RumbleON (RMBL) DEFM14AProxy related to merger

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No. __)

Filed by the Registrant   ☒

Filed by a Party other than the Registrant   ☐

Check the appropriate box:

Payment of Filing Fee (Check the appropriate box):

TRANSACTION PROPOSED — YOUR VOTE IS VERY IMPORTANT

The board of directors (the “Board”) of RumbleOn, Inc., a Nevada corporation (“RumbleOn” or the “Company,” or “we,” “us,” and “our”), has approved a Plan of Merger and Equity Purchase Agreement dated March 12, 2021, as amended on June 17, 2021 (the “Transaction Agreement”) by and among the Company and certain of the Company’s wholly owned subsidiaries (each such subsidiary as defined in the Transaction Agreement, and collectively, the “Merger Subs”), Bill Coulter (“Coulter”), Mark Tkach, (“Tkach,” and together with Coulter, the “Principal Owners”), certain other persons who own equity interests in an aggregate of 46 entities operating under the RideNow brand of powersports (we refer these entities collectively as “RideNow” or the “Target Companies” and we refer to the other persons who own equity interests in the Target Companies, together with the Principal Owners, as the “Sellers” and each a “Seller”), and Mr. Tkach as the representative of the Sellers (the “Sellers’ Representative”). Under the terms of the Transaction Agreement, RumbleOn will either acquire through the Merger Subs or will purchase the equity interests in the Target Companies (such acquisitions or purchases of equity interests, together with the other transactions contemplated in the Transaction Agreement, the “Transaction”).

Upon completion of the Transaction, the Target Companies will be wholly owned subsidiaries of RumbleOn, Inc. RumbleOn’s Class B common stock will continue to trade on the Nasdaq Capital Market (“Nasdaq”), under the symbol “RMBL.” On June 30, 2021, the closing price per share of RumbleOn Class B common stock as reported by Nasdaq was $40.47. You are urged to obtain current market quotations for the shares of RumbleOn Class B common stock.

If the Transaction is completed, Sellers will receive (i) cash in the aggregate amount of $400,400,000 less any adjustments for net working capital and closing indebtedness and (ii) 5,833,333 shares (the “Closing Shares”) of RumbleOn’s Class B common stock having an aggregate value of $175,000,000 based on an agreed to value at signing of $30.00 per share. The number of Closing Shares issued in the Transaction may be increased if either (A) the volume weighted average price (“VWAP”) of the Company’s Class B common stock for the twenty (20) trading days immediately before the closing date of the Transaction (“Closing Date”) or (B) the value on a per share basis paid for the Class B common stock by any person who purchases Class B common stock from the Company from the date of the Transaction Agreement until the Closing Date is less than $30.00. Ten percent (10%) of the Closing Shares will be considered escrow shares and will be released pursuant to the terms of the Transaction Agreement.

In addition to the share issuance in connection with the Transaction, the Board asks that you approve an amendment to the Company’s Articles of Incorporation to increase the number of shares of Class B common stock authorized for issuance from 4,950,000 to 100,000,000. RumbleOn will also ask stockholders to approve an increase in the number of shares of Class B common stock issuable under the Company’s 2017 Stock Incentive Plan (the “Incentive Plan”) from 700,000 to 2,700,000 and to extend the Incentive Plan for an additional ten years.

RumbleOn will hold a special meeting of its stockholders to vote on these three matters. Whether or not you plan to attend the special meeting, please take the time to cause your shares to be voted by completing and mailing the enclosed proxy card or submitting your proxy by telephone or through the Internet, using the procedures in the proxy voting instructions included with your proxy card. Even if you return the proxy, you may attend the special meeting and vote your shares in person at the meeting.

YOUR VOTE IS IMPORTANT. Each of these three matters are conditions to completing the Transaction and as such, RumbleOn stockholders must approve the proposals relating to these three matters in order for the Transaction to close. The Board has determined that the Transaction Agreement and the transactions contemplated thereby are advisable and in the best interests of RumbleOn and its stockholders. The Board unanimously recommends that RumbleOn stockholders vote to approve each of the three proposals required to close the Transactions at a special meeting of RumbleOn stockholders to be held on July 30, 2021, as set forth on the Notice of Special Meeting of Stockholders accompanying this proxy statement.

This document describes the proposed Transaction and other matters to be considered in more detail. RumbleOn encourages you to read this entire document carefully, including the Transaction Agreement, which is included as Annex A, and the section discussing “Risk Factors” relating to the Transaction and the combined company beginning on page 8.

RumbleOn looks forward to seeing you at the special meeting and to the successful completion of the Transaction.  

	Marshall Chesrown
	Chief Executive Officer and Chairman
	RumbleOn, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the matters described in this proxy statement or the RumbleOn Class B common stock to be issued pursuant to the Transaction, or determined if this proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

This proxy statement is dated July 1, 2021 and, together with the accompanying proxy card, is first being mailed or otherwise delivered to RumbleOn stockholders as of June 21, 2021, the record date for the special meeting, on or about July 1, 2021.

THIS PROXY STATEMENT INCORPORATES ADDITIONAL INFORMATION

This document incorporates by reference important business and financial information about RumbleOn from other documents filed with the Securities and Exchange Commission (the “SEC”) that are not included in or delivered with this proxy statement. This information is available to you without charge upon your written or oral request. For a list of the documents incorporated by reference into this proxy statement, see “Where You Can Find More Information.” You can obtain electronic or hardcopy versions of the documents that are incorporated by reference into this proxy statement, without charge, from the Investor Resources section of RumbleOn’s website or by requesting them in writing or by telephone, in each case as set forth below:

IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JULY 16, 2021 IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.

SUBMITTING A PROXY ELECTRONICALLY, BY INTERNET, TELEPHONE, OR BY MAIL

RumbleOn stockholders of record on June 21, 2021 may submit their proxies as follows:

If you are a beneficial owner, please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On July 30, 2021

Dear RumbleOn Stockholder:

RumbleOn and RideNow are proposing to combine their businesses to create the first - and only - omnichannel powersport platform in the US, offering the fastest, easiest, and most transparent transaction process available in powersports today. As part of the process of completing this transaction the Board of Directors of RumbleOn is pleased to invite you to attend a special meeting of the stockholders of RumbleOn which will be held on Friday, July 30, 2021 at 8:00 A.M. Central time, at 901 W. Walnut Hill Lane, Irving, Texas 75038, Conference Room A.

The purpose of the special meeting is to consider and to vote upon the following proposals:

The RumbleOn Board has unanimously determined that the Transaction Agreement and the transactions contemplated by it, are advisable and in the best interests of RumbleOn and its stockholders and recommends that RumbleOn stockholders vote “FOR” each of the Stock Issuance Proposal, the Authorized Stock Proposal, the Incentive Plan Proposal, and the Adjournment Proposal at the special meeting of RumbleOn stockholders.

Your vote is very important. Each of the Stock Issuance, Authorized Stock, and Incentive Plan Proposals are conditions to completing the Transaction and as such, RumbleOn stockholders must approve all three of these proposals in order for the Transaction to close. The Board unanimously recommends that stockholders vote to approve each of the proposals to be presented at the special meeting.

The close of business on June 21, 2021 has been fixed as the record date for the special meeting (the “Record Date”). Only holders of record of RumbleOn Class A and Class B common stock on the Record Date are entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. A list of holders of Class A and Class B common stock entitled to vote at the special meeting will be available for examination by any RumbleOn stockholder for any purpose germane to the special meeting at RumbleOn’s principal executive offices at 901 W. Walnut Hill Lane, Irving, Texas 75038, for ten days before the special meeting, during normal business hours, and at the time and place of the special meeting as required by law.

RumbleOn directs your attention to the proxy statement accompanying this notice for more detailed information regarding the matters to be acted upon at the special meeting. You are encouraged to read the entire proxy statement carefully, including the Transaction Agreement, which is included as Annex A to the proxy statement, and the section titled “Risk Factors” beginning on page 8.

SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU ATTEND THE SPECIAL MEETING, PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE BY MAIL, BY TELEPHONE OR THROUGH THE INTERNET. INSTRUCTIONS ON THESE DIFFERENT WAYS TO SUBMIT YOUR PROXY ARE FOUND ON THE ENCLOSED PROXY CARD. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING. REMEMBER, YOUR VOTE IS IMPORTANT, SO PLEASE ACT TODAY!

	By Order of the Board of Directors,
	Marshall Chesrown
	Chairman and Chief Executive Officer
	July 1, 2021

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

Upon completion of the Transaction, the Target Companies will be wholly owned subsidiaries of RumbleOn, Inc. RumbleOn’s Class B common stock will continue to trade on Nasdaq under the symbol “RMBL.” On the Record Date, the closing price per share of RumbleOn Class B common stock as reported by Nasdaq was $38.00. You are urged to obtain current market quotations for the shares of RumbleOn Class B common stock.

If the Transaction is completed, Sellers will receive (i) cash in the aggregate amount of $400,400,000 less any adjustments for net working capital and closing indebtedness and (ii) 5,833,333 shares of RumbleOn’s Class B common stock having an aggregate value of $175,000,000 based on an agreed to value at signing of $30.00 per share. The number of Closing Shares issued in the transaction may be increased if either (A) the VWAP of the Company’s Class B common stock for the twenty (20) trading days immediately before the closing date or (B) the value on a per share basis paid for the Class B common stock by any person who purchases Class B common stock from the Company from the date of the Transaction Agreement until the closing date is less than $30.00. Ten percent (10%) of the Closing Shares will be considered escrow shares and will be released pursuant to the terms of the Transaction Agreement.

If you choose either of the first two methods, you must send your notice of revocation or your new proxy to the Company’s Corporate Secretary at: 901 W. Walnut Hill Lane, Irving, Texas 75038 Attention: Corporate Secretary, so that it is received no later than the beginning of the special meeting. If you are a stockholder, you can find further details on how to revoke your proxy in “The Special Meeting — Revocation of Proxies.”

A broker non-vote will have the same effect as a vote “AGAINST” the Authorized Stock Proposal. A broker non-vote will have no effect on the Stock Issuance Proposal or the Incentive Plan Proposal. For additional information, see “The Special Meeting.”

In order for your shares to be represented at the special meeting:

RumbleOn, Inc.
901 W. Walnut Hill Lane,

Irving, Texas 75038
Attention: Investor Resources
Phone Number: (214) 771-9952
E-mail Address: investors@rumbleon.com

If you would like additional copies of this proxy statement or you need assistance voting your shares, you should contact:

Alliance Advisors, LLC

200 Broadacres Drive, 3^rd Floor

Bloomfield, New Jersey 07003

Phone: (973) 873-7700

Website: www.allianceadvisors.com 

RISK FACTORS

In addition to the other information included and incorporated by reference into this proxy statement, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” below, you should carefully consider the following risk factors before deciding how to vote on the matters presented to stockholders at the special meeting. In addition to the risk factors set forth below, you should read and consider other risk factors specific to RumbleOn’s business and securities that will also affect the combined company after the Transaction, which are described in Part I, Item 1A of RumbleOn’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 31, 2021, and incorporated by reference into this proxy statement. If any of the risks described below or in the periodic reports incorporated by reference into this proxy statement actually occur, the businesses, financial condition, results of operations, prospects, or stock price of RumbleOn or the combined company could be materially adversely affected. See “Where You Can Find More Information.”

Risk Factors Summary

The following is a summary of the principal risks included in this proxy statement that could adversely affect our business, operations and financial results.

Risks Related to the Transaction

Risks Related to the Combined Company if the Transaction is Completed

Risks Related to RideNow’s Business and the Powersports Retail Industry

Risks Related to the Transaction

Completion of the Transaction is subject to the conditions contained in the Transaction Agreement and if these conditions are not satisfied, the Transaction will not be completed.

The completion of the Transaction is subject to various closing conditions, including (a) the making of all filings and other notifications required to be made under any Antitrust Law (as defined in the Transaction Agreement) for the consummation of the Transaction, the expiration or termination of all waiting periods relating thereto, and the receipt of all clearances, authorizations, actions, non-actions, or other consents required from a governmental authority under any Antitrust Law for the consummation of the Transaction, (b) performance in all respects by each party of its covenants and agreements, (c) the RumbleOn Stockholder Approval, (d) the shares of our Class B common stock to be issued as consideration in the Transaction being approved for listing on Nasdaq, and (e) the receipt of consent to the Transaction from powersports manufacturers representing at least 95% of new vehicle sales of the Target Companies for the twelve months ended December 31, 2020.

Many of the conditions to the closing of the Transaction are not within our control, and we cannot predict with certainty when or if these conditions will be satisfied. The failure to satisfy any of the required conditions could delay the completion of the Transaction or prevent it from occurring. Any delay in completing the Transaction could cause us not to realize some or all of the benefits that we expect to achieve if the Transaction is successfully completed within the expected timeframe. There can be no assurance that the conditions to the closing of the Transaction will be satisfied or that the Transaction will be completed or that if completed we will realize the anticipated benefits.

Failure to complete the Transaction could negatively impact our stock price and our future business and financial results.

If the Transaction is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Transaction, we could be subject to a number of negative consequences, including, among others: (i) we may experience negative reactions from the financial markets, including negative impacts on our stock price; (ii) we will still be required to pay certain significant costs relating to the Transaction, including legal, accounting, and financial advisor costs; and (iii) matters related to the Transaction (including integration planning) require substantial commitments of our time and resources, which could result in our inability to pursue other opportunities that could be beneficial to us. If the Transaction is not completed or if completion of the Transaction is delayed, any of these risks could occur and may adversely affect our business, financial condition, financial results, and stock price.

The Transaction will involve substantial costs.

We have incurred, and expect to continue to incur, a number of non-recurring costs associated with the Transaction. The substantial majority of the non-recurring expenses will consist of transaction and regulatory costs related to the Transaction. We will also incur transaction fees and costs related to formulating and implementing integration plans, including system consolidation costs and employment-related costs. We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred from the Transaction and integration. Although we anticipate that the elimination of duplicative costs and the realization of other efficiencies and synergies related to the integration should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

In connection with the Transaction, we will incur additional indebtedness, which could adversely affect us, including our business flexibility and will increase our interest expense.

We will have increased indebtedness following completion of the Transaction, which could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing our interest expense. We will also incur various costs and expenses related to the financing of the Transaction. The amount of cash required to pay interest on our increased indebtedness following completion of the Transaction and thereby the demands on our cash resources will be greater than the amount of cash flow required to service our indebtedness prior to the Transaction. The increased levels of indebtedness following completion of the Transaction could also reduce funds available for working capital, capital expenditures, and other general corporate purposes, and may create competitive disadvantages for us relative to other companies with lower debt levels. If we do not achieve the expected synergies and cost savings from the Transaction, or if our financial performance after the Transaction does not meet our current expectations, then our ability to service the indebtedness may be adversely impacted.

Certain directors and executive officers of RumbleOn may have interests that may be different from, or in addition to, interests of RumbleOn stockholders generally.

Some of the directors of RumbleOn who recommend that RumbleOn stockholders vote in favor of the RumbleOn share issuance, and the executive officers of RumbleOn who provided information to the Board relating to the Transaction, have employment arrangements and other benefits in connection with the Transaction, and rights to ongoing indemnification and insurance that may provide them with interests in the Transaction. Stockholders of RumbleOn should be aware of these interests when considering the Board’s recommendations that they vote in favor of the proposals to be presented at the special meeting.

Risks Related to the Combined Company if the Transaction is Completed

Our business relationships, those of RideNow, or the combined company may be subject to disruption due to uncertainty associated with the Transaction.

Parties with which we or RideNow do business may experience uncertainty associated with the Transaction, including with respect to current or future business relationships with us, RideNow or the combined company. Our and RideNow’s business relationships may be subject to disruption, as customers, distributors, suppliers, vendors, and others may seek to receive confirmation that their existing business relations with us or RideNow, as the case may be, will not be adversely impacted as a result of the Transaction or attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us, RideNow, or the combined company as a result of the Transaction. Any of these other disruptions could have a material adverse effect on our or RideNow’s businesses, financial condition, or results of operations or on the business, financial condition or results of operations of the combined company, and could also have an adverse effect on our ability to realize the anticipated benefits of the Transaction.

