SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number number: 001-38248
RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
RumbleOn, Inc. (Exact name of registrant as specified in its charter) | ||||||||||||||
| Nevada | 46-3951329 | |||||||||||||
| (State or other jurisdiction of | (I.R.S. Employer | |||||||||||||
901 Irving Texas | 75038 | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(214) 771-9952
| (214) 771-9952 | ||
| (Registrant's telephone number, including area code) | ||
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||||||
| Class B Common Stock, $0.001 par value | RMBL | The | |||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒x Yes ☐o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒x Yes ☐o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "a smaller reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | ||||||||||
| Non-accelerated filer | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐o Yes ☒x No
The number of shares of Class B common stock,Common Stock, $0.001 par value, outstanding on November 12, 2021May 9, 2022 was 14,882,022 16,504,469shares. In addition,50,000shares of Class A common stock,Common Stock, $0.001 par value, were outstanding on November 12, 2021.
Table of Contents to Report on Form 10-Q RumbleOn, Inc. Condensed Consolidated Balance Sheets ( September 30, December 31, See Notes to the Condensed Consolidated Financial Statements. Condensed Consolidated Statements of Operations ( See Notes to the Condensed Consolidated Financial Statements. Condensed Consolidated Statement of ( Class A Total Shares See Notes to the Condensed Consolidated Financial Statements. Condensed Consolidated Statements of Cash Flows ( See Notes to the Condensed Consolidated Financial Statements. ( Description of Business Unless the context requires otherwise, references in these financial statements to “RumbleOn,” the “Company,” “we,” “us,” and “our” refer to RumbleOn, Inc. and its consolidated subsidiaries. Overview RumbleOn, Inc. was incorporated in October 2013 under the laws of the State of Nevada. We are the nation’s first Omnichannel marketplace platform in powersports, leveraging proprietary technology to transform the powersports supply chain from acquisition of supply through distribution of retail and wholesale. RumbleOn provides an unparalleled technology suite, national footprint of physical locations, and full line manufacturer representation to transform the entire customer journey and experience worldwide through technology. Headquartered in the Dallas Metroplex, RumbleOn is revolutionizing the customer experience for outdoor enthusiasts across the country and making Basis of Presentation The accompanying unaudited Condensed Consolidated Use of Estimates The preparation of these Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period, which management considers to be critical accounting estimates. Recent Pronouncements Adoption of New Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 for its fiscal year beginning January 1, 2021 and it did not have a material effect on its consolidated financial statements. On the Closing Date, RumbleOn completed its business combination with RideNow Pursuant to the RideNow Agreement, on the Closing Date, the RideNow equity holders received cash The following table summarizes the consideration paid in cash and equity securities for the The Supplemental The following unaudited supplemental pro forma information presents the financial results as if the RideNow Transaction was completed NOTE Notes payable consisted of the following as of Unsecured note payable to P&D Motorcycles in the original amount of $1,724 with interest rate of 4% through maturity which is July 1, 2022. 1,073 — Unsecured notes payable to RideNow Management, LLLP, a related party through equal ownership by two directors; monthly principal payments ranging from $7 to $13; interest accruing at rates ranging from LIBOR+.6% to LIBOR+1.3%. 1,033 — Term Loan Credit Agreement On the Closing Date, the Company entered into The loan is reported on the balance sheet as senior secured debt Obligations under the Oaktree Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its domestic wholly owned subsidiaries (the “Subsidiary Guarantors”) although certain assets of the Company and Subsidiary Guarantors are subject to a first-priority lien in favor of floor plan lenders, and such liens and priority are subject to certain other exceptions. The Subsidiary Guarantors also guarantee the obligations of the Company under the Oaktree Credit Agreement. PPP Loans On May 1, 2020, the Company, and its wholly owned subsidiaries Wholesale and Wholesale Express (together, the $1,536 unsecured note Powersports and Automotive Segments Revenue Gross Profit Gross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs (collectively, we refer to reconditioning and transportation costs as “Recon and Transport”).FINANCIAL INFORMATION Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations 3118Quantitative and Qualitative Disclosure About Market Risk 4328Controls and Procedures 4328OTHER INFORMATION Legal Proceedings 4430Risk Factors 4430Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 45Item 3. Defaults Upon Senior Securities 45Item 4. Mine Safety Disclosures 45Other Information 453046Exhibits4732Item 1. Financial StatementsStatements.dollarsDollars in thousands)(Unaudited)(unaudited)March 31, 2022 December 31, 2021 ASSETS Current assets: Cash $ 59,362 $ 48,974 Restricted cash 9,500 3,000 Accounts receivable, net 52,990 40,166 Inventory 229,032 201,666 Prepaid expense and other current assets 5,891 6,335 Total current assets 356,775 300,141 Property and equipment, net 59,843 21,417 Right-of-use assets 144,892 133,112 Goodwill 348,318 260,922 Intangible assets, net 301,889 302,066 Other assets 9,090 10,091 Total assets $ 1,220,807 $ 1,027,749 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 81,893 $ 57,068 Vehicle floor plan note payable 122,994 97,278 Current portion lease liabilities 21,542 20,249 Current portion of long-term, convertible debts, and notes payable 4,277 4,476 Total current liabilities 230,706 179,071 Long-term liabilities: Senior secured note 338,946 253,438 Convertible debt, net 29,862 29,242 Notes payable 6,928 150 Operating lease liabilities 126,241 114,687 Financing lease liabilities 2,873 2,869 Deferred tax liabilities 5,620 7,586 Other long-term liabilities 10,455 9,061 Total long-term liabilities 520,925 417,033 Total liabilities 751,631 596,104 Commitments and contingencies (Notes 2, 3, 6, and 11) 0 0 Stockholders' equity: Common B stock, $0.001 par value, 100,000,000 shares authorized, 16,381,443 and 14,882,022 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 16 15 Additional paid-in capital 578,444 550,055 Accumulated deficit (104,965) (114,106) Class B stock in treasury, at cost 123,089 shares as of March 31, 2022 and December 31, 2021 (4,319) (4,319) Total stockholders' equity 469,176 431,645 Total liabilities and stockholders' equity $ 1,220,807 $ 1,027,749
2021
2020 ASSETS Current assets: Cash $ 68,268 $ 1,467 Restricted cash 3,049 2,049 Accounts receivable, net 42,117 9,408 Inventory 171,455 21,360 Prepaid expense and other current assets 4,745 3,446 Total current assets 289,634 37,730 Property and equipment, net 58,929 6,521 Right-of-use assets 92,944 5,690 Goodwill 263,107 26,887 Intangible assets, net 303,560 46 Other assets 3,678 105 Total assets $ 1,011,852 $ 76,979 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities $ 73,384 $ 14,193 Floor plan notes payable 87,175 17,812 Current portion of convertible debt 279 563 Current portion of long-term debt 6,151 2,877 Total current liabilities 166,989 35,445 Long-term liabilities: Senior secured debt 252,777 — Convertible debt, net 28,648 27,166 Derivative liabilities 41 17 Notes payable 567 4,691 Long-term portion of operating lease liabilities 85,965 4,370 Long-term portion of financing lease liabilities 40,591 — Deferred tax liabilities 19,579 — Other long-term liabilities 7,765 720 Total long-term liabilities 435,933 36,964 Total liabilities 602,922 72,409 Commitments and contingencies (Notes 9, 10, 13, 18) Stockholders’ equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020 — — Class A common stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020 0.05 0.05 Class B common stock, $0.001 par value, 100,000,000 shares authorized, 14,881,522 and 2,191,633 shares issued and outstanding as of September 30, 2021 and December 31, 2020 15 2 Additional paid-in capital 548,000 108,949 Accumulated deficit (134,766 ) (104,381 ) Class B common stock in treasury, at cost 123,089 and 0 shares as of September 30, 2021 and December 31, 2020 (4,319 ) — Total stockholders’ equity 408,930 4,570 Total liabilities and stockholders’ equity $ 1,011,852 $ 76,979 dollarsDollars in thousands, except per share amounts)(Unaudited)(unaudited)Three-Months Ended March 31, 2022 2021 Revenue: Vehicles sales Powersports $ 254,633 $ 10,528 Automotive 110,729 84,071 Parts, service and accessories 54,737 — Finance and insurance, net 27,470 327 Vehicle logistics 12,351 9,338 Total revenue 459,920 104,264 Cost of revenue: Powersports 208,231 7,877 Automotive 107,154 77,860 Parts, service and accessories 29,455 — Vehicle logistics 9,867 7,349 Total cost of revenue 354,707 93,086 Gross profit 105,213 11,178 Selling, general and administrative 78,076 13,401 Depreciation and amortization 4,474 599 Operating income (loss) 22,663 (2,822) Interest expense (11,181) (1,609) Change in derivative liability 39 (21) Income (loss) before provision for income taxes 11,521 (4,452) Income tax provision 2,380 — Net income (loss) $ 9,141 $ (4,452) Weighted average number of common shares outstanding - basic 15,693,900 2,303,525 Net income (loss) per share - basic $ 0.58 $ (1.93) Weighted average number of common shares outstanding - fully diluted 15,718,441 2,303,525 Net income (loss) per share - fully diluted $ 0.58 $ (1.93) Three-Months Ended
September 30 Nine-Months Ended
September 30 2021 2020 2021 2020 Revenue: Vehicles Sales Powersports $ 83,292 $ 7,303 $ 121,307 $ 38,642 Automotive 105,298 99,315 316,655 281,242 Finance and insurance, net 6,180 199 6,998 672 Parts, service and accessories 16,075 — 16,075 — Transportation and vehicle logistics 10,369 10,440 32,788 25,192 Total revenue 221,214 117,257 493,823 345,748 Cost of revenue Powersports 68,295 5,606 97,193 33,692 Automotive 98,773 86,473 293,751 257,046 Parts, service and accessories 8,845 — 8,845 — Transportation and vehicle logistics 7,914 8,374 25,958 19,325 Cost of revenue before impairment loss 183,827 100,453 425,747 310,063 Impairment loss on automotive inventory — — — 11,738 Total cost of revenue 183,827 100,453 425,747 321,801 Gross profit 37,387 16,804 68,076 23,947 Selling, general and administrative 37,564 13,279 69,077 42,510 Stock-based compensation and other issuances 23,943 — 23,943 — Insurance recovery (3,135 ) — (3,135 ) (5,615 ) Depreciation and amortization 1,717 536 2,948 1,567 Operating income (loss) (22,702 ) 2,989 (24,757 ) (14,515 ) Interest expense (4,577 ) (1,488 ) (8,107 ) (5,187 ) Forgiveness of PPP loan 572 — 572 — Change in derivative liability (6,518 ) (14 ) (8,774 ) 7 Gain on early extinguishment of debt — — — 188 Income (Loss) before benefit for income taxes (33,225 ) 1,487 (41,066 ) (19,507 ) Benefit for income taxes 10,681 — 10,681 — Net income (loss) $ (22,544 ) $ 1,487 $ (30,385 ) $ (19,507 ) Weighted average number of common shares outstanding - basic and fully diluted 6,939,708 2,234,838 4,178,932 2,165,167 Net income (loss) per share - basic and fully diluted $ (3.25 ) $ 0.67 $ (7.27 ) $ (9.01 ) Stockholders’Stockholders' EquitydollarsDollars in thousands)(unaudited)
Common Shares Class B
Common Shares Additional
Paid in Accumulated Class B
Common Shares
in Treasury
Stockholders’ Amount Shares Amount Capital Deficit Shares Amount Equity Balance, as of December 31, 2020 50,000 $ 0.05 2,191,633 $ 2 $ 108,949 $ (104,381 ) — $ — $ 4,570 Issuance of common stock for restricted stock units — — 94,771 — — — — — — Stock-based compensation — — — — 1,734 — — — 1,734 Net loss — — — — — (4,451 ) — — (4,451 ) Balance as of March 31, 2021 50,000 0.05 2,286,404 2 110,683 (108,832 ) — — 1,853 Issuance of common stock, net of issuance cost — — 1,048,998 1 36,796 — — — 36,797 Issuance of common stock for restricted stock units — — 7,660 — — — — — — Stock-based compensation — — — — 702 — — — 702 Net loss — — — — — (3,390 ) — — (3,390 ) Balance as of June 30, 2021 50,000 0.05 3,343,062 3 148,181 (112,222 ) — — 35,962 Issuance of common stock, net of issuance cost — — 5,053,029 5 154,438 — — — 154,443 Issuance of common stock in acquisition — — 5,833,333 6 200,952 — — — 200,958 Issuance of common stock for restricted stock units — — 775,187 1 (1 ) — — — — Issuance of warrant — — — — 19,700 — — — 19,700 Stock-based compensation — — — — 24,730 — — — 24,730 Treasury stock purchases — — (123,089 ) — — — 123,089 (4,319 ) (4,319 ) Net loss — — — — — (22,544 ) — — (22,544 ) Balance as of September 30, 2021 50,000 $ 0.05 14,881,522 $ 15 $ 548,000 $ (134,766 ) 123,089 $ (4,319 ) $ 408,930 thousands, except per share amounts)
