We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type |
---|---|---|---|
Polished Inc | AMEX:POL | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.8222 | 0 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
For the transition period from ____________ to ____________
Commission File No.
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code) |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 17, 2023, there were
Polished.com Inc.
Quarterly Report on Form 10-Q
Period Ended September 30, 2023
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | 1 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 30 |
Item 4. | Controls and Procedures | 30 |
PART II OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 32 |
Item 1A. | Risk Factors | 33 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 |
Item 3. | Defaults Upon Senior Securities | 33 |
Item 4. | Mine Safety Disclosures | 33 |
Item 5. | Other Information | 33 |
Item 6. | Exhibits | 34 |
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
● | cybersecurity or data security breaches such as the hacking attack we disclosed in May 2023, the improper disclosure of confidential, personal or proprietary data and changes to laws and regulations governing cybersecurity and data privacy, including any related costs, fines or lawsuits, and our ability to continue ongoing operations and safeguard the integrity of our information technology infrastructure, data, and employee, customer and vendor information; |
● | our ability to acquire new customers and sustain and/or manage our growth; |
● | the effect of supply chain delays and disruptions on our operations and financial condition; |
● | our goals and strategies; |
● | the identification of material weaknesses in our internal control over financial reporting and disclosure controls and procedures that, if not corrected, could affect the reliability of our unaudited condensed consolidated financial statements and have other adverse consequences such as a failure to meet reporting obligations; |
● | our future business development, financial condition and results of operations; |
● | expected changes in our revenue, costs or expenditures; |
● | growth of and competition trends in our industry; |
● | our expectations regarding demand for, and market acceptance of, our products; |
● | our expectations regarding our relationships with investors, institutional funding partners and other parties we collaborate with; |
● | fluctuations in general economic and business conditions in the markets in which we operate; and |
● | relevant government policies and regulations relating to our industry. |
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
ii
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
POLISHED.COM INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
POLISHED.COM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Receivables, net | ||||||||
Vendor deposits | ||||||||
Merchandise inventory, net | ||||||||
Prepaid expenses and other current assets | ||||||||
Total Current Assets | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Derivative instruments | ||||||||
Goodwill | ||||||||
Intangible assets, net | ||||||||
Deferred tax asset | ||||||||
Other long-term assets | ||||||||
TOTAL ASSETS | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Customer deposits | ||||||||
Current portion of notes payable, net | ||||||||
Current portion of finance lease liabilities | ||||||||
Current portion of operating lease liabilities | ||||||||
Total Current Liabilities | ||||||||
Notes payable, net of current portion | ||||||||
Finance lease liabilities, net of current portion | ||||||||
Operating lease liabilities, net of current portion | ||||||||
Deferred tax liability | ||||||||
TOTAL LIABILITIES | ||||||||
Stockholders’ Equity | ||||||||
Preferred stock, $ | ||||||||
Common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Product sales, net | $ | $ | $ | $ | ||||||||||||
Cost of goods sold | ||||||||||||||||
Gross profit | ||||||||||||||||
Operating Expenses | ||||||||||||||||
Personnel | ||||||||||||||||
Advertising | ||||||||||||||||
Bank and credit card fees | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
General and administrative | ||||||||||||||||
Total Operating Expenses | ||||||||||||||||
LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Income (Expenses) | ||||||||||||||||
Interest income | ||||||||||||||||
Adjustment in value of contingency | ( | ) | ||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gain on change in fair value of derivative instruments | ||||||||||||||||
Loss on settlement of debt | ( | ) | ||||||||||||||
Other income (expense) | ( | ) | ( | ) | ||||||||||||
Total Other Income (Expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
NET LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
INCOME TAX (EXPENSE) BENEFIT | ( | ) | ||||||||||||||
NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Income per common share | ||||||||||||||||
Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | ||||||||||||||||
Diluted |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
For the Three and Nine Months Ended September 30, 2023
Common Stock | Additional Paid-In | Accumulated | Treasury Stock | Total Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | At Cost | Equity | |||||||||||||||||||
Balance January 1, 2023 | ( | ) | ||||||||||||||||||||||
Issuance of common stock through equity incentive awards | ||||||||||||||||||||||||
Issuance of common stock in connection with employment agreements | ||||||||||||||||||||||||
Stock compensation expense | - | |||||||||||||||||||||||
Net loss for the three months ended March 31, 2023 | - | ( | ) | ( | ) | |||||||||||||||||||
Balance March 31, 2023 (unaudited) | ( | ) | ||||||||||||||||||||||
Stock compensation expense | ||||||||||||||||||||||||
Net income for the three months ended June 30, 2023 | ||||||||||||||||||||||||
Balance June 30, 2023 (unaudited) | ( | ) | ||||||||||||||||||||||
Stock compensation expense | - | |||||||||||||||||||||||
Net loss for the three months ended September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
Balance September 30, 2023 (Unaudited) | ( | ) |
For the Three and Nine Months Ended September 30, 2022
Common Stock | Additional Paid-In | Accumulated | Treasury Stock | Total Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | At Cost | Equity | |||||||||||||||||||
Balance January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Issuance of common stock through equity incentive awards | ||||||||||||||||||||||||
Stock compensation expense for the three months ended March 31, 2022 | - | |||||||||||||||||||||||
Net income for the three months ended March 31, 2022 | - | |||||||||||||||||||||||
Balance March 31, 2022 (Unaudited) | ( | ) | ||||||||||||||||||||||
Purchase of treasury stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Stock compensation expense for the three months ended June 30, 2022 | - | |||||||||||||||||||||||
Net loss for the three months ended June 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||||||
Balance June 30, 2022 (Unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
Stock compensation expense for the three months ended September 30, 2022 | - | |||||||||||||||||||||||
Net loss for the three months ended September 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||||||
Balance September 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share data)
(Unaudited)
Nine Months Ended | ||||||||
September 30, | September 30, | |||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Amortization of debt discount | ||||||||
Loss on settlement of debt | ||||||||
Loss on disposal of fixed assets | ||||||||
Stock-based compensation | ||||||||
Adjustment to contingent liability | ||||||||
Inventory reserve | ( | ) | ||||||
Loss (Gain) on change in fair value of derivative instruments | ( | ) | ( | ) | ||||
Bad debt expense | ( | ) | ||||||
Deferred tax expense (benefit) | ( | ) | ||||||
Non-cash lease expense | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ||||||
Deposits with vendors | ( | ) | ( | ) | ||||
Inventory | ||||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
Due to related party | ||||||||
Customer deposits | ( | ) | ( | ) | ||||
Operating lease liabilities | ( | ) | ( | ) | ||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Cash received from notes payable | ||||||||
Repayment of notes payable | ( | ) | ( | ) | ||||
Repayments of financing lease liabilities | ( | ) | ( | ) | ||||
Purchase of treasury stock at cost | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ||||||
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ) | ( | ) | ||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | ||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | $ | ||||||
Cash, cash equivalents, and restricted cash consist of the following: | ||||||||
End of the period | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
$ | $ | |||||||
Cash, cash equivalents, and restricted cash consist of the following: | ||||||||
Beginning of the period | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
$ | $ | |||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | $ | $ | ||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Common stock issued in vesting of RSUs | $ | $ | ||||||
Financed purchases of property and equipment | $ | $ | ||||||
Common stock issued in connection with employment agreements | $ | $ | ||||||
Debt discount on notes payable | $ | $ | ||||||
Settlement of notes payable and interest through the issuance of a new note | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 1—BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Polished.com Inc. (the “Company,” “Polished.com Inc.,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The information included in the Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. Furthermore, interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023 or future periods.
NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted
In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
6
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT
Management assesses liquidity and going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
As of September 30, 2023, we had cash and cash
equivalents of $
The Company performed an assessment to determine whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern within one year after the filing date of this report, when the accompanying financial statements are being issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully implemented.
Based on the initial assessment, substantial doubt exists regarding our ability to continue as a going concern. Management then assessed the mitigating effect of its plans to determine if it is probable that the plans (1) would be effectively implemented within one year after the filing date of this report, when the accompanying financial statements are being issued and (2) when implemented, would mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.
As discussed below, the Company has implemented plans which encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, in addition to creating sustained cash flow generation thereafter. The Company has either taken or intends to take, the following actions, among others, to improve its liquidity position and to address uncertainty about its ability to continue as a going concern:
● | As described in Note 8, the Company entered into a loan amendment of their term loan and revolver loan agreement with Bank of America, granting the Company a waiver (relating to the specified events of default) through November 2024. |
● | We are taking concrete steps to improve efficiency and profitability through headcount reductions and consolidation of operations including the closing of one warehouse and the imminent relocation to a new warehouse increasing the efficiency of warehouse operations and reduction of product damage. |
7
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
● | We hired an internationally recognized firm of digital advertising consultants to help us improve our return on advertising spend. This firm provided us the tools needed to improve future digital marketing results which we are now beginning to deploy. |
● | We are implementing new financing initiatives for our customers, including a new store-branded credit card and a leasing alternative for customers who do not qualify for conventional credit. |
● | We have changed our sales focus to emphasizing the sale of high-margin luxury products, in addition to mass-market appliances, began becoming dealers for higher-margin small appliances and promoting them on our website, and have begun actively negotiating improved terms with several of our largest appliance vendors. |
Management has prepared estimates of operations for fiscal years 2023
and 2024 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations
for one year from the date of the filing of these consolidated financial statements in the Company’s 10-Q.
NOTE 4—DISAGGREGATION OF REVENUES
The Company sells a vast assortment of household appliances, including refrigerators, ovens, dishwashers, microwaves, freezers, washers and dryers. In addition to appliances, we also offer a broad assortment of products in the furniture, décor, bed & bath, lighting, outdoor living, electronics categories, fitness equipment, plumbing fixtures, air conditioners, fireplaces, fans, dehumidifiers, humidifiers, air purifiers and televisions.
Revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which time revenue is recognized.
The Company disaggregates revenue from contracts with customers by product type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30 | September 30 | September 30 | September 30 | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Appliance sales | $ | $ | $ | $ | ||||||||||||
Furniture and other sales | ||||||||||||||||
Total | $ | $ | $ | $ |
8
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 5—SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES
Receivables
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Trade accounts receivable | $ | $ | ||||||
Vendor rebates receivable | ||||||||
Other receivables | ||||||||
Total receivables | ||||||||
Less allowance for doubtful accounts | ( | ) | ( | ) | ||||
Total receivables, net | $ | $ |
Merchandise Inventory
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Appliances | $ | $ | ||||||
Furniture and other | ||||||||
Total merchandise inventory | ||||||||
Less reserve for obsolescence | ( | ) | ( | ) | ||||
Total merchandise inventory, net | $ | $ |
Property and Equipment
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Warehouse equipment | $ | $ | ||||||
Furniture and fixtures | ||||||||
Transportation equipment | ||||||||
Leasehold improvements | ||||||||
Showroom inventory | ||||||||
Total property and equipment | ||||||||
Less: accumulated depreciation | ( | ) | ( | ) | ||||
Property and equipment, net | $ | $ |
Depreciation expense for the three and nine months ended September
30, 2023 and 2022, was $
9
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
Intangible Assets
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Customer relationships | $ | $ | ||||||
Marketing related - tradename | ||||||||
Total intangible assets | ||||||||
Accumulated amortization | ( |
) | (- | ) | ||||
Intangible assets, net | $ | $ |
Amortization expense for the three and nine months
ended September 30, 2023, was $
These assets are being amortized on a straight-line basis over their
weighted average estimated useful life of
Year ending December 31, | Amount | |||
2023 (Remainder of year) | $ | |||
2024 | ||||
2025 | ||||
2026 | ||||
2027 | ||||
Total | $ |
Accounts Payable and Accrued Expenses
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Trade accounts payable | $ | $ | ||||||
Accrued sales tax | ||||||||
Accrued payroll liabilities | ||||||||
Accrued interest | ||||||||
Accrued liability for sales returns | ||||||||
Credit cards payable | ||||||||
Accrued insurance | ||||||||
Other accrued liabilities | ||||||||
Total accounts payable and accrued expenses | $ | $ |
10
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 6—OPERATING LEASES
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Operating lease right-of-use assets | $ | $ | ||||||
Lease liabilities, current portion | ||||||||
Lease liabilities, long-term | ||||||||
Total operating lease liabilities | $ | $ | ||||||
Weighted-average remaining lease term (months) | ||||||||
Weighted average discount rate | % | % |
Operating lease expense for the three and nine
months ended September 30, 2023 and 2022, was $
Years Ending December 31, | Amount | |||
2023 – Remainder of year | $ | |||
2024 | ||||
2025 | ||||
2026 | ||||
2027 | ||||
Thereafter | ||||
Total | ||||
Less: imputed interest | ( | ) | ||
Total operating lease liabilities | $ |
Finance Leases
The Company has three finance leases. At September
30, 2023, the total amount due on these leases was $
11
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 7—RELATED PARTIES
On March 15, 2022, the Company entered into a
lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie Fouerti,
the Company’s former Chief Executive and Chief Operating Officer, respectively. The Company contends that the lease required the
Landlord do certain work at Landlord’s expense to improve the building at a cost of approximately $
DMI
The Company is a member of DMI, an appliance purchasing
cooperative. DMI purchases consumer electronics and appliances at wholesale prices from various vendors, and then makes such products
available to its members, including the Company, who sell such products to end consumers. DMI’s purchasing group arrangement provides
its members, including the Company, with leverage and purchasing power with appliance vendors, and increases the Company’s ability
to compete with competitors, including big box appliance and electronics retailers. The Company owns an approximate
During the nine months ended September 30, 2023,
total purchases from DMI represented approximately
Lease Agreements
The Company has lease agreements with 1870 Bath
Ave. LLC, 812 and 5th Ave Realty LLC. These two entities are owned by the Company’s former Chief Executive Officer and
Chief Operating Officer. In addition, the Company has a sublease agreement with DMI. The total rent expense under these related party
leases was $
12
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 8—NOTES PAYABLE
Credit Facilities
Bank of America Credit Agreement
On May 9, 2022, the Company entered into
a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”) and Bank of America,
N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to which the Lenders agreed
to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $
On May 9, 2022, the Company borrowed the entire
amount of the Term Loan in the aggregate principal amount of $
As of September 30, 2023, the carrying value of
the Term Loan was $
As a result of our technical non-compliance with
specified loan covenants for both the Bank of America Term Loan and Revolving Loan, based in part due to our failure to timely deliver
financial statements, Bank of America froze the $
On July 25, 2023, the Company and Bank of America
amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash
and certain qualifying customer and credit card account receivables, of $
The Company entered into the Second Amendment,
in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed
to defer the principal installment of the Term Loans in the amount of $
The Term Loan and Revolving Loan will bear interest
on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at
the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then
at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark
for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR
or Base Rate (and, with respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by
notifying the Agent and the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable
Rate increased from a high of
13
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
On May 9, 2022, the Company entered into an interest
rate swap agreement to reduce its exposure to fluctuations in the floating interest rate tied to SOFR (see Note 9). The initial notional
amount of the swap is $
Commencing on September 30, 2023, through and including September 30,
2024, the Borrowers must repay the principal amount of the Term Loan in installments of $
As a result of the reduced term, the Company has begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.
