts receivable if not achieved.

Credit Facility

The Company has a credit facility with a financial institution, which provides a line of credit to support working capital of up to $4,000,000. The credit facility is subject to certain accounts receivable and inventory limitations, as defined in the credit facility.

Outstanding borrowings under the credit facility were $2,872,206 at December 31, 2022 ($2,851,651 at December 31, 2021), which bear interest at the greater of 5%, or the prime rate, plus 1.75% per annum (5.00% at December 31, 2022). The line of credit expires in April 2024.

-13-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the credit facility are collateralized by substantially all assets of the Company. The credit facility also requires the Company to maintain compliance with certain financial and non-financial covenants. At December 31, 2022, management believes the Company was in compliance with all covenants required by the credit facility.

Capital Stock

Common Stock:

The Company is authorized to issue 12,500,000 shares of common stock with a par value of $0.001 per share. The Company had 925,106 shares of common stock issued and outstanding at December 31, 2022.

Convertible Preferred Stock:

The Company is authorized to issue 8,800,000 shares of convertible preferred stock with a par value of $0.001 per share of which the Company’s Board has designated as 3,600,000 shares as Series A convertible preferred stock (Series A), 3,200,000 shares as Series A-1 convertible preferred stock (Series A-1) and 2,000,000 shares as Series A-2 convertible preferred stock (Series A-2). The Company had 3,299,640 shares of Series A, 3,175,627 shares of Series A-1 and 1,933,639 shares of Series A-2 issued and outstanding at December 31, 2022.

The holders of Series A, Series A-1 and Series A-2 (collectively, preferred stock) have the rights, preferences, privileges and restrictions as set forth below:

Liquidation:

In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of shares of Series A-2 are entitled to receive, prior to and in preference to the holders of Series A-1, Series A and common stock, an amount per share as adjusted for stock splits, dividends, reclassifications or the like equal to $3.6074 per share, plus all declared and unpaid dividends. If upon occurrence of a liquidation, the assets and funds to be distributed among the holders of Series A-2 are insufficient to permit the payment to all holders, then the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of Series A-2 in proportion to the preferential amount each holder is otherwise entitled to receive.

Upon completion of distribution to the holders of Series A-2, the holders of shares of Series A-1 are entitled to receive, prior to and in preference to the holders of Series A and common stock, an amount per share as adjusted for stock splits, dividends, reclassifications or the like equal to $10.822 per share, plus all declared and unpaid dividends. If upon occurrence of a liquidation, the assets and funds to be distributed among the holders of Series A-1 are insufficient to permit the payment to all holders, then the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of Series A-1 in proportion to the preferential amount each holder is otherwise entitled to receive.

Upon completion of distribution to the holders of Series A-2 and Series A-1, the holders of shares of Series A are entitled to receive, prior to and in preference to the holders of common stock, an amount per share as adjusted for stock splits, dividends, reclassifications or the like equal to $4.9296 per share, plus all declared and unpaid dividends. If upon occurrence of a liquidation, the assets and funds to be distributed among the holders of Series A are insufficient to permit the payment to all holders, then the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of Series A in proportion to the preferential amount each holder is otherwise entitled to receive.

Upon completion of distribution to the holders of preferred stock, all remaining assets, if any, will be distributed ratably to the holders of common stock and preferred stock, on an as-converted to common stock basis.

Voting:

The holders of shares of preferred stock are entitled to voting rights equal to the number of shares of common stock, into which each share of preferred stock could be converted. So long as shares of preferred stock are issued and outstanding, the holders of preferred stock, voting together as a single class, are entitled to elect four members to the Board. The holders of preferred stock and common stock, voting together as a single class, on an as-converted basis, are entitled to elect the remaining members of the Board.

-14-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Conversion:

Each share of preferred stock is convertible into shares of common stock, at the option of the holder, at any time. Each share of preferred stock automatically converts into the number of shares of common stock determined in accordance with the conversion ratio upon the earlier of (i) the date upon affirmative election by the holders of at least a majority of the shares of then outstanding preferred stock, voting together as a single class, or (ii) upon the closing of a public offering of common stock with aggregate gross proceeds of at least $40,000,000.