(Unaudited)Class A
Common SharesClass B
Common SharesAdditional Paid in Capital Accumulated Deficit Class B Common Shares in Treasury Total Stockholders' Equity Shares Amount Shares Amount Shares Amount Balance, as of December 31, 2021 50,000 $ — 14,882,022 $ 15 $ 550,055 $ (114,106) 123,089 $ (4,319) $ 431,645 Issuance of common stock for restricted stock units — — 450,703 — — — — — — Issuance of common stock in acquisition — — 1,048,718 1 26,510 — — — 26,511 Stock-based compensation — — — — 1,879 — — — 1,879 Net income — — — — — 9,141 — — 9,141 Balance as of March 31, 2022 50,000 $ — 16,381,443 $ 16 $ 578,444 $ (104,965) 123,089 $ (4,319) $ 469,176 Class A
Common SharesClass B
Common SharesAdditional Paid in Capital Accumulated Deficit Class B Common Shares in Treasury Total Stockholders' Equity Shares Amount Shares Amount Shares Amount Balance, as of December 31, 2020 50,000 $ — 2,191,633 $ 2 $ 108,949 $ (104,380) — $ — $ 4,571 Issuance of common stock for restricted stock units — — 94,771 — — — — — — Stock-based compensation — — — — 1,734 — — — 1,734 Net loss — — — — — (4,452) — — (4,452) Balance as of March 31, 2021 50,000 $ — 2,286,404 $ 2 $ 110,683 $ (108,832) — $ — $ 1,853 RumbleOn, Inc.Condensed Consolidated Statement of Stockholders’ Equity(dollars in thousands)(unaudited) Class A
Common Shares Class B
Common Shares Additional
Paid in Accumulated Class B
Common Shares
in Treasury Total
Stockholders’ Shares Amount Shares Amount Capital Deficit Shares Amount Equity Balance, as of December 31, 2019 50,000 $ 0.05 1,111,681 $ 1 $ 92,268 $ (79,382 ) — $ — $ 12,887 Issuance of common stock, net of issuance cost — — 1,035,000 1 10,779 — — — 10,780 Issuance of common stock for restricted stock units — — 4,485 — — — — — Convertible note exchange — — — — 2,924 — — — 2,924 Stock-based compensation — — — — 846 — — — 846 Net loss — — — — — (22,038 ) — — (22,038 ) Balance as of March 31, 2020 50,000 0.05 2,151,166 2 106,817 (101,420 ) — — 5,399 Issuance of common stock for restricted stock units — — 21,610 — — — — — — Stock-based compensation — — — — 717 — — — 717 Adjust for fractional shares in reverse stock split — — 7,131 — — — — — — Net income — — — — — 1,044 1,044 Balance as of June 30, 2020 50,000 0.05 2,179,907 2 107,534 (100,376 ) — — 7,160 Issuance of common stock for restricted stock units — — 11,726 — — — — — — Stock-based compensation — — — — 862 — — — 862 Net income — — — — — 1,487 — — 1,487 Balance as of September 30, 2020 50,000 $ 0.05 2,191,633 $ 2 $ 108,396 $ (98,889 ) — — $ 9,509 dollarsDollars in thousands)(Unaudited)(unaudited)Three Months Ended
March 31,2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 9,141 $ (4,452) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 4,474 599 Amortization of debt discount 1,935 559 Stock based compensation expense 1,879 1,734 (Gain) loss from change in value of derivatives (39) 21 Deferred taxes (1,966) — Changes in operating assets and liabilities: Increase in accounts receivable (10,565) (11,935) Increase in inventory (1,279) (2,674) Decrease (increase) in prepaid expenses and other current assets 658 (605) Increase in other assets (2,498) (8) Increase in other liabilities (2,062) (214) Increase in accounts payable and accrued liabilities 17,304 4,092 (Decrease) increase in lease right-of-use assets (9,778) 272 Increase (decrease) in lease liabilities 10,849 (326) Increase in floor plan trade note borrowings 13,221 — Net cash provided by (used in) operating activities 31,274 (12,937) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions, net of cash received (64,916) — Purchase of property and equipment (1,319) — Technology development (1,752) (395) Net cash used in investing activities (67,987) (395) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from new secured debt 84,500 2,500 Repayments of debt and mortgage notes (31,597) — Proceeds from issuance of notes 6,541 — Repayments of notes payable — (1,397) (Decrease) increase in borrowings from non-trade floor plans (5,843) 10,843 Net cash provided by financing activities 53,601 11,946 NET CHANGE IN CASH 16,888 (1,386) Cash and restricted cash at beginning of period 51,974 3,516 Cash and restricted cash at end of period $ 68,862 $ 2,130 Nine Months Ended
September 30 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (30,385 ) $ (19,507 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 2,948 1,568 Amortization of debt discounts 2,284 1,499 Forgiveness of PPP loan (572 ) — Share based compensation 27,165 2,425 Impairment loss on inventory — 11,738 Impairment loss on property and equipment — 178 Loss (gain) from change in value of derivatives 8,774 (7 ) Gain on early extinguishment of debt — (188 ) Deferred taxes (10,969 ) — Changes in operating assets and liabilities: Decrease (increase) in prepaid expenses and other current assets 486 (1,296 ) (Increase) decrease in inventory (33,343 ) 34,219 (Increase) in accounts receivable (6,476 ) (2,860 ) (Increase) decrease in other assets (3,452 ) 63 Increase (decrease) in accounts payable and accrued liabilities 16,306 (1,634 ) Increase in other liabilities 1,406 — Decrease in floor plan trade note borrowings (3,951 ) — Net cash (used in) provided by operating activities (29,779 ) 26,198 CASH FLOWS FROM INVESTING ACTIVITIES Cash used for acquisition, net of cash received (365,946 ) — Purchase of property and equipment (7,613 ) (175 ) Technology development (1,266 ) (1,598 ) Net cash used in investing activities (374,825 ) (1,773 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from senior secured debt 261,451 8,272 (Repayments of) proceeds from notes payable (7,974 ) 789 Increase (decrease) in borrowings from non-trade floor plans 27,688 (47,211 ) Net proceeds from PPP loan — 5,177 Net proceeds from sale of common stock 191,240 10,780 Net cash provided by (used in) financing activities 472,405 (22,193 ) NET INCREASE IN CASH 67,801 2,232 CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD 3,516 6,726 CASH AND RESTRICTED CASH AT END OF PERIOD $ 71,317 $ 8,958 dollarsDollars in thousands, except per share amounts)(Unaudited)(unaudited)NOTE 1 – DESCRIPTION–DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESpowersportpowersports vehicles accessible to more people, in more places than ever before. On August 31, 2021 (the “Closing Date”), weRumbleOn completed ourits business combinationcombinations with the RideNow Powersports, group, the nation’s largest powersports retailer group (“RideNow”) (see on August 31, 2021 (the “RideNow Closing Date”). On February 18, 2022 (the “Freedom Closing Date”), the Company completed its acquisition of Freedom Powersports, LLC ("Freedom Powersports") and Freedom Powersports Real Estate, LLC ("Freedom Powersports - RE" and together with Freedom Powersports, the "Freedom Entities"), a retailer group with 14 retail locations (refer to Note 32 - RideNow Transaction below)Acquisitions).financial statementsFinancial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“("U.S. GAAP”) for interim information and with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“("SEC”). The Condensed Consolidated financial statementsFinancial Statements include the accounts of RumbleOn, Inc. and its subsidiaries, which are all wholly owned, including RideNow and the Freedom Entities (as defined below) from the Freedom Closing Date. In accordance with those rules and regulations, the Company has omitted certain information and notes required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the Condensed Consolidated financial statementsFinancial Statements contain all adjustments, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented. The year-end condensed balance sheet data was derived from audited financial statements. These Condensed Consolidated financial statementsFinancial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K (the “2020"2021 Form 10-K”10-K") for the year ended December 31, 2020.2021. The results of operations for the three and nine-monthsmonths ended September 30, 2021March 31, 2022 are not necessarily indicative of the results expected for the entire fiscal year. All intercompany accounts and material intercompany transactions have been eliminated.Such estimates include certain assumptions related to goodwill and other intangible assets, long-lived assets, assets held for sale, accruals for chargebacks against revenue recognized from the sale of finance and insurance products, and estimated tax liabilities. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates. In particular, the Covid-19 pandemic and the continuing adverse impacts to global economic conditions, as well as the Company’s operations, may impact future estimates including, but not limited to inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions. These conditions include, but are not limited to, recession, inflation, interest rates, unemployment levels, the state of the housing market, gasoline prices, consumer credit availability, consumer credit delinquency and loss rates, personal discretionary spending levels, and consumer sentiment about the economy in general. These conditions and the economy in general could be affected by significant national or international events such as a global health crisis (like COVID-19), acts of terrorism or acts of war (including the recent Russian invasion of Ukraine). When these economic conditions worsen or stagnate, it can have a material adverse effect on consumer demand as well as the availability of credit to finance powersports and vehicle purchases.5Comprehensive Income (Loss)During the three and nine-month periods ended September 30, 2021, and 2020, the Company did not have any other comprehensive income and, therefore, the net loss and comprehensive income (loss) were the same for all periods presented.In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and earlier adoption is permitted beginning in the first quarter of fiscal 2019. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies will still have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. Under the current SEC definitions, the Company meets the definition of an SRC as of the ASU 2019-10 issuance date and is adopting the deferral period for ASU 2016-13.NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERSOurIn October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, Revenue from Contracts with Customers. At the acquisition date, the company acquiring the business should record related revenue, consistsas if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company early adopted these requirements prospectively in the first quarter of new vehicles sales, retail and wholesale used vehicle sales, sales of finance and insurance products and sales of parts, service, accessories and apparel. Due2022.Accounting for Business CombinationsTotal consideration transferred for acquisitions is allocated to the impact of RideNow’s revenue streams, specifically the additions of partstangible and service,intangible assets acquired and finance and insurance revenue, the following information is being provided.New and Used Powersports VehiclesRumbleOn sells new and used powersports vehicles. The transaction price for a powersports vehicle sale is determined with the customerliabilities assumed, if any, based on their fair values at the timedates of sale. Customers often trade in their own powersports vehicleacquisition. This purchase price allocation process requires management to apply toward the purchase of a retail new or used powersports vehicle.make significant estimates and assumptions with respect to intangible assets and deferred revenue obligations. The “trade-in” powersports vehicle is a type of noncash consideration measured at fair value based on external and internal market data for a specific powersports vehicle, and applied as payment of the contract price for the purchased powersports vehicle.When the Company sells a new or used powersports 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 powersports vehicle at such time. Except for limited circumstances, the Company does not directly finance its customer’s purchases or provide leasing. In many cases, RumbleOn arranges third- party financing for the retail sale or lease of powersports vehicles to customers in exchange for a fee paid to RumbleOn by a third-party financial institution. RumbleOn 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. The Company establishes provisions, which are not significant, for estimated returns and warranties on the basis of both historical information and current trends.Parts and ServiceRumbleOn 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. The Company 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 servicesidentifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the parts used,fair value of the numbernet tangible and intangible assets acquired is allocated to goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.labor hours applied,the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our Condensed Consolidated Statements of Operations. On August 31, 2021 the Company completed its acquisition of RideNow and standardized hourly labor rates. The performance obligation for repairassets acquired 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 basedliabilities assumed have been recorded on a directprovisional basis as of March 31, 2022. The Company did not record any measurement period adjustments with respect to the RideNow acquisition in the first quarter of labor hours, parts2022. The Company completed its acquisition of Freedom Entities on February 18, 2022, and accessories that are allocatedacquired assets and liabilities assumed have been recorded on a provisional basis as the Company’s third party valuation of certain assets and liabilities, including intangible assets, has not been completed.We use the income approach to open servicedetermine the fair value of certain identifiable intangible assets including franchise rights. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and repair ordersthen discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth rates, expected retention rates, etc. We base the discount rates used to arrive at a present value as of the enddate of each reporting period. As a practical expedient,acquisition on 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 wholesalecertain industry-specific risk factors. We believe the estimated purchased franchise rights, non-competition agreements and retail counter parts sales isother intangible asset amounts so determined represent the fair value at the timedate of sale based onacquisition and do not exceed the quantity and price of each product purchased. Payment is typically due at time of sale, or withinamount a short period following the sale. RumbleOn 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.RumbleOn 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. RumbleOn also offers customer loyalty points for parts and services for select franchises. RumbleOn 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 InsuranceRumbleOn 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. RumbleOn 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, RumbleOn sells the products on a commission basis. For the majority of finance and insurance product sales, RumbleOn’s performance obligation is to arrangewould pay for the provision of goods and services by another party. RumbleOn’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, RumbleOn 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.assets.RumbleOn’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 allocated to the performance obligations. As revenue are recognized at a point-in-time, costs to obtain the customer (i.e. commissions) do not require capitalization.Transportation and Vehicle LogisticsVehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The Company’s subsidiary, Wholesale Express, provides these services. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as risks and rewards of transportation of the vehicle are transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross.
NOTE 2 - ACQUISITIONSRideNow TransactionDisaggregation of RevenueThe significant majority of RumbleOn’s revenue is from contracts with customers. In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.Revenue from contracts with customers consists of the following: Three-Months Ended
September 30, Nine-Months Ended
September 30, 2021 2020 2021 2020 Revenue New vehicles $ 42,943 $ — $ 42,943 $ — Used vehicles Powersports 40,349 7,303 78,364 38,642 Automotive 105,298 99,315 316,655 281,242 Total used vehicles 145,647 106,618 395,019 319,884 Total new and used vehicles 188,590 106,618 437,962 319,884 Parts, service and accessories 16,075 — 16,075 — Finance and insurance, net 6,180 199 6,998 672 Transportation and vehicle logistics 10,369 10,440 32,788 25,192 Total revenue $ 221,214 $ 117,257 $ 493,823 $ 345,748 Timing of revenue recognition Goods and services transferred at a point in time $ 210,920 $ 117,257 $ 483,529 $ 345,748 Good and services transferred over time 10,294 — 10,294 — Total revenue $ 221,214 $ 117,257 $ 493,823 $ 345,748 NOTE 3 – RIDENOW TRANSACTION(the “RideNow(“RideNow Transaction”). Pursuant to the Plan of Merger and Equity Purchase Agreement as amended (the “RideNow Agreement”), on the Closing Date, there were both mergers and transfers of ownership interest comprising in aggregate the RideNow Transaction. For the mergers, five5 newly-created RumbleOn subsidiaries were merged with and into five5 RideNow entities (“Merged RideNow Entities”) with the Merged RideNow Entities continuing as the surviving corporations and with the Company obtaining ownership of these entities through these mergers and the transfers noted below.Merged RideNow Entities owned powersports retail locations representingcomprising approximately 30% of RideNow retail locations.location. For the transfers of ownership interest, the Company acquired all the outstanding equity interests of 21 entities comprising the remaining 70% of the RideNow’s retail locations (“6(“Acquired RideNow Entities,”Entities”, and together with the Merged RideNow Entities, the “RideNow Entities”) that directly or indirectly operate the remaining RideNow powersports retail locations.in the aggregate amountconsideration of $400,400 and 5,833,333 shares of RumbleOn’s Class B common stock.stock, valued at $200,958 based on the close price of the Company’s Class B common stock on the RideNow Closing Date. The cash consideration of $400,400 includes funds against which the Company may make claims for indemnification; this amount is included in consideration transferred. The cash consideration for the RideNow Transaction was funded from (i) the Company’s underwritten public offering of 5,053,029 shares of Class B common stock, which resulted in net proceeds of approximately $154,438$154,443 (the “August 2021 Offering”), and (ii) net proceeds of approximately $261,451$261,000 pursuant to the Oaktree Credit Facility entered into on the RideNow Closing Date (as further described in Note 9, the “Oaktree Credit Agreement”)3 - Notes Payable and Lines of Credit). The remaining funds received from these financing transactions were used for working capital purposes.acquisitions:RideNow Transaction:Cash, net of cash acquired $ 365,946 Fair value of Class B common stock issued 200,958 Total estimated purchase price consideration1 $ 566,904 1Cash$ The400,400 Class B Common Stock 200,958 Total provisional purchase price consideration is subject to a net working capital and debt adjustments. These adjustments are currently under review by management. The amount of these adjustments could not be reasonably estimated as of September 30, 2021, and therefore, no adjustment amount has been reflected in the current estimated purchase price consideration reflected above.$ 601,358 following amounts represent the preliminary determinationfinal purchase price allocation will be completed upon payment of the fair value of the identifiable assets acquiredfinal consideration for working capital and liabilities assumed from RideNow.other adjustments. RideNow is included in the Powersports reporting segment, including goodwill, as the RideNow business is entirely within the Company’s Powersports segment. As of September 30, 2021,March 31, 2022, we have performed an initiala provisional valuation of the amounts below; however, our assessment of these amounts remains open for completion. We expectThe preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, finalizefuture expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The final purchase price allocation process in 2022may include changes to: (1) property and equipment; (2) right-of-use assets and lease liabilities; (3) deferred tax liabilities, net; (4) allocations to intangible assets as we complete our review of valuations.well as goodwill; (5) final consideration paid related to working capital and other adjustments; and (6) other assets and liabilities. We are required to finalize our purchase price allocations within one year after the RideNow Closing Date.The following amounts represent the preliminary determination of the fair value of the identifiable assets acquired and liabilities assumed from RideNow Transaction. Any potential adjustments made could be material in relation to the preliminary values presented below.7Estimated fair value of assets: Contracts in transit $ 10,878 Accounts receivable 15,356 Inventory 116,752 Prepaid expenses 1,785 Right-of-use assets 92,715 Property & equipment 45,801 Franchise rights 282,000 Other intangible assets, net 22,129 Other Assets 119 Total assets acquired 587,535 Estimated fair value of liabilities assumed: Accounts payable, accrued expenses and other current liabilities 41,616 Notes payable - floor plan 45,626 Lease liabilities 126,302 Deferred tax liability 30,548 Notes payable 6,549 Other long-term liabilities 6,210 Total liabilities assumed 256,851 Total net assets acquired 330,684 Goodwill 236,220 Total consideration $ 566,904 Estimated fair value of assets: Cash $ 34,454 Contracts in transit 10,878 Accounts receivable 10,124 Inventory 127,080 Prepaid expenses 1,785 Right-of-use assets 126,886 Property & equipment 15,509 Franchise rights 282,000 Other intangible assets, net 22,129 Other assets 119 Total assets acquired 630,964 Estimated fair value of liabilities assumed: Accounts payable, accrued expenses and other current liabilities 43,409 Notes payable - floor plan 47,161 Lease liabilities 130,181 Notes payable 6,549 Deferred tax liabilities 30,548 Other long-term liabilities 6,210 Total liabilities assumed 264,058 Total net assets acquired 366,906 Goodwill 234,452 Total provisional purchase price consideration $ 601,358 The resultsCompany assumed 2 promissory notes liabilities with aggregate principal and accrued interest of operations$2,200 as of the RideNow from the Closing Date are included indue to entities controlled by former directors and executive officers of the accompanying Condensed Consolidated Financial Statements. Acquisition related costs of $1,558 and $3,515 were incurred during the three and nine-months ended September 30, 2021, respectively, and are included in Selling, General and Administrative expenses in the Condensed Consolidated Statements of Operations. In addition, the Company elected to accelerate the vesting of restricted stock units (“RSUs”) and grant other stock awards in connection with the RideNow Transaction. The total valueCompany. See Note 8 - Related Party Transactions for further details of these awards is $23,943 and is reported as stock-based compensation and other issuances in the Condensed Consolidated Statement of Operations.2 related party promissory notes.Pro Forma Informationpro forma informationas ofat January 1, 2020 for the three and nine-months ended September 30,2021.Three Months Ended March 31, 2022 2021 Pro forma revenue $ 459,920 $ 344,266 Pro forma net income $ 9,141 $ 11,553 Net income per share-basic $ 0.58 $ 0.92 Weighted average number of shares-basic 15,693,900 12,603,113 Net income per share-fully diluted $ 0.58 $ 0.90 Weighted average number of shares-fully diluted 15,718,441 12,816,170 Freedom TransactionOn November 8, 2021, and September 30, 2020. Pro forma net income for the three and nine-months ended September 30, 2021, includes the tax benefit of $10,681 reported in the Condensed Consolidated Statements of Operations. Three-Months Ended
September 30, Nine-Months Ended
September 30, 2021 2020 2021 2020 Pro forma total revenue $ 384,724 $ 337,001 $ 1,148,597 $ 1,015,260 Pro forma net income $ (6,045 ) $ 9,703 $ 50,524 $ 11,102 Net income per share-basic $ (0.45 ) $ 0.81 $ 3.91 $ 0.93 Weighted average number of shares-basic 13,305,416 11,960,127 12,915,495 11,886,326 Net income per share-fully diluted $ (0.45 ) $ 0.81 $ 3.86 $ 0.93 Weighted average number of shares-fully diluted 13,305,416 11,960,127 13,083,502 11,886,326 Pro forma adjustments for the three and nine-months ended September 30, 2021, primarily include: Three-Months Ended
September 30, Nine-Months Ended