Vehicle Loans
The Company has financed purchases of transportation
vehicles with notes payable, which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging
from
September 30, | ||||
For the years ended December 31, | 2023 | |||
2023 (Remainder of year) | $ | |||
2024 | ||||
2025 | ||||
2026 | ||||
2027 | ||||
Thereafter | ||||
Total | ||||
Less: Loan costs | ( | ) | ||
Total | $ | |||
Amount classified as a current liability | $ | |||
Amount classified as long-term liability | ||||
Total | $ |
14
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 9—DERIVATIVE INSTRUMENTS (INTEREST RATE SWAP):
On May 9, 2022, the Company entered into a Term
Loan agreement with Bank of America, N.A. (See Note 11). On the same day, the Company entered into an interest rate swap agreement to
reduce its exposure to fluctuations in the floating interest rate tied to SOFR under the Term Loan with a notional amount of $
As of September 30, 2023, the fair value of the
interest rate swap agreement was $
The Company classified the interest rate swap in Level 2 of the fair value hierarchy.
NOTE 10—STOCKHOLDERS’ EQUITY
As of September 30, 2023, the Company was authorized
to issue
Stock Options
Weighted- Average | ||||||||
Options | Exercise Price | |||||||
Outstanding at December 31, 2022 | $ | |||||||
Granted | $ | |||||||
Exercised | ||||||||
Forfeited | ( | ) | ||||||
Outstanding at September 30, 2023 | $ | |||||||
Exercisable at September 30, 2023 |
The number of options has been restated to reflect the impact of the
reverse stock split that occurred on October 20, 2023. During the nine months ended September 30, 2023,
Stock-based compensation expense of $
15
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
Warrants
Weighted- Average | ||||||||
Warrants | Exercise Price | |||||||
Outstanding at December 31, 2022 | $ | |||||||
Granted | ||||||||
Exercised | ||||||||
Forfeited | ||||||||
Outstanding at September 30, 2023 | $ | |||||||
Exercisable at September 30, 2023 | $ |
The number of options has been restated to reflect the impact of the
reverse stock split that occurred on October 20, 2023. As of September 30, 2023, the outstanding warrants have a weighted average remaining
contractual life of
NOTE 11—EARNINGS (LOSS) PER SHARE
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Basic Earnings (Loss) Per Share | ||||||||||||||||
Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Basic weighted average common shares outstanding | ||||||||||||||||
Basic earnings (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Effect of dilutive stock options and warrants | ||||||||||||||||
Diluted weighted average common shares outstanding | ||||||||||||||||
Diluted earnings (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
For the three and nine months ended September
30, 2023 and 2022, there were
16
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
NOTE 12—COMMITMENTS AND CONTINGENCIES
Legal Proceedings
At the Company’s annual meeting on December
21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation,
dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s
common stock, par value $
Two purported stockholders objected to the 205
Petition. One such objecting, purported stockholder (the “Stockholder Plaintiff”) filed his own lawsuit (which was then consolidated
with the 205 Petition) requesting that such relief not be granted and asserting two claims for relief: first, against the Company for
alleged violation of the Delaware General Corporation Law Section 225(b) for improper tabulation of the stockholder vote on the Share
Increase Proposal; and second, asserting that the Company’s directors breached their fiduciary duties by incorrectly tabulating
the stockholder vote, and by causing a purportedly invalid amendment to our Certificate of Incorporation to be filed with the Delaware
Secretary of State. The Court of Chancery held a hearing on May 27, 2022, to consider the Company’s motion for entry of an order
under Section 205 and subsequently entered an order denying the motion without prejudice on September 30, 2022. On July 7, 2022, the Company
filed a Certificate of Correction with the Secretary of State of the State of Delaware, voiding the Charter Amendment and causing the
number of authorized shares of Common Stock to remain at
On June 12, 2023, the Company submitted to the
Court of Chancery a Stipulation and [Proposed] Order Regarding Notice and Closing of the Case regarding the Action (the “Dismissal
Order”). As stated in the Dismissal Order, the Company and the other parties to the Action negotiated at arm’s length and
resolved the stockholders’ claims to entitlement to a mootness fee award, and the Company agreed to pay $
On October 31, 2022, a putative shareholder class action was filed against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as well as certain underwriters of the Company’s 2020 initial public offering (the “IPO”). The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Maschhof v. Polished.com Inc., et al., No. 1:22-cv-06606. The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as Sections 10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about September 8, 2023, the Court appointed lead plaintiff and lead counsel. An amended complaint was filed on or before October 31, 2023.
17
POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 and 2022 (UNAUDITED)
On January 26, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Wong v. Moore et al., No. 1:23-cv-00559. The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about March 7, 2023, plaintiff filed a stipulation and proposed order to stay proceedings until any motions to dismiss in the related class action (captioned Maschhoff v. Polished.com Inc. et al., No. 1:22-cv-06606) are decided. On March 23, 2023, the stipulation was so-ordered.
On February 13, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors as well as the Company’s external manager, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Gossett v. Moore, et al., No. 1:23-cv-1168. The complaint asserts claims for breach of fiduciary duty against the former officers and directors and aiding and abetting breaches of fiduciary of duty against the external manager, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about April 24, 2023, plaintiffs filed a joint stipulation and proposed order consolidating the related derivative actions and appointing co-lead counsel. To date, the stipulation has yet to be ordered.
NOTE 13—SUPPLIER CONCENTRATION
Significant customers and suppliers are those that account for greater than ten percent of the Company’s revenues and purchases.
For the nine months September 30, 2023, the Company
approximately
The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.
NOTE 14—SUBSEQUENT EVENTS
Subsequent to December 31, 2022, the Company signed
a letter of intent for a sublease from DMI, a related party for a new warehouse in a building being leased by DMI. The new lease will
allow the Company to close its two existing New Jersey warehouses and consolidate operations into one new warehouse. The lease, which
is expected to be finalized in the fourth quarter of 2023 or the first quarter of 2024 is for
On July 25, 2023, the Company and Bank of America
amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash
and certain qualifying customer and credit card account receivables, of $
The Company entered into the Second Amendment,
in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed
to defer the principal installment of the Term Loans in the amount of $
On October 19, 2023,
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Except as otherwise indicated by the context and for the purposes of this Quarterly Report on Form 10-Q, the terms “Company,” “we,” “us,” or “our” refer to Polished.com Inc., a Delaware corporation, and its consolidated subsidiaries, including but not limited to, 1 Stop Electronics Center, Inc., a New York corporation (“1 Stop”), Gold Coast Appliances, Inc., a New York corporation (“Gold Coast”), Superior Deals Inc., a New York corporation (“Superior Deals”), Joe’s Appliances LLC, a New York limited liability company (“Joe’s Appliances”), and YF Logistics LLC, a New Jersey limited liability company (“YF Logistics” and together with 1 Stop, Gold Coast, Superior Deals, and Joe’s Appliances, “Appliances Connection”), and AC Gallery Inc., a Delaware corporation (“AC Gallery”). The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the section “Cautionary Statement Regarding Forward-Looking Statements” and in our Annual Report on Form 10-K for the year ended December 31, 2022 under the heading Item 1A “Risk Factors.”
Overview
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto, which are included in Part I, Item 1 of this Form 10-Q.
We operate a content-driven and technology-enabled shopping destination for appliances, furniture and home goods. With warehouse fulfillment centers in the Northeast and Midwest, as well as showrooms in Brooklyn, New York, and Largo, Florida. We offer one-stop shopping for national and global brands. We carry many household name-brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and also carry many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve, Jenn-Air, and Viking, among others. We also sell furniture, fitness equipment, plumbing fixtures, televisions, outdoor appliances, and patio furniture, as well as commercial appliances for builders and business clients.
Recent Developments
Amendment of Bank of America Credit Agreement
On July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash and certain qualifying customer and credit card account receivables, of $8.0 million. The Company and Bank of America amended the Credit Agreement on November 20, 2023 (the “Second Amendment”), which requires the Company to establish a Bank of America cash collateral account where cash and cash equivalents deposited in the cash collateral account do not constitute Liquidity for purposes of the Credit Agreement. Further, the Second Amendment requires that (i) at least $3.0 million of Liquidity be comprised of unrestricted cash and cash equivalents and (ii) more than $5.0 million of Liquidity be comprised of certain qualifying customer and credit card accounts receivable.
The Company entered into the Second Amendment, in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed to defer the principal installment of the Term Loans in the amount of $937,500 required to be made on December 31, 2023 until the earliest to occur of (i) January 31, 2024, (ii) the date on which a subordinated Term Loan or an equity contribution, as applicable, is consummated (even if the date of such consummation precedes December 31, 2023) and (iii) an event of default. The Second Amendment requires the Company to pay the existing Term Facility and Revolving Facility by November 30, 2024 (the “Maturity Date”).
The Term Loan and Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively, for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing, following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable loan.
Concurrent with closing of the Bank of America loan, the Company purchased a fixed rate loan swap (See Note 9) capping its interest rate at 2.9%, plus applicable margins.
19
Commencing on December 31, 2023, through and including January 31, 2024, the Borrowers must repay the principal amount of the Term Loan in installments of $937,500, and quarterly installments of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.
As a result of the reduced term, the Company has begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.
Reverse Stock Split
On October 19, 2023, the Company filed with the Secretary of State of the State of Delaware the Certificate of Amendment to affect a reverse stock split (the “Reverse Split”) of the Company’s common stock at an exchange ratio of 1 for 50, which was approved by the board of directors. The Reverse Split was effective at 12:01 a.m. Eastern Time on October 20, 2023 (the “Effective Time”). At the Effective Time, every 50 shares of the Company’s issued and outstanding common stock were automatically converted into one share of common stock, without any change in the par value per share. In addition, proportionate adjustments were made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options, warrants and convertible securities, and to the number of shares issued and issuable under the Company’s stock incentive plans. Any stockholder who would otherwise be entitled to a fractional share of common stock created as a result of the Reverse Split will be entitled to receive a cash payment in lieu thereof equal to the fractional share to which the stockholder would otherwise be entitled multiplied by the closing sales price of a share of common stock on October 19, 2023, as adjusted for the Reverse Split.
Trends and Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
● | our ability to acquire new customers or retain existing customers, including those shopping online |
● | our ability to offer competitive product pricing; |
● | our ability to broaden product offerings; |
● | industry demand and competition; |
● | market conditions and our market position; and |
● | our ability to successfully integrate the operations of Appliances Connection with our business. |
20
Results of Operations
Comparison of Three Months Ended September 30, 2023 and 2022
The following table sets forth key components of our results of operations for the three months ended September 30, 2023 and 2022, in thousands and as a percentage of our revenue.
Three Months Ended | Three Months Ended | |||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||||
Amount | % of Sales | Amount | % of Sales | |||||||||||||
Product sales, net | $ | 77,818 | 100.0 | % | $ | 143,566 | 100.0 | % | ||||||||
Cost of goods sold | 62,513 | 80.3 | % | 122,431 | 85.3 | % | ||||||||||
Gross profit | 15,305 | 19.7 | % | 21,135 | 14.7 | % | ||||||||||
Operating Expenses | ||||||||||||||||
Personnel | 5,874 | 7.5 | % | 8,348 | 5.8 | % | ||||||||||
Advertising | 5,061 | 6.5 | % | 7,534 | 5.2 | % | ||||||||||
Bank and credit card fees | 2,557 | 3.3 | % | 5,932 | 4.1 | % | ||||||||||
Depreciation and amortization | 1,061 | 1.4 | % | 2,882 | 2.0 | % | ||||||||||
General and administrative | 6,747 | 8.7 | % | 7,260 | 5.1 | % | ||||||||||
Total Operating Expenses | 21,300 | 27.4 | % | 31,956 | 22.3 | % | ||||||||||
INCOME (LOSS) FROM OPERATIONS | (5,995 | ) | -7.7 | % | (10,821 | ) | -7.5 | % | ||||||||
Other Income (Expenses) | ||||||||||||||||
Interest income | 407 | 0.5 | % | 174 | 0.1 | % | ||||||||||
Interest expense | (1,886 | ) | -2.4 | % | (1,351 | ) | -0.9 | % | ||||||||
Gain (loss) on change in fair value of derivative instruments | 446 | 0.6 | % | 4,476 | 3.1 | % | ||||||||||
Other income (expense) | 227 | 0.3 | % | (50 | ) | 0.0 | % | |||||||||
Total Other Income (Expenses) | (806 | ) | -1.0 | % | 3,249 | 2.3 | % | |||||||||
NET INCOME (LOSS) BEFORE INCOME TAXES | (6,801 | ) | -8.7 | % | (7,572 | ) | -5.3 | % | ||||||||
INCOME TAX (EXPENSE) BENEFIT | 167 | 0.2 | % | 2,388 | 1.7 | % | ||||||||||
NET INCOME (LOSS) | $ | (6,634 | ) | -8.5 | % | $ | (5,184 | ) | -3.6 | % |
Product sales, net. We generate revenue from the retail sale of appliances, furniture, home goods and related products. Our product sales were $77.8 million for the three months ended September 30, 2023, as compared to $143.6 million for the three months ended September 30, 2022, a decrease of $65.7 million, or 45.8%. The decrease in sales is attributable to several factors including a general slowdown in the economy, inflation, an increase in interest rates which affects the mass market, housing and the remodeling business. Also, in 2023, the Company emphasized higher-margin sales instead of pursuing a policy of revenue growth with less emphasis on profitability.
Cost of goods sold. Our costs of goods sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their product. We negotiate special terms and pricing with the manufacturer, which are generally based on the number of products we purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time. Funding might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our cost of goods sold was $62.5 million for the three months ended September 30, 2023, as compared to $122.4 million for the three months ended September 30, 2022, a decrease of $59.9 million, or 48.9%. The decrease is related to reduced sales for the three months ended September 30, 2023.
21
Gross profit and gross margin. As a result of the foregoing, our gross profit was $15.3 million for the three months ended September 30, 2023, as compared to $21.1 million for the three months ended September 30, 2022, a decrease of $5.8 million, or 27.6%. Our gross margin (gross profit as a percentage of net sales) was 19.7% for the three months ended September 30, 2023 and 14.7% for the three months ended September 30, 2022. The improvement in the gross profit percentage is the result of management’s emphasis on profitability as opposed to revenue growth.
