| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
unaudited condensed consolidated financial statements of the Company and ACI have been prepared in accordance with generally accepted
accounting principles in the United States of America ("GAAP") and with the instructions to Article 8 of Regulation
S-X. In
the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results
for the three months March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December
31, 2021. These
unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2020. Principles
of Consolidation The
unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiary, ACI.
All significant intercompany balances and transactions have been eliminated in consolidation. The Company does not have a majority
or minority interest in any other company, either consolidated or unconsolidated. Stock
Split On
July 30, 2020, the Company completed a 4,750-for-1 forward stock split of its outstanding common stock. As a result of this stock
split, the Company's issued and outstanding common stock increased from 1,000 to 4,750,000 shares. Accordingly, all share
and per share information has been restated to retroactively show the effect of this stock split. Use
of Estimates The
preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. Cash
and Cash Equivalents Cash
and equivalents include: (1) currency on hand, (2) demand deposits with banks or financial institutions, (3) other kinds of accounts
that have the general characteristics of demand deposits, and (4) short-term, highly liquid investments that are both readily
convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because
of changes in interest rates. The majority of payments due from financial institutions for the settlement of credit card and debit
card transactions process within two business days and are, therefore, classified as cash and cash equivalents. Other payment
methods that take more time to settle are classified as receivables. At
March 31, 2021, restricted cash includes approximately $3,120,000 pledged to secure a note, $100,000 to secure a vendor letter
of credit and $6,874,932 withheld by credit card processors as security for the Company's customer refund claims and credit
card chargebacks. The cash pledged to secure the note payable will be released as the note is repaid, the cash pledged to secure
the letter of credit will be released when the vendor offers the Company credit terms, and the cash held by credit card processors
will be released at the discretion of the credit card companies. Revenue
Recognition and Cost of Revenue The
Company records revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 606. Revenue is recognized to depict the transfer of goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also
requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer
purchase orders, including significant judgments. The
Company collects the full sales price from the customer at the time the order is placed, which is recorded as customer deposits
on the accompanying consolidated balance sheet. The Company does not incur incremental costs obtaining purchase orders from customers,
however, if the Company did, because all the Company's contracts are less than a year in duration, any contract costs incurred
would be expensed rather than capitalized. The
revenue that the Company recognizes arises from orders it receives from its customers. The Company's performance obligations
under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result,
each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control
of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from,
the Company's products, which generally occurs when the customer assumes the risk of loss. The risk of loss shifts
to the customer at different times depending on the method of delivery. The Company delivers products to its customers in three
possible ways. The first way is through a shipment of the products through a third-party carrier from the Company's warehouse
to the customer (a "Company Shipment"). The second way is through a shipment of the products through a third-party
carrier from a warehouse other than the Company's warehouse to the customer (a "Drop Shipment") and the third
way is where the Company itself delivers the products to the customer and often also installs the product (a "Local Delivery").
In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the
customer's location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time
of installation and revenue is recognized upon installation at the customer's location. In the case of a Company Shipment
and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from the Company's
warehouse or a third party's warehouse). Therefore, risk of loss and title transfers to the customer once the products are
shipped (i.e., leaves the Company's warehouse or a third-party's warehouse). After shipment and prior to delivery,
the customer is able to redirect the product to a different destination, which demonstrates the customer's control over
the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation
and the Company recognizes revenue. The
Company agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed
upon sales price. In the Company's contracts with customers, it allocates the entire transaction price to the sales price,
which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any
sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing activities are excluded from
revenue. Cost
of revenue includes the cost of purchased merchandise plus the cost of shipping merchandise and where applicable installation,
net of promotional rebates and other incentives received from vendors. Substantially
all the Company's sales are to individual retail consumers. Shipping
and Handling ‒ The Company bills its customers for shipping and handling charges, which are included in net sales for
the applicable period, and the corresponding shipping and handling expense is reported in cost of sales. Disaggregated
Revenue The
Company's disaggregated revenue by product type is as follows:
March 31,
2021 2020
Appliance sales $ 10,273,393 $ 7,802,104
Furniture sales 2,327,834 1,281,836
Other sales 1,096,141 593,238
Total $ 13,697,368 $ 9,677,178 The
Company also sells extended warranty contracts. The Company is an agent for the warranty company and earns a commission on the
warranty contracts purchased by customers; therefore, the cost of the warranty contracts is netted against warranty revenue in
the accompanying consolidated statement of operations. The Company assumes no liability for repairs to products on which it has