September 30, 2021 2020 2021 2020 Stock compensation and other administrative costs $ 179 $ 275 $ 745 $ 758 Depreciation and amortization $ 1,229 $ 1,844 $ 4,918 $ 5,532 Interest expense and amortization of debt discount $ 5,563 $ 8,319 $ 22,345 $ 25,185 Income tax provision $ (5,575 ) $ 3,234 $ 13,281 $ 3,701 NOTE 4 – ACCOUNTS RECEIVABLE, NETAccounts receivable, net consistsRumbleOn entered into a Membership Interest Purchase Agreement to acquire 100% of the followingequity interests of Freedom Powersports, LLC and Freedom Powersports Real Estate, LLC. The Membership Interest Purchase Agreement was executed with TPEG Freedom Powersports Investors LLC, a Texas limited liability company, Kevin Lackey, Sanjay Chandra, the option holders of Freedom Powersports, LLC and Trinity Private Equity Group, LLC, as of September 30, 2021 and December 31, 2020: September 30,
2021 December 31,
2020 Contracts in transit $ 9,218 $ — Trade receivables 24,701 8,859 Factory receivables1 3,637 — Finance receivables2 4,972 2,118 42,528 10,977 Less: allowance for doubtful accounts 411 1,569 $ 42,117 $ 9,408 the agent, proxy81Factory receivables represent amounts due primarily from manufacturer for holdbacks, rebates, co-op advertising, warranty and supplier returns.2Finance receivables originated in connection with the Company’s vehicle sales are held for sale and are subsequently sold.NOTE 5 – INVENTORYand attorney-in-fact for Freedom Entities’ security holders. The Company completed the acquisition of Freedom Entities on February 18, 2022 (“Freedom Transaction”).Inventory consistsFreedom Entities owns and operates powersports retail dealerships, including associated real estate, involving sales, financing, and parts and service of the following as of September 30, 2021 and December 31, 2020: September 30,
2021 December 31,
2020 New Vehicles $ 53,975 $ — Pre-owned vehicles: Powersport vehicles 67,843 1,870 Automobiles and trucks 27,185 19,490 Parts, accessories and other 22,452 — $ 171,455 $ 21,360 Floor plan notes payable as of September 30, 2021 and December 31, 2020 were as follows: September 30,
2021 December 31,
2020 Floor plan notes payable - trade $ 21,350 $ — Floor plan notes payable - non-trade 65,825 17,812 Floor plan notes payable $ 87,175 $ 17,812 Floor plan notes payable-trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventory with corresponding manufacturers’ captive finance subsidiaries (“trade lenders”). Floor plan payable-non-trade represents amounts borrowed to finance the purchase of specific new and used vehicle inventoriesmotorcycles, ATVs, UTVs, scooters, side-by-sides, sport bikes, cruisers, watercraft, and other powersports vehicles.The Freedom Transaction was accounted for as a purchase of a business under ASC 805, Business Combinations, and the Company has engaged a third-party valuation firm to assist with non-trade lenders. Changesthe valuation of the business acquired; the third party valuation of the business acquired has not yet been finalized. Under the terms of the Membership Interest Purchase Agreement, all outstanding equity interests of the Freedom Entities were acquired for total provisional consideration of $97,809, consisting of $71,298 paid in floor plan notes payable-tradecash, including certain transaction expenses paid on behalf of the Freedom Entities'' equity holders, and issuance of 1,048,718 restricted shares of RumbleOn Class B common stock totaling $26,511. Consideration transferred includes cash and Class B common stock deposited into escrow accounts against which the Company may make claims for indemnification; these amounts are reported as operating cash flowsincluded in consideration transferred for accounting purposes. The final purchase price allocation will be completed upon payment of final consideration for working capital and changes in floor plan payable-non-trade are reported as financing cash flowsother adjustments, and finalization of valuation of acquired tangible and intangible assets. Freedom Powersports is included in the accompanying Combined StatementsPowersports reporting segment, including goodwill, as the Freedom Entities'' business is entirely within the Company’s Powersports segment.As of Cash Flows.New inventory costs are generally reduced by manufacturer holdbacks, incentives, floor plan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floor plan payables are reflectiveMarch 31, 2022, our initial valuation of the gross costamounts below is provisional and remains open for completion. The valuation of the vehicle.business acquired is in process and has not yet been completed. The vehicle floor plan payables,final purchase price allocation may include changes to: (1) inventories and deferred revenues (2) property and equipment; (3) right-of-use assets and lease liabilities; (4) deferred tax liabilities, net; (5) allocations to intangible assets as shownwell as goodwill; (6) final consideration paid related to working capital and other adjustments; and (7) other assets and liabilities. We are required to finalize our purchase price allocations within one year after completing the Freedom Transaction.The following amounts represent the provisional determination of the fair value of the identifiable assets acquired and liabilities assumed from the Freedom Entities. Any potential adjustments made could be material in relation to the preliminary values presented below.Estimated fair value of assets: Cash $ 6,383 Contracts in transit 1,170 Accounts receivable 1,089 Inventory 26,086 Prepaid expenses 214 Property & equipment 34,265 Right-of-use assets 2,002 Other assets 79 Total assets acquired 71,288 Estimated fair value of liabilities assumed: Accounts payable, accrued expenses and other current liabilities 4,003 Notes payable - floor plan 18,337 Lease liabilities 2,002 Deferred revenues 3,495 Mortgage notes 26,809 Notes payable 4,693 Total liabilities assumed 59,339 Total net assets acquired 11,949 Goodwill 85,860 Total provisional purchase price consideration $ 97,809 9As of the Freedom Closing Date, the Company assumed notes payable and mortgage notes liabilities of $31,502. The Company repaid the outstanding balance of the assumed notes payable and mortgage notes liabilities in the above table, will generally also be higher thanfirst quarter of 2022 and have reflected these payments as cash outflows from financing activities in the inventory cost due tostatements of cash flows. The Company funded the timingcash portion of the saleFreedom acquisition, transaction expenses, notes payable and mortgage note repayments through an $84,500 draw on the Oaktree Credit Facility and use of a vehicle and paymentapproximately $14,253 of available cash resources.The results of operations of the related liability. Vehicle floor plan facilitiesFreedom Entities are due on demand, but in the case of new vehicle inventories, are generally paid within several business days after the related vehicles are sold. Vehicle floor plan facilities are primarily collateralized by vehicle inventories and related receivables.New vehicle floor plan facilities generally utilize LIBOR or ADB (Average Daily Balance)-based interest rates, which generally ranged between 5.0% and 7.0% as of September 30, 2021. Used vehicle floor plan facilities generally utilize prime, LIBOR or ADB-based interest rates, which ranged between 4.75% and 8.0% as of September 30, 2021. The aggregate capacity to finance our inventory under the new and used vehicle floor plan facilities was $217,717 as of September 30, 2021.NOTE 6 – PROPERTY AND EQUIPMENT, NETThe following table summarizes property and equipment, net of accumulated depreciation and amortization as of September 30, 2021, and December 31, 2020: September 30,
2021 December 31,
2020 Buildings and improvements $ 40,908 $ — Leasehold Improvements 6,689 321 Equipment 4,832 — Furniture and fixtures 297 191 Technology development 12,274 11,008 Vehicles 1,418 241 Total property and equipment 66,418 11,761 Less: accumulated depreciation and amortization 7,489 5,240 Total $ 58,929 $ 6,521 Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from three to five years.As of September 30, 2021, capitalized technology development costs were $12,066 and capitalized software costs were $208. Total technology development costs incurred for the three and nine-months ended September 30, 2021 was $1,008 and $2,706, respectively, of which $360 and $1,266, respectively was capitalized and $648 and $1,441, respectively, was charged to expenseincluded in the accompanying Condensed Consolidated Financial Statements from the Freedom Closing Date and include revenues of Operations. Depreciation expense for the three$29,425 and nine-months ended September 30, 2021 was $689 and $1,920, respectively, which included the amortizationearnings of capitalized technology development$3,748. Acquisition related costs of $592 and $1,710, respectively. Total technology development costs$284 were incurred for the three months ended March 31, 2022 and nine-months ended-months ended September 30, 2020 was $1,164are included in Selling, General and $2,635, respectively, of which $984 and $1,598, respectively, was capitalized and $180 and $1,037 respectively, was charged to expenseAdministrative expenses in the accompanying Condensed Consolidated StatementsStatement of Operations. Depreciation expense for the three and nine-months ended-month periods ended September 30, 2020 was $536 and $1,568, respectively, which included the amortization of capitalized technology development costs of $477 and $1,367, respectively.NOTE 7 – INTANGIBLE ASSETS AND GOODWILLThe following is a summary of the carrying amounts of goodwill, franchise rights and other intangible assets as of September 30, 2021 and December 31, 2020. September 30,
2021 December 31,
2020 Goodwill $ 263,107 $ 26,887 Other Intangible Assets Franchise rights - indefinite life $ 282,000 $ — Other intangibles 22,175 46 304,175 46 Less accumulated amortization 615 — Intangible assets, net $ 303,560 $ 46 The Company evaluates intangible assets for impairment at least annually, or when triggering events occur. No triggering events were noted as of September 30, 2021.8 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIESThe following table summarizes accounts payable and other accrued liabilities as of September 30, 2021 and December 31, 2020: September 30,
2021 December 31,
2020 Accounts Payable $ 8,165 $ 8,168 Accrued Interest 2,977 1,486 Operating lease liability-current portion 7,435 1,630 Financing lease liability-current portion 345 — Accrued Payroll 22,674 1,080 Customer deposits 5,449 — State and local taxes 6,591 856 Professional fees 6,969 112 Other accrued expenses 12,779 861 Total $ 73,384 $ 14,193 NOTE 93 – NOTES PAYABLE AND LINES OF CREDITSeptember 30, 2021March 31, 2022 and December 31, 2020:2021: September 30,
2021 December 31,
2020 Term Loan Credit Agreement dated August 31, 2021. Amortization payments are required quarterly commencing in the quarter ending December 31, 2021. The Initial Loan Term Facility matures on August 31, 2026. The interest rate as of September 30, 2021 was 9.25%. $ 252,777 $ — Term Loan Credit Agreement-NextGen dated February 8, 2017. Interest payable semi-annually at 6.5% through February 9, 2019 and 8.5% through February 10, 2020 and 10.0% thereafter through maturity, which was January 31, 2021. — 833 Notes payable-private placement dated March 31, 2017. Interest payable semi-annually at 8.5% through September 30, 2020 and 10.0% thereafter through maturity, which was June 30, 2021 — 669 Line of Credit- RumbleOn Finance. Line of credit secured by the loans and other assets of RumbleOn Finance, LLC. Interest rate as of September 30, 2021 was 7.25%. Principal and interest is payable on demand. — 889 Notes payable-PPP Loans dated May 1, 2020. Payments of principal and interest at 1% were deferred until September 1, 2021, at which time the Company will make equal payments of principal and interest through maturity, which is April 1, 2025. 4,612 5,177 Total notes payable and lines of credit 259,495 7,568 Less: Current portion 6,151 2,877 Long-term debt, net of current portion $ 253,344 $ 4,691 March 31,
2022December 31,
2021Term Loan Credit Agreement dated August 31, 2021. Amortization payments are required quarterly commencing in the quarter ending December 31, 2021. The initial Loan Term Facility matures on August 31, 2026. The interest rate on March 31,