Personnel expenses. Personnel expenses include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, training costs and stock compensation expense. Our personnel expenses were $5.9 million for the three months ended September 30, 2023, as compared to $8.3 million for the three months ended September 30, 2022, a decrease of $2.5 million, or 29.6%. As a percentage of net sales, personnel expenses were 7.5% and 5.8% for the three months ended September 30, 2023 and 2022, respectively. In the current quarter, we affected a reduction in force to align headcount to declines in revenue. As a result, personnel costs include $0.2 million of severance costs.
Advertising expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $5.1 million for the three months ended September 30, 2023, as compared to $7.5 million for the three months ended September 30, 2022, a decrease of $2.5 million, or 32.8%. As a percentage of net sales, advertising expenses were 6.5% and 5.2% for the three months ended September 30, 2023 and 2022, respectively.
Bank and credit card fees. Bank and credit card fees are primarily the fees we pay credit card processors for processing credit card purchases made by customers and to third party sellers on whose websites we sell parts and other small items. Our bank and credit card fees were $2.6 million for the three months ended September 30, 2023, as compared to $5.9 million for the three months ended September 30, 2022, a decrease of $3.3 million, or 56.9%. As a percentage of net sales, bank and credit card fees were 3.3% and 4.1% for the three months ended September 30, 2023 and 2022, respectively. Bank and credit card fees are based on customer orders that are paid with a credit card (substantially all orders), so the decrease was largely due to the decline in sales.
Depreciation and amortization. Depreciation and amortization was $1.1 million, or 1.4% of net sales, for the three months ended September 30, 2023, as compared to $2.9 million, or 2.0% of net sales, for the three months ended September 30, 2022. The decrease is the result of the 2022 impairment charge that reduced the amount of intangible assets to be amortized.
General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, and other expenses incurred in connection with general operations. Our general and administrative expenses were $6.7 million for the three months ended September 30, 2023, as compared to $7.3 million for the three months ended September 30, 2022, a decrease of $0.5 million, or 7.1%. As a percentage of net sales, general and administrative expenses were 8.7% and 5.1% for the three months ended September 30, 2023 and 2022, respectively. The decrease results from lower insurance premiums and professional fees partially offset by the write-off of fixed assets associated with the terminated lease of 8780 19th Avenue.
Following is a summary of general and administrative expenses for the three months ended September 30, 2023 and 2022
Three Months Ended September 30 | ||||||||
2023 | 2022 | |||||||
Professional Fees | $ | 2,237 | $ | 3,029 | ||||
Insurance | 1,341 | 1,641 | ||||||
Loss on Disposal of Fixed Assets | 1,094 | - | ||||||
Rent | 1,045 | 988 | ||||||
All Other | 1,030 | 1,602 | ||||||
Total | $ | 6,747 | $ | 7,260 |
22
Total other income (expense). We had $0.8 million in total other expense, net, for the three months ended September 30, 2023, as compared to total other income, net, of $3.2 million for the three months ended September 30, 2022. Total other income, net, for the three months ended September 30, 2023 consisted primarily of a gain on the change in fair value of a derivative of $0.4 million and interest income of $0.4 million, offset by interest expense of $1.9 million. Total other expense, net, for the three months ended September 30, 2022 consisted of a change in the fair value of a derivative of $4.5 million and interest income of $0.2 million offset by interest expense of $1.4 million.
Income tax benefit (expense). We had an income tax benefit of $0.2 million for the three months ended September 30, 2023, as compared to an income tax benefit of $2.4 million for the three months ended September 30, 2022.
Net income (loss). As a result of the cumulative effect of the factors described above, we had net losses of $6.6 million and $5.2 million for the three months ended September 30, 2023 and September 30, 2022, respectively, an increase of $1.5 million or 28.0%.
Comparison of the Nine Months ended September 30, 2023 and 2022
The following table sets forth key components of our results of operations for the nine months ended September 30, 2023 and 2022, in thousands and as a percentage of our revenue.
Nine Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2023 | September 30, 2022 | |||||||||||||||
Amount | % of Sales | Amount | % of Sales | |||||||||||||
Product sales, net | $ | 261,018 | 100.0 | % | $ | 430,710 | 100.0 | % | ||||||||
Cost of goods sold | 204,987 | 78.5 | % | 355,788 | 82.6 | % | ||||||||||
Gross profit | 56,031 | 21.5 | % | 74,922 | 17.4 | % | ||||||||||
Operating Expenses | ||||||||||||||||
Personnel | 18,379 | 7.0 | % | 22,396 | 5.2 | % | ||||||||||
Advertising | 14,694 | 5.6 | % | 18,475 | 4.3 | % | ||||||||||
Bank and credit card fees | 8,935 | 3.4 | % | 15,121 | 3.5 | % | ||||||||||
Depreciation and amortization | 3,199 | 1.2 | % | 8,588 | 2.0 | % | ||||||||||
General and administrative | 16,619 | 6.4 | % | 15,078 | 3.5 | % | ||||||||||
Total Operating Expenses | 61,826 | 23.7 | % | 79,658 | 18.5 | % | ||||||||||
INCOME (LOSS) FROM OPERATIONS | (5,795 | ) | -2.2 | % | (4,736 | ) | -1.1 | % | ||||||||
Other Income (Expenses) | ||||||||||||||||
Interest income | 1,139 | 0.4 | % | 282 | 0.1 | % | ||||||||||
Adjustment in value of contingency | - | 0.0 | % | (2 | ) | 0.0 | % | |||||||||
Interest expense | (4,821 | ) | -1.8 | % | (2,594 | ) | -0.6 | % | ||||||||
Gain (loss) on change in fair value of derivative instruments | 1,020 | 0.4 | % | 3,540 | 0.8 | % | ||||||||||
Loss on extinguishment of debt | - | 0.0 | % | (3,241 | ) | -0.8 | % | |||||||||
Other income (expense) | 331 | 0.1 | % | (140 | ) | 0.0 | % | |||||||||
Total Other Income (Expenses) | (2,331 | ) | -0.9 | % | (2,155 | ) | -0.5 | % | ||||||||
NET INCOME (LOSS) BEFORE INCOME TAXES | (8,126 | ) | -3.1 | % | (6,891 | ) | -1.6 | % | ||||||||
INCOME TAX (EXPENSE) BENEFIT | (265 | ) | -0.1 | % | 3,234 | 0.8 | % | |||||||||
NET INCOME (LOSS) | $ | (8,391 | ) | -3.2 | % | $ | (3,657 | ) | -0.8 | % |
Product sales, net. We generate revenue from the retail sale of appliances, furniture, home goods and related products. Our product sales were $261.0 million for the nine months ended September 30, 2023, as compared to $430.7 million for the nine months ended September 30, 2022, a decrease of $169.7 million, or 39.4%. The decrease in sales is attributable to several factors including a general slowdown in the economy, inflation, an increase in interest rates which affects the mass market, housing and the remodeling business. Also, in 2023, the Company emphasized higher-margin sales instead of pursuing a policy of revenue growth with less emphasis on profitability.
23
Cost of goods sold. Our costs of goods sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their product. We negotiate special terms and pricing with the manufacturer, which are generally based on the number of products we purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time. Funding might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our cost of goods sold was $205.0 million for the nine months ended September 30, 2023, as compared to $355.8 million for the nine months ended September 30, 2022, a decrease of $150.8 million, or 42.4%.
Gross profit and gross margin. As a result of the foregoing, our gross profit was $56.0 million for the nine months ended September 30, 2023, as compared to $74.9 million for the nine months ended September 30, 2022, a decrease of $18.9 million, or 26.0%. Our gross margin (gross profit as a percentage of net sales) was 21.5% for the nine months ended September 30, 2023 and 17.4% for the nine months ended September 30, 2022. The improvement in the gross profit percentage is the result of management’s emphasis on profitability as opposed to revenue growth. The decrease in gross profit results from reduced sales. The increase in gross margin results from management’s emphasis on profitability in the current period.
Personnel expenses. Personnel expenses include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, training costs and stock compensation expense. Our personnel expenses were $18.4 million for the nine months ended September 30, 2023, as compared to $22.4 million for the nine months ended September 30, 2022, a decrease of $4.0 million, or 17.9%. As a percentage of net sales, personnel expenses were 7.0% and 5.2% for the nine months ended September 30, 2023 and 2022, respectively.
In 2023, we affected a reduction in force to align headcount to declines in revenue. As a result, personnel costs include $0.3 million of severance costs.
Advertising expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $14.7 million for the nine months ended September 30, 2023, as compared to $18.5 million for the nine months ended September 30, 2022, a decrease of $3.8 million, or 20.5%. As a percentage of net sales, advertising expenses were 5.6% and 4.3% for the nine months ended September 30, 2023 and 2022, respectively.
Bank and credit card fees. Bank and credit card fees are primarily the fees we pay credit card processors for processing credit card purchases made by customers and to third party sellers on whose websites we sell parts and other small items. Our bank and credit card fees were $8.9 million for the nine months ended September 30, 2023, as compared to $15.1 million for the nine months ended September 30, 2022, a decrease of $6.2 million, or 40.9%. As a percentage of net sales, bank and credit card fees were 3.4% and 3.5% for the nine months ended September 30, 2023 and 2022, respectively. Bank and credit card fees are based on customer orders that are paid with a credit card (substantially all orders), so the decrease was largely due to the decline in sales.
Depreciation and amortization. Depreciation and amortization was $3.2 million, or 1.2% of net sales, for the nine months ended September 30, 2023, as compared to $8.6 million, or 2.0% of net sales, for the nine months ended September 30, 2022. The decrease is the result of the 2022 impairment charge that reduced the amount of intangible assets to be amortized.
General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, and other expenses incurred in connection with general operations. Our general and administrative expenses were $16.6 million for the nine months ended September 30, 2023, as compared to $15.1 million for the nine months ended September 30, 2022, an increase of $1.5 million, or 10.2%. As a percentage of net sales, general and administrative expenses were 6.4% and 3.5% for the nine months ended September 30, 2023 and 2022, respectively. The increase results from higher insurance premiums and a write-off of fixed assets associated with the terminated lease of 8780 19th Avenue.
Following is a summary of general and administrative expenses for the three months ended September 30, 2023 and 2022
Nine Months Ended September 30 | ||||||||
2023 | 2022 | |||||||
Professional Fees | $ | 5,421 | $ | 5,625 | ||||
Insurance | 3,864 | 3,324 | ||||||
Rent | 3,237 | 3,045 | ||||||
Loss on Disposal of Fixed Assets | 1,094 | - | ||||||
All Other | 3,003 | 3,084 | ||||||
Total | $ | 16,619 | $ | 15,078 |
24
Total other income (expense). We had $2.3 million in total other expense, net, for the nine months ended September 30, 2023, as compared to total other expense, net, of $2.2 million for the nine months ended September 30, 2022. Total other expense, net, for the nine months ended September 30, 2023 consisted primarily of interest expense of $4.8 million, a gain on the change in fair value of a derivative of $1.0 million and interest income of $1.1 million. Total other expense, net, for the nine months ended September 30, 2022 consisted of a $3.2 million loss on settlement of a debt obligation and interest expense of $2.6 million offset by a gain on the fair value of a derivative of $3.5 million and interest income of $0.3 million.
Income tax benefit (expense). We had an income tax expense of $0.3 million for the nine months ended September 30, 2023, as compared to an income tax benefit of $3.2 million for the nine months ended September 30, 2022.
Net income (loss). As a result of the cumulative effect of the factors described above, we had a net loss of $8.4 million for the nine months ended September 30, 2023, as compared to a net loss of $3.7 million for the nine months ended September 30, 2022, an increase of $4.7 million, or 129.5%.
Liquidity and Capital Resources
As of September 30, 2023, we had cash and cash equivalents of $15.2 million including restricted cash of $5.4 million. For the nine months ended September 30, 2023, we had an operating loss of approximately $8.4 million, cash flows used in operations of $0.4 million and working capital of $15.9 million. As of and for the year ended December 31, 2022, we had an operating loss of $128.3 million (including a non-cash impairment charge of $109.1 million), cash used in operations of $46.7 million, cash and cash equivalents of $20.5 million including restricted cash of $0.95 million and working capital of $25.9 million.
Management has prepared estimates of operations for fiscal years 2023 and 2024 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of these unaudited condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these unaudited condensed consolidated financial statements, indicate improved operations and the Company’s ability to continue operations as a going concern.
25
Summary of Cash Flow
The following table provides detailed information about our net cash flow for the nine months ended September 30, 2023 and 2022 (in thousands).
Nine Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
Net cash used in operating activities | $ | (390 | ) | $ | (38,693 | ) | ||
Net cash used in investing activities | (140 | ) | (1,318 | ) | ||||
Net cash (used in) provided by financing activities | (4,767 | ) | 36,386 | |||||
Net change in cash, cash equivalents, and restricted cash | $ | (5,297 | ) | $ | (3,625 | ) |
Cashflows used in operating activities. Our net cash used in operating activities was $0.4 million for the nine months ended September 30, 2023, as compared to net cash used in operating activities of $38.7 million for the nine months ended September 30, 2022. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
● | Net loss was $8.4 million for the nine months ended September 30, 2023 compared to a net loss of $3.7 million for the nine months ended September 30, 2022, |
● | Cash used by receivables was $7.0 million and $1.8 million for the nine months ended September 30, 2023 and 2022, respectively, |
● | Cash used by vendor deposits was $5.8 million and $12.6 million for the nine months ended September 30, 2023 and 2022, respectively |
● | Cash provided by inventories was $12.9 million and $7.3 million for the nine months ended September 30, 2023 and 2022, respectively, due to efforts to manage inventory levels to support revenue levels in the respective years, |
● | Cash used by accounts payable and accrued expenses was $4.9 million and $12.1 million for the nine months ended September 30, 2023 and 2022, respectively, and |
● | Cash used by customer deposits was $2.8 million and $20.9 million for the nine months ended September 30, 2023 and 2022, respectively. Prior to July 2022, on certain sales transactions, the Company charged a customer’s card when an order was placed. After July 2022, the customer’s card was charged when the order shipped. The large decline in customer deposits results from shipping or refunding customer orders that had previously been paid. |
Cashflows provided by investing activities. Our net cash used in investing activities was $0.1 million for the nine months ended September 30, 2023, as compared to $1.3 million for the nine months ended September 30, 2022. The cash used in both years was for purchases of property and equipment.