Dividends:

The holders of preferred stock are entitled to receive non-cumulative dividends, when and if declared by the Board, at the rate of 8% of their original issuance price per share, as adjusted for stock dividends, combinations, splits, recapitalizations or the like, per annum, prior to any payment of dividends to holders of common stock.

Protective Provisions:

The holders of preferred stock also have certain protective provisions. The Company cannot, without the approval from the holders of at least a majority of the preferred stock then outstanding, voting as a single class, take any action that: (i) amends, alters or repeals any provisions of the Articles of Incorporation or Bylaws of the Company or changes the voting or other powers, preferences or other special rights, privileges or restrictions of preferred stock; (ii) increases or decreases the authorized number of shares of Series A; (iii) results in repurchase of common stock or preferred stock in which the stockholders of the same class and series are not treated equally; (iv) results in an asset transfer or acquisition of the Company; (v) consummates a liquidation, dissolution or winding up of the Company; or (vi) increases or decreases the authorized members of the Board.

Redemption:

Preferred stock is not redeemable at the option of the holder.

Equity Incentive Plan

In January 2013, the Board approved the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provides for the granting of stock options to Company employees, directors, and consultants. The Company has reserved 107,714 shares of common stock for issuance under the 2013 Plan.

The exercise price of incentive stock options and non-statutory stock options will be no less than 100% of the fair value per share of the Company’s common stock on the grant date. If a grantee owns capital stock representing more than 10% of the outstanding shares, the price of each share will be at 110% of the fair value. Fair value is determined by the Board. Options expire after ten years (five years for grantees owning greater than 10% of all classes of stock). Options granted generally vest over four years, of which, 25% of the options vest one year after the vesting commencement date, and the balance vests monthly thereafter over the remaining period.

In 2022 and 2021, the Company did not recognize any stock-based compensation related to options granted to employees as it was determined to not be material to the consolidated financial statements as a whole. No income tax benefits have been recognized in the consolidated statements of operations for stock-based compensation arrangements or capitalized inventory or property and equipment through December 31, 2022.

Stock option activity under the 2013 Plan is as follows:

			Options Outstanding
	Options Available for Grant		Number of Shares		Weighted Average Exercise Price
Balances, December 31, 2020		56,299		51,000	$	0.05
Balances, December 31, 2021		56,299		51,000		0.05
Balances, December 31, 2022		56,299		51,000	$	0.05

-15-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2022, incentive options outstanding had a weighted-average remaining contractual life of 2.4 years. At December 31, 2022, 48,844 options were vested and exercisable with a weighted-average exercise price of $0.05 and weighted-average remaining contractual life of 1.9 years. Future stock-based compensation for unvested options granted and outstanding at December 31, 2022 was not significant to the consolidated financial statements.

Employee Benefit Plan

The Company has a 401(k) plan to provide defined contribution retirement benefits for all eligible employees. The Company may match 25% of employee contributions up to 6% of a participant’s eligible compensation, subject to certain limitations. The Company did not make any matching contributions to the 401(k) plan in 2022 or 2021.

10.

Other Receivable

In August 2020, the Company was a victim of a cyber-attack whereby the attacker impersonated a Company employee and initiated a bank information change request to a customer. When the customer processed the change request and attempted to make a payment to the Company for PPE product purchases, the payment was instead fraudulently transferred to the attacker’s bank account. Investigators with the U.S. Secret Service were able to discover the fraud and recover the funds, which are now the subject of a civil forfeiture action in the Northern District of Texas. The Company filed a petition for remission of the funds. At December 31, 2020, the amount expected to be received of $5,577,234 was recorded as a receivable, which was received in 2021.

11.