2022 was 9.25%.$ 338,946 $ 253,438 Notes Payable-PPP Loans dated May 1, 2020 with maturity of April 1, 2025. Payments of principal and interest were deferred as of March 31, 2022 while the outstanding principal balance is under Small Business Administration (“SBA”) review. 2,534 2,534 Unsecured note payable to P&D Motorcycles in the original amount of $1,724 with interest rate of 4% through maturity which is July 1, 2022. 998 1,031 Unsecured notes payable to RideNow Management, LLLP, a related party through equal ownership by two directors; monthly principal payments ranging from $7 to $13; interest accruing at rates ranging from LIBOR+0.6% to LIBOR+1.3%. 781 907 RumbleOn Finance line of credit dated February 4, 2022. Interest accrues at 5%+SOFR. The line of credit matures on February 4, 2025. 6,853 — Total notes payable and lines of credit 350,112 257,910 Less: Current portion 4,238 4,322 Long-term portion $ 345,874 $ 253,588 the Oaktreea new Term Loan Credit Agreement (the “Oaktree Credit Agreement”) among the Company, as borrower, the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent and collateral agent (the “Administrative Agent”). The Oaktree Credit Agreement provides for secured credit facilities in the form of a $280,000 principal amount of initial term loans (the “Initial Term Loan Facility”) and a $120,000 in aggregate principal amount of delayed draw term loans (the “Delayed Draw Term Loans Facility,” and together with the Initial Term Loan Facility, the “Oaktree Credit Facility”). The proceeds from the Initial Term Loan Facility together with cash on hand, and the proceeds from the August 2021 Offering werewas used to (i) consummate the RideNow Transaction and (ii) pay fees, expenses and other items related to the consummation of the RideNow Transaction, the August 2021 Offering and to provide for working capital. The proceeds from the Delayed Draw Term Loans Facility, if drawn, will be used to finance acquisitions permitted by the Oaktree Credit Agreement and similar investments or “earn-outs” entered into in connection with acquisitions and to pay fees and expenses relating thereto. Loans under the Delayed Draw Term Loans Facility are subject to customary conditions precedent for facilities of this type including the need to meet certain financial tests and become available six (6) months after the Closing Date and are unavailable to be drawn after the eighteen (18) month anniversary of the Closing Date. The Oaktree Credit FacilityAgreement also provides for incremental draws for up to an additional $100,000 in accordance with the terms set forth in the Oaktree Credit Agreement, which may be used for acquisitions or working capital.and was recorded net of debt discount of $27,223. The debt discount includes the warrant for $10,950 that was previously recorded as a deferred finance charge. See Note 11-Stockholders’ Equity for a more detailed discussion of the warrant. The debt discount also includes fees incurrent in from our investment bankers and other debt issuance expenses.costs of $24,586, including the fair value of stock warrant of $10,950. Borrowings under the Oaktree Credit Facility bear interest at a rate per annum equal, at the Company’s option, to either (a) LIBOR (with a floor of 1.00%), plus an applicable margin of 8.25% or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of 7.25%. At the Company’s option, one percent (1.00%) of such interest may be payable in kind. The interest rate as of September 30, 2021on March 31, 2022, was 9.25%. Interest expense for the three and nine-monthsmonths ended September 2021March 31, 2022 was $2,666,$8,691, which included debt amortization of $509.The Oaktree Credit Agreement contains affirmative and negative covenants customary for facilities of its type which, among other things, generally limit (with certain exceptions including those for permitted acquisitions and floor plan financing): mergers, amalgamations or consolidations; the incurrence of additional indebtedness (including guarantees); the incurrence of additional liens; the sale, license, lease, transfer or other disposition of assets; certain investments; transactions with affiliates; payments of certain indebtedness; and other activities customarily restricted in such agreements. Beginning in the first full calendar quarter after the Closing Date, the Credit Agreement requires that (i) Consolidated Total Net Leverage Ratio not be greater than 4.25 to 1.00; (ii) Consolidated Senior Secured Net Leverage Ratio not be greater than 3.75 to 1.00, and (iii) its Liquidity not be less than $25,000 (each term as defined in the Oaktree Credit Agreement).On the last business day of each calendar quarter, beginning with the first full fiscal quarter ending after the Closing Date (or with regard$1,276 related to the Delayed Draw Term Loans Facility, beginning with the first full fiscal quarter ending after the applicable funding dates), the Company is required to make amortization payments in an aggregate principal amount equal to 0.25% of the aggregate principal amount of the Initial Term Loan Facility (or with regard to the Delayed Draw Term Loans Facility funded on the applicable funding date). Borrowings under the Oaktree Credit Facility mature five (5) years after the Closing Date.The Company is permitted to make voluntary prepayments of the loans and is obligated to make mandatory prepayments with regard to excess cash flow and out of the proceeds of certain asset sales and other recovery eventsdiscount and debt and certain equity issuances. Optional prepayments, mandatory prepayments out of the proceeds of debt and certain equity issuances, or an acceleration of the loans following an event of default will subject the Company to payment of certain fees, as defined inissuance costs. While the Oaktree Credit Agreement ifnotes that Secured Overnight Financing Rate ("SOFR") may be selected as the alternative benchmark rate, this has not been determined as10of March 31, 2022. As such, acceleration occurs on or before the thirty-six (36) month anniversaryCompany cannot predict the effect of the Closing Date.discontinuance of LIBOR or the establishment and use of alternative rates or benchmarks on interest expense as of March 31, 2022.TheIn connection with Oaktree Credit Agreement, contains customary events of default for facilities of this type. If an event of default under the Oaktree Credit Agreement occurs and is continuing, the commitments to make available the Delayed Draw Term Loan Facility may be terminated and the principal amount outstanding under the Oaktree Credit Agreement, together with all accrued and unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.Oaktree WarrantIn connection with providing the debt financing for the RideNow Transaction, and pursuant to the Commitment Letter executed on March 15, 2021, the Company issued warrants to purchase $40,000 of shares of Class B common stock to Oaktree Capital Management, L.P. and its lender affiliates (the “Oaktree Warrants”“Warrant”). In connection with the August 2021 Offering, the exercise priceThe initial warrant liability and deferred financing charge recognized was $10,950. The warrant liability is subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of the Warrants was set at $33.00 per share andchange in derivative liability in the aggregate numberCondensed Consolidated Statements of shares of Class B common stock underlying the Oaktree Warrants was set at 1,212,121.Operations. The Oaktree Warrants are immediately exercisable on the Closing Date and expire eighteen (18) months after the Closing.Line of Credit- RumbleOn Finance FacilityOn June 23, 2020, RumbleOn Finance, LLC, a wholly owned subsidiaryfair value of the Company (“RumbleOn Finance”), entered intoWarrant was estimated using a loan agreement providing for up to $2,500 in proceeds (the “ROF Facility”) with CL Rider Finance, L.P. (“CL Rider”). In connection with the ROF Facility, RumbleOn Finance pledged its assets to CL Rider to secure the ROF FacilityMonte Carlo simulation based on a combination of level 1 and executed a promissory note in favor of the CL Rider pursuant to which the ROF Facility will accrue interest at an initial rate not lower than 7% per annum. The ROF Facility is payable on demand by CL Rider. Interest expense on the ROF Facility for the for the three and nine-months ended September 30, 2021 was $0 and $71, respectively.Notes PayableNextGenOn February 8, 2017, in connection with the acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen (which note was subsequently assigned to Halcyon in February 2018) in the amount of $1,333. Halcyon was affiliated with Kartik Kakarala, a former director of the Company. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from thelevel 2 inputs. Upon closing date through the second anniversary of such date; (ii) at a rate of 8.5% annually from the second anniversary of the closing date through February 10, 2020; and (iii) 10.0% thereafter through the maturity date. The Company’s obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro LLC (“NetGen Pro”), pursuant to an Unconditional Guaranty Agreement (the “Guaranty Agreement”), by and among NextGen and NextGen Pro, and a related Security Agreement between the parties, each dated as of February 8, 2017. As discussed below, the note was exchanged for a new note in January 2020, which extended the maturity date of the note until January 31, 2021. Interest expense on the NextGen Note for the three and nine-months ended September 30, 2021 was $0 and $7, respectively. Interest expenses on the NextGen Note for the three and nine-months ended September 30, 2020, was $21 and $66, respectively.Private PlacementOn March 31, 2017, the Company completed funding of the second tranche of the 2016 Private Placement. The investors were issued 58,096 shares of Class B common stock of the Company and promissory notes (the “Private Placement Notes”) in the amount of $667, in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350. The Private Placement Notes matured on January 31, 2021. Interest accrued at a rate of 6.5% annually from the closing date through the second anniversary of such date; at a rate of 8.5% annually from the second anniversary of the closing date through March 31, 2020; and at a rate of 10% thereafter through the Maturity Date. Based on the relative fair values attributed to the Class B common stock and promissory notes issued in the 2016 Private Placement, the Company recorded a debt discount on the promissory notes of $667 with the corresponding amounts recorded as an addition to paid-in capital. The debt discount was fully amortized to interest expense at the scheduled maturity of the Private Placement Notes in January 2021 using the effective interest method. The effective interest rate at June 30, 2021 was 26.0%. Interest expense on the Private Placement Notes was $0 and $18, respectively for the three and nine months ended September 30, 2021. Interest expense for the three and nine-months ended September 30, 2020 was $17 and $125, respectively, which included debt discount amortization of $0 and $76, respectively. On January 31, 2021, a payment of $371 was made on the Private Placement Note and the remaining balance of $297 was extended through June 30, 2021. The Private Placement Notes were paid in full on July 1, 2021.Exchange of Notes PayableCertain of the Company’s investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for new notes (the “New Investor Notes”), pursuant to that certain Note Exchange Agreement, dated January 14, 2020 (the “Investor Note Exchange Agreement”), by and between the Company and each investor thereto, including Halcyon, such New Investor Note for an aggregate principal amount of $833 (after taking account of a $500 pay down of the previously outstanding Halcyon note), Blue Flame Capital, LLC (“Blue Flame”), an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99, and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $273. The Halcyon and Blue Flame outstanding principal plus accrued interest were paid in full on January 31, 2021. The remaining outstanding principal plus accrued interest of the New Investor Notes was paid in full on July 1, 2021.Bridge LoanOn March 12, 2021, in anticipation of the RideNow Transaction, the Companywarrants were considered equity linked contracts indexed to the Company’s stock and its subsidiary, NextGen Pro, executedtherefore met the equity classification guidance. As a secured promissory noteresult, the $19,700 was reclassified to additional paid-in-capital. The $10,950 deferred financing charge was reclassified as part of the debt discount related to the Oaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.Line of Credit - Floor PlanOn October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the “NextGear Credit Line”) with BRF Finance Co., LLC (“BRF Finance”NextGear. We ended borrowings under the NextGear Credit Line on August 31, 2021, at which point Wholesale entered into a floorplan vehicle financing credit line with AFC (the “AFC Credit Line”), an affiliate. Advances under the AFC Credit Line are limited to $29,000 as of B. Riley Securities, Inc., pursuant to which BRF Finance loaned the Company $2,500 (the “Bridge Loan”). The Bridge Loan matures on the earlier of September 30, 2021 or upon the issuance of debt or equity above a threshold. The Bridge Loan plus accrued interest at 12% was paid in full on the Closing Date.March 31, 2022. Interest expense on the Bridge LoanNextGear Credit Line and AFC Credit Line for the three months ended March 31, 2022 and nine-months ended September 30, 2021 was $53were $363 and $147,$304, respectively.“Subsidiaries,”“Subsidiaries”, and with the Company, the “Borrowers”), each entered into loan agreements and related promissory notes (the “SBA Loan Documents”) to receive U.S. Small Business Administration Loans (the “SBA Loans”) pursuant to the Paycheck Protection Program (the “PPP”) established under the CARES Act, in the aggregate amount of $5,177 (the “Loan Proceeds”). Pursuant to the terms of the SBA Loan Documents, the Borrowers can apply for and receive forgiveness for all, or a portion of the loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during a certain time period following the funding of the PPP Loans. In July 2021, wethe Company applied to obtain forgiveness of the PPP Loans and received approval forapproximately $2,643 of the loan forgiveness totaling $564 in September,was approved as of December 31, 2021. The balance of the PPP loans of $4,612$2,534 is still under review by the SBA and the Company can provide no assurance that it will obtain forgiveness of this remaining balance in whole or in part. As of September 30, 2021, paymentsPayments on this remaining loan balance commenced on September 1, 2021, and the loans mature on April 25,1, 2025.Interest expense on the PPP Notes for the three and nine-months ended September 30, 2021 was $13 and $39, respectively. Interest expense on the PPP Notes for the three and nine-months ended September 30, 2020 was $12 and $19 respectively.Line of Credit - RumbleOn FinanceNOTE 10 – CONVERTIBLE NOTESAsROF SPV I, LLC (“ROF SPV”), an indirect subsidiary of September 30, 2021, the outstanding convertible promissory notes net of debt discount and issue costs are summarized as follows: September 30, 2021 December 31, 2020 Principal
Amount Debt
Discount Carrying
Amount Principal
Amount Debt
Discount Carrying
Amount Convertible senior notes $ 38,750 $ 10,102 $ 28,648 $ 38,750 $ 11,737 $ 27,013 448 169 279 1,024 308 716 Total convertible notes 39,198 10,271 28,927 39,774 12,045 27,729 Less: Current portion 448 169 279 768 205 563 Convertible debt, net of current portion $ 38,750 $ 10,102 $ 28,648 $ 39,006 $ 11,840 $ 27,166 Convertible Senior NotesOn May 9, 2019, the Company, entered into a $25,000 secured loan facility on February 4, 2022 primarily to provide for the purchase agreement (the “Old Notes Purchase Agreement”) with JMP Securitiesby ROF SPV of consumer finance loans originated by RumbleOn Finance, LLC (“JMP Securities”ROF”) to issue and sell $30,000 in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the “Old Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A, the Company’s consumer finance subsidiary. Borrowings under the Securities Act of 1933, as amended (the “Securities Act”) (the “2019 Note Offering”). On January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by a Joinder Agreement (together, the “New Note Purchase Agreement”), with the investors in the 2019 Note Offering, pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the “New Notes,” and together with the Old Notes, the “Public Notes”) and (ii) the issuance of additional New Notes in a private placement (the “2020 Note Offering”). On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering after deducting for payment of accrued interest on the Old Notes and offering-related expenses were approximately $8,272.The New Notes were issued pursuant to an Indenture (the “New Indenture”), by and between the Company and the Trustee. The New Notesfacility generally bear interest at 6.75% per annum, payable semiannually on January 1 and July 1, beginning on July 1, 2020. The New Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradable as required by the New Indenture. The New Notes mature on January 1, 2025, unless earlier converted, redeemed, or repurchased pursuant to their terms.The initial conversion rate of the New Notes is 25 shares of Class B common stock per $1 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 62.0 shares per $1 in principal amount.The New Indenture contains a “blocker provision” which provides that no holder (other than the depository with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B common stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B common stock.The New Notes are not redeemable by the Company before January 14, 2023. The Company may redeem for cash all or any portion of the New Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the New Notes.The New Notes rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100% of the principal and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable.As of September 30, 2021, the conditions allowing holders of the New Notes to convert have not been met and therefore the New Notes are not yet convertible.The Company accounted for the exchange of the Old Notes and the issuance of the New Notes in accordance with the conversion guidance in ASC 470-20 “Debt – Debt with Conversion and Other Option” (ASC 470-20) and determined that the exchange of the Old Notes for the New Notes required derecognition of the Old Notes given that the difference in the fair value of the embedded conversion feature of the New Notes relative to the Old Notes was in excess of 10 percent of the Old Notes conversion feature fair value. In derecognizing the Old Notes, the Company recognized a gain of $188 equal to difference between the fair value of the Old Notes liability immediately prior to extinguishment and the carrying amount of the liability component of the Old Notes, including any unamortized debt issuance costs. The remaining consideration of $2,593 was allocated to the reacquisition of the equity component and recognized as a reduction of stockholder’s equity.The New Notes were accounted for in accordance with FASB ASC 470, Debt and ASC 815, Derivatives and Hedging, which required bifurcation of the liability and equity components. The Company determined the carrying amount of the liability component was $25,280 and represents the present value of the New Notes cash flows using an implied discount rate of 18.7%, which is a yield applicable to similar debt instruments that do not have the conversion feature. After allocation of the initial proceeds to the liability components, the remaining amount was allocated to the equity component and recorded as additional paid in capital. The Company recorded $13,529, in total debt discount related to the New Notes which included $60 of debt issuance costs. The Company allocates transaction costs related to the issuance of the New Notes to the liability and equity components using the same proportions as the initial carrying value of the New Notes. The $60 of transaction costs attributable to the debt component are being amortized to interest expense using the effective interest method over the term of the New Notes. Transaction costs attributable to the equity component were $41 and are netted with the equity component of the New Notes in stockholders’ equity. The equity component is not remeasured as long as it continues to meet the conditions for equity classification The Company further valued a derivative liability in connection with the interest make-whole provision at $11 on the issuance date based on a lattice model. This amount was recorded as a debt discount and is amortized to interest expense over the term of the New Notes using the effective interest rate. The derivative liability is remeasured at each reporting date with an increase in value of $7 and $25 being recorded in change in derivative liability in the Condensed Consolidated Statement of Operations for the three and nine-months ended September 30, 2021, respectively. The value of the derivative liability as of September 30, 2021 was $41.The interest expense recognized with respect to the Convertible Notes was as follows: Three-Months Ended
September 30, Nine-Months Ended
September 30, 2021 2020 2021 2020 Contractual interest expense $ 654 $ 654 $ 1,308 $ 1,912 Amortization of debt discount 569 479 2,290 1,367 Total interest expense $ 1,223 $ 1,133 $ 3,598 $ 3,279 Convertible Notes-Autosport USAOn February 3, 2019, in connection with the Autosport Acquisition, the Company issued a (i) $500 Promissory Note and (ii) a $1,536 Convertible Note in favor of the seller. The $500 Promissory Note was repaid in full in 2020. The $1,536 Convertible Note matures on January 31, 2022 and accrues interest at a rate per annum equal to the lesser of 6.5% per annum. Any interest andSOFR plus an applicable margin of 5%.ROF SPV may voluntarily prepay the full principal due under the Convertible Note is convertible into sharesbalance of the Company’s Class B common stockloan and all other obligations and terminate the loan agreement at any time after 24 months following the closing date (the “Revolving Period”), so long as, ROF SPV provides a conversion price of $115.00 per share, (i) at30 day written notice. Additionally, ROF SPV may prepay the Seller’s option, or (ii) at the Buyer’s option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company’s Class B common stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $140.00 per share. The maximum number of shares issuable pursuantloan in certain circumstances where a loan portfolio is sold, so long as a 1% fee is paid to the Convertible Note is 2,449 shareslenders.11RevenueRevenue of is comprised of vehicle sales, finance and insurance products bundled with retail vehicle sales (“F&I”), and parts, service and accessories/merchandise (“PSA”).channels; automotivechannels. F&I and PSA revenue is almost exclusively earned through retail channels. Automotive sales are almost exclusively via wholesale channels, and therefore, representcontribute to a very small portion of the F&I.&I revenue. These sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling through the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory19availability. The number of vehicles sold to any given channel may vary from period to period.period these factors. Subject to the lingering impact of Covid-19economic uncertainties and the resulting Demand/Supply Imbalances, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building and direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.don’tdo not include other ancillary gross profit attributable to financing and accessories. accessory.Factors affecting gross profit from period to period include the mix of new compared toversus used vehicles sold, the distribution channel through which they are sold, the sources from which we acquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalancesDemand/Supply Imbalances in our sales channels, which could temporarily lead to average selling prices and gross profits increasing or decreasing in any given channel.
Vehicles Sold
We define vehicles sold as the number of vehicles sold through both wholesale and retail channels in each period, net of returns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit. Vehicles sold also enables complementary revenue streams, such as financing. Vehicles sold increases our base of customers and improves brand awareness and repeat sales. Vehicles sold also provides the opportunity to successfully scale our logistics, fulfillment, and customer service operations.
Total Gross Profit per Unit
Total gross profit per unit is the aggregate gross profit of the Company in a given period, divided by retail units sold in that period including gross profit generated from the sale of the new and used vehicles, income related to the origination of loans originated to finance the vehicle, commissions on salesrevenue earned from the sale of variableF&I products including extended service contracts, revenue frommaintenance programs, guaranteed assetauto protection, waiver coverage,tire and wheel protection, and theft protection products, gross profit on the sale of parts, accessories and merchandise,PSA products, and gross profit generated from wholesale sales of vehicles.
Vehicle Logistics and Transportation Services Segment
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The freight brokerage agreements are fulfilled by independent third-party transporters who must meet our performance obligations and standards. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. In the normal course of operations, Wholesale Express also provides transportation services to Wholesale.
Vehicles Delivered
We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private parties. Vehicles delivered are the primary driver of revenue and in turn profitability in the vehicle logistics and transportation services segment.
Total Gross Profit Per Unit
Total gross profit per vehicle transported represents the difference between the price received from non-affiliated customers and our cost to contract an independent third-party transporter divided by the number of third party vehicles transported.
Results of Operations
| RumbleOn Metrics (on a GAAP Basis) | |||||||||||||||||
| Three-Months Ended | Nine-Months Ended | ||||||||||||||||
| Sept 2021 | Sept 2020 | Sept 2021 | Sept 2020 | ||||||||||||||
| Powersports | Revenue | New retail vehicles | $ | 42,943 | $ | 0 | $ | 42,943 | $ | 0 | |||||||
| Used vehicles | |||||||||||||||||
| Retail | 19,926 | 311 | 19,926 | $ | 4,243 | ||||||||||||
| Wholesale | 20,423 | 6,992 | 58,438 | 34,399 | |||||||||||||
| Total used vehicle revenue | 40,349 | 7,303 | 78,364 | 38,642 | |||||||||||||
| Finance and insurance, net | 6,180 | 199 | 6,998 | 672 | |||||||||||||
| Parts and service and other | 16,075 | 0 | 16,075 | 0 | |||||||||||||
| Total Revenue | $ | 105,547 | $ | 7,502 | $ | 144,380 | $ | 39,314 | |||||||||
Gross Profit | New retail vehicles | $ | 8,146 | $ | 0 | $ | 8,146 | $ | 0 | ||||||||
| Used vehicles | |||||||||||||||||
| Retail | 3,139 | 76 | 3,139 | 407 | |||||||||||||
| Wholesale | 3,712 | 1,620 | 12,829 | 4,541 | |||||||||||||
| Total used vehicle gross profit | 6,851 | 1,696 | 15,968 | 4,948 | |||||||||||||
| Finance and insurance, net | 6,180 | 199 | 6,998 | 672 | |||||||||||||
| Parts and service and other | 7,230 | 0 | 7,230 | 0 | |||||||||||||
| Total gross profit | $ | 28,407 | $ | 1,895 | $ | 38,342 | $ | 5,620 | |||||||||
| Vehicle Sales | New retail vehicles | 2,485 | 0 | 2,485 | 0 | ||||||||||||
| Used vehicles | |||||||||||||||||
| Retail | 1,336 | 30 | 1,336 | 455 | |||||||||||||
| Wholesale | 1,669 | 717 | 5,086 | 3,968 | |||||||||||||
| Total used vehicles | 3,005 | 747 | 6,422 | 4,423 | |||||||||||||
| Total vehicles sold | 5,490 | 747 | 8,907 | 4,423 | |||||||||||||
Revenue per vehicle | New retail vehicles | $ | 17,281 | $ | 0 | $ | 17,281 | $ | 0 | ||||||||
| Used vehicles | |||||||||||||||||
| Retail | $ | 14,915 | $ | 10,365 | $ | 14,915 | $ | 9,325 | |||||||||
| Wholesale | $ | 12,239 | $ | 9,752 | $ | 11,491 | $ | 8,669 | |||||||||
| Used vehicle | $ | 13,429 | $ | 9,777 | $ | 12,203 | $ | 8,737 | |||||||||
| Finance and insurance, net | $ | 1,617 | $ | 6,619 | $ | 1,831 | $ | 1,478 | |||||||||
| Parts and service and other | $ | 4,207 | $ | 0 | $ | 4,207 | $ | 0 | |||||||||
| Total Revenue per vehicle | $ | 27,623 | $ | 250,057 | $ | 37,786 | $ | 86,405 | |||||||||
Gross Profit per vehicle | New retail vehicles | $ | 3,278 | $ | N/A | $ | 3,278 | $ | N/A | ||||||||
| Used vehicle | $ | 2,280 | $ | 2,271 | $ | 2,487 | $ | 1,119 | |||||||||
| Finance and insurance | $ | 1,617 | $ | 6,619 | $ | 1,831 | $ | 1,478 | |||||||||
| Parts and service | $ | 1,892 | $ | 0 | $ | 1,892 | $ | 0 | |||||||||
| Total Gross Profit2 | $ | 5,542 | $ | 63,178 | $ | 8,142 | $ | 12,353 | |||||||||
| Automotive | Revenue | $ | 105,298 | $ | 99,315 | $ | 316,655 | $ | 281,242 | ||||||||
| Gross Profit3 | $ | 6,525 | $ | 12,842 | $ | 22,905 | $ | 12,459 | |||||||||
| Vehicles sold | 3,028 | 3,516 | 8,822 | 10,954 | |||||||||||||
| Revenue per vehicle | $ | 34,775 | $ | 28,247 | $ | 35,894 | $ | 25,675 | |||||||||
| Gross Profit per vehicle | $ | 2,155 | $ | 3,652 | $ | 2,596 | $ | 1,137 | |||||||||
| Transportation | Revenue | $ | 11,597 | $ | 11,415 | $ | 36,145 | $ | 28,657 | ||||||||
| Gross Profit | $ | 2,455 | $ | 2,067 | $ | 6,829 | $ | 5,867 | |||||||||
| Vehicles transported | 20,284 | 21,238 | 62,693 | 61,456 | |||||||||||||
| Revenue per vehicle transported | $ | 572 | $ | 537 | $ | 577 | $ | 466 | |||||||||
| Gross Profit per vehicle transported | $ | 121 | $ | 97 | $ | 109 | $ | 95 | |||||||||
| Total Company | Financial Overview | Revenue | |||||||||||||||
| Powersports | $ | 89,472 | $ | 7,502 | $ | 128,305 | $ | 39,314 | |||||||||
| Automotive | 105,298 | 99,315 | 316,655 | 281,242 | |||||||||||||
| Transportation and logistics | 11,597 | 11,415 | 36,145 | 28,657 | |||||||||||||
| Parts and service and other | 16,075 | 0 | 16,075 | 0 | |||||||||||||
| Total revenue | $ | 222,442 | $ | 118,232 | $ | 497,180 | $ | 349,213 | |||||||||
| Gross Profit | |||||||||||||||||
| Powersports | $ | 21,176 | $ | 1,895 | $ | 31,112 | $ | 5,621 | |||||||||
| Automotive | $ | 6,525 | $ | 12,842 | $ | 22,905 | $ | 12,459 | |||||||||
| Transportation and logistics | $ | 2,455 | $ | 2,067 | $ | 6,829 | $ | 5,867 | |||||||||
| Parts and service and other | $ | 7,230 | 0 | $ | 7,230 | 0 | |||||||||||
| Total Gross Profit | $ | 37,387 | $ | 16,804 | $ | 68,076 | $ | 23,947 | |||||||||
| Effects of the Nashville Tornado | — | 7,879 | — | (1,215 | ) | ||||||||||||
| Gross Profit as reported in the Consolidated Statements of Operations3 | 337,387 | 16,804 | 68,076 | 23,947 | |||||||||||||
| Total SG&A | $ | 37,564 | $ | 13,279 | $ | 69,077 | $ | 42,510 | |||||||||
| Net Income (Loss) before Income Tax | $ | (33,227 | ) | $ | 1,487 | $ | (41,066 | ) | $ | (19,507 | ) | ||||||
| Adjusted EBITDA | $ | 3,616 | $ | 4,720 | $ | 6,679 | $ | (3,142 | ) | ||||||||
| Unit Metrics | Vehicles Sold | ||||||||||||||||
| Retail | 3,821 | 30 | 3,821 | 455 | |||||||||||||
| Wholesale | 4,697 | 4,233 | 13,908 | 14,922 | |||||||||||||
| Total Vehicles Sold | 8,518 | 4,263 | 17,729 | 15,377 | |||||||||||||
| Revenue per Unit Sold | |||||||||||||||||
| Retail | $ | 18,071 | $ | 16,984 | $ | 18,285 | $ | 10,803 | |||||||||
| Wholesale | $ | 26,768 | $ | 25,114 | $ | 26,970 | $ | 21,191 | |||||||||
| Other | $ | 3,249 | $ | 2,678 | $ | 2,946 | $ | 1,864 | |||||||||
| Total Revenue | $ | 26,116 | $ | 27,734 | $ | 28,044 | $ | 22,747 | |||||||||
| Gross Profit per Unit | |||||||||||||||||
| Retail | $ | 4,571 | $ | 9,163 | $ | 4,785 | $ | 2,373 | |||||||||
| Wholesale3 | $ | 2,179 | $ | 1,555 | $ | 2,569 | $ | 1,221 | |||||||||
| Other | $ | 1,137 | $ | 485 | $ | 3,679 | $ | 382 | |||||||||
| Total Gross Profit | $ | 4,389 | $ | 2,094 | $ | 3,840 | $ | 1,636 | |||||||||
Results of Operations
POWERSPORTS
Revenue
Three-Months Ended September 30, 2021March 31, 2022 Compared to September 30, 2020.March 31, 2021
| RumbleOn Total Company Metrics | ||||||||||||||||||||||||||
| Three-Months Ended March 31, | ||||||||||||||||||||||||||
| 2022 | 2021 | YoY Change | ||||||||||||||||||||||||
| Total Company | Financial Overview ($ in 000s) | Revenue | ||||||||||||||||||||||||
| Powersports | $ | 336,840 | $ | 10,855 | $ | 325,985 | ||||||||||||||||||||
| Automotive | 110,729 | 84,071 | 26,658 | |||||||||||||||||||||||
| Vehicle Logistics | 12,351 | 9,338 | 3,013 | |||||||||||||||||||||||
| Total revenue | $ | 459,920 | $ | 104,264 | $ | 355,656 | ||||||||||||||||||||
| Gross Profit | ||||||||||||||||||||||||||
| Powersports | $ | 99,154 | $ | 2,978 | $ | 96,176 | ||||||||||||||||||||
| Automotive | 3,575 | 6,211 | (2,636) | |||||||||||||||||||||||
| Vehicle Logistics | 2,484 | 1,989 | 495 | |||||||||||||||||||||||
| Total Gross Profit | $ | 105,213 | $ | 11,178 | $ | 94,035 | ||||||||||||||||||||
| Total Operating Expenses | $ | 82,550 | $ | 14,000 | $ | 68,550 | ||||||||||||||||||||
| Operating Income (Loss) | $ | 22,663 | $ | (2,822) | $ | 25,485 | ||||||||||||||||||||
| Net Income (Loss) | $ | 9,141 | $ | (4,452) | $ | 13,593 | ||||||||||||||||||||
Adjusted EBITDA (1) | $ | 31,428 | $ | 21 | $ | 31,407 | ||||||||||||||||||||
| Unit Metrics | Vehicles Sold | |||||||||||||||||||||||||
| Retail | 15,839 | 206 | 15,633 | |||||||||||||||||||||||
| Wholesale | 3,541 | 3,294 | 247 | |||||||||||||||||||||||
| Total Vehicles Sold | 19,380 | 3,500 | 15,880 | |||||||||||||||||||||||
| Revenue per Unit Sold | ||||||||||||||||||||||||||
| Retail | $ | 19,230 | $ | 4,896 | $ | 14,334 | ||||||||||||||||||||
| Wholesale | $ | 24,919 | $ | 25,656 | $ | (737) | ||||||||||||||||||||
| Other | $ | 3,462 | $ | 2,668 | $ | 794 | ||||||||||||||||||||
| Total Revenue | $ | 23,732 | $ | 29,790 | $ | (6,058) | ||||||||||||||||||||
| Gross Profit per Unit | ||||||||||||||||||||||||||
| Retail | $ | 4,633 | $ | 493 | $ | 4,140 | ||||||||||||||||||||
| Wholesale | $ | 1,103 | $ | 2,382 | $ | (1,279) | ||||||||||||||||||||
| Other | $ | 1,433 | $ | 568 | $ | 865 | ||||||||||||||||||||
| Total Gross Profit | $ | 5,429 | $ | 3,194 | $ | 2,235 | ||||||||||||||||||||
| RumbleOn Powersports Metrics | ||||||||||||||||||||
| Three-Months Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | YoY Change | ||||||||||||||||||
| Powersports | Revenue ($ in 000s) | New retail vehicles | $ | 162,183 | $ | — | $ | 162,183 | ||||||||||||
| Used vehicles: | ||||||||||||||||||||
| Used retail vehicles | 86,658 | — | 86,658 | |||||||||||||||||
| Used wholesale vehicles | 5,791 | 10,528 | (4,737) | |||||||||||||||||
| Total used vehicles | 92,449 | 10,528 | 81,921 | |||||||||||||||||
| Finance and insurance, net | 27,470 | 327 | 27,143 | |||||||||||||||||
| Parts, service and accessories/merchandise | 54,737 | — | 54,737 | |||||||||||||||||
| Total revenue | $ | 336,839 | $ | 10,855 | $ | 325,984 | ||||||||||||||
| Gross Profit ($ in 000s) | New retail vehicles | $ | 31,193 | $ | — | $ | 31,193 | |||||||||||||
| Used vehicles: | ||||||||||||||||||||
| Used retail vehicles | 14,722 | — | 14,722 | |||||||||||||||||
| Used wholesale vehicles | 470 | 2,651 | (2,181) | |||||||||||||||||
| Total used vehicles | 15,192 | 2,651 | 12,541 | |||||||||||||||||
| Finance and insurance | 27,470 | 327 | 27,143 | |||||||||||||||||
| Parts, service and accessories/merchandise | 25,282 | — | 25,282 | |||||||||||||||||
| Total gross profit | $ | 99,137 | $ | 2,978 | $ | 96,159 | ||||||||||||||
| Vehicle Unit Sales | New retail vehicles | 9,677 | — | 9,677 | ||||||||||||||||
| Used vehicles: | ||||||||||||||||||||
| Used retail vehicles | 6,101 | — | 6,101 | |||||||||||||||||
| Used wholesale vehicles | 979 | 1,006 | (27) | |||||||||||||||||