sold a warranty contract. The
Company experiences operational trends which are primarily holidays such as Presidents Day, Memorial Day, July 4th, Labor Day,
Thanksgiving Day, and Christmas and Black Friday and Cyber Monday. Receivables Receivables
represent rebates receivable due from manufacturers from whom the Company purchases products and amounts due from credit card
processors that do not settle within two days. Rebates receivable are stated at the amount that management expects to collect
from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs
from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos,
which can be applied against vendor accounts payable. Based on the Company's assessment of the credit history with its manufacturers,
it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially
all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible. Merchandise
Inventory Inventory
consists of finished products acquired for resale and is valued at the lower-of-cost-or-market with cost determined on an average
item basis. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on
its estimate of market conditions. Property
and Equipment Property
and equipment is stated at the historical cost. Maintenance and repairs of property and equipment are charged to operations as
incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold
improvements. Depreciation is computed using the straight-line method over estimated useful lives as follows:
Category Useful Life
Machinery and equipment 5
Office equipment 5
Vehicles 5 Goodwill The
Company tests its goodwill for impairment at least annually on December 31 and whenever events or circumstances change that indicate
impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred.
Such indicators may include, among others: a significant decline in the Company's expected future cash flows; a significant
adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change
in these factors could have a significant impact on the recoverability of goodwill and the Company's consolidated financial
results. The
Company tests goodwill by estimating fair value using a Discounted Cash Flow ("DCF") model. The key assumptions used
in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit
margins based on internal forecasts, terminal value and an estimate of a market participant's weighted-average cost of capital
used to discount future cash flows to their present value. There were no impairment charges during three months ended March 31,
2021 and 2020. Intangible
Assets As
of March 31, 2021 and December 31, 2020, definite-lived intangible assets primarily consisted of tradenames and customer relationships
which are being amortized over their estimated useful lives, or 5 years. The
Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized,
they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances
indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based
on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives. In
applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on
estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are
initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable
intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators
of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually
as of December 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared against their
carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.
At March 31, 2021 and December 31, 2020, there were no impairments in intangible or the right of use ("ROU") assets. Long-Lived
Assets The
Company reviews its property and equipment and any identifiable intangibles (including ROU asset) for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required
to be performed by management upon triggering events. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount
or fair value less costs to sell. At March 31, 2021 and December 31, 2020, there were no impairments in long-lived assets. Lease
Liabilities Lease
liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease
term at the lease commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses an
estimated incremental borrowing rate ("IBR") based on the information available at the commencement date of the respective
lease to determine the present value of future payments. The determination of the IBR requires judgment and is primarily based
on publicly available information for companies within the same industry and with similar credit profiles. The Company adjusts
the rate for the impact of collateralization, the lease term and other specific terms included in each lease arrangement. The
IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease arrangement. Lease
expense for minimum lease payments is recognized on a straight-line basis over the lease term. The
Company reviews the ROU asset for impairment whenever events or changes in circumstances indicate that the carrying amount of
the ROU asset may not be recoverable. When such events occur, the Company compares the carrying amount of the ROU asset to the
undiscounted expected future cash flows related to the ROU asset. If the comparison indicates that an impairment exists, the amount
of the impairment is calculated as the difference between the excess of the carrying amount over the fair value of the ROU asset.
If a readily determinable market price does not exist, fair value is estimated using discounted expected cash flows attributable
to the ROU asset. Fair
Value of Financial Instruments The
fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices
and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair
value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization
within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Cash,
restricted cash, receivables, inventory, and prepaid expenses approximate fair value, due to their short-term nature. The fair
value hierarchy is defined in the following three categories: Level
1: Quoted market prices in active markets for identical assets or liabilities. Level
2: Observable market-based inputs or inputs that are corroborated by market data. Level
3: Unobservable inputs that are not corroborated by market data. Customer
Deposits Customer
deposits represent the amount collected from customers when an order is placed. The deposits are transferred to revenue when the
order ships to the customer or returned to the Company if the order is subsequently cancelled. Income
Taxes Under
the Company's accounting policies, the Company initially recognizes a tax position in its unaudited condensed consolidated
financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities.
Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50%
likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all
relevant facts. Although the Company believes its provisions for unrecognized tax positions are reasonable, the Company can make
no assurance that the final tax outcome of these matters will not be different from that which the Company has reflected in its
income tax provisions and accruals. The tax law is subject to varied interpretations, and the Company has taken positions related
to certain matters where the law is subject to interpretation. Such differences could have a material impact on the Company's
income tax provisions and operating results in the period(s) in which the Company makes such determination. Sales
Tax Liability On
June 21, 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) Quill Corp v. North Dakota Basic
Income (Loss) Per Share Basic
income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number
of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive securities. For the three months ended March 31,
2021, the potentially dilutive securities were warrants for the purchase of 455,560 shares of common stock and options for the
purchase of 555,000 shares of common stock. The potentially dilutive securities for the three months ended March 31, 2020 were
warrants for the purchase of 250,000 shares of common stock. These potentially dilutive securities were excluded from diluted
loss per share. Reclassifications Certain
accounts have been reclassified to conform with classifications adopted in the period ended March 31, 2021. Such reclassifications
had no effect on net earnings or financial position. Going
Concern Assessment Management
assesses going concern uncertainty in the Company's unaudited condensed consolidated financial statements to determine whether
there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least
one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the
"look-forward period", as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably
knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key
assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures
or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary
or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs
and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority
to execute them within the look-forward period. The
Company has generated significant losses since its acquisition and has relied on cash on hand, external bank lines of credit,
proceeds from the IPO described below, issuance of third party and related party debt and the issuance of a note to support cashflow
from operations. For
the three months ended March 31, 2021, the Company incurred operating losses of approximately $3,280,686, cash flows used in operations
of $2,807,673 and negative working capital of $19,801,748. Management
has prepared estimates of operations for fiscal years 2021 and 2022 and believes that sufficient funds will be generated from
operations to fund its operations, and to service its debt obligations for one year from the date of the filing of these unaudited
condensed consolidated financial statements in the Company's Form 10-Q. As
described in Note 10 below, the Company received net proceeds of $4,590,000 from the sale of 10% OID senior secured promissory
notes due December 19, 2021 and warrants on March 19, 2021. These proceeds will supplement the Company's cash flow from
operations and provide additional liquidity. The
impact of COVID-19 on the Company's business has been considered in these assumptions; however, it is too early to know
the full impact of COVID-19 or its timing on a return to more normal operations. The
accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis under which the
Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business. Management
believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year
from the date of the filing of these unaudited condensed consolidated financial statements, indicate improved operations and the
Company's ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses
and cash outlays should operations not improve in the look forward period. Recent
Accounting Pronouncements Recently
Adopted In
August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic
350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes
to the Disclosure Requirements for Fair Value Measurement Not
Yet Adopted In
June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments The
Company currently believes that all other issued and not yet effective accounting standards are not relevant to the Company's
unaudited condensed consolidated financial statements. | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements of the Company
and ACI have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP")
and are presented in US dollars. Management has analyzed the impact of the Coronavirus
pandemic ("COVID-19") on its consolidated financial statements as of December 31, 2020 and has determined that the changes to
its significant judgments and estimates did not have a material impact with respect to goodwill, intangible assets or long-lived assets. Principles of Consolidation The consolidated financial statements include the
accounts of the Company and its consolidated subsidiary, ACI. All significant intercompany balances and transactions have been eliminated
in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated. Stock Split On July 30, 2020, the Company completed a 4,750-for-1
forward stock split of its outstanding common stock. As a result of this stock split, the Company's issued and outstanding common stock
increased from 1,000 to 4,750,000 shares. Accordingly, all share and per share information has been restated to retroactively show the
effect of this stock split. Predecessor
and Successor Reporting The acquisition of Goedeker,
as described in Note 1, was accounted for under the acquisition method of accounting in accordance with GAAP. For the purpose of financial
reporting, Goedeker was deemed to be the predecessor company and the Company is deemed to be the successor company in accordance with