Cashflows (used in) provided by financing activities. Our net cash used in financing activities was ($4.8) million for the nine months ended September 30, 2023, as compared to net cash provided by financing activities of $36.4 million for the nine months ended September 30, 2022.
Significant changes in financing activities affecting cash flows during these years included:
● | Net cash received from notes payable proceeds of $43.0 million for the nine months ended September 30, 2022, |
● | Repayments of notes payable of $4.7 million and $4.6 million for the nine months ended September 30, 2023 and 2022, respectively, and |
● | Stock repurchases of $2.0 million for the nine months ended September 30, 2022. |
26
Credit Facilities
Bank of America Credit Agreement
On May 9, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”) and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to which the Lenders agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140.0 million, including (i) a $100.0 million term loan (the “Term Loan”) and (ii) a $40.0 million revolving credit facility (the “Revolving Loan”), which revolving credit facility included a $2.00 million swingline sublimit (the “Swing Line Loan” and together with the Term Loan and the Revolving Loan, the “Loans”) and, separately, a $10.0 million letter of credit commitment, in each case, on the terms and conditions contained in the Credit Agreement.
On May 9, 2022, the Company borrowed the entire amount of the Term Loan in the aggregate principal amount of $100.0 million. A portion of the proceeds of the Term Loan were to repay and terminate the M&T Credit Agreement. Commencing on September 30, 2022, through and including September 30, 2023, the Borrowers repaid the principal amount of the Term Loan in quarterly installments of $1,250,000 each, payable on the last business day of each March, June, September and December.
As of September 30, 2023, the carrying value of the Term Loan was $92.3 million, comprised of principal of $93.7 million, net of unamortized loan costs of $0.8 million.
As a result of our technical non-compliance with specified loan covenants for both the Bank of America Term Loan and Revolving Loan, based in part due to our failure to timely deliver financial statements, Bank of America froze the $40.0 million Revolving Loan before any borrowings had been made against the facility.
On July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash and certain qualifying customer and credit card account receivables, of $8.0 million. The Company and Bank of America amended the Credit Agreement on November 20, 2023 (the “Second Amendment”), which requires the Company to establish a Bank of America cash collateral account where cash and cash equivalents deposited in the cash collateral account do not constitute Liquidity for purposes of the Credit Agreement. Further, the Second Amendment requires that (i) at least $3.0 million of Liquidity be comprised of unrestricted cash and cash equivalents and (ii) more than $5.0 million of Liquidity be comprised of certain qualifying customer and credit card accounts receivable.
The Company entered into the Second Amendment, in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed to defer the principal installment of the Term Loans in the amount of $937,500 required to be made on December 31, 2023 until the earliest to occur of (i) January 31, 2024, (ii) the date on which a subordinated Term Loan or an equity contribution, as applicable, is consummated (even if the date of such consummation precedes December 31, 2023) and (iii) an event of default. The Second Amendment requires the Company to pay the existing Term Facility and Revolving Facility by November 30, 2024 (the “Maturity Date”).
27
The Term Loan and Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively, for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing, following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable loan.
Commencing on December 31, 2023, through and including January 31, 2024, the Borrowers must repay the principal amount of the Term Loan in installments of $937,500, and quarterly installments of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.
As a result of the reduced term, the Company has begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.
Management Services Agreement
On April 5, 2019, the Company entered into a management services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts, the Company’s chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to the offsetting management services agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500; provided, however, that under certain circumstances specified in the management services agreement, the quarterly fee may be reduced if similar fees payable to the Manager by subsidiaries of the Company’s former parent company, 1847 Holdings LLC, exceed a threshold amount.
28
The Company shall also reimburse the Manager for all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing services under the management services agreement.
The Company expensed management fees of $0.06 and $0.18 million for the three and nine months ended September 30, 2023 and 2022, respectively.
Leases
On April 5, 2019, the Company entered into a lease agreement with S.H.J., L.L.C. for its prior principal office in Ballwin, Missouri. The lease is for a term of five years and provides for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term. The lease agreement contains customary events of default, representations, warranties, and covenants. The termination date of this lease agreement is April 4, 2024.
On May 31, 2019, YF Logistics entered into a sublease agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in Hamilton, NJ. The initial term of the sublease was for a period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one-year terms until the earlier of (i) termination by either upon thirty days’ prior written notice or (ii) April 30, 2024. The sublease provides for a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses, additional charges or any other amounts due by DMI, for a total of $56,250 per month.
On January 13, 2021, the Company entered into a lease agreement with Westgate 200, LLC, which was amended on March 31, 2021, for its new principal office and showroom in St. Charles, Missouri. The lease terminates on April 30, 2027, with two options to renew for an additional five-year period. The base rent is $20,977 per month until September 30, 2021, and increases to $31,465 per month until April 30, 2022, after which time the base rent increases at approximately 2.5% per year thereafter. The Company must also pay its 43.4% pro rata portion of the property taxes, operating expenses and insurance costs and is also responsible to pay for the utilities used on the premises. The lease contains customary events of default.
On June 2, 2021, 1 Stop entered into a new lease agreement with 1870 Bath Ave. LLC, a related party, for the premises located at 1870 Bath Avenue, Brooklyn, New York. The lease is for a term of ten years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896 during the last year of the term. 1 Stop is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018.
On June 2, 2021, Joe’s Appliances entered into a new lease agreement with 7812 5th Ave Realty LLC, a related party, for the premises located at 7812 5th Avenue, Brooklyn, New York. The lease is for a term of ten years and provides for a base rent of $6,365 per month during the first year with annual increases to $8,305 during the last year of the term. Joe’s Appliances is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The initial ROU asset and liability associated with this lease is $0.7 million.
29
On July 29, 2021, AC Gallery entered into a lease agreement with Tom’s Flooring, LLC for the showroom and warehouse located in Largo, Florida. The lease is for a term of four months commencing on September 1, 2021 and ending on December 31, 2021 and provides for a base rent of $6,500 per month. The lease is currently month-to-month. AC Gallery must also pay its one-third pro rata portion of the common area maintenance charges, utilities and sales taxes. The lease contains customary events of default. The lease is short term and therefore not recorded as a ROU asset and liability.
On September 9, 2021, the Company entered into a warehouse agreement for a new warehouse in Somerset, New Jersey. The warehouse agreement is for a term of 26 months commencing on October 1, 2021, and ending November 29, 2023, unless the master lease for the premises is terminated earlier. The monthly storage fee is $136,274 for the first year, $140,362 for the second year, and $144,573 for the last two months. The Company also paid a security deposit of $272,549. The lease agreement contains customary events of default, representations, warranties, and covenants. The initial ROU and liability associated with this operating lease is $3.4 million.
On March 15, 2022, the Company entered into a lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie Fouerti, the Company’s former Chief Executive and Chief Operating Officer, respectively. The Company contends that the lease required the Landlord do certain work at Landlord’s expense to improve the building at a cost of approximately $1.2 million. Landlord has refused to pay for this work, contending that this expense was the Company’s responsibility. In addition, the total remaining amount due on the lease at September 30, 2023 is also approximately $1.2 million. Landlord contends that the Company is in default of the lease for failing to pay rent. The Company disagreed that its rent obligations have been triggered and further contended that Landlord has violated the lease by failing to pay for the work. On August 23, 2023, the Company entered into a lease termination agreement with the Landlord. Under the terms of the termination agreement, the Company was relieved of its obligations under the lease and agreed to terminate its claims for reimbursement of the improvements it made to the building and to pay $100,000.
Critical Accounting Policies and Estimates
For information regarding the Company’s Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to disclose information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, designed to ensure that information required to be disclosed by a company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Management, with the participation of our Interim Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023.
Based on the evaluation performed as of September 30, 2023, as a result of the material weaknesses in internal control over financial reporting that are described below, and as further described in Item 9A of our Annual Report on Form 10-K filed with the SEC on July 31, 2023, our Interim Chief Executive Officer and Interim Chief Financial Officer determined that our disclosure controls and procedures were not effective as of such date.
30
Material Weaknesses in Internal Control over Financial Reporting
Management has determined that the Company’s ineffective internal control over financial reporting and resulting material weaknesses, stem primarily from management’s inability to maintain appropriately designed controls, which impacts the control environment, risk assessment procedures and ability to detect or prevent material misstatements to the financial statements. The material weaknesses were attributed to:
● | Lack of structure and responsibility, insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls; |
● | Ineffective assessment and identification of changes in risk impacting internal control over financial reporting; |
● | Inadequate selection and development of effective control activities, general controls over technology and effective policies and procedures; |
● | Ineffective evaluation and determination as to whether the components of internal control were present and functioning; and |
● | The lack of an accounting system that is required for a company or our size. |
Management’s Remediation Plans
Management is actively engaged in the implementation of remediation plans to address the controls contributing to the material weaknesses. The Company has taken, and continues to take, the following remediation actions:
● | Enhance reporting structure and increase the number of qualified resources in roles over internal control over financial reporting; |
● | Establish formal risk assessment procedures to identify and monitor changes in the organization that could have an impact on internal control over financial reporting; |
● | Develop and document policies and procedures, including related business process and technology controls, assess their effectiveness and establish a program for continuous assessment of their effectiveness; and |
● | Implementation of a new ERP |
We believe these measures will remediate the control deficiencies, but management is assessing the need for any additional steps to remediate the underlying causes that give rise to these material weaknesses. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. There is no assurance that additional remediation steps will not be necessary.
Changes in Internal Control Over Financial Reporting
Except as set forth above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Derivative Actions
At the Company’s annual meeting on December 21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s common stock, par value $0.0001 per share (“Common Stock” and such proposal, the “Share Increase Proposal”) by 50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021, the Share Increase Proposal was adopted and a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment adopted pursuant to the Share Increase Proposal (the “Certificate of Amendment”) was filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”). To date, none of these newly authorized shares has actually been issued. Three purported beneficial owners of Common Stock subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the situation performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated and that the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure against any future question as to the validity of these newly authorized shares, the Company elected to seek validation of its Certificate of Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section 205 of the Delaware General Corporation Law (the “205 Petition”). The action, styled In re 1847 Goedeker Inc., C.A. 2022-0219-SG (the “Action”), sought entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating the additional shares of Common Stock authorized under the Share Increase Proposal.
Two purported stockholders objected to the 205 Petition. One such objecting, purported stockholder (the “Stockholder Plaintiff”) filed his own lawsuit (which was then consolidated with the 205 Petition) requesting that such relief not be granted and asserting two claims for relief: first, against the Company for alleged violation of the Delaware General Corporation Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal; and second, asserting that the Company’s directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment to our Certificate of Incorporation to be filed with the Delaware Secretary of State. The Court of Chancery held a hearing on May 27, 2022, to consider the Company’s motion for entry of an order under Section 205 and subsequently entered an order denying the motion without prejudice on September 30, 2022. On July 7, 2022, the Company filed a Certificate of Correction with the Secretary of State of the State of Delaware, voiding the Charter Amendment and causing the number of authorized shares of Common Stock to remain at 200,000,000.
On June 12, 2023, the Company submitted to the Court of Chancery a Stipulation and [Proposed] Order Regarding Notice and Closing of the Case regarding the Action (the “Dismissal Order”). As stated in the Dismissal Order, the Company and the other parties to the Action negotiated at arm’s length and resolved the stockholders’ claims to entitlement to a mootness fee award, and the Company agreed to pay $475,000 for attorneys’ fees and expenses to the stockholders’ counsel (the “Attorneys’ Fees”). Pursuant to Court of Chancery Rules 23(e) and 41(a), the parties to the Action stipulated to voluntary dismissal of the Action with prejudice as to the Stockholder Plaintiff and without prejudice as to any actual or potential claims of any other members of the putative class, and such dismissal was granted by the Court on June 13, 2023. As stipulated in the Dismissal Order, the Company paid the Attorneys’ Fees to the stockholders’ counsel on June 28, 2023 and such payment fully satisfied and resolved the stockholders’ and the stockholders’ counsel’s entitlement to any fees or expenses in the Action.
On October 31, 2022, a putative shareholder class action was filed against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as well as certain underwriters of the Company’s 2020 initial public offering (the “IPO”). The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Maschhof v. Polished.com Inc., et al., No. 1:22-cv-06606. The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as Sections 10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about September 8, 2023, the Court appointed lead plaintiff and lead counsel. An amended complaint was filed on or before October 31, 2023.
On January 26, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Wong v. Moore et al., No. 1:23-cv-00559. The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about March 7, 2023, plaintiff filed a stipulation and proposed order to stay proceedings until any motions to dismiss in the related class action (captioned Maschhoff v. Polished.com Inc. et al., No. 1:22-cv-06606) are decided. On March 23, 2023, the stipulation was so-ordered.
On February 13, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors as well as the Company’s external manager, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Gossett v. Moore, et al., No. 1:23-cv-1168. The complaint asserts claims for breach of fiduciary duty against the former officers and directors and aiding and abetting breaches of fiduciary of duty against the external manager, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about April 24, 2023, plaintiffs filed a joint stipulation and proposed order consolidating the related derivative actions and appointing co-lead counsel. To date, the stipulation has yet to be ordered.
32
Action Against Former Employee
On February 22, 2023, the Company filed an action against a former employee asserting a claim for conversion based on the individual’s retention of profits from sales to the Company’s customers. The action was commenced in the Supreme Court of the State of New York, County of Kings and is captioned Polished.com, Inc. v. Naoulo, No. 505712/2023. On March 5, 2023, the defendant filed an answer and asserted counterclaims for breach of contract, breach of implied contract and defamation. On May 25, 2023, the defendant filed an amended answer and added a counterclaim for tortious interference with prospective business relations. On June 14, 2023, the Company moved to dismiss the amended counterclaims. On October 10, 2023, the Court dismissed all of the amended counterclaims except for breach of implied contract.
On September 19, 2023, the Company filed an action against a former employee and certain entities under that former employee’s control, asserting claims for fraud and conversion based on the individual’s misappropriation of Company inventory. The action was commenced in the Superior Court of New Jersey, Monmouth County and is captioned Polished.com, Inc. v. Irmiyayev et al., No. MON-L-002942-23. The defendant’s response is due on or before November 9, 2023.
From time to time, we may be subject to various legal proceedings and claims arising in the ordinary course of business. All other litigation currently pending against the Company relates to matters that have arisen in the ordinary course of business and we believe that such matters will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on July 31, 2023. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on July 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We have not sold any equity securities during the nine months ended September 30, 2023 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.
We did not repurchase any shares of our common stock during the nine months ended September 30, 2023
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
33
ITEM 6. EXHIBITS.
* | Filed herewith |
** | Furnished herewith |
34
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 thereunto duly authorized.