If we are unable to maintain effective internal control over financial reporting for the combined companies, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements.

We and RideNow currently maintain separate internal control over financial reporting with different financial reporting processes and different process control software. We plan to integrate our internal control over financial reporting with those of RideNow. We may encounter difficulties and unanticipated issues in combining our respective accounting systems due to the complexity of the financial reporting processes. We may also identify errors or misstatements that could require audit adjustments. If we are unable to implement and maintain effective internal control over financial reporting following completion of the Transaction, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decline.

The combined company’s ability to incur additional debt could have a material adverse effect on its business, financial condition, results of operations, and cash flows.

At the close of the Transaction, the combined company will have total debt in excess of $400 million. The combined company’s debt service obligations could have important consequences to it for the foreseeable future, including the following: (i) its ability to obtain additional financing for acquisitions, capital expenditures, working capital or other general corporate purposes may be impaired; (ii) a substantial portion of its cash flow from operating activities will be dedicated to the payment of principal and interest on its debt, thereby reducing the funds available for operations and other corporate purposes; (iii) some of its borrowings are and will continue to be at variable rates of interest, which exposes the combined company to risks of interest rate increases; and (iv) it may be or become substantially more leveraged than some of its competitors, which may place the combined company at a relative competitive disadvantage and make it more vulnerable to changes in market conditions and governmental regulations.

In addition to limits on the combined company to incur additional debt in the future, there are operating and financial restrictions and covenants in the Credit Facility and the indenture governing its senior notes such as leverage covenants, may adversely affect the combine company’s ability to finance its future operations or capital needs or to pursue certain business activities. The combined company’s failure to comply with any of these covenants in the future could constitute a default under the relevant agreement, which would have a material adverse effect on the combined company’s business, financial condition, results of operations and/or cash flows. In some cases, a default under one of the debt agreements, could trigger cross-default provisions in one or more of its other debt agreements. There can be no assurance that the combined company’s creditors would agree to an amendment or waiver of its covenants, if necessary. In the event the combined company needed to obtain an amendment or waiver, it would likely incur additional fees and higher interest expense.

In addition to the financial and other covenants contained in the combined company’s debt agreements, certain of its lease agreements contain covenants that give its landlords the right to terminate the lease, seek significant cash damages, or evict RideNow from the applicable property, if it fails to comply. Similarly, the combined company’s failure to comply with any financial or other covenants in any of its framework agreements, would give the relevant manufacturer certain rights, including the right to reject proposed acquisitions, and may give it the right to repurchase its franchises. Events that give rise to such rights, could inhibit the combined company’s ability to acquire additional dealerships or require that the combined company sell one or more of its dealerships at any time, and could have a material adverse effect on the combined company’s business, financial condition, results of operations and cash flows. Manufacturers may also have the right to restrict the combined company’s ability to provide guarantees of its operating companies, pledges of the capital stock of its subsidiaries and liens on its assets, which could materially adversely affect its ability to obtain financing for its business and operations on favorable terms or at desired levels, if at all.

RideNow may have liabilities that are not known, probable or estimable at this time.

After the Transaction, the Target Companies will remain subject to certain past, current, and future liabilities. There could be unasserted claims or assessments against or affecting the Target Companies, including the failure to comply with applicable laws and regulations. In addition, there may be liabilities of the Target Companies that are neither probable nor estimable at this time that may become probable or estimable in the future, including indemnification requests received from customers of the Target Companies relating to claims of infringement or misappropriation of third party intellectual property or other proprietary rights, tax liabilities arising in connection with ongoing or future tax audits and liabilities in connection with other past, current and future legal claims and litigation. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial results. We may learn additional information about the Target Companies that adversely affects us, such as unknown, unasserted, or contingent liabilities and issues relating to compliance with applicable laws or infringement or misappropriation of third party intellectual property or other proprietary rights.

RumbleOn stockholders will experience dilution as a consequence of the issuance of the Class B common stock in connection with the Transaction.

RumbleOn stockholders will experience dilution upon the issuance of additional shares of Class B common stock pursuant to the Transaction Agreement. Under the terms of the Transaction Agreement, the Class B common stock was valued based on an agreed to $30.00 per share price. However, under the Transaction agreement, the total number of shares of Class B common stock to be issued as “Closing Payment Shares,” will be equal to a value of $175,000,000, valued equally, on a per share basis, based upon the lowest value of: (A) $30.00; (B) the VWAP of the Purchaser Class B Common Stock for the twenty (20) trading days immediately preceding the Closing; and (C) the value on a per share basis paid for the Class B common stock or any shares underlying securities convertible into or exercisable for Class B common stock by any person which purchases Class B common stock or any shares underlying securities convertible into or exercisable for Class B Common Stock from the Purchaser from the date of the Transaction Agreement until Closing, not including purchases of Class B common stock underlying currently outstanding options, warrants, convertible notes, or other derivative securities, minus Escrow Shares (as defined in the Transaction Agreement), which Escrow Shares shall be retained solely from the consideration payable to the Principal. Such dilution will, among other things, limit the ability of the current RumbleOn stockholders to influence management of RumbleOn, including through the election of directors following the Transaction.

RumbleOn may experience difficulties integrating RideNow’s businesses.

Achieving the anticipated benefits of the Transaction will depend in significant part upon whether RumbleOn and the Target Companies integrate their businesses in an efficient and effective manner. Due to legal restrictions, RumbleOn has been able to conduct only limited planning regarding the integration of the companies following the Transaction and have not yet determined the exact nature of how the businesses and operations of the companies will be combined after the Transaction. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. The companies may not be able to accomplish the integration process smoothly, successfully or on a timely basis. The necessity of coordinating geographically separated organizations, systems of controls, and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. The companies operate numerous systems and controls, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance. The integration of operations following the Transaction will require the dedication of significant management and external resources, which may temporarily distract management’s attention from the day-to-day business of the combined company and be costly. Employee uncertainty and lack of focus during the integration process may also disrupt the business of the combined company. Any inability of management to successfully and timely integrate the operations of the companies could have a material adverse effect on the business and results of operations of the combined company.

The combined company may not fully realize the anticipated benefits of the Transaction within the timing anticipated or at all.

RumbleOn and RideNow entered into the Transaction Agreement because each company believes that the Transaction will be beneficial to each of RumbleOn and RideNow primarily as a result of the anticipated benefits resulting from the combined company’s operations. The companies may not be able to achieve the anticipated long-term strategic benefits of the Transaction. An inability to realize the full extent of, or any of, the anticipated benefits of the Transaction, as well as any delays that may be encountered in the integration process, which may delay the timing of such benefits, could have an adverse effect on the business and results of operations of the combined company, and may affect the value of RumbleOn Class B common stock after the completion of the Transaction.

Charges to earnings resulting from the application of the acquisition method of accounting may adversely affect the market value of RumbleOn Class B common stock following the Transaction.

In accordance with GAAP, RumbleOn will be considered the acquiror of the Target Companies for accounting purposes. RumbleOn will account for the Transaction using the acquisition method of accounting. There may be charges related to the acquisition that are required to be recorded to RumbleOn’s earnings that could adversely affect the market value of RumbleOn Class B common stock following the completion of the Transaction. Under the acquisition method of accounting, RumbleOn will allocate the total purchase price to the assets acquired, including identifiable intangible assets, and liabilities assumed from the Target Companies based on their fair values as of the date of the completion of the Transaction, and record any excess of the purchase price over those fair values as goodwill. For certain tangible and intangible assets, revaluating them to their fair values as of the completion date of the Transaction may result in RumbleOn’s incurring additional depreciation and amortization expense that may exceed the combined amounts recorded by RumbleOn and the Target Companies prior to the Transaction. This increased expense will be recorded by RumbleOn over the useful lives of the underlying assets. In addition, to the extent the value of goodwill or intangible assets were to become impaired after the Transaction, RumbleOn may be required to incur charges relating to the impairment of those assets.

The combined company’s goodwill or other intangible assets may become impaired, which could result in material non-cash charges to its results of operations.

The combined company will have goodwill and other intangible assets resulting from the Transaction. At least annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying value as defined by GAAP, the combined company will evaluate this goodwill and other intangible assets for impairment based on the fair value of each reporting unit. Estimated fair values could change if there are changes in the combined company’s capital structure, cost of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization. Impairments of goodwill or other intangible assets could require material non-cash charges to the combined company’s results of operations.

The combined company may be unable to manage its growth effectively.

The combined company’s growth strategy will place significant demands on its financial, operational and management resources. In order to continue its growth, the combined company may need to add administrative and other personnel, and will need to make additional investments in operations and systems. There can be no assurance that the combined company will be able to find and train qualified personnel, or do so on a timely basis, or expand its operations and systems to the extent, and in the time, required.

The combined company may be unable to execute its acquisition growth strategy.

The combined company’s ability to execute its growth strategy depends in part on its ability to identify and acquire desirable acquisition candidates as well as its ability to successfully integrate RideNow’s operations into its business. The consolidation of RumbleOn’s operations with the operations of the Target Companies will present significant challenges to management, particularly during the initial phases of combining the operations of RumbleOn and the Target Companies.

Additional factors may negatively impact the combined company’s growth strategy. The combined company’s strategy may require spending significant amounts of capital. If the combined company is unable to obtain additional needed financing on acceptable terms, it may need to reduce the scope of its acquisition growth strategy, which could have a material adverse effect on its growth prospects. If any of the aforementioned factors force management to alter the combined company’s growth strategy, the combined company’s growth prospects could be adversely affected.

RideNow and RumbleOn are investing significantly in their brand extension strategy, and if these strategic initiatives are not successful, the combined company will have incurred significant expenses without the benefit of improved financial results.

RideNow and RumbleOn have invested and will continue to invest substantial resources in marketing activities with the goals of, among other things, extending and enhancing the “RideNow Powersports” and “RumbleOn” retail brands. The companies are also investing significantly in their brand extension strategy, which includes branded parts and accessories, branded customer financial services products, stand-alone used vehicle sales and service centers, and parts distribution centers. The roll-out of these strategic initiatives may be impacted by a number of variables, including customer adoption, demand for our branded products, market conditions, and our ability to identify, acquire, and build out suitable locations in a timely manner. In addition, we depend on sourcing our branded parts and accessories through various partnerships and third-party suppliers. Our partners and third-party suppliers may be adversely impacted by a number of factors, including supply shortages, rising raw material costs, delays in shipping, economic downturns, liquidity concerns, natural disasters, labor strikes or shortages, fluctuations in currency exchange rates, product defects, litigation, governmental laws and regulations, tariffs and export product restrictions, and adverse publicity relating to their employment, environmental, or other business practices. There can be no assurance that those initiatives will be successful or that the amount we invest in those initiatives will result in improved financial results. If our initiatives are not successful, we will have incurred significant expenses without the benefit of improved financial results, and we may be required to incur impairment charges.

If we are not able to maintain and enhance our retail brands and reputation or to attract consumers to our own digital channels, or if events occur that damage our retail brands, reputation, or sales channels, our business and financial results may be harmed.

RideNow built an excellent reputation as a powersports vehicle retailer in the South and Southwest. All of RideNow’s stores are unified under the RideNow PowerSports retail brand and the RumbleOn technology we gain access to as a result of the Transaction. We believe that our continued success will depend on our ability to maintain and enhance the value of our retail brands across all of our sales channels, including in the communities in which we operate, and to attract consumers to our own digital channels.

Consumers are increasingly shopping for new and used vehicles, vehicle repair and maintenance services, and other vehicle products and services online and through mobile applications, including through third-party online and mobile sales platforms, with which we compete, that are designed to generate consumer sales leads that are sold to vehicle dealers. If we fail to preserve the value of our retail brands, maintain our reputation, or attract consumers to our own digital channels, our business could be adversely impacted.

An isolated business incident at a single store could materially adversely affect our other stores, retail brands, reputation, and sales channels, particularly if such incident results in adverse publicity, governmental investigations, or litigation. In addition, the growing use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about RideNow, RumbleOn or any of our stores could materially damage our retail brands, reputation, and sales channels.

Our largest stockholders may have the ability to exert substantial influence over actions to be taken or approved by our stockholders.

After the closing of the Transaction, the executive officers and directors and their affiliates of the combined company will beneficially own approximately 45.8% of the voting power in the combined company. As a result, these individuals may have the ability to exert substantial influence over actions to be taken or approved by our stockholders, including the election of directors and any transactions involving a change of control.

In the future, our largest stockholders may acquire or dispose of shares of our Class B common stock and thereby increase or decrease their ownership stake in us. Significant fluctuations in the levels of ownership of our largest stockholders could impact the volume of trading, liquidity, and market price of our Class B common stock.

The loss of key personnel could have a material adverse effect on the combined company’s financial condition, results of operations and growth prospects.

The success of the combined company will depend on the continued contributions of key employees and officers. The loss of the services of key employees and officers, whether such loss is through resignation or other causes, or the inability to attract additional qualified personnel, could have a material adverse effect on the combined company’s financial condition, results of operations and growth prospects.

Risks Related to RideNow’s Business and the Powersports Retail Industry

The powersports retail industry is sensitive to unfavorable changes in general economic conditions and various other factors that could affect demand for RideNow’s products and services, which could have a material adverse effect on its business, its ability to implement its strategy, and its results of operations.

RideNow’s future performance will be impacted by general economic conditions including: changes in employment levels; consumer demand, preferences and confidence levels; the lessening of the impact the COVID-19 pandemic had on social distancing and working from home which resulted in heightened demand for RideNow’s products in 2020; the availability and cost of credit; fuel prices; levels of discretionary personal income; and interest rates. RideNow is also subject to economic, competitive, and other conditions prevailing in the various markets in which it operates, even if those conditions are not prominent nationally.

Retail powersports sales are cyclical and historically have experienced periodic downturns characterized by oversupply and weak demand, which could result in a need for RideNow to lower the prices at which it sells vehicles and watercraft, which would reduce its revenue per vehicle or watercraft sold and its margins. Additionally, a shift in consumer’s vehicle preferences driven by pricing, fuel costs or other factors may have a material adverse effect on RideNow’s revenues, margins and results of operations.

Changes in general economic conditions may make it difficult for RideNow to execute its business strategy. In such an event, RideNow may be required to enter into certain transactions in order to generate additional cash, which may include, but not be limited to, selling certain of its dealerships or other assets or increasing borrowings under its existing, or any future, credit facilities. There can be no assurance that, if necessary, RideNow would be able to enter into any such transactions in a timely manner or on reasonable terms, if at all. Furthermore, in the event RideNow were required to sell dealership assets, the sale of any material portion of such assets could have a material adverse effect on its revenue and profitability.

Adverse conditions affecting one or more of the powersports manufacturers with which RideNow holds franchises, or their inability to deliver a desirable mix of vehicles that RideNow’s consumers demand, could have a material adverse effect on RideNow’s business, results of operations, financial condition, and cash flows.

Historically, RideNow has generated most of its revenue through new vehicle sales, and new vehicle sales tend to lead to sales of higher-margin products and services, such as finance and insurance products and vehicle-related parts and service. As a result, RideNow’s profitability is dependent to a great extent on various aspects of vehicle manufacturers’ operations, many of which are outside of its control. RideNow’s ability to sell new vehicles is dependent on its manufacturers’ ability to design and produce, and willingness to allocate and deliver to RideNow’s dealerships, a desirable mix of popular new vehicles that consumers demand. Popular vehicles may often be difficult to obtain from manufacturers for a number of reasons, including the fact that manufacturers generally allocate their vehicles to dealerships based on sales history and capital expenditures associated with such dealerships. Further, if a manufacturer fails to produce desirable vehicles or develops a reputation for producing undesirable vehicles or produces vehicles that do not comply with applicable laws or government regulations, and RideNow owns dealerships which sell that manufacturer’s vehicles, RideNow’s revenues from those dealerships could be adversely affected as consumers shift their vehicle purchases away from that brand.