Subsequent Events

Merger Agreement and Credit Facilities:

On December 21, 2022, 1847 ICU Holdings Inc. (1847 ICU) and 1847 ICU Acquisition Sub Inc. (Merger Sub), both wholly owned subsidiaries of 1847 Holdings, entered into an agreement and plan of merger (the Merger Agreement) with the Company and its investors. On February 9, 2023, the transactions contemplated by the parties were completed. Pursuant to the Merger Agreement, Merger Sub merged with and into the Company, with the Company becoming the surviving entity and a wholly owned subsidiary of 1847 ICU. The merger consideration paid by 1847 ICU to the Company stockholders consisted of (i) $4,000,000 in cash, minus any unpaid debt of Eyewear and certain transaction expenses, and (ii) 6% subordinated promissory notes in the aggregate principal amount of $500,000.

In connection with the Merger Agreement, the Company’s existing credit facility (Note 6) was repaid in full, and the Company entered into a new credit facility with a financial institution (the 2023 credit facility) which provides a line of credit to support working capital of up to $5,000,000. The credit facility is subject to certain accounts receivable and inventory limitations, as defined in the 2023 credit facility. Outstanding borrowings under the 2023 credit facility bear interest at the greater of the prime rate as reported in The Wall Street Journal, plus 8.0% per annum, or 15.0%. The line of credit expires in February 2025. Borrowings under the 2023 credit facility are collateralized by substantially all assets of the Company and requires the Company to maintain compliance with certain financial and non-financial covenants.

In September 2023, the Company entered into a new credit facility with a financial institution (the September 2023 credit facility), which provides a line of credit to support working capital of up to $15,000,000. Upon entering into the September 2023 credit facility, the Company repaid all existing borrowings under the February 2023 credit facility and it was closed. The September 2023 credit facility is subject to certain accounts receivable and inventory limitations, as defined in the facility. Outstanding borrowings generally bear interest between 7% to 8% and are collateralized by substantially all assets of the Company. The September 2023 credit facility expires in September 2026 and requires the Company to maintain compliance with certain financial and non-financial covenants.

-16-

ICU EYEWEAR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Banking Industry:

On March 10, 2023, Silicon Valley Bank (SVB), a financial institution heavily integrated into the ecosystem of the venture community, was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the FDIC, the U.S. Department of the Treasury and the Federal Reserve System issued a joint statement indicating actions would be taken to complete the FDIC’s resolution of SVB in a manner that protects depositors. The financial institution was reopened by the FDIC on March 13, 2023, with customers having full access to their deposits and debt facilities as at the time of the closure. As of April 25, 2023, the Company does not have a direct relationship with SVB and will continue to monitor and evaluate potential risks related to customers and partners who may be impacted.

Subsequent events have been evaluated through February 2, 2024, which is the date the consolidated financial statements were approved by the Company and available to be issued. No additional items requiring disclosure in the consolidated financial statements have been identified.

-17-

Exhibit 99.2

Unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma financial information presented below sets forth the financial position and results of operations of 1847 Holdings LLC (the “Company”) after giving effect to the acquisition of ICU Eyewear Holdings, Inc. (“ICU Eyewear”). The following unaudited pro forma consolidated financial statements were prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”).

The unaudited pro forma consolidated balance sheet as of December 31, 2022 combines the historical balance sheet of the Company with the historical balance sheet of ICU Eyewear and was prepared as if the acquisition had occurred on December 31, 2022.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2022 combines the historical statement of operations of the Company with the historical statement of operations of ICU Eyewear and was prepared as if the acquisition had occurred on January 1, 2022.

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the Company’s financial position would have been had the acquisition been completed on the dates indicated or what the Company’s results of operations would have been had the acquisition been completed as of the beginning of the periods indicated. In addition, the pro forma consolidated financial statements do not purport to project the future financial position or operating results of the Company. The pro forma consolidated financial statements include adjustments for events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results.

The pro forma financial information has been derived from and should be read in conjunction with (i) the audited consolidated financial statements and related notes of the Company for the years ended December 31, 2022 and 2021 and (ii) the audited consolidated financial statements and related notes of ICU Eyewear for the years ended December 31, 2022 and 2021.