Date: November 20, 2023 |
Polished.com Inc. | |
/s/ J. E. “Rick” Bunka | ||
Name: | J. E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
(Principal Executive Officer) | ||
/s/ Robert D. Barry | ||
Name: | Robert D. Barry | |
Title: | Interim Chief Financial Officer, Chief Accounting Officer and Secretary | |
(Principal Financial and Accounting Officer) |
35
Exhibit 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this “Second Amendment”) is entered into as of November 20, 2023, by and among POLISHED.COM INC., a Delaware corporation (the “Company”), APPLIANCES CONNECTION INC., a Delaware corporation (together with the Company, the “Borrowers”), the Guarantors that are identified on the signature pages hereof (the “Guarantors”, together with the Borrowers, the “Loan Parties”), the Lenders under the Credit Agreement referred to below that are identified on the signature pages hereof and BANK OF AMERICA, N.A., as administrative agent for the Lenders (the “Administrative Agent”).
WHEREAS, the Loan Parties, the lenders from time to time party thereto (the “Lenders”) and the Administrative Agent have entered into that certain Credit Agreement, dated as of May 9, 2022 (as amended by that certain First Amendment to Credit Agreement, dated as of July 25, 2023, as further amended, amended and restated, supplemented, extended, or otherwise modified from time to time prior to the effectiveness of this Second Amendment, the “Existing Credit Agreement”; the Existing Credit Agreement, as amended by this Second Amendment, is referred to herein as the “Credit Agreement”); capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement; and
WHEREAS, the Loan Parties have requested that, on the Second Amendment Effective Date (as defined below), the Administrative Agent and the Lenders waive the Events of Default set forth in Annex C attached hereto (collectively, the “Specified Events of Default”), as more fully provided herein; and the Administrative Agent and the Lenders have agreed to waive the Specified Events of Default, subject to the modifications to the Existing Credit Agreement and the other terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Amendment.
(a) The Existing Credit Agreement
(excluding any Exhibits or Schedules thereto (other than as expressly set forth in Section 1(b))) is hereby amended as set forth
in Annex A attached hereto such that all of the newly inserted double underlined text (indicated textually in the same manner
as the following example: double-underlined
text) and any formatting changes attached hereto shall be deemed to be inserted and all stricken text (indicated textually
in the same manner as the following example: stricken text) shall be deemed to
be deleted therefrom.
(b) Exhibit C (Form of Compliance Certificate) and Exhibit L (Form of Liquidity Certificate), and Schedule 7.01 (Existing Liens), to the Existing Credit Agreement, are hereby amended and restated in their entirety as set forth in Annex B attached hereto. A new Exhibit M (Form of 26-Week Cash-Flow Forecast Update Certificate) is hereby attached to the Credit Agreement as set forth in Annex B attached hereto.
1
2. Waiver. Subject to the compliance by the Loan Parties with the terms and conditions set forth in this Second Amendment, the Administrative Agent and the Lenders hereby agree to waive the Specified Events of Default. For the avoidance of doubt, (a) the waiver of the Specified Events of Default is a one-time waiver, effective solely for the purposes set forth herein, and shall be limited precisely as written and shall not extend beyond the terms expressly set forth herein, and (b) in no event shall this Second Amendment be deemed to be a waiver of any other Default or Event of Default now existing or hereafter arising or enforcement of the Administrative Agent’s, the Lenders’ and the other Secured Parties’ rights with respect thereto.
3. Conditions Precedent. This Second Amendment shall become effective when the following conditions have been satisfied, as determined by the Agent in its sole discretion (the date on which the foregoing occurs, the “Second Amendment Effective Date”):
(a) The Administrative Agent shall have received complete and correct copies of:
(i) this Second Amendment, duly executed by the Administrative Agent and each of the Loan Parties and Lenders and the L/C Issuer; and
(ii) that certain letter agreement regarding fees, duly executed by the Company and the Administrative Agent (the “Second Amendment Fee Letter”).
(b) (i) The Administrative Agent (on behalf of the Lenders) shall have a valid and perfected first priority Lien and security interest in the Collateral (subject to Permitted Liens having priority by operation of law) and (ii) all filings, recordations and customary lien searches (the results of which shall demonstrate that no Liens exist with respect to any Collateral, other than Permitted Liens) necessary or desirable in connection with the security interests in and Liens on the Collateral shall have been duly made or obtained and all filing and recording fees and taxes in connection therewith shall have been duly paid.
(c) The Administrative Agent shall have received (i) a copy of the organizational documents of each Loan Party, as amended, modified, or supplemented prior to the date hereof, and, to the extent applicable, certified as of the Second Amendment Effective Date or a recent date (not more than 30 days prior to the date hereof) by the appropriate Governmental Authority (or, in the event that any organizational documents of any Loan Party have not been amended or otherwise modified from such organizational documents delivered to the Administrative Agent on the Closing Date, a certification by the secretary or assistant secretary of the relevant Loan Party to such effect), (ii) resolutions of the governing body of each Loan Party approving and authorizing the execution, delivery, and performance of this Second Amendment and the other applicable Loan Documents to which it is a party, certified by its secretary or assistant secretary as being in full force, (iii) signature and incumbency certificates of the officers of such Loan Party executing this Second Amendment and the other documents contemplated hereby, and (iv) for each Loan Party, such Person’s good standing certificate in its state of incorporation (or organization).
(d) The Administrative Agent shall have received an opinion of McDermott Will & Emery LLP, counsel to the Loan Parties, in form and substance satisfactory to the Administrative Agent.
2
(e) The Administrative Agent and the Lenders shall have received all fees and expenses, if any, required to be paid pursuant to the Amendment Fee Letter and Section 2.09 of the Credit Agreement and the Loan Documents, and all reasonable and documented fees and expenses of Morgan, Lewis & Bockius LLP to the extent required to be paid on the Second Amendment Effective Date, to the extent that a reasonably detailed invoice is provided to the Borrowers at least one (1) Business Day prior to the Second Amendment Effective Date.
(f) [Reserved].
(g) The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Company (i) certifying that after giving effect to the Transactions contemplated to occur on the Second Amendment Effective Date (1) the representations and warranties of each Borrower and each other Loan Party set forth in the Credit Agreement and the other Loan Documents shall (A) with respect to representations and warranties that contain a materiality qualification, be true and correct on and as of the Second Amendment Effective Date, and (B) with respect to representations and warranties that do not contain a materiality qualification, be true and correct in all material respects on and as of the Second Amendment Effective Date, in each case except to the extent stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects (except to the extent such representations and warranties are already qualified by materiality, in which case they shall be true and correct in all respects) as of such earlier date, and (2) no Default or Event of Default shall exist, (ii) certifying that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, and (iii) either (x) attaching copies of all material consents, licenses and approvals required in connection with the execution, delivery and performance by each Loan Party and the validity against each Loan Party of the Loan Documents to which it is a party, and such material consents, licenses and approvals shall be in full force and effect or (y) stating that no such material consents, licenses or approvals are so required.
(h) Upon the reasonable request of any Lender made at least two (2) Business Days prior to the Second Amendment Effective Date, the Borrowers shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act, and any Loan Party that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall have delivered to each Lender that so requests, a Beneficial Ownership Certification in relation to such Loan Party.
(i) The representations and warranties in Section 5 below shall be true and correct as of the Second Amendment Effective Date after giving effect to the Transactions contemplated to occur on such date.
3
4. Post-Closing Obligations.
(a) No later than fifteen (15) days after the date hereof (or any such later date agreed to in writing by the Administrative Agent in its discretion), the Loan Parties shall deliver the following to the Administrative Agent (each in form and substance satisfactory to the Administrative Agent):
(i) a written confirmation issued by Manufacturers and Traders Trust Company (“M&T”) confirming that each account referred to in Schedule D1 of that certain Perfection Certificate dated as of July 25, 2023 as being held by a Loan Party with M&T have closed;
(ii) a termination statement with respect to (1) UCC-1 financing statement (original filing #202006025817121) filed against Gold Coast Appliances, Inc. in favor of U.S. Small Business Administration with the New York Department of State; (2) UCC-1 financing statement (original filing #201707135840267) filed against 1 Stop in favor of Wells Fargo Commercial Distribution Financing, LLC; (3) UCC-1 financing statement (original filing #202005285730371) filed against 1 Stop in favor of the U.S. Small Business Administration; (4) UCC-1 financing statement (original filing #54153561) filed against YF Logistics, LLC in favor of the U.S. Small Business Administration; (5) UCC-1 financing statement (original filing # 202112076952781) filed against 1 Stop in favor of Northpoint Commercial Finance LLC; (6) UCC-1 financing statement (original filing # 2021 3622355) filed against 1847 Goedeker Inc. in favor of Northpoint Commercial Finance LLC; (7) UCC-1 financing statement (original filing #2021 9947665) filed against AC Gallery Inc. in favor of Northpoint Commercial Finance LLC; and (8) UCC-1 financing statement (original filing # 2023 5625093) filed against the Company in favor of Northpoint Commercial Finance LLC;
(iii) an amendment and/or termination statement with respect to UCC-1 financing statement (original filing # 202304245568992) filed against 1 Stop in favor of Fisher & Paykel Appliances, Inc.; and
(iv) deliver to the Administrative Agent a cash collateral agreement with respect to the Specified Cash Collateral Account.
(b) No later than thirty (30) days after the date hereof (or any such later date agreed to in writing by the Administrative Agent in its discretion), the Loan Parties shall deliver to the Administrative Agent estoppel letters, consents and waivers with respect to all locations referred to in Section 6.13(d) of the Credit Agreement.
5. Representations and Warranties. To induce the Administrative Agent and the Lenders to enter into this Second Amendment, each of the Loan Parties represents and warrants to the Administrative Agent and the Lenders, as of the Second Amendment Effective Date, that:
(a) All of the representations and warranties of each Borrower and each other Loan Party set forth in the Credit Agreement and the other Loan Documents shall (i) with respect to representations and warranties that contain a materiality qualification, be true and correct on and as of the Second Amendment Effective Date, and (ii) with respect to representations and warranties that do not contain a materiality qualification, be true and correct in all material respects on and as of the Second Amendment Effective Date, in each case except to the extent stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects (except to the extent such representations and warranties are already qualified by materiality, in which case they shall be true and correct in all respects) as of such earlier date.
4
(b) The execution, delivery and performance of this Second Amendment by each Loan Party party hereto has been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene the terms of any of such Person’s Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation of (or the requirement to create) any Lien (other than any Lien created pursuant to the Collateral Documents and any Permitted Lien) under, or require any payment to be made under (1) any material Contractual Obligation to which such Person is a party or (2) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any Applicable Law.
(c) This Second Amendment has been duly executed and delivered by each Loan Party party hereto and constitutes a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity.
(d) At the time of and immediately after giving effect to this Second Amendment and the Transactions contemplated to occur on the Second Amendment Effective Date, no Default or Event of Default has occurred and is continuing.
6. Release. Each Loan Party hereby fully and unconditionally releases and forever discharges each of the Administrative Agent, the Lenders and the other Secured Parties and their respective directors, officers, employees, subsidiaries, branches, affiliates, attorneys, agents, representatives, successors and assigns and all persons, firms, corporations and organizations acting on any of their behalfs (collectively, the “Released Parties”), of and from any and all claims, allegations, causes of action, costs or demands and liabilities, of whatever kind or nature, from the beginning of the world, whether known or unknown, liquidated or unliquidated, fixed or contingent, asserted or unasserted, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, anticipated or unanticipated, which any Loan Party has, had, claims to have had or hereafter claims to have against the Released Parties by reason of any act or omission on the part of the Released Parties, or any of them, occurring on or prior to the Second Amendment Effective Date, including all such loss or damage of any kind heretofore sustained or that may arise as a consequence of the dealings among the parties regarding or relating to the Transactions or the Loan Documents on or prior to the Second Amendment Effective Date (collectively, all of the foregoing, the “Claims”), but, in all cases, excluding any Claim that (x) is determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Released Party or (y) results from a claim brought by a Borrower or any other Loan Party against a Released Party for a material breach of such Released Party’s obligations under this Second Amendment, if such Borrower or such Loan Party has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction. Each Loan Party represents and warrants that it has no knowledge of any claim by it against the Released Parties or of any facts or acts of omissions of the Released Parties which on the date hereof would be the basis of a claim of any Loan Party against the Released Parties which is not released hereby, in each case, regarding or relating to the Transactions or the Loan Documents. Each Loan Party acknowledges that the agreements in this paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Claims.
5
7. Chief Transition Officer. The Company shall continue to retain the current Chief Transition Officer on such terms as are approved by the Administrative Agent from time to time.
8. Reference to and Effect on the Credit Agreement and the Other Loan Documents; Ratification.
(a) Each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Existing Credit Agreement, as amended by this Second Amendment.
(b) The Existing Credit Agreement and each of the other Loan Documents, as specifically amended by this Second Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Each Loan Party hereby further ratifies and reaffirms the validity and enforceability of all of the Liens heretofore granted, pursuant to and in connection with the Credit Agreement or any other Loan Document to the Administrative Agent on behalf and for the benefit of the Lenders and the other Secured Parties, as collateral security for the Secured Obligations, in accordance with their respective terms, and acknowledges that all of such Liens, and all Collateral pledged or otherwise provided as security for the Secured Obligations, continues to be and remain Collateral for such Secured Obligations from and after the Second Amendment Effective Date and further agrees and acknowledges that all Collateral secures, and has always been intended to secure, all Secured Obligations and agrees that such security shall continue in full force and effect as continuing security for all the present and future Secured Obligations of the Loan Parties.
(c) Each Loan Party expressly acknowledges and agrees that (i) there has not been, and this Second Amendment does not constitute or establish, a novation with respect to the Existing Credit Agreement or any of the other Loan Documents, or a mutual departure from the strict terms, provisions, and conditions thereof, other than as set forth herein, and (ii) nothing in this Second Amendment shall affect or limit the Administrative Agent’s or the Lenders’ right to demand payment of liabilities owing from the Company and the other Loan Parties that may be parties to the Loan Documents from time to time to the Administrative Agent or the Lenders under, or to demand strict performance of the terms, provisions and conditions of, the Credit Agreement and the other Loan Documents, to exercise any and all rights, powers, and remedies under the Credit Agreement or the other Loan Documents or at law or in equity, or to do any and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of Default under the Credit Agreement or the other Loan Documents, in each case, in accordance with the terms set forth in the Credit Agreement and the other Loan Documents. Nothing implied in this Second Amendment or in any other document contemplated hereby shall be construed as a release or other discharge of any of the Loan Parties under any Loan Document from any of its obligations and liabilities as a borrower, guarantor or pledgor under any of the Loan Documents.