the rules and regulations issued by the Securities and Exchange Commission. The assets and liabilities of Goedeker were recorded at their
respective fair values as of the acquisition date. Fair value adjustments related to the transaction are reflected in the books of the
Company, resulting in assets and liabilities of the Company being recorded at fair value at April 6, 2019. Therefore, the Company's financial
information prior to the transaction is not comparable to its financial information subsequent to the transaction. As a result of the impact
of pushdown accounting, the consolidated financial statements and certain note presentations separate the Company's presentations into
two distinct periods, the period before the consummation of the transaction (labeled "Predecessor") and the period after that
date (labeled "Successor"), to indicate the application of a different basis of accounting between the periods presented. Use of Estimates The preparation of consolidated financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and equivalents include: (1) currency on hand,
(2) demand deposits with banks or financial institutions, (3) other kinds of accounts that have the general characteristics of demand
deposits, and (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity
that they present insignificant risk of changes in value because of changes in interest rates. The
majority of payments due from financial institutions for the settlement of credit card and debit card transactions process within two
business days and are, therefore, classified as cash and cash equivalents. Other payment methods that take more time to settle are classified
as receivables. Restricted cash includes $3,298,529 pledged to secure
a note, $100,000 to secure a vendor letter of credit and $5,578,658 withheld by credit card processors as security for the Company's customer
refund claims and credit card chargebacks. The cash pledged to secure the note payable will be released as the note is repaid, the cash
pledged to secure the letter of credit will be released when the vendor offers the Company credit terms, and the cash held by credit card
processors will be released at the discretion of the credit card companies. Revenue Recognition and Cost of Revenue The Company records revenue in accordance with Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606. Revenue is recognized to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. ASC 606 also requires additional disclosure about the nature, amount, timing, and uncertainty
of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company collects the full sales price from the
customer at the time the order is placed, which is recorded as customer deposits on the accompanying consolidated balance sheet. The Company
does not incur incremental costs obtaining purchase orders from customers, however, if the Company did, because all the Company's contracts
are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from
orders it receives from its customers. The Company's performance obligations under the customer orders correspond to each sale of merchandise
that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation
based on the merchandise sale to be completed. Control of the delivery transfers to customers when
the customer can direct the use of, and obtain substantially all the benefits from, the Company's products, which generally occurs when
the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method of delivery.
The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products through a third-party
carrier from the Company's warehouse to the customer (a "Company Shipment"). The second way is through a shipment of the products
through a third-party carrier from a warehouse other than the Company's warehouse to the customer (a "Drop Shipment") and the
third way is where the Company itself delivers the products to the customer and often also installs the product (a "Local Delivery").
In the case of a Local Delivery, the Company loads the product on to its own truck and delivers and installs the product at the customer's
location. When a product is delivered through a Local Delivery, risk of loss passes to the customer at the time of installation and revenue
is recognized upon installation at the customer's location. In the case of a Company Shipment and a Drop Shipment, the delivery to the
customer is made free on board, or FOB, shipping point (whether from the Company's warehouse or a third party's warehouse). Therefore,
risk of loss and title transfers to the customer once the products are shipped (i.e., leaves the Company's warehouse or a third-party's
warehouse). After shipment and prior to delivery, the customer is able to redirect the product to a different destination, which demonstrates
the customer's control over the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its
performance obligation and the Company recognizes revenue. The Company agrees with customers on the selling price
of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company's contracts with customers,
it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling
price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects concurrently with revenue-producing
activities are excluded from revenue. Cost of revenue includes the cost of purchased merchandise
plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives received from
vendors. Substantially all the Company's sales are to individual
retail consumers. Shipping and Handling ‒ The Company bills
its customers for shipping and handling charges, which are included in net sales for the applicable period, and the corresponding shipping
and handling expense is reported in cost of sales. Disaggregated Revenue The Company's disaggregated revenue by product type
is as follows:
Successor Predecessor
Year Ended Period from Period from
Appliance sales $ 40,113,568 $ 28,487,053 $ 9,784,525
Furniture sales 11,800,277 4,405,866 2,456,085
Other sales 3,219,808 1,775,193 706,291
Total $ 55,133,653 $ 34,668,112 $ 12,946,901 The Company also sells extended warranty contracts.