Although RideNow seeks to limit its dependence on any one vehicle manufacturer, there can be no assurance the brand mix allocated and delivered to its dealerships by the manufacturers will be appropriate or sufficiently diverse to protect RideNow from a significant decline in the desirability of vehicles manufactured by a particular manufacturer or disruptions in a manufacturer’s ability to produce vehicles. For the year ended December 31, 2020, manufacturers representing 10% or more of RideNow’s revenues from new vehicle sales were as follows:

Similar to vehicle retailers, vehicle manufacturers may be affected by the long-term U.S. and international economic climate. In addition, RideNow remains vulnerable to other matters that may impact the manufacturers of the vehicles it sells, many of which are outside of its control, including: (i) changes in their respective financial condition; (ii) changes in their respective marketing efforts; (iii) changes in their respective reputation; (iv) manufacturer and other product defects, including recalls; (v) changes in their respective management; (vi) disruptions in the production and delivery of vehicles and parts due to natural disasters or other reasons; and (vii) issues with respect to labor relations. RideNow’s business is highly dependent on consumer demand and brand preferences for its manufacturers’ products. Manufacturer recall campaigns are a common occurrence that have accelerated in frequency and scope. Manufacturer recall campaigns could adversely affect RideNow’s new and used vehicle sales or customer residual trade-in valuations, could cause RideNow to temporarily remove vehicles from its inventory, could force RideNow to incur increased costs, and could expose RideNow to litigation and adverse publicity related to the sale of recalled vehicles, which could have a material adverse effect on its business, results of operations, financial condition and cash flows. Vehicle manufacturers that produce vehicles outside of the U.S. are subject to additional risks including changes in quotas, tariffs or duties; fluctuations in foreign currency exchange rates; regulations governing imports and the costs related thereto; and foreign governmental regulations.

Adverse conditions that materially affect a vehicle manufacturer and its ability to profitably design, market, produce or distribute desirable new vehicles could in turn materially adversely affect RideNow’s ability to (i) sell vehicles produced by that manufacturer, (ii) obtain or finance RideNow’s new vehicle inventories, (iii) access or benefit from manufacturer financial assistance programs, (iv) collect in full or on a timely basis any amounts due therefrom, and/or (v) obtain other goods and services provided by the impacted manufacturer. In addition, RideNow depends on manufacturers’ ability to design, produce, and supply parts to it and any failure to do so could have a material adverse effect on its parts and services business. RideNow’s business, results of operations, financial condition, and cash flows could be materially adversely affected as a result of any event that has an adverse effect on any vehicle manufacturer.

In addition, if a vehicle manufacturer’s financial condition worsens and it seeks protection from creditors in bankruptcy or similar proceedings, or otherwise under the laws of its jurisdiction of organization, (i) the manufacturer could seek to terminate or reject all or certain of RideNow’s franchises, (ii) if the manufacturer is successful in terminating all or certain of RideNow’s franchises, RideNow may not receive adequate compensation for those franchises, (iii) RideNow’s cost to obtain financing for its new vehicle inventory may increase or no longer be available from such manufacturer’s captive finance subsidiary, (iv) consumer demand for such manufacturer’s products could be materially adversely affected, especially if costs related to improving such manufacturer’s financial condition are factored into the price of its products, (v) there may be a significant disruption in the availability of consumer credit to purchase or lease that manufacturer’s vehicles or negative changes in the terms of such financing, which may negatively impact RideNow’s sales, or (vi) there may be a reduction in the value of receivables and inventory associated with that manufacturer, among other things. The occurrence of any one or more of these events could have a material adverse effect on RideNow’s business, results of operations, financial condition, and cash flows.

In addition, the powersports manufacturing supply chain spans the globe. As such, supply chain disruptions resulting from natural disasters, adverse weather and other events may affect the flow of vehicle and parts inventories to RideNow or its manufacturing partners. For example, in early 2020, the outbreak of the novel coronavirus in Wuhan, China led to quarantines of a significant number of Chinese cities and other cities worldwide and widespread disruptions to travel and economic activity in most countries. Until such time as the coronavirus is contained, ongoing quarantines may lead RideNow to experience disruptions in the (i) supply of vehicle and parts inventories, (ii) ability and willingness of its customers to visit its stores to purchase products or service their vehicles, and (iii) overall health of its labor force. Although during 2020 the impact of the coronavirus resulted in significant increases in RideNow’s sales and profitability as its customers purchased significantly more vehicles presumably to pursue an entertainment option which complied with social distancing measures and because its customers were limited to fewer other alternatives, it is unclear what effect, if any, the outbreak and resulting disruptions may have on the vehicle manufacturing, vehicle and parts supply chain, the health of RideNow’s labor force and the ability and willingness of its customers to visit its stores to purchase products or service their vehicles. Such disruptions could have a material adverse effect on RideNow’s business, results of operations, financial condition, and cash flows.

All of RideNow’s manufacturers will require their consent to consummate the Transaction. Ultimately, if RideNow fails to obtain the consent with respect to dealership locations representing less than 5% of revenue of the dealership locations from the sale of new vehicles for the twelve (12) months ending December 31, 2020, it is permitted to close the Transaction anyway. This may result in the loss of critical brand name vehicles to certain dealership locations which in turn may have a material adverse effect on their performances if not replaced by other manufacturers’ products.

RideNow’s business, financial condition, and results of operations may be materially adversely affected by increases in interest rates.

RideNow generally finances its purchases of new vehicle inventory, has the ability to finance the purchases of used vehicle inventory, and has the availability to borrow funds for working capital under its senior secured credit facilities that charge interest at variable rates. Therefore, RideNow’s interest expense from variable rate debt will rise with increases in interest rates. In addition, a significant rise in interest rates may also have the effect of depressing demand in the interest rate sensitive aspects of RideNow’s business, particularly new and used vehicle sales and the related profit margins and revenue per vehicle, because most of its customers finance their vehicle purchases. As a result, rising interest rates may have the effect of simultaneously increasing RideNow’s capital costs and reducing its revenues. When considered in connection with reduced expected sales as and if interest rates increase, any such increase could materially adversely affect RideNow’s business, financial condition and results of operations.

RideNow’s vehicle and watercraft sales, financial condition, and results of operations may be materially adversely affected by changes in costs or availability of consumer financing.

The majority of vehicles and watercraft purchased by RideNow’s customers are financed. Reductions in the availability of credit to consumers have contributed to declines in RideNow’s vehicle sales in past periods. Reductions in available consumer credit or increased costs of that credit could result in a decline in RideNow’s vehicle sales, which would have a material adverse effect on its financial condition and results of operations.

Lenders that have historically provided financing to those buyers who, for various reasons, do not have access to traditional financing, including those buyers who have a poor credit history or lack the down payment necessary to purchase a vehicle, are often referred to as subprime lenders. If market conditions cause subprime lenders to tighten credit standards, or if interest rates increase, the ability to obtain financing from subprime lenders for these consumers to purchase vehicles could become limited, resulting in a decline in RideNow’s vehicle sales, which in turn, could have a material adverse effect on its financial condition and results of operations.

Substantial competition in powersports sales and services may have a material adverse effect on RideNow’s results of operations.

The powersports retail and service industry is highly competitive with respect to price, service, location, and selection. RideNow’s competition includes: (i) franchised vehicle dealerships in its markets that sell the same or similar new and used vehicles and boats; (ii) privately negotiated sales of used vehicles and boats; (iii) other used vehicle and boat retailers, including regional and national vehicle rental companies; (iv) internet-based used vehicle brokers that sell used vehicles and boats to consumers; (v) service center and parts supply chain stores; and (vi) independent service and repair shops.

RideNow does not have any material cost advantage over other retailers in purchasing new vehicles from manufacturers. RideNow typically relies on its advertising, merchandising, sales expertise, service reputation, strong local branding, and dealership location to sell new vehicles. Because RideNow’s dealer agreements only grant it a non-exclusive right to sell a manufacturer’s product within a specified market area, its revenues, gross profit and overall profitability may be materially adversely affected if competing dealerships expand their market share. Further, RideNow’s vehicle manufacturers may decide to award additional franchises in its markets in ways that negatively impact its sales.

Internet and text messaging have become a significant part of the advertising and sales process in RideNow’s industry. Customers are using the internet to shop, and compare prices, for new and used vehicles, repair and maintenance services, finance and insurance products, and other powersports products. If RideNow is unable to effectively use the internet or text messaging to attract customers to its own on-line channels and mobile applications, and, in turn, to its stores, its business, financial condition, results of operations, and cash flows could be materially adversely affected. Additionally, the growing use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about RideNow or any of its stores could damage RideNow’s reputation and brand names, which could have a material adverse effect on its business, financial condition, results of operations, and cash flows.

Additionally, if one or more companies are permitted to circumvent the state franchise laws of several states in the United States thereby permitting them to sell their new vehicles without the requirements of establishing a dealer-network, they may be able to have a competitive advantage over the traditional dealers, which could have a material adverse effect on RideNow’s sales in those states.

RideNow is dependent upon its relationships with the manufacturers of vehicles that it sells and is subject to restrictions imposed by, and significant influence from, these vehicle manufacturers. Any of these restrictions or any changes or deterioration of these relationships could have a material adverse effect on RideNow’s business, financial condition, results of operations, and cash flows.

RideNow is dependent on its relationships with the manufacturers of the vehicles it sells, which have the ability to exercise a great deal of control and influence over its day-to-day operations, as a result of the terms of its dealer, framework, and related agreements. RideNow may obtain new vehicles from manufacturers, service vehicles, sell new vehicles, and display vehicle manufacturers’ trademarks only to the extent permitted under these agreements. The terms of these agreements may conflict with RideNow’s interests and objectives and may impose limitations on key aspects of its operations, including acquisition strategy and capital spending.

For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness and customer satisfaction, and require RideNow to obtain manufacturer consent before it can acquire dealerships selling a manufacturer’s vehicles. From time to time, RideNow may be precluded under agreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent RideNow is not meeting certain performance criteria at its existing stores (with respect to matters such as sales volume, customer satisfaction and sales effectiveness) until its performance improves in accordance with the agreements, subject to applicable state franchise laws. In addition, many vehicle manufacturers place limits on the total number of franchises that any group of affiliated dealerships may own and certain manufacturers place limits on the number of franchises or share of total brand vehicle sales that may be maintained by an affiliated dealership group on a national, regional or local basis, as well as limits on store ownership in contiguous markets, which limits may be applicable to the Company as a result of the Transaction. If RideNow reaches any of these limits, it may be prevented from making further acquisitions, or it may be required to dispose of certain dealerships, whether as a result of the Transaction or otherwise, which could adversely affect its future growth. RideNow cannot provide assurance that manufacturers will approve future acquisitions timely, if at all, which could significantly impair the execution of its acquisition strategy.

In addition, certain manufacturers use a dealership’s manufacturer-determined customer satisfaction index score as a factor governing participation in incentive programs. To the extent RideNow does not meet minimum score requirements, its future payments may be materially reduced or it may be precluded from receiving certain incentives, which could materially adversely affect its business, financial condition, results of operations and cash flows.

Manufacturers also typically establish facilities and minimum capital requirements for dealerships on a case-by-case basis. In certain circumstances, including as a condition to obtaining consent to a proposed acquisition, a manufacturer may require RideNow to remodel, upgrade or move its facilities, and capitalize the subject dealership at levels it would not otherwise choose to fund, causing RideNow to divert its financial resources away from uses that management believes may be of higher long-term value to it. Delays in obtaining, or failing to obtain, manufacturer consent, would impede RideNow’s ability to execute acquisitions that it believes would integrate well with its overall strategy and limit its ability to expand its business.

Manufacturers can also establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocation of franchises in RideNow’s markets could have a material adverse effect on the business, financial condition and results of operations of its dealerships in the market in which the action is taken.

Manufacturers may also limit RideNow’s ability to divest one or more of its dealerships in a timely manner or at all. Most of RideNow’s dealer agreements provide the manufacturer with a right of first refusal to purchase any of the manufacturer’s franchises RideNow seeks to sell. Divestitures may also require manufacturer consent and failure to obtain consent would require RideNow to find another potential buyer or wait until the buyer is able to meet the requirements of the manufacturer. A delay in the sale of a dealership could have a negative impact on RideNow’s business, financial condition, results of operations, and cash flows.

Manufacturers may terminate or may not renew RideNow’s dealer and framework agreements, or may compel RideNow to divest its dealerships for a number of reasons, including, default under the agreement, any unapproved change of control (which specific changes vary from manufacturer to manufacturer, but which include material changes in the composition of RideNow’s Board during a specified time period, the acquisition of 5% or more of RideNow’s voting stock by another vehicle manufacturer or distributor, the acquisition of 20% or more of RideNow’s voting stock by third parties, and the acquisition of an ownership interest sufficient to direct or influence management and policies), or certain other unapproved events (including certain extraordinary corporate transactions such as a merger or sale of all or substantially all of RideNow’s assets). Restrictions on any unapproved changes of ownership or management may adversely impact RideNow’s value, as they may prevent or deter prospective acquirers from gaining control of it. In addition, actions taken by a manufacturer to exploit its bargaining position in negotiating the terms of renewals of franchise agreements or otherwise, could also have a material adverse effect on RideNow’s revenues and profitability.

There can be no assurances that RideNow will be able to renew its dealer and framework agreements on a timely basis, on acceptable terms, or at all. RideNow’s business, financial condition, and results of operations may be materially adversely affected to the extent that its rights become compromised or its operations are restricted due to the terms of its dealer or framework agreements or if it loses franchises representing a significant percentage of its revenues due to termination or failure to renew such agreements.

If vehicle manufacturers reduce or discontinue sales incentive, warranty or other promotional programs, RideNow’s financial condition, results of operations, and cash flows may be materially adversely affected.

RideNow benefits from certain sales incentive, warranty, and other promotional programs of vehicle manufacturers that are intended to promote and support their respective new vehicle sales. Key incentive programs include: (i) customer rebates on new vehicles; (ii) dealer incentives on new vehicles; (iii) special financing or leasing terms; (iv) warranties on new and used vehicles; and (v) sponsorship of used vehicle sales by authorized new vehicle dealers.

Vehicle manufacturers often make many changes to their incentive programs. Any reduction or discontinuation of manufacturers’ incentive programs for any reason, including a supply and demand imbalance, may reduce RideNow’s sales volume which, in turn, could have a material adverse effect on its results of operations, cash flows, and financial condition.

If state laws that protect powersports retailers are repealed, weakened, or superseded by RideNow’s framework agreements with manufacturers, its dealerships will be more susceptible to termination, non-renewal, or renegotiation of their dealer agreements, which could have a material adverse effect on its business, results of operations and financial condition.

Applicable state laws generally provide that a vehicle manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with written notice setting forth “good cause” and stating the grounds for termination or non-renewal. Some state laws allow dealers to file protests or petitions or allow them to attempt to comply with the manufacturer’s criteria within a notice period to avoid the termination or non-renewal. RideNow’s framework agreements with certain manufacturers contain provisions that, among other things, attempt to limit the protections available to dealers under these laws, and, though unsuccessful to date, manufacturers’ ongoing lobbying efforts may lead to the repeal or revision of these laws. If these laws are repealed in the states in which RideNow operates, manufacturers may be able to terminate RideNow’s franchises without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of these state laws, it may also be more difficult for RideNow to renew its dealer agreements upon expiration. Changes in laws that provide manufacturers the ability to terminate RideNow’s dealer agreements could materially adversely affect its business, financial condition, and results of operations. Furthermore, if a manufacturer seeks protection from creditors in bankruptcy, courts have held that the federal bankruptcy laws may supersede the state laws that protect vehicle retailers resulting in the termination, non-renewal or rejection of franchises by such manufacturers, which, in turn, could materially adversely affect RideNow’s business, financial condition, and results of operations.