(d) Each Loan Party hereby restates, ratifies, and reaffirms each and every term, covenant, and condition set forth in the Credit Agreement and the other Loan Documents to which it is a party effective as of the Second Amendment Effective Date.
6
(e) The execution, delivery and effectiveness of this Second Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under any of the Loan Documents, nor constitute a waiver of or consent to any provision of any of the Loan Documents, except as expressly provided herein.
9. Governing Law. THIS SECOND Amendment AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS SECOND Amendment AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. Counterparts; Integration.
(a) This Second Amendment may be in the form of an Electronic Record and may be executed using Electronic Signatures. Each of the Loan Parties and Credit Parties agrees that any Electronic Signature on or associated with this Second Amendment shall be valid and binding on such Person to the same extent as a manual, original signature, and that this Second Amendment will constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered. This Second Amendment may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Second Amendment. Notwithstanding anything contained herein to the contrary, Administrative Agent is not under any obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by such Person pursuant to procedures approved by it; provided, further, without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept such Electronic Signature, the Administrative Agent and each of the Credit Parties shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party and/or any Credit Party without further verification and (ii) upon the request of the Administrative Agent or any Credit Party, any Electronic Signature shall be promptly followed by such manually executed counterpart.
(b) This Second Amendment, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent or the L/C Issuer, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
11. Expenses. The Loan Parties agree to pay the Administrative Agent for its reasonable and documented expenses in connection with this Second Amendment and the transactions contemplated hereby to the extent required under Section 11.04(a) of the Credit Agreement.
12. Miscellaneous. Sections 11.02 (Notices; Effectiveness; Electronic Communications) (to the extent not set forth in Section 9 above), 11.12 (Severability), 11.14 (Governing Law; Jurisdiction; Etc.) (to the extent not set forth in Section 8 above) and 11.15 (Waiver of Jury Trial) of the Credit Agreement are incorporated herein, mutatis mutandis. This Second Amendment shall constitute a Loan Document.
[The remainder of the page is intentionally left blank]
7
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Second Amendment as of the date first above written.
POLISHED.COM INC., | ||
as a Borrower | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
APPLIANCES CONNECTION INC., | ||
as a Borrower | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer |
[Polished – Signature Page to Second Amendment to Credit Agreement]
1 STOP ELECTRONICS CENTER, INC., | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
GOLD COAST APPLIANCES, INC., | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
SUPERIOR DEALS INC., | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
JOE’S APPLIANCES LLC, | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
YF LOGISTICS LLC, | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer | |
AC GALLERY INC., | ||
as a Guarantor | ||
By: | /s/ J.E. “Rick” Bunka | |
Name: | J.E. “Rick” Bunka | |
Title: | Interim Chief Executive Officer |
[Polished – Signature Page to Second Amendment to Credit Agreement]
BANK OF AMERICA, N.A., | ||
as Administrative Agent | ||
By: | /s/ Christine Trotter | |
Name: | Christine Trotter | |
Title: | Vice President |
[Polished – Signature Page to Second Amendment to Credit Agreement]
BANK OF AMERICA, N.A., | ||
as a Lender and L/C Issuer | ||
By: | /s/ Kelly Werbecki | |
Name: | Kelly Werbecki | |
Title: | Senior Vice President |
[Polished – Signature Page to Second Amendment to Credit Agreement]
MANUFACTURERS
AND TRADERS TRUST COMPANY, | ||
as a Lender | ||
By: | /s/ Wendy M. Andrus | |
Name: | Wendy M. Andrus | |
Title: | Senior Vice President |
[Polished – Signature Page to Second Amendment to Credit Agreement]
FIRST HORIZON BANK, | ||
as a Lender | ||
By: | /s/ Jason Haire | |
Name: | Jason Haire | |
Title: | Senior Vice President |
[Polished – Signature Page to Second Amendment to Credit Agreement]
WEBSTER BANK, NATIONAL ASSOCIATION, | ||
as a Lender | ||
By: | /s/ Harry Vlandis | |
Name: | Harry Vlandis | |
Title: | Managing Director |
[Polished – Signature Page to Second Amendment to Credit Agreement]
BANKUNITED, N.A., | ||
as a Lender | ||
By: | /s/ Scott Milchuk | |
Name: | Scott Milchuk | |
Title: | SVP – Director of Workout and Recovery |
[Polished – Signature Page to Second Amendment to Credit Agreement]
Annex A
Conformed Credit Agreement
[attached]
Annex B
Exhibit C to the Credit Agreement
[attached]
Exhibit L to the Credit Agreement
[attached]
Exhibit M to the Credit Agreement
[attached]
Schedule 7.01 to the Credit Agreement
[attached]
Annex C
Specified Events of Default
1. An Event of Default arising under Section 8.01(b) of the Existing Credit Agreement as a result of the Loan Parties’ failure to comply with the requirement that Consolidated EBITDA for the fiscal quarter (and the Cumulative Period (as defined in the Existing Credit Agreement)) ending September 30, 2023 not be less than the amounts set forth opposite such EBITDA Covenant Testing Date in Section 7.11(b) of the Existing Credit Agreement.
Exhibit 31.1
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. E. “Rick” Bunka, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Polished.com Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 20, 2023 | By: | /s/ J. E. “Rick” Bunka |
J. E. “Rick” Bunka | ||
Interim Chief Executive Officer | ||
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert D. Barry, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Polished.com Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 20, 2023 | By: | /s/ Robert D. Barry |
Robert D. Barry | ||
Interim Chief Financial Officer | ||
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Polished.com Inc. (the “Company”) for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J.E. “Rick” Bunka, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 20, 2023 | By: | /s/ J. E. “Rick” Bunka |
J. E. “Rick” Bunka | ||
Interim Chief Executive Officer | ||
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Polished.com Inc. (the “Company”) for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert D. Barry, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 20, 2023 | By: | /s/ Robert D. Barry |
Robert D. Barry | ||
Interim Chief Financial Officer | ||
(Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 2,109,398 | 2,104,558 |
Common stock, shares outstanding | 2,109,398 | 2,104,558 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Income Statement [Abstract] | ||||
Product sales, net | $ 77,818 | $ 143,566 | $ 261,018 | $ 430,710 |
Cost of goods sold | 62,513 | 122,431 | 204,987 | 355,788 |
Gross profit | 15,305 | 21,135 | 56,031 | 74,922 |
Operating Expenses | ||||
Personnel | 5,874 | 8,348 | 18,379 | 22,396 |
Advertising | 5,061 | 7,534 | 14,694 | 18,475 |
Bank and credit card fees | 2,557 | 5,932 | 8,935 | 15,121 |
Depreciation and amortization | 1,061 | 2,882 | 3,199 | 8,588 |
General and administrative | 6,747 | 7,260 | 16,619 | 15,078 |
Total Operating Expenses | 21,300 | 31,956 | 61,826 | 79,658 |
LOSS FROM OPERATIONS | (5,995) | (10,821) | (5,795) | (4,736) |
Other Income (Expenses) | ||||
Interest income | 407 | 174 | 1,139 | 282 |
Adjustment in value of contingency | (2) | |||
Interest expense | (1,886) | (1,351) | (4,821) | (2,594) |
Gain on change in fair value of derivative instruments | 446 | 4,476 | 1,020 | 3,540 |
Loss on settlement of debt | (3,241) | |||
Other income (expense) | 227 | (50) | 331 | (140) |
Total Other Income (Expenses) | (806) | 3,249 | (2,331) | (2,155) |
NET LOSS BEFORE INCOME TAXES | (6,801) | (7,572) | (8,126) | (6,891) |
INCOME TAX (EXPENSE) BENEFIT | 167 | 2,388 | (265) | 3,234 |
NET LOSS | $ (6,634) | $ (5,184) | $ (8,391) | $ (3,657) |
Income per common share | ||||
Basic (in Dollars per share) | $ (3.14) | $ (2.46) | $ (3.98) | $ (1.73) |
Diluted (in Dollars per share) | $ (3.14) | $ (2.46) | $ (3.98) | $ (1.73) |
Weighted average common shares outstanding | ||||
Basic (in Shares) | 2,109,398 | 2,104,558 | 2,108,811 | 2,115,846 |
Diluted (in Shares) | 2,109,398 | 2,104,558 | 2,108,811 | 2,115,846 |
Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Basis of Presentation [Abstract] | |
BASIS OF PRESENTATION | NOTE 1—BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Polished.com Inc. (the “Company,” “Polished.com Inc.,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The information included in the Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. Furthermore, interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023 or future periods. |
Recent Accounting Pronouncements |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Recent Accounting Pronouncements [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted
In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures. |
Liquidity and Going Concern Assessment |
9 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||
Liquidity and Going Concern Assessment [Abstract] | ||||||||||||||||
LIQUIDITY AND GOING CONCERN ASSESSMENT | NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT
Management assesses liquidity and going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
As of September 30, 2023, we had cash and cash equivalents of $9.8 million, restricted cash of $5.4 million, and vendor deposits of $30.8 million. For the nine months ended September 30, 2023, the Company incurred an operating loss of $5.8 million (including $3.2 million in non-cash charges for depreciation and amortization), cash flows used in operations of $0.4 million, and working capital of $15.9 million. As of December 31, 2022, we had cash and cash equivalents of $19.6 million, restricted cash of $1.0 million, and vendor deposits of $25 million, and total working capital of $25.9 million. For the year ended December 31, 2022, the Company incurred an operating loss of $134.4 million (including $11.5 million in non-cash charges for depreciation and amortization, as well as an impairment charge of $109.1 million), and cash flows used in operations of $46.7 million.
The Company performed an assessment to determine whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern within one year after the filing date of this report, when the accompanying financial statements are being issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully implemented.
Based on the initial assessment, substantial doubt exists regarding our ability to continue as a going concern. Management then assessed the mitigating effect of its plans to determine if it is probable that the plans (1) would be effectively implemented within one year after the filing date of this report, when the accompanying financial statements are being issued and (2) when implemented, would mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.
As discussed below, the Company has implemented plans which encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, in addition to creating sustained cash flow generation thereafter. The Company has either taken or intends to take, the following actions, among others, to improve its liquidity position and to address uncertainty about its ability to continue as a going concern:
Management has prepared estimates of operations for fiscal years 2023 and 2024 and believes that sufficient funds will be generated from operations to fund its operations, and to service its debt obligations for one year from the date of the filing of these consolidated financial statements in the Company’s 10-Q. The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these consolidated financial statements, indicate improved operations and the Company’s ability to continue operations as a going concern. |
Disaggregation of Revenues |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISAGGREGATION OF REVENUES | NOTE 4—DISAGGREGATION OF REVENUES
The Company sells a vast assortment of household appliances, including refrigerators, ovens, dishwashers, microwaves, freezers, washers and dryers. In addition to appliances, we also offer a broad assortment of products in the furniture, décor, bed & bath, lighting, outdoor living, electronics categories, fitness equipment, plumbing fixtures, air conditioners, fireplaces, fans, dehumidifiers, humidifiers, air purifiers and televisions.
Revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which time revenue is recognized.
The Company disaggregates revenue from contracts with customers by product type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company’s disaggregated revenue by product type is as follows (in thousands):
|
Supplemental Financial Statement Disclosures |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Statement Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES | NOTE 5—SUPPLEMENTAL FINANCIAL STATEMENT DISCLOSURES
Receivables
Receivables at September 30, 2023 and December 31, 2022, consisted of the following (in thousands):
Merchandise Inventory
Inventory as of September 30, 2023 and December 31, 2022, consisted of the following (in thousands):
Property and Equipment
Property and equipment at September 30, 2023 and December 31, 2022, consisted of the following (in thousands):
Depreciation expense for the three and nine months ended September 30, 2023 and 2022, was $0.3 million and $0.9 million, respectively.
Intangible Assets
The following table provides a breakdown of identifiable intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):
Amortization expense for the three and nine months ended September 30, 2023, was $0.8 million and $2.3 million, respectively. In comparison, amortization expense for the three and nine months ended September 30, 2022, was $2.6 million and $7.7 million, respectively.
These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 2.6 years.
At September 30, 2023, estimated annual amortization expense for each of the next five years is as follows (in thousands):
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at September 30, 2023 and December 31, 2022, consisted of the following (in thousands):
|
Operating Leases |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OPERATING LEASES | NOTE 6—OPERATING LEASES
The following was included in our unaudited condensed consolidated balance sheet at September 30, 2023 and December 31, 2022 (in thousands):
Operating lease expense for the three and nine months ended September 30, 2023 and 2022, was $1.3 million and $3.2 million, respectively.
As of September 30, 2023, maturities of operating lease liabilities were as follows, in thousands:
Finance Leases
The Company has three finance leases. At September 30, 2023, the total amount due on these leases was $0.3 million. |
Related Parties |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Related Parties [Abstract] | |
RELATED PARTIES | NOTE 7—RELATED PARTIES
On March 15, 2022, the Company entered into a lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie Fouerti, the Company’s former Chief Executive and Chief Operating Officer, respectively. The Company contends that the lease required the Landlord do certain work at Landlord’s expense to improve the building at a cost of approximately $1.2 million. Landlord has refused to pay for this work, contending that this expense was the Company’s responsibility. In addition, the total remaining amount due on the lease at September 30, 2023 is also approximately $1.2 million. Landlord contends that the Company is in default of the lease for failing to pay rent. The Company disagrees that its rent obligations have been triggered and further contends that Landlord has violated the lease by failing to pay for the work. On August 23, 2023, the Company entered into a lease termination agreement with the Landlord. Under the terms of the termination agreement, the Company was relieved of its obligations under the lease and agreed to terminate its claims for reimbursement of the improvements it made to the building and to pay $100,000.
DMI
The Company is a member of DMI, an appliance purchasing cooperative. DMI purchases consumer electronics and appliances at wholesale prices from various vendors, and then makes such products available to its members, including the Company, who sell such products to end consumers. DMI’s purchasing group arrangement provides its members, including the Company, with leverage and purchasing power with appliance vendors, and increases the Company’s ability to compete with competitors, including big box appliance and electronics retailers. The Company owns an approximate 1.6% interest in DMI.
During the nine months ended September 30, 2023, total purchases from DMI represented approximately 65% of total purchases. At September 30, 2023 vendor deposits at DMI totaled $30.8 million.