1847 HOLDINGS LLC

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2022

	Historical Balances
	1847 Holdings			ICU Eyewear			Pro Forma Adjustments			Notes		Pro Forma Combined
ASSETS
Current Assets
Cash and cash equivalents	$	1,079,355		$	907,651		$	(4,000,000	)		(a)	$	3,499,706
								1,963,182			(d)
								3,549,518			(e)
Investments		277,310			-			-					277,310
Receivables, net		5,215,568			1,441,686			-					6,657,254
Contract assets		89,574			-			-					89,574
Inventories, net		4,184,019			10,164,500			-					14,348,519
Prepaid expenses and other current assets		379,875			130,094			-					509,969
Total Current Assets		11,225,701			12,643,931			1,512,700					25,382,332
Property and equipment, net		1,885,206			578,204			-					2,463,410
Operating lease right-of-use assets		2,854,196			-			-					2,854,196
Long-term deposits		82,197			74,800			-					156,997
Intangible assets, net		9,985,129			642,000			-					10,627,129
Goodwill		19,452,270			-			-					19,452,270
Total Assets	$	45,484,699		$	13,938,935		$	1,512,700					60,936,334

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	6,741,769		$	5,959,970		$	289,305			(f)	$	12,978,544
								(12,500	)		(g)
Contract liabilities		2,353,295			-			-					2,353,295
Customer deposits		3,059,658			-			-					3,059,658
Due to related parties		193,762			-			-					193,762
Current portion of operating lease liabilities		713,100			-			-					713,100
Current portion of finance lease liabilities		185,718			-			-					185,718
Current portion of notes payable, net		551,210			-			500,000			(b)		3,240,366
								2,189,156			(e)
Line of credit		-			2,872,206			(2,389,755	)		(a)		2,445,633
								1,963,182			(d)
Related party note payable		362,779			-			-					362,779
Total Current Liabilities		14,161,291			8,832,176			2,539,388					25,532,855
Operating lease liabilities, net of current portion		2,237,797			-			-					2,237,797
Finance lease liabilities, net of current portion		784,148			-			-					784,148
Notes payable, net of current portion		144,830			-			-					144,830
Convertible notes payable, net		24,667,799			-			-					24,667,799
Deferred tax liability, net		599,000			-			-					599,000
Total Liabilities		42,594,865			8,832,176			2,539,388					53,966,429
Shareholders’ Equity
Series A convertible preferred shares		1,338,746			8,408			(8,408	)		(i)		1,338,746
Series B convertible preferred shares		1,214,181			-			-					1,214,181
Allocation shares		1,000			-			-					1,000
Common shares		57			925			4			(e)		61
								(925	)		(i)
Distribution receivable		(2,000,000	)		-			-					(2,000,000	)
Additional paid-in capital		43,966,628			37,535,504			1,360,358			(e)		45,326,986
								(37,535,504	)		(i)
Accumulated deficit		(41,919,277	)		(32,438,078	)		35,157,787			(h)		(39,199,568	)
Total 1847 Holdings Shareholders’ Equity		2,601,335			5,106,759			(1,026,688	)				6,681,406
Non-Controlling Interests		288,499			-			-					288,499
Total Shareholders’ Equity		2,889,834			5,106,759			(1,026,688	)				6,681,406
Total Liabilities and Shareholders’ Equity	$	45,484,699		$	13,938,935		$	1,512,700				$	60,936,334

1847 HOLDINGS LLC

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2022

	Historical Balances
	1847 Holdings			ICU Eyewear			Pro Forma Adjustments			Notes		Pro Forma Combined
Revenues	$	48,929,124		$	20,446,381		$	-				$	69,375,505
								-
Operating Expenses								-
Cost of revenues		33,227,730			14,053,642			-					47,281,372
Personnel		9,531,101			4,454,735			-					13,985,836
Depreciation and amortization		2,037,112			482,659			-					2,519,771
General and administrative		9,872,689			2,335,221			(12,500	)		(f)		12,495,410
								300,000			(g)
Impairment of intangible assets		-			82,000			-					82,000
Total Operating Expenses		54,668,632			21,408,257			287,500					76,364,389

Loss From Operations		(5,739,508	)		(961,876	)		(287,500	)				(6,988,884	)

Other Income (Expense)
Other income (expense)		(11,450	)		237,329			-					225,879
Interest expense		(4,594,740	)		(262,743	)		-					(4,857,483	)
Gain (loss) on disposal of property and equipment		65,417			-			-					65,417
Loss on extinguishment of debt		(2,039,815	)		-			-					(2,039,815	)
Loss on write-down of contingent note payable		(158,817	)		-			-					(158,817	)
Gain on bargain purchase		-			-			2,996,514			(c)		2,996,514
Total Other Income (Expense)		(6,739,405	)		(25,414	)		2,996,514					(3,768,305	)

Net Income (Loss) Before Income Taxes		(12,478,913	)		(987,290	)		2,709,014					(10,757,189	)
Income Tax Benefit (Expense)		1,677,000			(17,361	)		-					1,659,639
Net Income (Loss)	$	(10,801,913	)	$	(1,004,651	)	$	2,709,014				$	(9,097,550	)
Net Loss Attributable to Non-Controlling Interests		(642,313	)		-			-					(642,313	)
Net Income (Loss) Attributable to 1847 Holdings	$	(10,159,600	)	$	(1,004,651	)	$	2,709,014				$	(8,455,237	)
Preferred Share Dividends		(899,199	)		-			-					(899,199	)
Deemed Dividend		(9,012,730	)		-			-					(9,012,730	)
Net Income (Loss) Attributable to Common Shareholders	$	(20,071,529	)	$	(1,004,651	)	$	2,709,014				$	(18,367,166	)

Loss Per Common Share – Basic and Diluted	$	(836.28	)										(652.31	)
Weighted-Average Shares Outstanding – Basic and Diluted		24,001										$	28,157

1847 HOLDINGS LLC

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF THE TRANSACTIONS

Acquisition of ICU Eyewear

On December 21, 2022, the Company’s newly formed wholly owned subsidiaries 1847 ICU Holdings Inc. (“1847 ICU”) and 1847 ICU Acquisition Sub Inc. entered into an agreement and plan of merger with ICU Eyewear and San Francisco Equity Partners, as the stockholder representative, which was amended on February 9, 2023.

On February 9, 2023, closing of the transactions contemplated by the agreement and plan of merger was completed. Pursuant to the agreement and plan of merger, 1847 ICU Acquisition Sub Inc. merged with and into ICU Eyewear, with ICU Eyewear surviving the merger as a wholly owned subsidiary of 1847 ICU. The merger consideration paid by 1847 ICU to the stockholders of ICU Eyewear consists of (i) $4,000,000 in cash, minus any unpaid debt of ICU Eyewear and certain transaction expenses, and (ii) 6% subordinated promissory notes in the aggregate principal amount of $500,000.

6% Subordinated Promissory Notes

The 6% subordinated promissory notes bear interest at the rate of 6% per annum with all principal and accrued interest being due and payable in one lump sum on February 9, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. 1847 ICU may prepay all or any portion of the notes at any time prior to the maturity date without premium or penalty of any kind. The notes contain customary events of default, including, without limitation, in the event of (i) non-payment, (ii) a default by 1847 ICU of any of its covenants in the notes, the agreement and plan of merger or any other agreement entered into in connection with the agreement and plan of merger, or a breach of any of the representations or warranties under such documents, (iii) the insolvency or bankruptcy of 1847 ICU or ICU Eyewear or (iv) a change of control (as defined in the notes) of 1847 ICU or ICU Eyewear. The notes are unsecured and subordinated to all senior indebtedness (as defined in the notes).

Loan and Security Agreement

On February 9, 2023, 1847 ICU and ICU Eyewear entered into a loan and security agreement with Industrial Funding Group, Inc. for a revolving loan of up to $5,000,000, which is evidenced by a secured promissory note in the principal amount of up to $5,000,000. On February 9, 2023, 1847 ICU received an advance of $2,063,182 under the note, of which $1,963,182 was used to repay certain debt of ICU Eyewear in connection with the agreement and plan of merger, with the remaining $100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and assigned the loan and security agreement, the note and related loan documents to GemCap Solutions, LLC.

The note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime rate changes, plus (b) eight percent (8.00%), and (ii) fifteen percent (15.00%); provided that following and during the continuation of an event of default (as defined in the loan and security agreement), interest on the unpaid principal balance of the advances shall accrue at an annual rate equal to such rate plus three percent (3.00%). Interest accrued on the advances shall be payable monthly commencing on March 7, 2023. The borrowers may voluntarily prepay the entire unpaid principal amount of the note without premium or penalty; provided that in the event that we make such prepayment on or before February 9, 2024, then the borrowers must pay certain fees set forth in the note. The note is secured by all of the assets of 1847 ICU and ICU Eyewear.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for loans of this type. The loan and security agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the note when due, or to pay any fees due under the loan and security agreement; (ii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iii) if any statement, representation or warranty in the loan and security agreement or any document delivered in connection therewith is at any time found to have been false in any material respect at the time such representation or warranty was made; (iv) if the borrowers default under any agreement or contract with a third party which default would result in a liability to us in excess of $25,000; (v) for any voluntary or involuntary bankruptcy, insolvency, or dissolution or assignment to creditors; (vi) if any judgments or attachments aggregating in excess of $10,000 at any given time are obtained against the borrowers which remain unstayed for a period of ten (10) days or are enforced or if there is an indictment under an criminal statute or proceeding pursuant to which remedies sought may include the forfeiture of any property; (vii) if a material adverse effect or change of control (each as defined in the loan and security agreement) shall have occurred; (viii) for certain environmental claims; and (ix) for failure to notify the lender of certain events or failure to deliver certain documentation required by the loan and security agreement.

Management Services Agreement

On February 9, 2023, 1847 ICU entered into a management services agreement with 1847 Partners LLC (the “Manager”). This management services agreement is an offsetting management services agreement as defined in the management services agreement between the Company and the Manager.

Pursuant to the management services agreement, 1847 ICU 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 1847 ICU, 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 the Company’s gross income in any fiscal year or the management fee paid under the management services agreement in any fiscal quarter, then the management fee to be paid by 1847 ICU 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. 1847 ICU shall also reimburse the Manager for all costs and expenses of 1847 ICU which are specifically approved by the board of directors of 1847 ICU, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of 1847 ICU in connection with performing services under the management services agreement.

Private Placements

On February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $604,000, which include an original issue discount in the amount of $60,400, and (ii) five-year warrants for the purchase of an aggregate of 1,259 common shares at an exercise price of $420.00 per share (subject to adjustment) for a total purchase price of $543,600. As additional consideration, the Company issued an aggregate of 1,259 common shares to the investors as a commitment fee.

On February 9, 2023, the Company entered into securities purchase agreements with the same two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $2,557,575, which include an original issue discount in the amount of $139,091, and (ii) five-year warrants for the purchase of an aggregate of 5,329 common shares at an exercise price of $420.00 per share (subject to adjustment) for a total purchase price of $2,301,818. As additional consideration, the Company issued 2,898 common shares to one investor and issued to the other investor a five-year warrant for the purchase of 2,431 common shares at an exercise price of $1.00 per share (subject to adjustment), which were issued as a commitment fee.

On February 22, 2023, the Company entered into another securities purchase agreement with one of the investors pursuant to which the Company issued to such investor (i) a promissory note in the principal amount of $878,000, which includes an original issue discount in the amount of $87,800, and (ii) a five-year warrant for the purchase of 1,830 common shares at an exercise price of $420.00 per share (subject to adjustment) for a total purchase price of $790,200. As additional consideration, the Company issued a five-year warrant for the purchase of 1,984 common shares at an exercise price of $1.00 per share (subject to adjustment) to the investor as a commitment fee.