A failure of any of RideNow’s information systems or those of its third-party service providers, or a data security breach with regard to personally identifiable information about RideNow’s customers or employees, could have a material adverse effect on its business, results of operations, financial condition and cash flows.

RideNow depends on the efficient operation of its information systems and those of its third-party service providers. RideNow relies on information systems at its dealerships in all aspects of its sales and service efforts, as well in the preparation of its consolidated financial and operating data. All of RideNow’s dealerships currently operate on a common dealership management system (“DMS”). RideNow’s business could be significantly disrupted if (i) the DMS fails to integrate with other third-party information systems, customer relations management tools or other software, or to the extent any of these systems become unavailable to RideNow or fail to perform as designed for an extended period of time, or (ii) RideNow’s relationship with its DMS provider or any other third-party provider deteriorates. Additionally, any disruption to access and connectivity of RideNow’s information systems due to natural disasters, power loss or other reasons could disrupt its business operations, impact sales and results of operations, expose RideNow to customer or third-party claims, or result in adverse publicity.

Additionally, in the ordinary course of business, RideNow and its partners receive significant confidential personal information about its customers in order to complete the sale or service of a vehicle and related products. RideNow also receives confidential personal information from its employees. The regulatory environment surrounding information security and privacy is increasingly demanding, with numerous state and federal regulations, as well as payment card industry and other vendor standards, governing the collection and maintenance of confidential personal information from consumers and other individuals. RideNow believes the powersports dealership industry is a particular target of identity thieves, as there are numerous opportunities for a data security breach, including cyber-security breaches, burglary, lost or misplaced data, scams, or misappropriation of data by employees, vendors or unaffiliated third parties. Because of the increasing number and sophistication of cyber-attacks, and despite the security measures RideNow has in place and any additional measures it may implement or adopt in the future, its facilities and systems, and those of its third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, burglary, human errors, acts of vandalism, and/or other events. Alleged or actual data security breaches can increase costs of doing business, negatively affect customer satisfaction and loyalty, expose RideNow to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe on proprietary information, any of which could have a material adverse effect on its business, financial condition, results of operations, or cash flows.

RideNow’s operations are subject to extensive governmental laws and regulations. If RideNow is found to be in purported violation of or subject to liabilities under any of these laws or regulations, or if new laws or regulations are enacted that adversely affect its operations, its business, results of operations, financial condition, cash flows, reputation and prospects could suffer.

The powersports retail industry, including RideNow’s facilities and operations, is subject to a wide range of federal, state, and local laws and regulations, such as those relating to motor vehicle and boat sales, retail installment sales, leasing, finance and insurance, marketing, licensing, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, vehicle emissions and fuel economy, and health and safety. In addition, with respect to employment practices, RideNow is subject to various laws and regulations, including complex federal, state, and local wage and hour and anti-discrimination laws. The violation of the laws or regulations to which RideNow is subject could result in administrative, civil, or criminal sanctions against RideNow, which may include a cease and desist order against the subject operations or even revocation or suspension of its license to operate the subject business, as well as significant fines and penalties. Violation of certain laws and regulations to which RideNow is subject may also subject it to consumer class action or other lawsuits or governmental investigations and adverse publicity. RideNow currently devotes significant resources to comply with applicable federal, state, and local regulation of health, safety, environmental, zoning, and land use regulations, and it may need to spend additional time, effort, and money to keep its operations and existing or acquired facilities in compliance therewith.

In addition, there is a risk that RideNow’s employees could engage in misconduct that violates the laws or regulations to which it is subject. It is not always possible to detect or prevent employee misconduct, and the precautions RideNow takes to detect and deter this activity may not be effective in all cases. If any of RideNow’s employees were to engage in misconduct or were to be accused of such misconduct, its business and reputation could be adversely affected.

The Dodd-Frank Act, which was signed into law on July 21, 2010, established the Consumer Financial Protection Bureau (the “CFPB”), an independent federal agency funded by the United States Federal Reserve with broad regulatory powers and limited oversight from the United States Congress. Although vehicle dealers are generally excluded, the Dodd-Frank Act could lead to additional, indirect regulation of vehicle dealers, in particular, their sale and marketing of finance and insurance products, through its regulation of vehicle finance companies and other financial institutions. In addition, the CFPB possesses supervisory authority with respect to certain non-bank lenders, including vehicle finance companies, participating in vehicle financing. The Dodd-Frank Act also provided the Federal Trade Commission (the “FTC”) with new and expanded authority regarding vehicle dealers. Since then, the FTC has been gathering information on consumer protection issues through roundtables, public comments and consumer surveys. The FTC may exercise its additional rule-making authority to expand consumer protection regulations relating to the sale, financing and leasing of motor vehicles.

Continued pressure from the CFPB, FTC, and other federal agencies could lead to significant changes in the manner that dealers are compensated for arranging customer financing, and while it is difficult to predict how any such changes might impact RideNow, any adverse changes could have a material adverse impact on its finance and insurance business and results of operations. Furthermore, RideNow expects that new laws and regulations, particularly at the federal level, in other areas may be enacted, which could also materially adversely impact its business.

Environmental laws and regulations govern, among other things, discharges into the air and water, storage of petroleum substances and chemicals, the handling and disposal of hazardous wastes, and investigation and remediation of contamination. Similar to many of its competitors, RideNow has incurred and expects to continue to incur capital and operating expenditures and other costs to comply with such federal and state statutes. In addition, RideNow may become subject to broad liabilities arising out of contamination at its currently and formerly owned or operated facilities, at locations to which hazardous substances were transported from such facilities, and at such locations related to entities formerly affiliated with it. For such potential liabilities, RideNow believes it is entitled to indemnification from other entities. However, RideNow cannot provide assurance that such entities will view their obligations as it does or will be able or willing to satisfy them. Failure to comply with applicable laws and regulations, or significant additional expenditures required to maintain compliance therewith, could have a material adverse effect on RideNow’s business, results of operations, financial condition, or cash flows.

A significant judgment against RideNow or the imposition of a significant fine could have a material adverse effect on its business, financial condition and future prospects. RideNow further expects that, from time to time, new laws and regulations, particularly in the environmental area will be enacted, and compliance with such laws, or penalties for failure to comply, could significantly increase its costs. For example, vehicle manufacturers are subject to government-mandated fuel economy and greenhouse gas emission standards, which continue to change and become more stringent over time. Failure of a manufacturer to develop vehicles that meet fuel economy or greenhouse gas emission standards could subject the manufacturer to substantial penalties, increase the cost of vehicles sold to RideNow, and adversely affect RideNow’s ability to market and sell vehicles to meet consumer needs and desires, which could have a material adverse effect on its business, results of operations, financial condition, or cash flows.

RideNow is subject to risks related to the provision of employee health care benefits, which could have a material adverse effect on its business, results of operations, financial condition, and cash flows.

RideNow uses insurance for health care plans. It records expenses under those plans based on estimates of the costs of expected claims, administrative costs, stop-loss insurance premiums, and expected health care trends. Actual costs under these plans are subject to variability that is dependent upon participant enrollment, demographics, and the actual costs of claims made. Negative trends in any of these areas could cause RideNow to incur additional unplanned health care costs, which could adversely impact its business, financial condition, results of operations, and cash flows. In addition, if enrollment in RideNow’s health care plans increases significantly, the additional costs that it will incur may be significant enough to materially affect its business, financial condition, results of operations, and cash flows.

RideNow is, and expects to continue to be, subject to legal and administrative proceedings, which, if the outcomes are adverse to it, could have a material adverse effect on its business, results of operations, financial condition, cash flows, reputation and prospects.

RideNow is involved and expects to continue to be involved in numerous legal proceedings arising out of the conduct of its business, including litigation with customers, employment-related lawsuits, class actions, purported class actions, and actions brought by governmental authorities. RideNow does not believe that the ultimate resolution of any known matters will have a material adverse effect on its business, financial condition, results of operations, cash flows, reputation or prospects. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on RideNow’s business, financial condition, results of operations, and cash flows.

Property loss or other uninsured liabilities could have a material adverse impact on RideNow’s results of operations.

RideNow is subject to substantial risk of property loss due to the significant concentration of property at dealership locations, and concentration of dealerships themselves, including vehicles and parts. RideNow has historically experienced business interruptions from time to time at several of its dealerships, due to actual or threatened adverse weather conditions or natural disasters, such as hurricanes, tornadoes, floods, and hail storms, or other extraordinary events. Concentration of property at dealership locations also makes the powersports retail business particularly vulnerable to theft, fraud, and misappropriation of assets. Illegal or unethical conduct by employees, customers, vendors, and unaffiliated third parties can result in loss of assets, disrupt operations, impact brand reputation, jeopardize manufacturer and other relationships, result in the imposition of fines or penalties, and subject RideNow to governmental investigations or lawsuits. While RideNow maintains insurance to protect against a number of losses, including cyber-security breaches or attacks, its insurance coverage often contains significant deductibles. In addition, RideNow “self-insures” a portion of its potential liabilities, meaning it does not carry insurance from a third-party for such liabilities, and is wholly responsible for any related losses including for certain potential liabilities that some states prohibit the maintenance of insurance to protect against. In certain instances, RideNow’s insurance may not fully cover a loss depending on the applicable deductible or the magnitude and nature of the claim. Additionally, changes in the cost or availability of insurance in the future could substantially increase RideNow’s costs to maintain its current level of coverage or could cause it to reduce its insurance coverage and increase its self-insured risks. To the extent RideNow incurs significant additional costs for insurance, suffers losses that are not covered by in-force insurance or suffers losses for which it is self-insured, its financial condition, results of operations, or cash flows could be materially adversely impacted.

RideNow is subject to risks associated with imported product restrictions or limitations, foreign trade and currency fluctuations.

RideNow’s business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the United States. As a result, its operations are subject to risks of doing business outside of the United States and importing merchandise, including import duties, exchange rates, trade restrictions, work stoppages, natural or man-made disasters, and general political and socio-economic conditions in other countries. The United States or the countries from which RideNow’s products are imported may, from time to time, impose new quotas, duties, tariffs or other restrictions or limitations, or adjust presently prevailing quotas, duties, or tariffs. The imposition of new, or adjustments to prevailing, quotas, duties, tariffs or other restrictions or limitations could have a material adverse effect on RideNow’s business, financial condition, results of operations and cash flows. Relative weakness of the U.S. dollar against foreign currencies in the future may result in an increase in costs to RideNow and in the retail price of such vehicles or parts, which could discourage consumers from purchasing such vehicles and adversely impact its revenues and profitability.

If RideNow is unable to acquire and successfully integrate additional dealerships into its business, its revenue and earnings growth may be adversely affected.

RideNow believes that the vehicle retailing industry is a mature industry whose sales are significantly impacted by the prevailing economic climate, both nationally and in local markets. Accordingly, RideNow believes that its future growth depends in part on its ability to manage expansion, control costs in its operations and acquire and effectively integrate acquired dealerships into its organization. When seeking to acquire other dealerships, RideNow often competes with several other national, regional and local dealership groups, and other strategic and financial buyers, some of which may have greater financial resources than it. Competition for attractive acquisition targets may result in fewer acquisition opportunities for RideNow, and it may have to forgo acquisition opportunities to the extent it cannot negotiate such acquisitions on acceptable terms.

RideNow also faces additional risks commonly encountered with growth through acquisitions. These risks include, but are not limited to: (i) failing to obtain manufacturers’ consents to acquisitions of additional franchises; (ii) incurring significant transaction-related costs for both completed and failed acquisitions; (iii) incurring significantly higher capital expenditures and operating expenses; (iv) failing to integrate the operations and personnel of the acquired dealerships and impairing relationships with employees; (v) incorrectly valuing entities to be acquired or incurring undisclosed liabilities at acquired dealerships; (vi) disrupting its ongoing business and diverting its management resources to newly acquired dealerships; (vii) failing to achieve expected performance levels; and (viii) impairing relationships with manufacturers and customers as a result of changes in management.

RideNow may not adequately anticipate all the demands that its growth will impose on its personnel, procedures and structures, including its financial and reporting control systems, data processing systems, and management structure. Moreover, its failure to retain qualified management personnel at any acquired dealership may increase the risks associated with integrating the acquired dealership. If RideNow cannot adequately anticipate and respond to these demands, it may fail to realize acquisition synergies and its resources will be focused on incorporating new operations into its structure rather than on areas that may be more profitable.

Natural disasters and adverse weather events can disrupt RideNow’s business.

RideNow’s stores are concentrated in states and regions in the United States, including primarily Florida, Texas, Arizona and California, in which actual or threatened natural disasters and severe weather events (such as hail storms, hurricanes, earthquakes, fires, tornadoes, snow storms, and landslides) may disrupt its store operations, which may adversely impact its business, results of operations, financial condition, and cash flows. In addition to business interruption, the vehicle retail business is subject to substantial risk of property loss due to the significant concentration of property values at store locations.

RideNow cannot assure you that it will not be exposed to uninsured or underinsured losses that could have a material adverse effect on its business, financial condition, results of operations, or cash flows. In addition, natural disasters may adversely impact new vehicle production and the global vehicle supply chain, which in turn could materially adversely impact RideNow’s business, results of operations, financial conditions, and cash flows.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in RumbleOn’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 31, 2021, and incorporated by reference into this proxy statement, and in particular, the risks discussed under the caption “Risk Factors” included in this proxy statement. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

PROPOSAL 1: THE STOCK ISSUANCE PROPOSAL

The following discussion contains important information relating to the Transaction. The Plan of Merger and Equity Purchase Agreement, dated March 12, 2021, among RumbleOn, the Merger Subs, the Sellers, and the Sellers’ Representative, which is referred to as the Transaction Agreement, is included as Annex A to this proxy statement. RumbleOn encourages you to carefully read the Transaction Agreement in its entirety because it is the principal legal agreement that governs the Transaction.

The Companies

RumbleOn, Inc.

RumbleOn, Inc., a Nevada corporation, is a technology driven, motor vehicle dealer and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.

We operate an infrastructure-light platform that facilitates the ability of all participants in the supply chain, including RumbleOn, other dealers and consumers to Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal is to transform the way VIN-specific pre-owned vehicles are bought and sold by providing users with the most comprehensive, efficient, timely and transparent transaction experiences. While our initial customer facing emphasis through most of 2018 was on motorcycles and other powersports vehicles, we continue to enhance our platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Of the 3,500 vehicles we sold during the three-months ended March 31, 2021, 2,494 (71%) were automotive and 1,006 (29%) were powersports vehicles. For the three-months ended March 31, 2020, we sold 7,420 vehicles of which 4,603 (62%) were automotive and 2,817 (38%) were powersports vehicles. In August 2020, we launched RumbleOn 3.0, bringing traditional brick and mortar powersports dealers across the country online. Then, in March 2021, we announced a definitive agreement to combine our e-commerce platform with the RideNow powersports group, the nation’s largest powersports retailer, as discussed further below. The combination of RumbleOn and RideNow will become the first omnichannel platform in powersports. This channel is a full-service platform that will revolutionize the customer experience. This omnichannel platform will offer the consumer the fastest, easiest, and most transparent transaction online or in store while providing customers the most comprehensive offering that includes:

The combination of RumbleOn and RideNow is well positioned to capitalize on the secular changes in consumer behavior accelerated by COVID-19. These changes include:

Shift in Demographics⁽¹⁾

Transition to Outdoor Lifestyle⁽¹⁾

Digital Adoption Accelerated⁽¹⁾

We believe today’s consumer is experience focused; RumbleOn’s acquisition platform for pre-owned vehicles enables the combined business to capture incremental market share as new riders continue to enter the category.

(1)       Source: NPD, National Marine Manufacturers Association, U.S. Department of Commerce, Cox Automotive, Boston Consulting Group, McKinsey & Company.

This document incorporates important business and financial information about RumbleOn from other documents that are not included in or delivered with this proxy statement. For a list of the documents incorporated by reference into this proxy statement, see “Where You Can Find More Information.”

RideNow

RideNow Group and Affiliates, a non-legal entity, (“RideNow” or “The Group”) is an affiliated group of powersports franchise dealerships that has been accumulated primarily through acquisition over the past 37 years by its principal owners Bill Coulter and Mark Tkach. Today, RideNow is the nation’s largest powersports dealer group with 45 locations in 11 states predominantly in the Sunbelt region of the United States. For the year ended December 31, 2020, combined revenue, gross profit, and net income were $900 million, $256 million, and $93 million, respectively. The Group sells new and used motorcycles, all-terrain vehicles, personal watercraft, other powersports vehicles, and related products and services, including repair and maintenance services, parts and accessories, riding gear, and apparel. The core brands sold by RideNow are Harley-Davidson, Honda, Yamaha, Kawasaki, Suzuki, Bombardier, Polaris, BMW, Ducati and Triumph, which are sold through franchise dealer agreements. RideNow prides itself on bringing quality vehicles, service, and experience to the communities it serves and has long been admired by industry leaders as the largest and most professionally operated Powersports dealer group in the U.S.

RideNow was founded by William Coulter in 1983 as a Honda powersports distributor under the name “Coulter Town & Country Honda” located in Tempe, Arizona. Mark Tkach became the General Manager of this location in 1989. In 2005, RideNow first introduced the tradename “RideNow Powersports” for use in all of the franchise retail stores which had no uniform or identifiable common name prior to that time.

Since inception, management has believed in an “acquisition strategy” acquiring inefficient operators in a highly fragmented industry. RideNow’s business strategy is to acquire and operate existing retail locations in the Sunbelt states where the weather permits use year-round. Management has focused on centralizing services which benefit from economies of scale such as heavy maintenance, inventory, IT and distribution centers while locating and maintaining high caliber local management who are aficionados of the vehicles offered. Establishing consistent operating procedures at all locations, enhanced bonus opportunities, employee training, shared product knowledge and a customer centered approach has often resulted in the turnaround of poorly performing retail locations after acquisition. Facility renovations and enhancements are often required as well to improve the physical appearance of the retail space. Marketing and advertising campaigns using the “RideNow” logo provide enhancement and better customer recognition. Finally, the strong financing capabilities of the owners present timely and needed cash infusions when necessary. The strong historic relationships of Mr. Coulter and Mr. Tkach with the equipment manufacturers add credibility to the retail locations permitting at times brand expansion.

Today approximately 47.3% of revenue is from sales of off-road vehicles (UTVs, ATV, Dirt Bikes), 46.4% from sales of motorcycles and 6.3% from sales of personal watercraft, and other vehicles. The following table summarizes RideNow’s operating performance for the three years ended December 31, 2020 as well as for the quarter ended March 31, 2021. You should also review RideNow’s complete financial statements for these periods beginning on page F-1 of this proxy statement.

RideNow Group

Management Discussion and Analysis of Financial Condition and Results of Operations
for the Quarterly Periods ended March 31, 2021 and March 31, 2020

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of the RideNow Group is provided as a supplement to, and should be read in conjunction with, the unaudited Combined Financial Statements and Notes thereto for the three months ended March 31, 2021 and 2020, which are included in this report.

Overview

RideNow Group and Affiliates, a non-legal entity, (“RideNow” or “The Group” or the “Company”) is a collection of franchised dealerships operating in the powersports industry. The Group is engaged in the sale of new and used motorcycles, all-terrain vehicles, personal watercraft, other powersports vehicles, and related products and services, including repair and maintenance services, parts and accessories, riding gear, and apparel. As of March 31, 2021, RideNow owned and operated more than 43 retail dealerships in the United States, predominately in the Sunbelt region. The core brands sold by RideNow are Harley-Davidson, Honda, Yamaha, Kawasaki, Suzuki, Bombardier, Polaris, BMW, Ducati and Triumph, which are sold through franchise dealer agreements.

On March 31, 2021, and December 31, 2020 RideNow had two operating segments: (1) Harley-Davidson motor sports dealerships and (2) Metric motor sports dealerships (representing all Non-Harley-Davidson motor sports dealerships). RideNow’s Harley-Davidson dealership segment is comprised of retail franchises that sell new and used motorcycles and related accessories, riding gear and apparel, replacement parts, equipment repair and maintenance services, and also arrange for the delivery of finance and insurance products through third party providers. RideNow’s Metric dealerships segment is comprised of retail franchises that sell new and used motorcycles (non-Harley-Davidson) and other motor sports equipment, including all-terrain vehicles, utility terrain vehicles, boats, personal watercraft, snowmobiles and scooters from manufacturers such as Honda, Yamaha, Kawasaki, Suzuki, Bombardier, Polaris, BMW, Ducati and Triumph. Additionally, dealerships in RideNow’s Metric segment sell related products and services, including repair and maintenance services and also arrange for the delivery of finance and insurance products through third party providers. RideNow has determined that the operating segments also represent the reportable segments. The reportable segments identified above are the business activities of RideNow for which discrete financial information is available and for which operating results are regularly reviewed by the chief operating decision maker to assess operating performance and allocate resources. RideNow’s chief operating decision maker is comprised of its two owners, who are also RideNow’s (1) Chairman of the Board and (2) Chief Executive Officer.

For the three months ended March 31, 2021, new vehicle sales accounted for 58.4% of the Company’s revenue and 37.4% of total gross profit compared to 50.5% and 23.6% of the Company’s revenue and gross profit, respectively in 2020. Used vehicle sales accounted for 15.9% of the Company’s revenue and 9.7% of total gross profit for the three months ended March 31, 2021, compared to 21.4% and 10.0%, of the Company’s revenue and gross profit, respectively, in 2020. Service, parts and others accounted for 17.8% of the Company’s revenue and 26.9% of total gross profit for the three months ended March 31, 2021, compared to 20.2% and 36.5%, respectively in 2020. Finance and insurance, accounted for 7.9% of the Company’s revenue and 26.0% of total gross profit compared to 7.9%% and 29.9%, respectively in 2020.

Acquisition by RumbleOn

On March 12, 2021, RumbleOn, Inc. announced a definitive agreement to combine with the RideNow Group to create the only omnichannel customer experience in powersports and the largest publicly traded powersports dealership platform (the “RideNow Transactions”). Under the terms of the definitive agreement, RumbleOn will combine with up to 46 entities operating under the RideNow brand for a total consideration of up to $575.4 million, consisting of $400.4 million of cash and approximately 5.8 million shares of RumbleOn Class B Common Stock. RumbleOn will finance the cash consideration through a combination of up to $280.0 million of debt and the remainder through the issuance of new equity. RumbleOn has entered into a commitment letter with Oaktree Capital Management, L.P. (“Oaktree”) to provide for the debt financing, subject to certain conditions (the “Oaktree Financing”). The number of shares to be issued to RideNow is subject to increase as described in the definitive agreement. The RideNow Transaction is subject to successful completion of the debt and equity financing, RumbleOn stockholder approval, manufacturer approval, other federal and state regulatory approvals, and other customary closing conditions as described in the definitive agreement. We expect to close the RideNow Transaction during the third quarter of 2021.

COVID-19 Update

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The rapid spread of COVID-19 resulted in governmental authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, shutdowns and vaccines. We initially took aggressive action in response to the Pandemic, furloughing nearly 45% of our workforce. However, we quickly rebounded as we found the Pandemic was actually creating great demand as people, weary of staying at home found riding an off-road vehicle in the wide-open, socially distant spaces of tracks and trails to be appealing. While the manufacturers curtailed or shut down operations for a time, and our supply of new vehicles declined, our off-road vehicle demand increased significantly. For the quarter ended June 30, 2020, our vehicles sold, revenue and gross profit were up 57.1%, 49.8% and 58.1%, respectively compared to the quarter ending March 31, 2020. This trend continued throughout the remainder of 2020, and we believe demonstrates that we have been successful in navigating the impact of COVID-19 on our business to date and that our business model makes us well-positioned to meet expected customer demand during the current COVID-19 pandemic. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as circumstances evolve surrounding the COVID-19 pandemic.

Results of Operations

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our combined financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. Refer to Note 1 — Summary of Significant Accounting Policies of the unaudited Combined Financial Statements included in this report, for more detailed information regarding our critical accounting policies.

Revenue Recognition

Revenue consists of the sales of new and used recreational vehicles, commissions from related finance and insurance products, sales of parts and services, and sale of other products. RideNow adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU, collectively referred to as Accounting Standards Codification (ASC) Topic 606, which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope. RideNow’s goods and services that fall within the scope of Topic 606 are recognized as revenue when promised goods or services are transferred to customers in amounts that reflect the consideration to which RideNow expects to be entitled in exchange for those goods or services.

RideNow adopted the accounting standard effective January 1, 2018, using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods recorded an increase to retained earnings of approximately $737,000.

Valuation of Inventory

Inventories, consisting of new vehicles, are stated at the lower of cost or net realizable value on a specific identification basis. Parts and accessories inventories are stated at the weighted average cost. Used vehicles and other inventories are stated at the lower of cost or wholesale net realizable values on a specific identification basis, as determined by management.

Accounting for Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update (ASC Topic 842) that amends the accounting guidance on leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, described below, as well as certain practical expedients related to land easements and lessor accounting. The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to the leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provides an additional and optional transition method that allows entities to initially apply the new leases standard at the

adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. RideNow adopted this accounting standard effective January 1, 2018, using the optional transition method with no restatement of comparative periods.

RideNow elected certain practical expedients available under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification of RideNow’s existing leases. RideNow did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to RideNow. The new standard also provides practical expedients for an entity’s ongoing accounting. RideNow elected the short- term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, RideNow will not recognize ROU assets or lease liabilities, and RideNow did not recognize ROU asset or lease liabilities for existing short-term leases of those assets in transition. RideNow also elected the practical expedient to not separate lease and non-lease components of leases for the majority of RideNow classes of underlying assets.

Goodwill

RideNow acquisitions have resulted in the recording of goodwill and other intangible assets. Goodwill is an asset representing operational synergies, franchise rights and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Other intangible assets represent non-compete agreements entered into with sellers from acquired businesses.

RideNow does not amortize goodwill. Goodwill is tested for impairment annually or more frequently when events or changes in circumstances indicate that impairment may have occurred. RideNow elected to perform a quantitative goodwill impairment test for its reporting units as of December 31, 2020 and 2019, and no goodwill impairment charges resulted from the testing.

Other intangible assets identified include non-compete agreements which are intangible assets with definite lives and are carried at the acquired fair values less accumulated amortization. The non-compete agreements are amortized over the estimate useful lives.

Key Operating Metrics

We regularly review a number of metrics, to evaluate our business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our business, including increasing brand awareness, maximizing the opportunity to source the purchase of low-cost pre-owned vehicles from consumers and dealers while enhancing the selection of vehicles we make available to our customers. Our key operating metrics also demonstrate our ability to translate these drivers into sales and to monetize these retail sales through a variety of product offerings.

Metric Segment (Non-Harley Dealerships)

Harley-Davidson Segment

Vehicles Sold

We define vehicles sold as the number of new and used retail vehicles sold to consumers in each period. We view vehicles sold as a key measure for several reasons. First, vehicles sold is the primary driver of our revenue and, indirectly, gross profit, since vehicle sales enable multiple complementary revenue streams, including financing, vehicle service contracts, additional parts and accessories and trade-ins. Second, vehicles sold increases the base of available customers for referrals and repeat sales. Third, vehicles sold is an indicator of our ability to retain and capture market share from our competitors.

Days Sales of Inventory

We define Day’s Sales of Inventory (DSI) as the average time in days that it takes to turn our vehicle inventory. In other words, this metric represents how many days our current stock of inventory will last. We view days sales of inventory as a useful metric due to its impact on vehicle average gross profit per unit and flooring costs. It also helps with forecasting, open-to-buy procurement strategies and simply understanding if we have enough inventory to meet the demand.

Total Vehicle Revenue

Total vehicle revenue is comprised of new and used vehicle sales. We sell vehicles primarily direct to consumer onsite at our dealerships (bricks and mortar) as well as online. Factors primarily affecting total vehicle sales are availability of inventory from OEMs as well as availability of consumer finance. The effects of COVID-19 accelerated vehicle sales in 2020 and we expect that to continue through 2021 dependent upon available inventory and consumer finance.

Gross Profit Per Unit

Gross profit is generated on new and used vehicle sales from the difference between the vehicle selling price and our cost associated with acquiring the vehicle and preparation for sale.  

Components of Results of Operations

Revenue from Contracts with Customers

New and Used Recreational Vehicles

RideNow sells new and used recreational vehicles. The transaction price for a recreational vehicle sale is determined with the customer at the time of sale. Customers often trade in their own recreational vehicle to apply toward the purchase of a retail new or used recreational vehicle. The “trade-in” recreational vehicle is a type of noncash consideration measured at fair value, based on external and internal market data for a specific recreational vehicle, and applied as payment of the contract price for the purchased recreational vehicle.

When RideNow sells a new or used recreational vehicle, transfer of control typically occurs at a point in time upon delivery of the vehicle to the customer, which is generally at the time of sale, as the customer is able to direct the use of and obtain substantially all benefits from the recreational vehicle at such time. RideNow does not directly finance its customer’s purchases or provide leasing. In many cases, RideNow arranges third- party financing for the retail sale or lease of recreational vehicles to customers in exchange for a fee paid to RideNow by a third-party financial institution. RideNow receives payment directly from the customer at the time of sale or from a third-party financial institution (referred to as contracts-in-transit) within a short period of time following the sale. RideNow establishes provisions, which are not significant, for estimated returns and warranties on the basis of both historical information and current trends.

Parts and Service

RideNow sells parts and vehicle services related to customer-paid repairs and maintenance, repairs and maintenance under manufacturer warranties and extended service contracts, and collision-related repairs. RideNow also sells parts through wholesale and retail counter channels.

Each repair and maintenance service is a single performance obligation that includes both the parts and labor associated with the vehicle service. Payment for each vehicle service work is typically due upon completion of the service, which is generally completed within a short period from contract inception. The transaction price for repair and maintenance services is based on the parts used, the number of labor hours applied, and standardized hourly labor rates. The performance obligation for repair and maintenance service are satisfied over time and create an asset with no alternative use and with an enforceable right to payment for performance completed to date. Revenue is recognized over time based on a direct measurement of labor hours, parts and accessories that are allocated to open service and repair orders at the end of each reporting period. As a practical expedient, the time value of money is not considered since repair and maintenance service contracts have a duration of one year or less. The transaction price for wholesale and retail counter parts sales is determined at the time of sale based on the quantity and price of each product purchased. Payment is typically due at time of sale, or within a short period following the sale. RideNow establishes provisions, which are not significant, for estimated parts returns based on historical information and current trends. Delivery method of wholesale and retail counter parts vary.

RideNow generally considers control of wholesale and retail counter parts to transfer when the products are shipped, which typically occurs the same day as or within a few days of sale. RideNow also offers customer loyalty points for parts and services for select franchises. RideNow satisfies its performance obligations and recognizes revenue when the loyalty points are redeemed. Amounts deferred related to the customer loyalty programs are insignificant.

Finance and Insurance

RideNow sells and receives commissions on the following types of finance and insurance products: extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, among others. RideNow offers products that are sold and administered by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries.

Pursuant to the arrangements with these third-party providers, RideNow sells the products on a commission basis. For the majority of finance and insurance product sales, RideNow’s performance obligation is to arrange for the provision of goods and services by another party. RideNow’s performance obligation is satisfied when this arrangement is made, which is when the finance and insurance product is delivered to the end customer, generally at the time of the vehicle sale. As agent, RideNow recognizes revenue in the amount of any fee or commission to which it expects to be entitled, which is the net amount of consideration that it retains after paying the third-party provider the consideration received in exchange for the goods or services to be fulfilled by that party.

RideNow’s customers are concentrated in the Sunbelt region. There are no significant judgements or estimates required in determining the satisfaction of the performance obligations or the transaction priced at a point-in-time, costs to obtain the customer (i.e. commissions) do not require capitalization.