Lease Agreements
The Company has lease agreements with 1870 Bath Ave. LLC, 812 and 5th Ave Realty LLC. These two entities are owned by the Company’s former Chief Executive Officer and Chief Operating Officer. In addition, the Company has a sublease agreement with DMI. The total rent expense under these related party leases was $0.8 million for the nine months ended September 30, 2023. |
Notes Payable |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE | NOTE 8—NOTES PAYABLE
Credit Facilities
Bank of America Credit Agreement
On May 9, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”) and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to which the Lenders agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140.0 million, including (i) a $100.0 million term loan (the “Term Loan”) and (ii) a $40.0 million revolving credit facility (the “Revolving Loan”), which revolving credit facility included a $2.00 million swingline sublimit (the “Swing Line Loan” and together with the Term Loan and the Revolving Loan, the “Loans”) and, separately, a $10.0 million letter of credit commitment, in each case, on the terms and conditions contained in the Credit Agreement.
On May 9, 2022, the Company borrowed the entire amount of the Term Loan in the aggregate principal amount of $100.0 million. A portion of the proceeds of the Term Loan were to repay and terminate the M&T Credit Agreement. Commencing on September 30, 2022, through and including September 30, 2023, the Borrowers repaid the principal amount of the Term Loan in quarterly installments of $1,250,000 each, payable on the last business day of each March, June, September, and December.
As of September 30, 2023, the carrying value of the Term Loan was $92.3 million, comprised of a principal of $93.1 million, net of unamortized loan costs of $0.8 million. Loan costs before amortization included $1.1 million of lender and other fees.
As a result of our technical non-compliance with specified loan covenants for both the Bank of America Term Loan and Revolving Loan, based in part due to our failure to timely deliver financial statements, Bank of America froze the $40.0 million Revolving Loan before any borrowings had been made against the facility.
On July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash and certain qualifying customer and credit card account receivables, of $8.0 million. The Company and Bank of America amended the Credit Agreement on November 20, 2023 (the “Second Amendment”), which requires the Company to establish a Bank of America cash collateral account where cash and cash equivalents deposited in the cash collateral account do not constitute Liquidity for purposes of the Credit Agreement. Further, the Second Amendment requires that (i) at least $3.0 million of Liquidity be comprised of unrestricted cash and cash equivalents and (ii) more than $5.0 million of Liquidity be comprised of certain qualifying customer and credit card accounts receivable.
The Company entered into the Second Amendment, in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed to defer the principal installment of the Term Loans in the amount of $937,500 required to be made on December 31, 2023 until the earliest to occur of (i) January 31, 2024, (ii) the date on which a subordinated Term Loan or an equity contribution, as applicable, is consummated (even if the date of such consummation precedes December 31, 2023) and (iii) an event of default. The Second Amendment requires the Company to pay the existing Term Facility and Revolving Facility by November 30, 2024 (the “Maturity Date”).
The Term Loan and Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively, for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing, following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than the interest rate then in effect for the applicable loan. On May 9, 2022, the Company entered into an interest rate swap agreement to reduce its exposure to fluctuations in the floating interest rate tied to SOFR (see Note 9). The initial notional amount of the swap is $100 million with an original termination date of May 31, 2029, which was amended in the current period to May 31, 2027. As a result of the swap, the Company pays interest at a fixed rate of 2.9%, plus applicable margins.
Commencing on September 30, 2023, through and including September 30, 2024, the Borrowers must repay the principal amount of the Term Loan in installments of $937,500 each, payable on the last business day of December and January and quarterly installments of $1,875,000 payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.
As a result of the reduced term, the Company has begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.
Vehicle Loans
The Company has financed purchases of transportation vehicles with notes payable, which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging from 3.8% to 5.7%. As of September 30, 2023, the outstanding balance of these vehicle loans is $0.7 million.
Maturities of Notes Payable are as follows:
|
Derivative Instruments (Interest Rate Swap) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Derivative Instruments (Interest Rate Swap) [Abstract] | |
DERIVATIVE INSTRUMENTS (INTEREST RATE SWAP) | NOTE 9—DERIVATIVE INSTRUMENTS (INTEREST RATE SWAP):
On May 9, 2022, the Company entered into a Term Loan agreement with Bank of America, N.A. (See Note 11). On the same day, the Company entered into an interest rate swap agreement to reduce its exposure to fluctuations in the floating interest rate tied to SOFR under the Term Loan with a notional amount of $100 million. The interest rate swap became effective on May 9, 2022, and was to terminate on May 31, 2029. The swap agreement was modified in the current period and will now terminate on May 31, 2027. The Company receives variable interest payments monthly based on a one-month SOFR and pays a fixed rate of 2.93% to the counterparty.
As of September 30, 2023, the fair value of the interest rate swap agreement was $4.2 million and was classified as a derivative asset in our consolidated balance sheet. During the three and nine months ended September 30, 2023 the Company recognized a $0.4 million and $1.0 million gain, respectively on the change in fair value of the interest rate swap.
The Company classified the interest rate swap in Level 2 of the fair value hierarchy. |
Stockholders' Equity |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | NOTE 10—STOCKHOLDERS’ EQUITY
As of September 30, 2023, the Company was authorized to issue 200,000,000 shares of common stock, $0.0001 par value per share, and 20,000,000 shares of “blank check” preferred stock, 0.0001 par value per share. On September 30, 2023 and December 31, 2022, there were 2,109,398 and 2,104,558 shares of common stock outstanding, respectively.
Stock Options
Below is a table summarizing the changes in stock options outstanding during the nine months ended September 30, 2023:
The number of options has been restated to reflect the impact of the reverse stock split that occurred on October 20, 2023. During the nine months ended September 30, 2023, 750 stock options were forfeited, as a result of employee terminations.
Stock-based compensation expense of $0.2 million was recorded during the nine months ended September 30, 2023. As of September 30, 2023, the remaining unrecognized compensation cost related to non-vested stock options is $0.03 million and is expected to be recognized over 3.3 years. The outstanding stock options have a weighted average remaining contractual life of 9.26 years and a total intrinsic value of $ .
Warrants
Below is a table summarizing the changes in warrants outstanding during the nine months ended September 30, 2023
The number of options has been restated to reflect the impact of the reverse stock split that occurred on October 20, 2023. As of September 30, 2023, the outstanding warrants have a weighted average remaining contractual life of 2.67 years and a total intrinsic value of $ . |
Earnings (Loss) Per Share |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS (LOSS) PER SHARE | NOTE 11—EARNINGS (LOSS) PER SHARE
The computation of weighted average shares outstanding and the basic and diluted earnings (loss) per common share for the following periods consisted of the following (in thousands, except share and per share amounts):
For the three and nine months ended September 30, 2023 and 2022, there were 1,852,015 and 1,871,333, respectively, potentially diluted options and warrants were excluded from the diluted EPS calculations as their effect is anti-dilutive. |
Commitments and Contingencies |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12—COMMITMENTS AND CONTINGENCIES
Legal Proceedings
At the Company’s annual meeting on December 21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s common stock, par value $0.0001 per share (“Common Stock” and such proposal, the “Share Increase Proposal”) by 50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021, the Share Increase Proposal was adopted and a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment adopted pursuant to the Share Increase Proposal (the “Certificate of Amendment”) was filed with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”). To date, none of these newly authorized shares has actually been issued. Three purported beneficial owners of Common Stock subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the situation performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated and that the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure against any future question as to the validity of these newly authorized shares, the Company elected to seek validation of its Certificate of Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section 205 of the Delaware General Corporation Law (the “205 Petition”). The action, styled In re 1847 Goedeker Inc., C.A. 2022-0219-SG (the “Action”), sought entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating the additional shares of Common Stock authorized under the Share Increase Proposal.
Two purported stockholders objected to the 205 Petition. One such objecting, purported stockholder (the “Stockholder Plaintiff”) filed his own lawsuit (which was then consolidated with the 205 Petition) requesting that such relief not be granted and asserting two claims for relief: first, against the Company for alleged violation of the Delaware General Corporation Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal; and second, asserting that the Company’s directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment to our Certificate of Incorporation to be filed with the Delaware Secretary of State. The Court of Chancery held a hearing on May 27, 2022, to consider the Company’s motion for entry of an order under Section 205 and subsequently entered an order denying the motion without prejudice on September 30, 2022. On July 7, 2022, the Company filed a Certificate of Correction with the Secretary of State of the State of Delaware, voiding the Charter Amendment and causing the number of authorized shares of Common Stock to remain at 200,000,000.
On June 12, 2023, the Company submitted to the Court of Chancery a Stipulation and [Proposed] Order Regarding Notice and Closing of the Case regarding the Action (the “Dismissal Order”). As stated in the Dismissal Order, the Company and the other parties to the Action negotiated at arm’s length and resolved the stockholders’ claims to entitlement to a mootness fee award, and the Company agreed to pay $475,000 for attorneys’ fees and expenses to the stockholders’ counsel (the “Attorneys’ Fees”). Pursuant to Court of Chancery Rules 23(e) and 41(a), the parties to the Action stipulated to voluntary dismissal of the Action with prejudice as to the Stockholder Plaintiff and without prejudice as to any actual or potential claims of any other members of the putative class, and such dismissal was granted by the Court on June 13, 2023. As stipulated in the Dismissal Order, the Company paid the Attorneys’ Fees to the stockholders’ counsel on June 28, 2023 and such payment fully satisfied and resolved the stockholders’ and the stockholders’ counsel’s entitlement to any fees or expenses in the Action.
On October 31, 2022, a putative shareholder class action was filed against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as well as certain underwriters of the Company’s 2020 initial public offering (the “IPO”). The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Maschhof v. Polished.com Inc., et al., No. 1:22-cv-06606. The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as Sections 10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about September 8, 2023, the Court appointed lead plaintiff and lead counsel. An amended complaint was filed on or before October 31, 2023.
On January 26, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Wong v. Moore et al., No. 1:23-cv-00559. The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about March 7, 2023, plaintiff filed a stipulation and proposed order to stay proceedings until any motions to dismiss in the related class action (captioned Maschhoff v. Polished.com Inc. et al., No. 1:22-cv-06606) are decided. On March 23, 2023, the stipulation was so-ordered.
On February 13, 2023, a derivative stockholder complaint was filed against certain of the Company’s current and former officers and directors as well as the Company’s external manager, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Gossett v. Moore, et al., No. 1:23-cv-1168. The complaint asserts claims for breach of fiduciary duty against the former officers and directors and aiding and abetting breaches of fiduciary of duty against the external manager, arising from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about April 24, 2023, plaintiffs filed a joint stipulation and proposed order consolidating the related derivative actions and appointing co-lead counsel. To date, the stipulation has yet to be ordered. |
Supplier Concentration |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Supplier Concentration [Abstract] | |
SUPPLIER CONCENTRATION | NOTE 13—SUPPLIER CONCENTRATION
Significant customers and suppliers are those that account for greater than ten percent of the Company’s revenues and purchases.
For the nine months September 30, 2023, the Company approximately 65% of purchases were made from DMI.
The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive. |
Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 14—SUBSEQUENT EVENTS
Subsequent to December 31, 2022, the Company signed a letter of intent for a sublease from DMI, a related party for a new warehouse in a building being leased by DMI. The new lease will allow the Company to close its two existing New Jersey warehouses and consolidate operations into one new warehouse. The lease, which is expected to be finalized in the fourth quarter of 2023 or the first quarter of 2024 is for 232,640 square feet for seven years at a cost of approximately $15 per square foot, including common area charges with annual increases of 3.75%.
On July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “First Amendment”), in part, to require the Company maintain liquidity, which includes cash and certain qualifying customer and credit card account receivables, of $8.0 million. The Company and Bank of America amended the Credit Agreement on November 20, 2023 (the “Second Amendment”), which requires the Company to establish a Bank of America cash collateral account where cash and cash equivalents deposited in the cash collateral account do not constitute Liquidity for purposes of the Credit Agreement. Further, the Second Amendment requires that (i) at least $3.0 million of Liquidity be comprised of unrestricted cash and cash equivalents and (ii) more than $5.0 million of Liquidity be comprised of certain qualifying customer and credit card accounts receivable.
The Company entered into the Second Amendment, in part, to waive events of defaults on its existing Credit Agreement. The Term Loan Lenders, as part of the Second Amendment, agreed to defer the principal installment of the Term Loans in the amount of $937,500 required to be made on December 31, 2023 until the earliest to occur of (i) January 31, 2024, (ii) the date on which a subordinated Term Loan or an equity contribution, as applicable, is consummated (even if the date of such consummation precedes December 31, 2023) and (iii) an event of default. The Second Amendment requires the Company to pay the existing Term Facility and Revolving Facility by November 30, 2024 (the “Maturity Date”).