The Company is an agent for the warranty company and earns a commission on the warranty contracts purchased by customers; therefore, the
cost of the warranty contracts is netted against warranty revenue in the accompanying consolidated statement of operations. The Company
assumes no liability for repairs to products on which it has sold a warranty contract. The Company experiences operational trends which are
primarily holidays such as Presidents Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day, and Christmas and Black Friday and Cyber
Monday. Receivables Receivables represent rebates receivable due from
manufacturers from whom the Company purchases products and amounts due from credit card processors that do not settle within two days.
Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due
the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods
either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company's
assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts.
The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the
period it is determined to be uncollectible. Merchandise Inventory Inventory consists of finished products acquired for
resale and is valued at the lower-of-cost-or-market with cost determined on an average item basis. The Company periodically evaluates
the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. Property and Equipment Property and equipment is stated at the historical
cost. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized
over the lesser of the base term of the lease or estimated life of the leasehold improvements. Depreciation is computed using the
straight-line method over estimated useful lives as follows:
Category Useful Life (Years)
Machinery and equipment 5
Office equipment 5
Vehicles 5 Goodwill The Company tests its goodwill for impairment at least
annually on December 31 and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of
judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant
decline in the Company's expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated
competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill
and the Company's consolidated financial results. The Company tests goodwill by estimating fair value
using a Discounted Cash Flow ("DCF") model. The key assumptions used in the DCF model to determine the highest and best use
of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate
of a market participant's weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment
charges during the years ended December 31, 2020 and 2019. Intangible Assets As of December 31, 2020 and 2019, definite-lived intangible
assets primarily consisted of tradenames and customer relationships which are being amortized over their estimated useful lives, or 5
years. The Company periodically evaluates the reasonableness
of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed
for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired,
intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles
with indefinite lives. In applying the acquisition method of accounting,
amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with
the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation
methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated
useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for
impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair values
of intangible assets are compared against their carrying values, and an impairment loss would be recognized for the amount by which a
carrying amount exceeds its fair value. At December 31, 2020 and 2019, there were no impairments in intangible or the right of use ("ROU")
assets. Long-Lived Assets The Company reviews its property and equipment and
any identifiable intangibles (including ROU asset) for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The test for impairment is required to be performed by management upon triggering events. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash
flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported
at the lower of carrying amount or fair value less costs to sell. At December 31, 2020 and 2019, there were no impairments in long-lived
assets. Lease Liabilities Lease liabilities and their corresponding ROU assets
are recorded based on the present value of lease payments over the expected lease term at the lease commencement date. As most of the
Company's leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate ("IBR") based on
the information available at the commencement date of the respective lease to determine the present value of future payments. The determination
of the IBR requires judgment and is primarily based on publicly available information for companies within the same industry and with
similar credit profiles. The Company adjusts the rate for the impact of collateralization, the lease term and other specific terms included
in each lease arrangement. The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease
arrangement. Lease expense for minimum lease payments is recognized
on a straight-line basis over the lease term. The Company reviews the ROU asset for impairment whenever
events or changes in circumstances indicate that the carrying amount of the ROU asset may not be recoverable. When such events occur,
the Company compares the carrying amount of the ROU asset to the undiscounted expected future cash flows related to the ROU asset. If
the comparison indicates that an impairment exists, the amount of the impairment is calculated as the difference between the excess of
the carrying amount over the fair value of the ROU asset. If a readily determinable market price does not exist, fair value is estimated
using discounted expected cash flows attributable to the ROU asset. Fair Value of Financial Instruments The fair value of a financial instrument is the amount
that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair
value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of
the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. Cash, restricted cash, receivables, inventory, and prepaid expenses approximate
fair value, due to their short-term nature. The fair value hierarchy is defined in the following three categories: Level 1: Quoted
market prices in active markets for identical assets or liabilities. Level 2: Observable
market-based inputs or inputs that are corroborated by market data. Level 3: Unobservable
inputs that are not corroborated by market data. Customer Deposits Customer deposits represent the amount collected from
customers when an order is placed. The deposits are transferred to revenue when the order ships to the customer or returned to the Company
if the order is subsequently cancelled. Derivative Instrument Liability The Company accounts for derivative instruments in
accordance with ASC 815, Derivatives and Hedging Income Taxes Under the Company's accounting policies, the Company
initially recognizes a tax position in its consolidated financial statements when it becomes more likely than not that the position will
be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount
of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full
knowledge of the position and all relevant facts. Although the Company believes its provisions for unrecognized tax positions are reasonable,
the Company can make no assurance that the final tax outcome of these matters will not be different from that which the Company has reflected
in its income tax provisions and accruals. The tax law is subject to varied interpretations, and the Company has taken positions related
to certain matters where the law is subject to interpretation. Such differences could have a material impact on the Company's income tax
provisions and operating results in the period(s) in which the Company makes such determination. Sales Tax Liability On June 21, 2018, the U.S. Supreme Court issued an
opinion in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) Quill Corp v. North Dakota
Basic Income (Loss) Per Share Basic income (loss) per share is calculated by dividing
the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per
share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding
during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially
dilutive securities. For the year ended December 31, 2020, the potentially dilutive securities were warrants for the purchase of 55,560
shares of common stock issued to affiliates of the underwriter in its initial public offering described below and options for the purchase
of 555,000 shares of common stock. For the year ended December 31, 2019, the potentially dilutive securities were penny warrants for the
purchase of 250,000 shares of common stock, which were included in basic loss per share, but excluded from diluted loss per share. Reclassifications Certain accounts have been reclassified to conform
with classifications adopted in the period ended December 31, 2020. Such reclassifications had no effect on net earnings or financial
position. Going Concern Assessment Management assesses going concern uncertainty in the
Company's consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available
borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available
to be issued, which is referred to as the "look-forward period", as defined in GAAP. As part of this assessment, based on conditions
that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and
will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or
curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment,
as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of
programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority
to execute them within the look-forward period. The Company has generated significant losses since
its acquisition and has relied on cash on hand, external bank lines of credit, proceeds from the IPO described below, issuance of third
party and related party debt and the issuance of a note to support cashflow from operations. For the year ended December 31, 2020, the Company
incurred operating losses of approximately $14.4 million, cash flows from operations of $5.4 million, and negative working capital of
$17.5 million. Management has prepared estimates of operations for
fiscal years 2021 and 2022 and believes that sufficient funds will be generated from operations to fund its operations, and to service
its debt obligations for one year from the date of the filing of these consolidated financial statements in the Company's 10-K. On August 4, 2020, the Company completed an initial
public offering of its common stock, pursuant to which the Company sold 1,111,200 shares of its common stock, at a purchase price of $9.00
per share, for total gross proceeds of $10,000,800 (the "IPO"). After deducting the underwriting commission and offering expenses,
the Company received net proceeds of $8,602,166. The Company used a portion of the proceeds from the IPO to pay off certain debt as described
below. As described in Note 19 below, the Company received net proceeds of $4,590,000
from the sale of 10% OID senior secured promissory note and warrants on March 19, 2021. These proceeds will supplement the Company's cash
flow from operations and provide additional liquidity. The impact of COVID-19 on the Company's business has
been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to more normal
operations. The accompanying consolidated financial statements
have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities
in the normal course of business. Management believes that based on relevant conditions
and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these consolidated financial
statements, indicate improved operations and the Company's ability to continue operations as a going concern. The Company has contingency
plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period. Recent Accounting Pronouncements Recently Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases
(Topic 842) In June 2018, the FASB issued Accounting Standards
Update ("ASU") 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting, Compensation
- Stock Compensation In February 2018, the FASB issued ASU 2018-02, Income
Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In August 2017, the FASB issued ASU 2017-12, Derivatives
and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities In August 2018, the FASB issued ASU 2018-15, Intangibles
– Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in
a Cloud Computing Arrangement That Is a Service Contract In August 2018, the FASB issued ASU 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement Not Yet Adopted In June 2016, the FASB issued ASU 2016-13 Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments The Company currently believes that all other issued and not yet effective
accounting standards are not relevant to the Company's consolidated financial statements. |