In the aggregate, the Company issued promissory notes in the aggregate principal amount of $4,039,575, warrants for the purchase of an aggregate of 12,833 common shares and 4,157 common shares for gross proceeds of $3,635,618 and net proceeds of approximately $3,553,118.

The notes bear interest at a rate of 12% per annum and mature on the first anniversary of the date of issuance; 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 principal and interest commencing in May 2023. The Company may voluntarily prepay the outstanding principal amount and accrued interest of each note in whole upon payment of certain prepayment fees. 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. The notes contain 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) $420.00 (subject to adjustments) and (ii) 80% of the lowest volume weighted average price of the 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 $3.00 (subject to adjustments).

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.

NOTE 2 – BASIS OF PRO FORMA PRESENTATION

The historical financial information is adjusted in the unaudited pro forma consolidated financial information to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the combined statement of operations, expected to have a continuing impact on the combined results.

The Company accounted for the acquisitions using the acquisition method of accounting in accordance with Financial Accounting Standards Board ASC Topic 805 “Business Combinations”. 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. Goodwill as of the acquisition dates is measured as the difference of fair value of the net tangible assets and identifiable assets acquired over the purchase consideration.

The unaudited pro forma consolidated 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 transactions described herein occurred on the dates assumed, nor are the necessarily indicative of future consolidated results of operations or financial position.

The Company expects to incur costs and realize benefits associated with integrating the operations of the Company and ICU Eyewear. The unaudited pro forma consolidated 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 consolidated statement of operations does not reflect any non-recurring charges directly related to the acquisition that the combined companies incurred upon completion of the acquisition.

NOTE 3 – PURCHASE PRICE CONSIDERATION

In accordance with ASC 805, the Company assigned fair value to the tangible and intangible assets of ICU Eyewear acquired and liabilities assumed at the acquisition date. Goodwill is measured as the excess of the purchase consideration over the fair value of the net tangible assets and identifiable assets acquired, or if the fair value of the net assets acquired exceeds the purchase consideration, a bargain purchase gain is recorded. The fair value of the net assets to be acquired is $4.5 million. The fair value of the net assets acquired exceeded the purchase consideration, resulting in a bargain purchase gain of $2.4 million. The process for estimating fair values in many cases requires the use of significant estimates, assumptions and judgments, including developing appropriate discount rates. The Company has engaged an independent third-party valuation firm to assist in determining the preliminary estimated fair values of identifiable intangible assets. Since these unaudited pro forma combined financial statements have been prepared based on preliminary estimates of fair values using currently available information and certain assumptions, the actual amounts recorded may differ materially if additional information becomes available. These provisional amounts may be adjusted as necessary during the measurement period (up to one year from the acquisition date) while the accounting is finalized. These valuation adjustments may occur (as a result of management review and auditor audit procedures on acquisition date balances and the valuation), whereby increases or decreases in the fair value of the relevant balance sheet accounts will result in adjustments, which may result in material differences from the information presented herein.

The table below shows a preliminary analysis for the acquisition:

Purchase consideration at preliminary fair value:
Closing cash consideration	$	4,000,000
Seller notes payable		500,000
Amount of consideration	$	4,500,000

Assets acquired and liabilities assumed at preliminary fair value
Cash	$	436,807
Accounts receivable		1,814,358
Inventory		9,997,332
Prepaids and other current assets		79,777
Property and equipment		545,670
Other assets		74,800
Intangibles		-
Accounts payable and accrued expenses		(6,116,883	)
Line of credit		-
Net assets acquired	$	6,831,861

Total net assets acquired	$	6,831,861
Consideration paid		4,500,000
Preliminary goodwill (gain on bargain purchase)	$	(2,331,861	)