On October 19, 2023, the Company’s shareholders approved a reverse stock split between 1-for-25 and not more than 1-for-75 at any time on or prior to October 19, 2023. The directors of the Company determined on a ratio of 1-for-50 for the Reverse Stock Split. On October 20, 2023, the Reverse Stock Split became effective. All references in these financial statements to number of common shares, price per share and weighted average number of shares outstanding prior to the 1 for 50 reverse split have been adjusted to reflect the stock split on a retroactive basis as of the earliest period presented, unless otherwise noted. |
Accounting Policies, by Policy (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Recent Accounting Pronouncements [Abstract] | |
Recently Adopted | Recently Adopted In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures. In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. The Company adopted this guidance on January 1, 2023. The Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures. |
Disaggregation of Revenues (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenue | The Company’s disaggregated revenue by product
type is as follows (in thousands):
|
Supplemental Financial Statement Disclosures (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Statement Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Receivables | Receivables at September 30, 2023 and December
31, 2022, consisted of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventory as of September 30, 2023 and
December 31, 2022, consisted of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Property and equipment at September 30, 2023 and
December 31, 2022, consisted of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Breakdown of Identifiable Intangible Assets | The following table provides a breakdown of identifiable
intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Estimated Annual Amortization Expense | At September 30, 2023, estimated annual amortization
expense for each of the next five years is as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses at September
30, 2023 and December 31, 2022, consisted of the following (in thousands):
|
Operating Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Consolidated Balance Sheet | The following was included in our unaudited condensed
consolidated balance sheet at September 30, 2023 and December 31, 2022 (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Operating Lease Liabilities | As of September 30, 2023, maturities of operating
lease liabilities were as follows, in thousands:
|
Notes Payable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Notes Payable | Maturities of Notes Payable are as follows:
|
Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options Outstanding | Below is a table summarizing the changes in stock options outstanding
during the nine months ended September 30, 2023:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrants Outstanding | Below is a table summarizing the changes in warrants outstanding during
the nine months ended September 30, 2023
|
Earnings (Loss) Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Shares Outstanding and the Basic Loss per Common Share | The computation of weighted average shares outstanding
and the basic and diluted earnings (loss) per common share for the following periods consisted of the following (in thousands, except
share and per share amounts):
|
Liquidity and Going Concern Assessment (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|---|
Oct. 19, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Liquidity and Going Concern Assessment (Details) [Line Items] | |||||||
Cash and cash equivalent | $ 9,811 | $ 28,433 | $ 9,811 | $ 28,433 | $ 19,549 | $ 25,724 | |
Restricted cash | 5,391 | 5,391 | 950 | ||||
Vendor deposits | 30,828 | 30,828 | 25,022 | ||||
Operating income | 5,800 | ||||||
Non-cash charges for depreciation and amortization | 3,200 | ||||||
Cash used in operations | 400 | 46,700 | |||||
Working capital | 15,900 | 25,900 | |||||
Cash and cash equivalents | 19,600 | ||||||
Restricted cash | 1,000 | ||||||
Deposits | 25,000 | ||||||
Operating loss | (5,995) | (10,821) | (5,795) | (4,736) | 134,400 | ||
Cash and restricted cash | 15,202 | $ 30,166 | 15,202 | $ 30,166 | 20,499 | $ 33,791 | |
Non cash impairment charge | 109,100 | ||||||
Subsequent Event [Member] | |||||||
Liquidity and Going Concern Assessment (Details) [Line Items] | |||||||
Reverse stock split, description | The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. | ||||||
Cash Equivalents [Member] | |||||||
Liquidity and Going Concern Assessment (Details) [Line Items] | |||||||
Cash and cash equivalent | $ 9,800 | $ 9,800 | |||||
Cash and restricted cash | $ 11,500 |
Disaggregation of Revenues (Details) - Schedule of Disaggregated Revenue - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Appliance Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total disaggregated revenue | $ 70,620 | $ 136,044 | $ 234,797 | $ 402,835 |
Furniture and Other Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total disaggregated revenue | 7,198 | 7,522 | 26,221 | 27,875 |
Total Disaggregated Revenue [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total disaggregated revenue | $ 77,818 | $ 141,566 | $ 261,018 | $ 430,710 |
Supplemental Financial Statement Disclosures (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Supplemental Financial Statement Disclosures [Abstract] | ||||
Depreciation expense | $ 0.3 | $ 0.3 | $ 0.3 | $ 0.9 |
Amortization expense | $ 0.8 | $ 2.6 | $ 2.3 | $ 7.7 |
Weighted average estimated useful life | 2 years 7 months 6 days |
Supplemental Financial Statement Disclosures (Details) - Schedule of Receivables - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Receivables with Imputed Interest [Line Items] | ||
Receivables gross | $ 21,146 | $ 28,156 |
Less allowance for doubtful accounts | (1,282) | (1,506) |
Total receivables, net | 19,864 | 26,650 |
Trade Accounts Receivable [Member] | ||
Receivables with Imputed Interest [Line Items] | ||
Receivables gross | 15,050 | 13,691 |
Vendor Rebates Receivable [Member] | ||
Receivables with Imputed Interest [Line Items] | ||
Receivables gross | 5,459 | 8,514 |
Other receivables [Member] | ||
Receivables with Imputed Interest [Line Items] | ||
Receivables gross | $ 637 | $ 5,951 |
Supplemental Financial Statement Disclosures (Details) - Schedule of Inventory - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory [Line Items] | ||
Total merchandise inventory | $ 30,682 | $ 43,555 |
Less reserve for obsolescence | (589) | (1,789) |
Total merchandise inventory, net | 30,093 | 41,766 |
Appliances [Member] | ||
Inventory [Line Items] | ||
Total merchandise inventory | 28,240 | 39,702 |
Furniture and other [Member] | ||
Inventory [Line Items] | ||
Total merchandise inventory | $ 2,442 | $ 3,853 |
Supplemental Financial Statement Disclosures (Details) - Schedule of Property and Equipment - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 5,903 | $ 6,764 |
Less: accumulated depreciation | (2,628) | (1,689) |
Property and equipment, net | 3,275 | 5,075 |
Warehouse equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 806 | 806 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 337 | 324 |
Transportation Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 1,566 | 1,466 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 2,157 | 3,131 |
Showroom Inventory [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 1,037 | $ 1,037 |
Supplemental Financial Statement Disclosures (Details) - Schedule of Breakdown of Identifiable Intangible Assets - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Supplemental Financial Statement Disclosures (Details) - Schedule of Breakdown of Identifiable Intangible Assets [Line Items] | ||
Total intangible assets | $ 10,296 | $ 10,296 |
Accumulated amortization | (2,260) | |
Intangible assets, net | 8,036 | 10,296 |
Customer Relationships [Member] | ||
Supplemental Financial Statement Disclosures (Details) - Schedule of Breakdown of Identifiable Intangible Assets [Line Items] | ||
Total intangible assets | 3,461 | 3,461 |
Marketing Related - Tradename [Member] | ||
Supplemental Financial Statement Disclosures (Details) - Schedule of Breakdown of Identifiable Intangible Assets [Line Items] | ||
Total intangible assets | $ 6,835 | $ 6,835 |
Supplemental Financial Statement Disclosures (Details) - Schedule of Estimated Annual Amortization Expense - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Estimated Annual Amortization Expense [Abstract] | ||
2023 (Remainder of year) | $ 754 | |
2024 | 3,013 | |
2025 | 3,013 | |
2026 | 1,256 | |
2027 | ||
Total | $ 8,036 | $ 10,296 |
Supplemental Financial Statement Disclosures (Details) - Schedule of Accounts Payable and Accrued Expenses - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Accounts Payable and Accrued Expenses [Abstract] | ||
Trade accounts payable | $ 38,002 | $ 34,345 |
Accrued sales tax | 32,039 | 36,196 |
Accrued payroll liabilities | 1,110 | 680 |
Accrued interest | 39 | 37 |
Accrued liability for sales returns | 1,916 | 3,916 |
Credit cards payable | 115 | 32 |
Accrued insurance | 1,180 | |
Other accrued liabilities | 3,303 | 5,151 |
Total accounts payable and accrued expenses | $ 76,524 | $ 81,537 |
Operating Leases (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Operating Leases [Abstract] | ||||
Operating lease expense | $ 1.3 | $ 3.2 | $ 1.3 | $ 3.2 |
Finance lease amount | $ 0.3 | $ 0.3 |
Operating Leases (Details) - Schedule of Consolidated Balance Sheet - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Consolidated Balance Sheet [Abstract] | ||
Operating lease right-of-use assets | $ 9,172 | $ 11,688 |
Lease liabilities, current portion | 1,945 | 3,726 |
Lease liabilities, long-term | 7,919 | 9,013 |
Total operating lease liabilities | $ 9,864 | $ 12,739 |
Weighted-average remaining lease term (months) | 77 years | 73 years |
Weighted average discount rate | 3.90% | 3.90% |
Operating Leases (Details) - Schedule of Maturities of Operating Lease Liabilities - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Maturities of Operating Lease Liabilities [Abstract] | ||
2023 – Remainder of year | $ 948 | |
2024 | 1,808 | |
2025 | 1,489 | |
2026 | 1,532 | |
2027 | 1,284 | |
Thereafter | 4,158 | |
Total | 11,219 | |
Less: imputed interest | (1,355) | |
Total operating lease liabilities | $ 9,864 | $ 12,739 |
Related Parties (Details) - USD ($) $ in Millions |
9 Months Ended | ||
---|---|---|---|
Aug. 23, 2023 |
Sep. 30, 2023 |
Mar. 15, 2022 |
|
Related Parties [Abstract] | |||
Expense to improve the building | $ 1.2 | ||
Total lease amount due | $ 1.2 | ||
Payment of taxes and insurance | $ 100,000.0 | ||
Interest rate | 1.60% | ||
Total purchases | 65.00% | ||
Vendor deposits at DMI totaled | $ 30.8 | ||
Total rent expense under these related party leases | $ 0.8 |
Notes Payable (Details) - Schedule of Maturities of Notes Payable - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of future minimum principal payments [Abstract] | ||
2023 (Remainder of year) | $ 1,033 | |
2024 | 92,531 | |
2025 | 201 | |
2026 | 29 | |
2027 | 21 | |
Thereafter | ||
Total | 93,815 | |
Less: Loan costs | (796) | |
Total | 93,019 | |
Amount classified as a current liability | 7,859 | $ 6,628 |
Amount classified as long-term liability | $ 85,160 | $ 90,816 |
Derivative Instruments (Interest Rate Swap) (Details) - Interest Rate Swap [Member] - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
May 09, 2022 |
|
Derivative Instruments (Interest Rate Swap) (Details) [Line Items] | |||
Derivative notional amount | $ 100.0 | ||
Derivative fixed interest | 2.93% | ||
Derivative asset fair value | $ 4.2 | $ 4.2 | |
Fair value interest rate swap | $ 0.4 | $ 1.0 |
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
Stockholders' Equity (Details) [Line Items] | ||
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares outstanding | 2,109,398 | 2,104,558 |
Stock options forfeited | 750 | |
Stock-based compensation expense (in Dollars) | $ 200 | |
Weighted average remaining life of warrants | 2 years 8 months 1 day | |
Intrinsic value of warrants (in Dollars) | ||
Stock-Based Compensation Expense [Member] | ||
Stockholders' Equity (Details) [Line Items] | ||
Unrecognized compensation cost (in Dollars) | $ 30 | |
Non vested stock option recognized period | 3 years 3 months 18 days | |
Weighted average remaining term | 9 years 3 months 3 days | |
Intrinsic value (in Dollars) |
Stockholders' Equity (Details) - Schedule of Stock Options Outstanding |
9 Months Ended |
---|---|
Sep. 30, 2023
$ / shares
shares
| |
Schedule of Stock Options Outstanding [Abstract] | |
Outstanding beginning balance, Options | shares | 750 |
Outstanding beginning balance, Weighted Average Exercise Price | $ / shares | $ 155 |
Granted, Options | shares | 1,731 |
Granted, Weighted Average Exercise Price | $ / shares | $ 28.89 |
Exercised, Options | shares | |
Exercised, Weighted Average Exercise Price | $ / shares | |
Forfeited, Options | shares | (750) |
Forfeited, Weighted Average Exercise Price | $ / shares | $ 155 |
Outstanding ending balance, Options | shares | 1,731 |
Outstanding ending balance, Weighted Average Exercise Price | $ / shares | $ 28.89 |
Exercisable, Options | shares | |
Exercisable, Weighted Average Exercise Price | $ / shares |
Stockholders' Equity (Details) - Schedule of Warrants Outstanding - Warrant [Member] |
9 Months Ended |
---|---|
Sep. 30, 2023
$ / shares
shares
| |
Stockholders' Equity (Details) - Schedule of Warrants Outstanding [Line Items] | |
Outstanding beginning balance, Warrants | shares | 1,871,333 |
Outstanding beginning balance, Weighted Average Exercise Price | $ / shares | $ 114.85 |
Granted, Warrants | shares | |
Granted, Weighted Average Exercise Price | $ / shares | |
Exercised, Warrants | shares | |
Exercised, Weighted Average Exercise Price | $ / shares | |
Forfeited, Warrants | shares | |
Forfeited, Weighted Average Exercise Price | $ / shares | |
Outstanding ending balance, Warrants | shares | 1,871,333 |
Outstanding ending balance, Weighted Average Exercise Price | $ / shares | $ 114.85 |
Exercisable, Warrants | shares | 1,871,333 |
Exercisable, Weighted Average Exercise Price | $ / shares | $ 114.85 |
Earnings (Loss) Per Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Earnings (Loss) Per Share [Abstract] | ||||
EPS anti-dilutive shares | 1,852,015 | 1,871,333 | 1,852,015 | 1,871,333 |
Earnings (Loss) Per Share (Details) - Schedule of Weighted Average Shares Outstanding and the Basic Loss per Common Share - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Basic Earnings (Loss) Per Share | ||||
Net income (loss) (in Dollars) | $ (6,634) | $ (5,184) | $ (8,391) | $ (3,657) |
Basic weighted average common shares outstanding | 2,109,398 | 2,104,558 | 2,108,811 | 2,115,846 |
Basic earnings (loss) per share (in Dollars per share) | $ (3.14) | $ (2.46) | $ (3.98) | $ (1.73) |
Effect of dilutive stock options and warrants | ||||
Diluted weighted average common shares outstanding | 2,109,398 | 2,104,558 | 2,108,811 | 2,115,846 |
Diluted earnings (loss) per share (in Dollars per share) | $ (3.14) | $ (2.46) | $ (3.98) | $ (1.73) |
Commitments and Contingencies (Details) - USD ($) $ / shares in Units, $ in Thousands |
Jun. 12, 2023 |
Sep. 30, 2023 |
Dec. 31, 2022 |
Jul. 07, 2022 |
---|---|---|---|---|
Commitments and Contingencies (Details) [Line Items] | ||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | ||
Shares of common stock | 50,000,000 | |||
Agreed to pay amount (in Dollars) | $ 475,000 | |||
Common Stock [Member] | ||||
Commitments and Contingencies (Details) [Line Items] | ||||
Shares of common stock | 200,000,000 |
Supplier Concentration (Details) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Supplier Concentration [Abstract] | |
Purchases made from DMI | 65.00% |
Subsequent Events (Details) |
1 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 19, 2023 |
Sep. 30, 2023
ft²
SquareFoot
|
Dec. 31, 2023
USD ($)
|
Nov. 20, 2023
USD ($)
|
Jul. 25, 2023
USD ($)
|
|
Subsequent Events (Details) [Line Items] | |||||
Square feet (in Square Feet) | ft² | 232,640 | ||||
Per square foot (in SquareFoot) | SquareFoot | 15 | ||||
Annual interest rate | 3.75% | ||||
Subsequent Event [Member] | |||||
Subsequent Events (Details) [Line Items] | |||||
Stock split | the Company’s shareholders approved a reverse stock split between 1-for-25 and not more than 1-for-75 at any time on or prior to October 19, 2023. The directors of the Company determined on a ratio of 1-for-50 for the Reverse Stock Split. On October 20, 2023, the Reverse Stock Split became effective. All references in these financial statements to number of common shares, price per share and weighted average number of shares outstanding prior to the 1 for 50 reverse split have been adjusted to reflect the stock split on a retroactive basis as of the earliest period presented, unless otherwise noted. | ||||
Forecast [Member] | |||||
Subsequent Events (Details) [Line Items] | |||||
Term Loans amount | $ 937,500 | ||||
Liquidity [Member] | |||||
Subsequent Events (Details) [Line Items] | |||||
Account receivables | $ 8,000,000 | ||||
Cash and cash equivalents | $ 3,000,000 | ||||
Liquidity [Member] | Forecast [Member] | |||||
Subsequent Events (Details) [Line Items] | |||||
Cash and cash equivalents | 3,000,000 | ||||
Customer and credit card accounts receivable | $ 5,000,000 |
1 Year Polished Chart |
1 Month Polished Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions