1847 Holdings LLC (NYSE American: EFSH), a management consulting services company, has entered into a settlement agreement on Monday, August 19, 2024, with the Wilhelmsen Family Trust, resolving a dispute over a promissory note issued by its subsidiary, 1847 Asien Inc.
The agreement resulted in the forgiveness of the outstanding balance of the note, amounting to $831,027, and the issuance of 83,603 series C senior convertible preferred shares to the Trust.
The conflict stemmed from an assignment for the benefit of creditors by Asien’s Appliance, Inc., another subsidiary of 1847 Asien, around February 26, 2024. The Trust had claimed that 1847 Holdings and its affiliates were liable under the theory of alter ego liability, which the company denied.
According to the settlement details, the series C senior convertible preferred shares have a stated value of $10.00 per share and rank senior to all common shares and other equity except for series A senior convertible preferred shares and any indebtedness. The shares carry an annual dividend rate of 6.0% of the stated value, payable upon liquidation or conversion.
In the event of liquidation, holders of series C shares are entitled to receive 100% of the stated value plus any accrued dividends before any distribution to junior securities. These shares have no voting rights unless there is a proposed change to their specific terms.
The conversion rights allow each series C share, along with accrued dividends, to be converted into common shares at a conversion price of $10.00 per share, subject to certain adjustments.
However, the conversion is capped such that the holder and its affiliates cannot own more than 4.99% of the outstanding common shares post-conversion, a limit that can be increased to 9.99% with prior notice.
This transaction represents a material definitive agreement for 1847 Holdings and a material modification to the rights of security holders, as it introduces a new class of convertible equity with specific financial and conversion terms. The settlement concludes the dispute with the Trust, allowing the company to move forward without the outstanding debt from the promissory note.
In other recent news, 1847 Holdings LLC has seen significant developments. The firm recently appointed Eric Vandam as its Chief Operating Officer, effective from August 16, 2024.
Vandam brings with him 30 years of operational leadership experience, including a longstanding relationship with Toyota (NYSE:TM) and executive roles at Crenlo, LLC, and Heritage Home Group, LLC. The employment agreement includes an annual base salary of $300,000 and the potential for an annual incentive bonus contingent on earnings targets set by the board.
In addition to this, 1847 Holdings had to adjourn its 2024 annual meeting of shareholders due to a lack of quorum. The company has postponed the annual meeting to allow more shareholders to participate and achieve a quorum.
InvestingPro Insights
As 1847 Holdings LLC (NYSE American: EFSH) navigates its recent settlement agreement, it's crucial to consider the company's financial health and market performance. According to InvestingPro data, EFSH operates with a market capitalization of just $1.39 million, reflecting a very small-scale operation. The company's revenue growth over the last twelve months has been positive at 18.5%, which may indicate some operational momentum despite a quarterly revenue growth decline of -20.06%. However, the company's significant debt burden and the fact that it is not profitable over the last twelve months, as reflected by a negative P/E ratio of -0.01, raise concerns about its financial stability.
InvestingPro Tips suggest that EFSH may struggle with its financial obligations, as it's quickly burning through cash and its short-term obligations exceed its liquid assets. The stock's high price volatility and the significant return over the last week could attract investors looking for short-term opportunities, but the price has fallen significantly over the last year, indicating potential risk for long-term investors. For a comprehensive analysis, InvestingPro provides additional tips that can further guide investment decisions concerning EFSH. Visit the platform to discover more than ten additional InvestingPro Tips that can offer deeper insights into EFSH's financial and market performance.
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