Cost of Sales

Cost of sales includes the cost to acquire, recondition, and transport recreational vehicles associated with preparing them for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles, and supply-and-demand dynamics in the wholesale vehicle market. Reconditioning costs consist of direct costs, including parts, labor, and third-party repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Gross Profit

Vehicle gross profit is the vehicle sales price minus our cost of sales associated with the vehicles sold.

Used Vehicle Gross Profit.

Gross Profit from Sales of Service, Parts and Other Revenue represents the sales price for those products and services minus the labor and material costs associated with those sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising and marketing, rent and other facility expenses and other corporate overhead expenses, including expenses associated with information technology, insurance, legal, accounting, finance, and business development. Selling, general and administrative expenses also include the transportation cost associated with selling vehicles but exclude the cost of reconditioning, inspecting, and similar costs which are included in cost of revenue. Subject to the impact of the COVID-19 pandemic and our efforts to preserve liquidity as described elsewhere in this MD&A, we expect selling, general and administrative expenses will continue to increase in future periods as we execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures, but we anticipate selling, general and administrative expenses will decline as a percentage of revenue.

Interest Expense

Interest expense includes interest incurred on floor plan financing and notes payable.

Other (Income) Expense

Other (income) expense includes miscellaneous income for interest earned, cash discounts earned, vending income, cash-back incentives, cash over and short, gains and losses on capital asset disposals and other non-operating additions and deductions from income.

Seasonality

The volume of vehicles sold will generally fluctuate from quarter-to-quarter. This seasonality is caused by several factors including weather, the timing of vehicles available for sale from the OEM’s or selling consumers, the quality of vehicles, temperature, and weather in the state where the dealership is located. Warmer weather locations typically experience less seasonality than colder weather locations when it comes to motorcycle sales. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower sales as well as additional costs associated with the holidays and winter weather.

Results of Operations

The following table provides the results of operations for the quarters ended March 31, 2021 and 2020, including key financial information relating to our business and operations. The financial information should be read in conjunction with our Condensed Combined Financial Statements for the three months ended March 31, 2021, which are included in this report.

Revenue and Gross Profit

Metric Segment

Harley-Davidson Segment

Revenue

First Quarter 2021 compared to First Quarter 2020

Total revenue increased $63,395,823 to $245,182,051 compared to $181,786,228 in 2020. The increase was primarily due to an increase of 51,510,495 in new vehicle sales plus and increase of $6,804,945 in sales of service, parts and other income and an increase of $5,028,845 in finance and insurance income. The increase was primarily attributable to an increase of 2,593 in the number of new vehicles that were sold to 8,148 compared to 5,555 in 2020 offset by a slight decrease of $84 total revenue per vehicle sold to $24,716 compared to $24,800 in 2020.

Total new vehicle sales increased $51,510,497 to $143,257,026 compared to $91,746,529 in 2020. $40,864,798 of this increase resulted from an increase of 2,782 in new vehicles sold to 9,028 compared to 6,246 for 2020. The balance of the increase of $10,645,699 was primarily attributable to an increase in the average selling price per vehicle of $878 to $20,614 compared to 19,736 for 2020. Substantially all new vehicle categories were up in the first quarter of 2021 compared to 2020. The largest increase was driven by the Utility Vehicle Market (or side-by-side) which increased 58.8% or $23,409,406 over the first quarter 2020. There continues to be strong demand for this product, particularly the sport models in Arizona, Nevada and Florida where families can have fun socially distancing on the vast amounts of public land available.

Total used vehicle sales increased $51,537 to $38,988,271 compared to $38,936,734 in 2020. The increase was due to an increase in average selling price per vehicle of $472 offset by a decrease in the number of vehicles sold to 2,866 compared to 2,965 in 2020. The increase in price is attributable to the increase in demand along with the lack of available product which has driven prices higher in 2021.

Total service, parts and other income increased $6,804,945 to $43,529,102 compared to $36,724,157 in 2020. This was primarily due to the 2,683, increase in vehicles sold in 2021. Service revenue increased $1,755,433 while parts accessories and apparel income increased $5,049,512. The average service, parts and other income per vehicle decreased $327 to $3,660 compared to $3,987 in 2020 due to the significant increase in vehicles sold in 2021 which serves as the denominator in this metric.

Total finance and insurance income increased $5,208,844 to $19,407,653 compared to $14,378,808 in 2020. This was primarily due to the 2,683, increase in vehicles sold in 2021. This increase resulted from an increase of sales of extended maintenance and service contracts of $1,520,542 documentation fees of $1,415,602, prepaid maintenance of $1,153,747 and finance income and other products of $938,954.

Metric Segment (Non-Harley-Davidson) total revenue increased 62,245,393 to $188,961,894 compared to $126,716,501 in 2020. The increase was primarily attributable to the sale of 9,920 vehicles, which was 2,590 more vehicles sold than the 7,330 vehicles that were sold in 2020. In addition, the overall average revenue per vehicle sold increased $1,762 to $19,049 compared to $17,287 in 2020. This increase in revenue included $46,869,411 from the sale of new vehicles at an average sales price per vehicle of $14,954 compared to $13,496 in 2020. Revenue from used vehicle sales increased $4,366,751 at an average sales price per vehicle of $12,142 compared to $9,661 in 2020. Sales of service, parts and other income increased $6,552,443 and sale of finance and insurance products increased $4,875,975.

Harley-Davidson total revenue increased $571,566 to $56,220,157 compared to $55,648,591 in 2020. The increase was primarily attributable to an increase in new vehicle sales of $4,641,086 at an average sales price per vehicle of $24,336 compared to $24,276 in 2020, offset by a decrease of $4,315,214 in used vehicle sales at an average sales price of $15,971 compared to $18,309 in 2020. Sales of service, parts and other income increased $252,502 and sales of finance and insurance products decreased $6,808.

Gross Profit

Total gross profit increased $27,123,293 to $74,580,374 compared to $47,457,081 in 2020. The increase was primarily due to an increase in gross profit of $16,538,029 and $2,451,560 from new and used vehicle sales, respectively, plus an increase of $2,525,995 in sales of service, parts and other income and an increase of $5,028,844 in finance and insurance income. The increase was primarily attributable to an increase of 2,683 in the number of new and used vehicles that were sold to 11,894 compared to 9,211 in 2020 and an increase in the total gross margin to 30.0% compared to 26.0% in 2020.

The gross profit on new vehicle sales increased $16,538,029 to $27,878,176 compared to $11,340,147 in 2020. $8,590,816 of this increase resulted from an increase of 2,782 in vehicles sold to 9,028 compared to 6,246 for 2020. The balance of the increase of $7,947,213 was primarily attributable to the increase in the gross margin to 19.5% compared to 12.4% in 2020. This increase resulted from an increase in the average selling price per vehicle of $1,179 to $15,868 compared to 14,689 in 2020 and a change in the vehicle mix sold. Off-road vehicle sales accounted for 62.3% of new vehicle sales in 2021 compared to 57.7% in 2020 and the gross margin on these sales were 19.8% in 2021 compared to 10.5% in 2020.

The gross profit on used vehicle sales increased $2,451,560 to $7,242,044 compared to $4,790,484 in 2020. $2,701,729 of this increase was attributable to an increase in the gross margin on vehicles sold to 18.6% compared to 12.3% for 2020 offset by a decrease of $250,169 due a reduction in the number of used vehicles sold of 99 to 2,866 compared to 2,965 in 2020. The increase the gross margin was due to an increase in the average selling price per vehicle of $472 to $13,604 compared to $13,132 in 2020 and the change in mix of vehicles sold. Off-road vehicle sales accounted for 21.1% of used vehicle sales in 2021 compared to 29.3% in 2020 and the gross margin on these sales were 20.0% in 2021 compared to 9.2% in 2020.

Total gross profit on service, parts and other income increased $2,525,995 to $20,052,501 compared to $17,526,506 in 2020. This was primarily due to the 2,683, increase in vehicles sold in 2021 offset by a reduction of $154 in the average gross profit per vehicle sold to $1,686 compared to $1,840 in 2020. The average gross margin on service income was 76.8% compared to 75.6% in 2020 and the average gross margin on parts and accessories was 31.4% compared to 31.3% in 2020.

Total finance and insurance gross profit increased $5,208,844 to $19,407,653 compared to $14,378,808 in 2020. This was primarily due to the 2,683, increase in vehicles sold in 2021. This increase resulted from an increase of sales of extended maintenance and service contracts of $1,520,542 documentation fees of $1,415,602, prepaid maintenance of $1,153,747 and finance income and other products of $938,954.

Metric Segment (Non-Harley-Davidson) total gross profit increased $23,992,829 to $57,255,652 compared to $33,262,823 in 2020. $7,491,177 of this increase was attributable to the increase of 2,590 in vehicles sold to 9,920 compared to 7,330 in 2020. $9,118,946 of the increase is due to an increase in the gross margin on new and used vehicle sales to 19.4% compared to 12.1% in 2020, an increase in the gross profit on sales of service, parts and other income of $2,856,078, and an increase in sales of finance and insurance products of $4,533,762. The overall gross margin from sales by the Metric Segment increased to 30.3% compared to 26.2% in 2020.

Harley-Davidson Segment total gross profit increased $2,551,600 to $17,324,722 compared to $14,773,122 in 2020. The increase was primarily attributable to an increase in the gross profit on new and used vehicle sales of $1,550,482 and $855,447, respectively, plus an increase in the gross profit from sales of service, parts and other income of $248,784 offset a decrease in the gross profit from sales of finance and insurance products of $(83,113) The overall gross margin increased to 30.8% compared to 26.5% in 2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $7,641,540 to $43,111,337 (17.6% of total revenue) compared to $35,469,797 (19.5% of total revenue) in 2020. The increase primarily resulted from an increase of $6,326,557 in compensation and related costs. The increase in compensation and related costs includes an increase in sales commissions of $3,949,026 as a result of the increased sales in 2021 compared to 2020. A small portion of the increase was also due to a reduction in workforce that occurred towards the end of March 2020 due to the COVID-19 pandemic. In the third week of March 2020, we furloughed 284 of our staff. We quickly brought everyone back that would come back which equaled 250 employees in May as we learned the COVID-19 pandemic was increasing the demand for our vehicles. The increase in advertising, marketing and other selling expenses was directly attributable to the increase in sales. During the three months ended March 31, 2021 we purchased additional online and digital marketing with increases in SEO/SEM and paid search. The increase in facilities expenses was primarily related to an increase in warehouse space in order to handle the growing UTV (side by side) market as these vehicles are the size of automobiles. The increase in general and administrative expenses is primarily due to an increase in costs related to our technology platform of $233,023.

Depreciation and Amortization

Depreciation and Amortization decreased by $67,882 to $803,507 (0.33% of total revenue) compared to $871,389 (0.48% of total revenue) in 2020

Interest Expense

Floor plan interest expense decreased $755,411 to $491,915 in 2021 compared to $1,247,326 in 2020 due to significantly lower new inventory as demand outpaced supply in the first quarter 2021 compared to 2020. New inventory value and days supply are the leading indicators for floorplan interest expense. New inventory was down $103,656,764 from $168,025,252 to $64,368,488 and Days supply (DSI) was down to 53 days versus 170 in the prior year.

Liquidity and Capital Resources

Our capital allocation strategy focuses on growing long-term value for our owners and shareholders. We invest capital in our business to maintain and upgrade existing facilities as well as other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions and improve facilities of newly acquired dealerships. For the three months ended March 31, 2021 and 2020 the following table summarizes our capital expenditures:

As of March 31, 2021, and December 31, 2020, excluding lease liabilities, the outstanding principal amount of indebtedness as $95,135,652 and $101,947,256, respectively, are summarized in the table below. See Notes to our Condensed Combined Financial Statements as of March 31, 2021 included in this report and Notes to our audited Combined Financial Statements as of December 31, 2020, which were included in RumbleOn’s Form 8-K that was filed on April 8, 2021.

The following table sets for a summary of our cash flows for the three months ended March 31, 2021, and 2020:

Operating Activities

Our primary sources of operating cash flows result from the sales of new and used vehicles and ancillary products and services and our floor plans. Our primary uses of cash from operating activities are purchases of inventory, personnel-related expenses, selling expenses, facility costs and other administrative expenses. For the three months ended March 31, 2021, and 2020, the net cash (used in) or provided by operating activities was $(12,864,897), and $9,211,195, respectively. In 2021 the principal reasons for the decrease in cash from operating activities was the increase in accounts receivable-related parties of $32,227,071 and reduction in the floor plan liabilities of $16,914,758. The increase in accounts receivable-related parties is a result of an increase in the sweep account balance to $66,416,689 compared to $14,903,590 on March 31, 2020.

Investing Activities

Net cash used in investing activities consists primarily of cash used in capital additions. For the three months ended March 31, 2021, cash used in investing activities increased $67,883 to $286,169 compared to $218,286 for the three months ended March 31, 2020.

Financing Activities

Cash flows from financing activities primarily relate to our short and long-term borrowing activity and contributions/distributions to or from the owners. In addition, for the three months ended March 31, 2020, there were borrowings under the Company’s revolving line of credit of $16,000,000. That line of credit was completely paid down during the year ended December 31, 2020, and there were not borrowings during the three months ended March 31, 2021.

Management Discussion and Analysis of Financial Condition and Results of Operations
for the Three Years Ended December 31, 2020.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited Combined Financial Statements and notes thereto for the years ended December 31, 2020, 2019 and 2018, which were included in RumbleOn’s Form 8-K that was filed on April 8, 2021.

Overview

RideNow Group and Affiliates, a non-legal entity, (“RideNow” or “The Group” or the “Company”) is a collection of franchised dealerships operating in the powersports industry. The Group is engaged in the sale of new and used motorcycles, all-terrain vehicles, personal watercraft, other powersports vehicles, and related products and services, including repair and maintenance services, parts and accessories, riding gear, and apparel. As of December 31, 2020, RideNow owned and operated more than 45 retail dealerships in the United States, predominately in the Sunbelt region. The core brands sold by RideNow are Harley-Davidson, Honda, Yamaha, Kawasaki, Suzuki, Bombardier, Polaris, BMW, Ducati and Triumph, which are sold through franchise dealer agreements.

On December 31, 2020, and December 31, 2019 RideNow had two operating segments: (1) Harley-Davidson motor sports dealerships and (2) Metric motor sports dealerships (representing all Non-Harley-Davidson motor sports dealerships). RideNow’s Harley-Davidson dealership segment is comprised of retail franchises that sell new and used motorcycles and related accessories, riding gear and apparel, replacement parts, equipment repair and maintenance services, and also arrange for the delivery of finance and insurance products through third party providers. RideNow’s Metric dealerships segment is comprised of retail franchises that sell new and used motorcycles (non-Harley-Davidson) and other motor sports equipment, including all-terrain vehicles, utility terrain vehicles, boats, personal watercraft, snowmobiles and scooters from manufacturers such as Honda, Yamaha, Kawasaki, Suzuki, Bombardier, Polaris, BMW, Ducati and Triumph. Additionally, dealerships in RideNow’s Metric segment sell related products and services, including repair and maintenance services and also arrange for the delivery of finance and insurance products through third party providers. RideNow has determined that the operating segments also represent the reportable segments. The reportable segments identified above are the business activities of RideNow for which discrete financial information is available and for which operating results are regularly reviewed by the chief operating decision maker to assess operating performance and allocate resources. RideNow’s chief operating decision maker is comprised of its two owners, who are also RideNow’s (1) Chairman of the Board and (2) Chief Executive Officer.

For the years ended December 31, 2020, new vehicle sales accounted for 57.4% of the Company’s revenue and 33.3% of total gross profit compared to 54.0% and 23.4% of the Company’s revenue and gross profit, respectively in 2019 and 55.7% and 26.0%, respectively in 2018. Used vehicle sales accounted for 16.3% of the Company’s revenue and 9.4% of total gross profit for the year ended December 31, 2020, compared to 18.0% and 9.2%, of the Company’s revenue and gross profit, respectively, in 2019 and 16.2% and 7.4%, respectively in 2018. Service, parts and others accounted for 18.3% of the Company’s revenue and 28.8% of total gross profit for the year ended December 31, 2020, compared to 20.6% and 37.7%, respectively in 2019 and 20.9% and 37.6%, respectively in 2018. Finance and insurance, accounted for 8.0% of the Company’s revenue and 28.0% of total gross profit compared to 7.4%% and 29.7%, respectively in 2019 and 7.2% and 29.1%, respectively in 2018.

Acquisition by RumbleOn

On March 12, 2021, RumbleOn, Inc. announced a definitive agreement to combine with the RideNow Group to create the only omnichannel customer experience in powersports and the largest publicly traded powersports dealership platform (the “RideNow Transactions”). Under the terms of the definitive agreement, RumbleOn will combine with up to 46 entities operating under the RideNow brand for a total consideration of up to $575.4 million, consisting of $400.4 million of cash and approximately 5.8 million shares of RumbleOn Class B Common Stock. RumbleOn will finance the cash consideration through a combination of up to $280.0 million of debt and the remainder through the issuance of new equity. RumbleOn has entered into a commitment letter with Oaktree Capital Management, L.P. (“Oaktree”) to provide for the debt financing, subject to certain conditions (the “Oaktree Financing”). The number of shares to be issued to RideNow is subject to increase as described in the definitive agreement. The RideNow Transaction is subject to successful completion of the debt and equity financing, RumbleOn stockholder approval, manufacturer approval, other federal and state regulatory approvals, and other customary closing conditions as described in the definitive agreement. We expect to close the RideNow Transaction during the third quarter of 2021.

COVID-19 Update

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The rapid spread of COVID-19 resulted in governmental authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, shutdowns and vaccines. We initially took aggressive action in response to the Pandemic, furloughing nearly 45% of our workforce. However, we quickly rebounded as we found the Pandemic was actually creating great demand as people, weary of staying at home found riding an off-road vehicle in the wide-open, socially distant spaces of tracks and trails to be appealing. While the manufacturers curtailed or shut down operations for a time, and our supply of new vehicles declined, our off-road vehicle demand increased significantly. For the quarter ended June 30, 2020, our vehicles sold, revenue and gross profit were up 57.1%, 49.8% and 58.1%, respectively compared to the quarter ending March 31, 2020. This trend continued throughout the remainder of 2020, and we believe demonstrates that we have been successful in navigating the impact of COVID-19 on our business to date and that our business model makes us well-positioned to meet expected customer demand during the current COVID-19 pandemic. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as circumstances evolve surrounding the COVID-19 pandemic.

Results of Operations

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our combined financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. Refer to Note 1 — Summary of Significant Accounting Policies of the audited Combined Financial Statements and notes thereto for the years ended December 31, 2020, 2019 and 2018, which were included in RumbleOn’s Form 8-K that was filed on April 8, 2021, for more detailed information regarding our critical accounting policies.

Revenue Recognition

Revenue consists of the sales of new and used recreational vehicles, commissions from related finance and insurance products, sales of parts and services, and sale of other products. RideNow adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU, collectively referred to as Accounting Standards Codification (ASC) Topic 606, which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope. RideNow’s goods and services that fall within the scope of Topic 606 are recognized as revenue when promised goods or services are transferred to customers in amounts that reflect the consideration to which RideNow expects to be entitled in exchange for those goods or services.

RideNow adopted the accounting standard effective January 1, 2018, using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods recorded an increase to retained earnings of approximately $737,000.

Valuation of Inventory

Inventories, consisting of new vehicles, are stated at the lower of cost or net realizable value on a specific identification basis. Parts and accessories inventories are stated at the weighted average cost. Used vehicles and other inventories are stated at the lower of cost or wholesale net realizable values on a specific identification basis, as determined by management.

Accounting for Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update (ASC Topic 842) that amends the accounting guidance on leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, described below, as well as certain practical expedients related to land easements and lessor accounting. The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to the leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provides an additional and optional transition method that allows entities to initially apply the new leases standard at the

adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. RideNow adopted this accounting standard effective January 1, 2018, using the optional transition method with no restatement of comparative periods.

RideNow elected certain practical expedients available under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification of RideNow’s existing leases. RideNow did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to RideNow. The new standard also provides practical expedients for an entity’s ongoing accounting. RideNow elected the short- term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, RideNow will not recognize ROU assets or lease liabilities, and RideNow did not recognize ROU asset or lease liabilities for existing short-term leases of those assets in transition. RideNow also elected the practical expedient to not separate lease and non-lease components of leases for the majority of RideNow classes of underlying assets.

Goodwill

RideNow acquisitions have resulted in the recording of goodwill and other intangible assets. Goodwill is an asset representing operational synergies, franchise rights and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Other intangible assets represent non-compete agreements entered into with sellers from acquired businesses.

RideNow does not amortize goodwill. Goodwill is tested for impairment annually or more frequently when events or changes in circumstances indicate that impairment may have occurred. RideNow elected to perform a quantitative goodwill impairment test for its reporting units as of December 31, 2020 and 2019, and no goodwill impairment charges resulted from the testing.

Other intangible assets identified include non-compete agreements which are intangible assets with definite lives and are carried at the acquired fair values less accumulated amortization. The non-compete agreements are amortized over the estimate useful lives.

Key Operating Metrics

We regularly review several metrics, to evaluate our business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our business, including increasing brand awareness, maximizing the opportunity to source the purchase of vehicles from original equipment manufacturers (OEM’s) and consumers and while enhancing the selection of vehicles we make available to our customers. Our key operating metrics also demonstrate our ability to translate these drivers into sales and to monetize these retail sales through a variety of product offerings.

Metric Segment (Non-Harley Dealerships)

Harley-Davidson Segment

Vehicles Sold

We define vehicles sold as the number of new and used retail vehicles sold to consumers in each period. We view vehicles sold as a key measure for several reasons. First, vehicles sold is the primary driver of our revenue and, indirectly, gross profit, since vehicle sales enable multiple complementary revenue streams, including financing, vehicle service contracts, additional parts and accessories and trade-ins. Second, vehicles sold increases the base of available customers for referrals and repeat sales. Third, vehicles sold is an indicator of our ability to retain and capture market share from our competitors.

Days Sales of Inventory

We define Day’s Sales of Inventory (DSI) as the average time in days that it takes to turn our vehicle inventory. In other words, this metric represents how many days our current stock of inventory will last. We view days sales of inventory as a useful metric due to its impact on vehicle average gross profit per unit and flooring costs. It also helps with forecasting, open-to-buy procurement strategies and simply understanding if we have enough inventory to meet the demand.

Total Vehicle Revenue

Total vehicle revenue is comprised of new and used vehicle sales. We sell vehicles primarily direct to consumer onsite at our dealerships (bricks and mortar) as well as online. Factors primarily affecting total vehicle sales are availability of inventory from OEMs as well as availability of consumer finance. The effects of COVID-19 accelerated vehicle sales in 2020 and we expect that to continue through 2021 dependent upon available inventory and consumer finance.

Gross Profit Per Unit

Gross profit is generated on new and used vehicle sales from the difference between the vehicle selling price and our cost associated with acquiring the vehicle and preparation for sale.

Components of Results of Operations

Revenue from Contracts with Customers

New and Used Recreational Vehicles

RideNow sells new and used recreational vehicles. The transaction price for a recreational vehicle sale is determined with the customer at the time of sale. Customers often trade in their own recreational vehicle to apply toward the purchase of a retail new or used recreational vehicle. The “trade-in” recreational vehicle is a type of noncash consideration measured at fair value, based on external and internal market data for a specific recreational vehicle, and applied as payment toward the contracted price of the purchased recreational vehicle.

When RideNow sells a new or used recreational vehicle, transfer of control typically occurs at a point in time upon delivery of the vehicle to the customer, which is generally at the time of sale, as the customer is able to direct the use of and obtain substantially all benefits from the recreational vehicle at such time. RideNow does not directly finance its customer’s purchases or provide leasing. In many cases, RideNow arranges third- party financing for the retail sale or lease of recreational vehicles to customers in exchange for a fee paid to RideNow by a third-party financial institution. RideNow receives payment directly from the customer at the time of sale or from a third-party financial institution (referred to as contracts-in-transit) within a short period of time following the sale. RideNow establishes provisions, which are not significant, for estimated returns and warranties on the basis of both historical information and current trends.

Parts and Service

RideNow sells parts and vehicle services related to customer-paid repairs and maintenance, repairs and maintenance under manufacturer warranties and extended service contracts, and collision-related repairs. RideNow also sells parts through wholesale and retail counter channels.

Each repair and maintenance service is a single performance obligation that includes both the parts and labor associated with the vehicle service. Payment for each vehicle service work is typically due upon completion of the service, which is generally completed within a short period from contract inception. The transaction price for repair and maintenance services is based on the parts used, the number of labor hours applied, and standardized hourly labor rates. The performance obligation for repair and maintenance service are satisfied over time and create an asset with no alternative use and with an enforceable right to payment for performance completed to date. Revenue is recognized over time based on a direct measurement of labor hours, parts and accessories that are allocated to open service and repair orders at the end of each reporting period. As a practical expedient, the time value of money is not considered since repair and maintenance services typically have a duration of one year or less. The transaction price for wholesale and retail counter parts sales is determined at the time of sale based on the quantity and price of each product purchased. Payment is typically due at time of sale, or within a short period following the sale. RideNow establishes provisions, which are not significant, for estimated parts returns based on historical information and current trends. Delivery method of wholesale and retail counter parts vary.

RideNow generally considers control of wholesale and retail counter parts to transfer when the products are shipped, which typically occurs the same day as or within a few days of sale. RideNow also offers customer loyalty points for parts and services for select franchises. RideNow satisfies its performance obligations and recognizes revenue when the loyalty points are redeemed. Amounts deferred related to the customer loyalty programs are insignificant.

Finance and Insurance

RideNow sells and receives commissions on the following types of finance and insurance products: extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, among others. RideNow offers products that are sold and administered by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries.

Pursuant to the arrangements with these third-party providers, RideNow sells the products on a commission basis. For the majority of finance and insurance product sales, RideNow’s performance obligation is to arrange for the provision of goods and services by another party. RideNow’s performance obligation is satisfied when this arrangement is made, which is when the finance and insurance product is delivered to the end customer, generally at the time of the vehicle sale. As agent, RideNow recognizes revenue in the amount of any fee or commission to which it expects to be entitled, which is the net amount of consideration that it retains after paying the third-party provider the consideration received in exchange for the goods or services to be fulfilled by that party.

RideNow’s customers are concentrated in the Sunbelt region. There are no significant judgements or estimates required in determining the satisfaction of the performance obligations or the transaction price at a point-in-time, costs to obtain the customer (i.e. commissions) do not require capitalization.

Cost of Sales

Cost of sales includes the cost to acquire, recondition, and transport recreational vehicles associated with preparing them for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles, and supply-and-demand dynamics in the wholesale vehicle market. Reconditioning costs consist of direct costs, including parts, labor, and third-party repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Gross Profit

Vehicle gross profit is the vehicle sales price minus our cost of sales associated with the vehicles sold.

Gross Profit from Sales of Service, Parts and Other Revenue represents the sales price for those products and services minus the labor and material costs associated with those sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising, marketing and other selling expenses, rent and other facility expenses and other corporate overhead expenses, including expenses associated with information technology, outside services, legal, accounting, finance, and business development. Selling, general and administrative expenses also include the transportation cost associated with selling vehicles but exclude the cost of reconditioning, inspecting, and similar costs which are included in cost of revenue. We expect selling, general, and administrative expenses will continue to increase in future periods as we execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures, but we anticipate selling, general and administrative expenses will decline as a percentage of revenue.

Interest Expense

Interest expense includes interest incurred on floor plan financing and notes payable.

Other (Income) Expense

Other (income) expense includes miscellaneous income for interest earned, cash discounts earned, vending income, cash-back incentives, cash over and short, gains and losses on capital asset disposals and other non-operating additions and deductions from income.

Seasonality

The volume of vehicles sold will generally fluctuate from quarter-to-quarter. This seasonality is caused by several factors including weather, the timing of vehicles available for sale from the OEM’s or selling consumers, the quality of vehicles, temperature, and weather in the state where the dealership is located. Warmer weather locations typically experience less seasonality than colder weather locations when it comes to motorcycle sales. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower sales as well as additional costs associated with the holidays and winter weather.

Results of Operations

The following table provides the results of operations for the years ended December 31, 2020, 2019 and 2018, including key financial information relating to our business and operations. The financial information should be read in conjunction with our audited Combined Financial Statements for the years ended December 31, 2020, 2019 and 2018, which were included in RumbleOn’s Form 8-K filed on April 8, 2021.

Revenue and Gross Profit

Metric Segment (Non-Harley-Davidson Dealerships)

Harley-Davidson Segment

Revenue

Year Ended December 31, 2020 Compared to December 31, 2019

Total revenue increased $162,649,679 to $898,890,399 compared to $736,240,720 in 2019. The increase was primarily due to an increase of $118,106,095 and $13,520,228 in new and used vehicle sales respectively plus an increase of $13,046,845 in sales of service, parts and other income and an increase of $17,976,511 in finance and insurance income, net. The increase was primarily attributable to an increase of 5,310 in the number of new and used vehicles that were sold to 45,527 compared to 40,217 in 2019 and an increase of $1,437 in the average total revenue per unit to $19,744 compared to $18,307 in 2019.

Total new vehicle sales increased $118,106,095 to $515,823,974 compared to $397,717,879 in 2019. $85,935,808 of this increase resulted from an increase of 5,726 in vehicles sold to 34,370 compared to 28,644 for 2019. The balance of the increase of $32,170,287 was primarily attributable to an increase in the average selling price per vehicle of $1,123 to $15,008 compared to 13,885 for 2019. Substantially all new vehicle categories were up in 2020 compared to 2019. The largest increase was driven by the Utility Vehicle Market (or side-by-side) which increased 58.8%. There was strong demand for this product, particularly the sport models in Arizona, Nevada and Florida where families can have fun socially distancing on the vast amounts of public land available.

Total used vehicle sales increased $13,520,228 to $146,325,260 compared to $132,805,032 in 2019. The increase was entirely due to an increase in average selling price per vehicle as the total unit volume actually decreased by 416 down from 11,573 in 2019 to 11,157 in 2020. Overall used unit decrease was due to a switch to new units and the increase in price is attributable to more expensive Harley-Davidson motorcycles which increased 69 units from 4,734 to 4,804.

Total service, parts and other income increased $13,046,845 to $164,895,944 compared to $151,849,099 in 2019. This was primarily due to the increase of 5,310 vehicles sold in 2020. Service revenue increased $3,607,876 while parts accessories and apparel income increased $9,438,969. The average service, parts and other income per vehicle decreased $154 to $3,622 compared to $3,776 in 2019.

Total finance and insurance income increased $17,976,511 to $71,845,221 compared to $53,868,710 in 2019. This was primarily due to the increase of 5,310 vehicles sold in 2020. This increase resulted in an increase of sales of insurance products of $711,226, maintenance and service contracts of $9,401,447, documentation fees of $4,922,333 and finance and other income of $2,941,454.

Metric Segment (Non-Harley-Davidson) total revenue increased $156,617,949 to $672,237,556 compared to $515,619,607 in 2019. The increase was primarily attributable to the sale of 37,844 vehicles, which was 5,882 more vehicles sold than the 31,962 vehicles that were sold in 2019. In addition, the overall average revenue per vehicle sold increased $1,631 to $17,763 compared to $16,132 in 2019. This increase in revenue included $125,977,054 from the sale of new vehicles at an average sales price per vehicle of $14,098 compared to $12,656 in 2019. Revenue from used vehicle sales increased a nominal amount of $360,115 at an average sales price per vehicle of $10,120 compared to $9,350 in 2019. Sales of service, parts and other income increased $13,610,848 and sale of finance and insurance products increased $16,669,932.

Harley-Davidson total revenue increased $6,031,730 to $226,652,843 compared to $220,621,113 in 2019. The increase was primarily attributable to an increase in used vehicle sales of $13,160,113 at an average sales price per vehicle of $17,076 compared to $14,545 in 2019, offset by a decrease of $7,870,959 in new vehicle sales at an average sales price of $24,963 compared to $22,653 in 2019. Sales of service, parts and other income decreased $564,003 while sales of finance and insurance products increased $1,306,579.

Year Ended December 31, 2019 Compared to December 31, 2018

Total revenue increased $36,886,015 to $736,240,720 compared to $699,354,705 in 2018. The increase was primarily due to an increase of $8,371,119 and $19,188,777 in new and used vehicle sales respectively plus an increase of $5,637,668 in sales of service, parts and other income and an increase of $3,688,451 in finance and insurance income, net. The increase was primarily attributable to an increase of 1,339 in the number of new and used vehicles that were sold to 40,217 compared to 38,878 in 2018 and an increase of $319 in the average total revenue per unit to $18,307 compared to $17,988 in 2018.

Total new vehicle sales increased $8,371,119 to $397,717,879 compared to $389,346,760 in 2018. $2,402,105 of this increase resulted from an increase of 173 vehicles sold to 28,644 compared to 28,471 for 2018. The balance of the increase of $5,969,014 was primarily attributable to an increase in the average selling price per vehicle of $210 to $13,885 compared to 13,675 for 2018. The slight increase was attributable to the Metric segment as Harley-Davidson was flat in 2018.

Total used vehicle sales increased $19,188,777 to $132,805,032 compared to $113,616,255 in 2018. The increase was in part due to an increase of 1,166 in vehicles sold to 11,573 compared to 10,407 in 2018. In addition, the average selling price per vehicle sold increased $558 to $11,475 compared to $10,917 in 2018. The increase in price is attributable to more expensive Harley-Davidson motorcycles which increased 69 units from 2018 to 2019.

Total service, parts and other income increased $5,637,668 to $151,849,099 compared to $146,211,431 in 2018. This was primarily due to the increase of 1,339 in vehicles sold in 2019. Service revenue increased $3,088,108 while parts accessories and apparel income increased $2,549,560. The average service, parts and other income per vehicle increased $15 to $3,776 compared to $3,761 in 2018.

Total finance and insurance income, net increased $3,688,451 to $53,868,710 compared to $50,180,259 in 2018. This was primarily due to the increase of 1,339 in vehicles sold in 2019. This increase resulted in an increase of sales of insurance products of $501,748, maintenance and service contracts of $1,785,322, documentation fees of $1,250,534, and the $652,595 in other finance products.

Metric Segment (Non-Harley-Davidson) total revenue increased $39,914,636 to $515,619,607 compared to $475,704,971 in 2018. The increase was primarily attributable to the sale of 31,962 vehicles, which was 1,040 more vehicles sold than the 30,922 vehicles that were sold in 2018. In addition, the overall average revenue per vehicle sold increased $748 to $16,132 compared to $15,384 in 2018. This increase in revenue included $20,122,296 from the sale of new vehicles at an average sales price per vehicle of $12,656 compared to $11,940 in 2018. Revenue from used vehicle sales increased $7,110,697 at an average sales price per vehicle of $9,350 compared to $8,911 in 2018. Sales of service, parts and other income increased $5,356,803 and sale of finance and insurance products increased $3,755,012.

Harley-Davidson total revenue decreased $3,028,621 to $220,621,113 compared to $223,649,734 in 2018. The decrease was primarily attributable to a decrease in new vehicle sales of $11,751,177 at an average sales price of $22,653 per vehicle sold compared to $25,955 in 2018. This decrease was offset by an increase in used vehicle sales of $8,508,252 to $68,871,728 compared to $60,363,476 in 2018 at an average sales price per vehicle of $14,545 compared to $13,623 in 2018. Sales of service, parts and other income increased $280,865 while sales of finance and insurance products decreased $66,561.

Gross Profit

Year Ended December 31, 2020 Compared to December 31, 2019

Total gross profit increased $74,671,328 to $256,220,772 compared to $181,549,444 in 2019. The increase was primarily due to an increase in gross profit of $43,974,782 and $7,318,301 from new and used vehicle sales, respectively, plus an increase of $5,401,734 in sales of service, parts and other income and an increase of $17,976,511 in finance and insurance income, net. The increase was primarily attributable to an increase of 5,310 in the number of new and used vehicles that were sold to 45,527 compared to 40,217 in 2019 and an increase in the gross margin to 28.5% compared to 24.7% in 2019.

The gross profit on new vehicle sales increased $43,974,782 to $86,478,020 compared to $42,503,238 in 2019. $14,406,616 of this increase resulted from an increase of 5,726 in vehicles sold to 34,370 compared to 28,644 for 2019. The balance of the increase of $29,568,166 was primarily attributable to the increase in the gross margin to 16.8% compared to 10.7% in 2019. This increase resulted from an increase in the average selling price per vehicle of $1,123 to $15,008 compared to of $13,885 in 2019 and the change mix of vehicles sold. Off-road vehicle sales accounted for 64.2% of new vehicle sales in 2020 compared to 54.6% in 2019 and the gross margin on these sales were 16.1% in 2020 compared to 10.7% in 2019.

The gross profit on used vehicle sales increased $7,318,301 to $24,019,116 compared to $16,700,815 in 2019. $8,213,949 of this increase was attributable to an increase in the gross margin on vehicles sold to 16.4% compared to 12.6% for 2019 offset by a decrease of $895,648 due to a reduction in the number of used vehicles sold of 416 to 11,157 compared to 11,573 in 2019. The increase in the gross margin was due to an increase in the average selling price per vehicle of $1,640 to $13,115 compared to $11,475 in 2019 and the change in mix of vehicles sold. Off-road vehicle sales accounted for 20.2% of used vehicle sales in 2020 compared to 12.9% in 2019 and the gross margin on these sales were 19.9% in 2020 compared to 18.1% in 2019.

Total gross profit on service, parts and other income increased $5,401,734 to $73,878,415 compared to $68,476,681 in 2019. This was primarily due to the increase of 5,310 in vehicles sold in 2020 offset by a reduction of $80 in the average gross profit per vehicle sold to $1,623 compared to $1,703 in 2019. The average gross margin on service income was 77.0% compared to 75.7% in 2019 and the average gross margin on parts and other income was 31.5% compared to 31.9% in 2019.

Total gross profit on finance and insurance income increased $17,976,511 to $71,845,221 compared to $53,868,710 in 2019. This was primarily due to the increase of 5,310 in vehicles sold in 2020. This increase resulted in an increase of sales of insurance products of $711,226, maintenance and service contracts of $9,401,447, documentation fees of $4,922,333 and finance and other income of $2,941,454.

Metric Segment (Non-Harley-Davidson) total gross profit increased $68,027,537 to $188,788,119 compared to $120,760,582 in 2019. $14,714,137 of this increase was attributable to the increase of 5,882 in vehicles sold to 37,844 compared to 31,962 in 2019. The remaining $27,955,354 increase in gross profit on sales of vehicles was due to the increase in the gross profit margin to 28.1% compared to 23.4% in 2019. The increase of $5,807,140 for sales of service, parts and other income of $5,807,140 and $16,432,833 for sales of finance and insurance products was due to the increase in sales of 2020 compared to 2019.

Harley-Davidson Segment total gross profit increased $6,643,791 to $67,432,653 compared to $60,788,862 in 2019. The increase was primarily attributable to an increase in the gross profit on vehicle sales of $5,505,519 plus an increase in finance and insurance offset by a reduction in the margin on service, parts and other income of $405,406. The overall gross margin increased to 29.8% compared to 27.5% in 2019.

Year Ended December 31, 2019 Compared to December 31, 2018

Total gross profit increased $8,975,584 to $181,549,444 compared to $172,573,860 in 2019. The increase was primarily due to an increase in gross profit of $3,648,331 for service, parts and other income and $3,688,451 from sales of finance and insurance products. The gross profit on sales of new vehicles declined $2,308,949 due primarily to the decrease in the gross margin to 10.7% compared to 11.5% in 2018. The gross profit on sales of used vehicles increased $3,947,751 due in part to the increase in the gross margin to 12.6% compared to 11.2% in 2019, and in part due to the increase of 1,339 in the number of vehicles sold to 40,217 compared to 38,878 in 2018.

The gross profit on new vehicle sales decreased $2,308,949 to $42,503,238 compared to $44,812,187 in 2018. $2,565,681 of this decrease was due to a decrease in the gross margin to 10.7% compared to 11.5% in 2019, which was offset by a slight increase in gross profit due to an increase of 173 of vehicles sold in 2019 and an increase of $210 in the average sales price per vehicle sold. Off-road vehicle sales accounted for 54.6% of new vehicle sales in 2019 compared to 54.0% in 2018 and the gross margin on these sales were 10.7% in 2019 compared to 10.3% in 2018.

The gross profit on used vehicle sales increased $3,947,751 to $16,700,815 compared to $12,753,064 in 2019. $2,265,213 of this increase was attributable to an increase in the gross margin on vehicles sold to 12.6% compared to 11.2% for 2019. In addition, the gross profit on used vehicle sales increased $1,682,538 due to the increase of 1,166 in used vehicles sales to 11,573 compared to 10,407 in 2018. Off-road vehicle sales accounted for 12.9% of used vehicle sales in 2019 compared to 11.2% in 2018 and the gross margin on these sales were 18.1% in 2019 compared to 21.7% in 2018.

Total gross profit on service, parts and other income increased $3,688,451 to $53,868,710 compared to $50,180,259 in 2018. This was primarily due to the 1,339, increase in vehicles sold in 2019 plus an increase of $36 in the average gross profit per vehicle sold to $1,703 compared to $1,667 in 2018. The average gross margin on service income was 75.7% compared to 76.6% in 2018 and the average gross margin on parts and other income was 31.9% compared to 31.2% in 2018.

Total gross profit on finance and insurance income increased $3,688,451 to $53,868,710 compared to $50,180,259 in 2018. This was primarily due to the 1,339, increase in vehicles sold in 2019. This increase resulted in an increase of sales of insurance products of $501,748, maintenance and service contracts of $1,785,322, documentation fees of $1,250,534, and the $652,595 in other finance products.

Metric Segment (Non-Harley-Davidson) total gross profit increased $9,782,248 to $120,760,582 compared to $110,978,334 in 2018. $2,571,453 of this increase was attributable to the increase in the gross margin to 23.4% compared to 23.3% in 2018, The remaining $213,244 increase in gross profit from sales of vehicles was due to the increase of 1,040 in vehicles sold to 31,962 compared to 30,922 in 2018. The increase of $3,273,558 for sales of service, parts and other income and $2,801,098 for sales of finance and insurance products was due to the increase in sales of 2020 compared to 2019.

Harley-Davidson Segment total gross profit decreased $806,664 to $60,788,862 compared to $61,595,526 in 2018. The decrease was primarily attributable to a decrease in the gross profit on new vehicle sales of $5,093,646 offset by an increase in gross profit on used vehicle sales of $3,024,856. The gross margin on new vehicle sales decreased to 15.6% compared to 19.1% in 2018, while the gross margin on used vehicle sales increased to 11.4% compared to 8.0% in 2018.

Selling, General and Administrative Expenses

Year Ended December 31, 2020 Compared to December 31, 2019

Selling, general and administrative expenses increased by $17,318,138 to $154,520,043 (17.2% of total revenue) compared to $137,201,905 (18.5% of total revenue) in 2019. Compensation and related costs expense increased $14,947,112 to $104,155,686 compared to $89,208,574 in 2019. This large increase in compensation was due to selling commissions which are variable pay plans that increase or decrease as sales go up and down. Overall advertising, marketing and other selling expenses for 2020 were comparable to 2019. However, the Company committed less funds to direct advertising expenditure due to COVID-19. The increase in facilities expense was primarily due to annual CPI increases built into the leases and additional warehouse rent due to the increase in UTV (side by side) vehicles which are the size of an automobile. The overall reduction in general and administrative expenses were due curtailment of costs due primarily to the COVID-19 pandemic.

Year Ended December 31, 2019 Compared to December 31, 2018

Selling, general and administrative expenses increased by $8,272,389 to $137,201,905 (18.5% of total revenue) compared to $128,929,516 (18.5% of total revenue) in 2018. Compensation and related costs expense increased $6,157,634 to $89,208,574 compared to $83,050,940 in 2018. This large increase in compensation was due to selling commissions which are variable pay plans that increase or decrease as sales go up and down. Overall advertising, marketing and other selling expenses for 2019 increased $1,799,669 and $605,575, respectively. These increases are in line with the 2019 at 0.7% of revenue. The company ramped up its digital marketing spend and moved away from the more traditional forms of advertising which seems to be working.   The increase in facilities expense was primarily due to additional new locations from acquisitions in Florida, Texas and Arizona as well as general CPI annual rent increases.  The overall reduction in general and administrative expenses were due in 2019 were related to shop supply credits which reduced our supplies and tools expense account.  We did a better job of charging shop supply fees to our customers on repair orders in 2019 versus 2018 which led to a large reduction in general and administrative expenses. 

Depreciation and Amortization

Year Ended December 31, 2020 Compared to December 31, 2019

Depreciation and Amortization increased by $334,992 to $4,087,914 (0.5% of total revenue) compared to $3,752,922 (0.5% of total revenue) in 2019.

Year Ended December 31, 2019 Compared to December 31, 2018

Depreciation and Amortization decreased by $115,591 to $3,752,922 (0.5% of total revenue) compared to $3,868,513 (0.6% of total revenue) in 2018.

Interest Expense

Year Ended December 31, 2020 Compared to December 31, 2019

Floor plan interest expense decreased $2,476,486 to $3,051,930 in 2020 compared to $5,528,416 in 2019. The large decrease is attributable to significantly lower new inventory due to increased demand and supply shortage from the OEM’s. As of December 31, 2020, the outstanding balances on our floor plan notes payable was $68,533,679 compared to $162,975,930 as of December 31, 2019. Other interest expense decreased $646,808 to $3,904,879 compared to $4,551,687 in 2019. The decrease was due to lowering principal balances on long-term notes payable.

Year Ended December 31, 2019 Compared to December 31, 2018

Floor plan interest expense increased $1,381,282 to $5,528,416 in 2019 compared to $4,147,134 in 2018. As of December 31, 2019, the outstanding balances on our floor plan notes payable was $162,975,930 compared to $149,859,103 as of December 31, 2018. Other interest expense increased $134,887 to $4,551,687 compared to $4,416,800 in 2018.

Other Income (Expense), Net

Year Ended December 31, 2020 Compared to December 31, 2019

Other income (expense) includes miscellaneous income for interest earned, cash discounts earned, vending income, cash-back incentives, cash over and short, gains and losses on capital asset disposals and other non-operating additions and deductions from income. Other income (expense) declined by $89,012 to $1,126,614 compared to $1,215,627 for 2019.

Year Ended December 31, 2019 Compared to December 31, 2018

Other income (expense) increased by $774,940 to $1,215,627 compared to $440,687 for 2018.

Liquidity and Capital Resources

We had the following sources of liquidity available for the years ended December 31, 2020, 2019 and 2018:

Our capital allocation strategy focuses on growing long-term value for our owners and shareholders. We invest capital in our business to maintain and upgrade existing facilities as well as other strategic and technology initiatives. We also deploy capital opportunistically to complete acquisitions and improve facilities of newly acquired dealerships. For the years ended December 31, 2020, 2019 and 2018 the following table summarizes our capital expenditures:

As of December 31, 2020, 2019 and 2018, excluding lease liabilities, the outstanding principal amount of indebtedness was $101,947,256, $204,397,360 and $179,392,480, respectively, summarized in the table below. See Notes to our audited Combined Financial Statements for the years ended December 31, 2020, 2029 and 2018, which were included in RumbleOn’s Form 8_K that was filed on April 8, 2021.