NOTE 4 – PRO FORMA ADJUSTMENTS

The following is a summary of pro forma adjustments reflected in the unaudited pro forma combined financial information based on preliminary estimates, which may change as additional information is obtained:

(a)

Reflects the cash purchase consideration for the purchase of ICU Eyewear, as follows:

	(1)	Cash consideration of $1,009,965 paid to sellers	$	1,009,965
	(2)	Cash consideration of $2,389,755 paid to settle ICU Eyewear’s outstanding line of credit		2,389,755
	(3)	Cash consideration of $600,280 paid to settle ICU Eyewear’s transaction expenses		600,280
Total cash purchase consideration for the purchase of ICU Eyewear			$	4,000,000

(b)

Reflects the purchase consideration for the issuance of 6% subordinated promissory notes to the sellers of ICU Eyewear

(c)

The fair value of the net assets acquired exceeded the purchase consideration, resulting in a bargain purchase gain

(d)

Reflects the issuance of a revolving loan line of credit used to settle ICU Eyewear’s outstanding line of credit

(e)

Reflects the net working capital proceeds from the private placement issuance of promissory notes with warrants and commitment shares, as follows:

(1)	Promissory notes, net of discounts	$	2,189,156
(2)	Commitment common shares		4
(3)	Additional paid-in capital from the issuance of promissory notes with warrants and commitment shares		1,360,358
Net impact on cash from the private placement issuance of promissory notes with warrants and commitment shares		$	3,549,518

(f)

Reflects estimated transaction related expenses. These costs are not included in the unaudited pro forma combined statement of operations because they are non-recurring. The adjustment does not include severance, restructuring or other costs that may result from the acquisition.

(1)	Total estimated acquisition related costs	$	301,805
(2)	Costs reflected in 1847 Holdings historical financial statements as of December 31, 2022		(12,500	)
Pro Forma acquisition costs reflected through the recordation of accounts payable at December 31, 2022		$	289,305

(g)

Reflects an annualized management fee accrual by 1847 ICU to the Manager

(h)

Impact on accumulated deficit, as follows:

(1)	Reflects the total acquisition costs not recorded in historical financial statements as of December 31, 2022	$	289,305
(2)	Reflects the bargain purchase gain of ICU Eyewear		(2,996,514	)
(3)	Reflects the annualized management fee accrual by 1847 ICU to the Manager		(12,500	)
(4)	Reflects removal of ICU Eyewear accumulated deficit in the acquisition		(32,438,078	)
Pro Forma reduction to accumulated deficit as of December 31, 2022			35,157,787

(i)

Reflects the elimination of the remaining historical equity accounts of ICU Eyewear

Exhibit 99.3

Consent of Independent Auditors

We consent to the incorporation by reference of our report related to the consolidated financial statements of ICU Eyewear Holdings, Inc., dated February 2, 2024, appearing in Exhibit 99.1 of Amendment No. 2 of this Current Report on Form 8-K/A.

/s/ Frank, Rimerman + Co. LLP

San Jose, California

February 9, 2024

Cover	Feb. 09, 2023
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Amendment Description	On February 9, 2023, 1847 ICU Holdings Inc. (“1847 ICU”), a subsidiary of 1847 Holdings LLC (the “Company”), acquired ICU Eyewear Holdings Inc. (“ICU Eyewear”), pursuant to an agreement and plan of merger, dated December 21, 2022, among 1847 ICU, 1847 ICU Acquisition Sub Inc., ICU Eyewear and San Francisco Equity Partners, as the stockholder representative, as amended on February 9, 2023.
Document Period End Date	Feb. 09, 2023
Entity File Number	001-41368
Entity Registrant Name	1847 Holdings LLC
Entity Central Index Key	0001599407
Entity Tax Identification Number	38-3922937
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	590 Madison Avenue
Entity Address, Address Line Two	21st Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10022
City Area Code	212
Local Phone Number	417-9800
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Shares
Trading Symbol	EFSH
Security Exchange Name	NYSEAMER
Entity Emerging Growth Company	false