| Total used vehicles | 7,080 | 1,006 | 6,074 | |||||||||||||||||
| Total vehicles sold | 16,757 | 1,006 | 15,751 | |||||||||||||||||
| Revenue per vehicle | New retail vehicles | $ | 16,760 | $ | — | $ | 16,760 | |||||||||||||
| Used vehicles: | ||||||||||||||||||||
| Used retail vehicles | 14,204 | — | 14,204 | |||||||||||||||||
| Used wholesale vehicles | 5,915 | 10,465 | (4,550) | |||||||||||||||||
| Total used vehicles | 13,058 | 10,465 | 2,593 | |||||||||||||||||
| Finance and insurance, net | 1,741 | — | 1,741 | |||||||||||||||||
| Parts, service and accessories/merchandise | 3,469 | — | 3,469 | |||||||||||||||||
| Total revenue per retail vehicle | $ | 21,349 | $ | — | $ | 21,349 | ||||||||||||||
| Gross Profit per vehicle | New vehicles | $ | 3,223 | $ | — | $ | 3,223 | |||||||||||||
| Used vehicles | 2,146 | — | 2,146 | |||||||||||||||||
| Finance and insurance, net | 1,741 | — | 1,741 | |||||||||||||||||
| Parts, service and accessories/merchandise | 1,602 | — | 1,602 | |||||||||||||||||
Total gross profit per retail vehicle (1) | $ | 4,681 | $ | — | $ | 4,681 | ||||||||||||||
Nine-Months Ended September 30, 2021 Compared to September 30, 2020. Total powersports revenue, including F&I and PSA, increased by $105,066 to $144,380 for the nine-months ended September 30, 2021 compared to $39,3141,006 for the same period in 2021. Overall, the average revenue per retail vehicle sold was $21,349, much of 2020. The Acquisition Effect specific to new vehicles, F&I, and PSA revenue accounted for approximately $65,000 of the increase, with the balancewhich is attributable to a 1,999higher price point vehicles like UTVs and side-by-sides. We anticipate that unit purchasing levels and sales will continue to grow as we increase penetration in the number of used vehicles sold coupled with a 39.7% increase in the revenue per used unit sold from $8,737existing markets, build out fulfillment centers and acquire new dealers.
Gross Profit
Three-Months Ended September 30, 2021 Compared to September 30, 2020. Powersports vehicles gross profit, including F&I and PSA, increased by $26,512 to $28,407 for the three-months ended September 30, 2021March 31, 2022 compared to $1,895$2,978 for the same period of 2020.in 2021. The increase in gross profit was primarily due to 4,743 unit increase in the total vehicles sold in 2021 compared to 2020 and the Acquisition Effect specific to new vehicles, F&I, and PSA which accounted for $21,357 of the increase and supplemented a 0.4% increase in gross profit per used vehicle. Total used vehicle gross profit, exclusive of F&I and PSA, increased by $5,155 based on a 2,258 increase in the number of used vehicles sold.
Nine-Months Ended September 30, 2021 Compared to September 30, 2020. Powersports gross profit, including F&I and PSA, increased by $32,722 to $38,342 during the nine-months ended September 30, 2021 compared to $5,620 for the same period of 2020. This increase in gross profit was primarily due to the Acquisition Effect; vehicle sales accounted for approximately $43,734 of the increase, PSA accounted for approximately $25,282 of the increase, and F&I accounted for approximately $27,143 of the increase. Overall, gross profit per retail vehicle sold was $4,681. The Acquisition Effect specific towas the primary driver of this, as all new vehicles,vehicle sales fell into this category, however F&I and PSA which accountedrepresent new revenue channels for $21,702the Company after the RideNow
| RumbleOn Automotive Metrics | ||||||||||||||||||||
| Automotive | ($ in 000s, except per unit) | Three-Months Ended March 31, | ||||||||||||||||||
| 2022 | 2021 | YoY Change | ||||||||||||||||||
| Revenue | $ | 110,729 | $ | 84,071 | $ | 26,658 | ||||||||||||||
Gross Profit (1) | $ | 3,436 | $ | 6,211 | $ | (2,775) | ||||||||||||||
| Vehicles sold | 2,623 | 2,494 | 129 | |||||||||||||||||
| Revenue per vehicle | $ | 42,215 | $ | 33,709 | $ | 8,506 | ||||||||||||||
| Gross Profit per vehicle | $ | 1,310 | $ | 2,490 | $ | (1,180) | ||||||||||||||
new vehicle, used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.
AUTOMOTIVE
Revenue
Three-Months Ended September 30, 2021March 31, 2022 Compared to September 30, 2020.March 31, 2021.
Nine-Months Ended September 30, 2021 Compared to September 30, 2020. Total automotive vehicle revenue increased by $35,413 to $316,65525.2% for the nine-monthsthree months ended September 30, 2021 compared to $281,242 for the same period of 2020. The 12.6%March 31, 2022 and an increase in revenue occurred despite a 19.5% decrease in the total numbervehicles sold of automotive units sold from 10,954 to 8,822. The revenue per vehicle for the nine-months ended September 30 2021 was $35,894129 as compared to $25,675 for the nine-months ended September 30, 2020, a 39.8% year-over-year increase resulting from the effects of Demand/Supply Imbalances, the Nashville Tornado, and the 2020 effect of shelter-in-place orders and other responses to Covid-19.
Gross Profit
Three-Months Ended September 30, 2021 Compared to September 30, 2020. Automotive vehicle gross profit, excluding the benefit of the 2020 impairment accounting relative to the Nashville Tornado, decreased by $6,317 to $6,525 for the three-months ended September 30, 2021 compared to the same period in 2020.2021.
Nine-Months Ended September 30, 2021 Compared to September 30, 2020. Automotive vehicle gross profit, excluding the benefit of the 2020 impairment accounting relating129 as compared to the Nashville Tornado, profit increased by $10,446 to $22,905 for the nine-months ended September 30,same period in 2021. The increase was attributable to the continued impact
VEHICLE LOGISTICS AND TRANSPORTATION SERVICES
| RumbleOn Vehicle Logistics Metrics | ||||||||||||||||||||
| Vehicle Logistics | ($ in 000s, except per unit) | Three-Months Ended March 31, | ||||||||||||||||||
| 2022 | 2021 | YoY Change | ||||||||||||||||||
Revenue (1) | $ | 13,612 | $ | 10,030 | $ | 3,582 | ||||||||||||||
| Gross Profit | $ | 2,640 | $ | 1,989 | $ | 651 | ||||||||||||||
| Vehicles transported | 21,831 | 18,907 | 2,924 | |||||||||||||||||
| Revenue per vehicle transported | $ | 624 | $ | 531 | $ | 93 | ||||||||||||||
| Gross Profit per vehicle transported | $ | 121 | $ | 105 | $ | 16 | ||||||||||||||
Revenue
Three-Months Ended September 30, 2021 Compared to September 30, 2020. Total revenue, inclusive ofBefore intercompany freight services provided to Wholesale of $1,228, which is$1,261 and $692, respectively for the three months ended March 31, 2022 and 2021 are eliminated in the Condensed Consolidated Financial Statements,Statements.
Nine-Months Ended September 30, 2021 Compared to September 30, 2020. Total revenue, inclusive of intercompany freight services provided to Wholesale of $3,357, which is eliminated in the Condensed Consolidated Financial Statements, increased by $7,488 to $36,145 for the nine-months ended September 30, 2021 compared to $28,657 for the same period in 2020. The increase in total revenue for the nine-month period ended September 30, 2021 resulted from the transport of 62,693 vehicles at2021. Additionally, revenue per vehicle transported of $577for the three months ended March 31, 2022 increased by approximately 17.5% to $624 as compared to revenue from the transport of 61,456 vehicles at a revenue per vehicle transported of $466$531 for the same period of 2020. The continued Demand/Supply Imbalances and proactive pricing by management contributed to these increases.
2021.
Gross Profit
Three-Months Ended September 30, 2021March 31, 2022 Compared to September 30, 2020.March 31, 2021. Total Vehicle Logistics gross profit for the three-monthsthree months ended September 30, 2021March 31, 2022 increased $388by $651, or 32.7%, to $2,455,$2,640, or $121 per vehicle transported, as compared to $2,067,$1,989, or $97$105 per vehicle transported, for the same period in 2020.2021. The increased gross profit was attributed to an increase in revenue per vehicles transported as well as higher gross profit per vehicle transported.
Nine-Months Ended September 30, 2021 Comparedincreases to September 30, 2020. Total gross profit for the nine-months ended September 30, 2021 increased $962 to $6,829, or $109 per vehicle transported, as compared to $5,867 or $95 per vehicle transported for the same period in 2020. The increased gross profit was attributed to an increase in the number of vehicles transported higherand revenue earned per vehicle transported and gross profit per vehicle transported.
Selling, General and Administrative
| Three-Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Advertising, marketing and selling | $ | 6,847 | $ | 1,596 | |||||||||||||||||||
| Compensation and related costs | 45,935 | 4,247 | |||||||||||||||||||||
| Facilities | 9,690 | 508 | |||||||||||||||||||||
| General and administrative | 13,092 | 4,913 | |||||||||||||||||||||
| Stock based compensation | 1,879 | 1,734 | |||||||||||||||||||||
| Technology development and software | 633 | 403 | |||||||||||||||||||||
| Total SG&A expenses | $ | 78,076 | $ | 13,401 | |||||||||||||||||||
| Three-Months Ended September 30 | Nine-Months Ended September 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Selling general and administrative: | ||||||||||||||||
| Compensation and related costs | $ | 12,669 | $ | 7,169 | $ | 26,983 | $ | 20,496 | ||||||||
| Advertising and marketing | 4,241 | 840 | 7,799 | 4,330 | ||||||||||||
| Technology development and software | 686 | 180 | 1,513 | 1,037 | ||||||||||||
| Facilities | 3,576 | 751 | 4,774 | 1,718 | ||||||||||||
| General and administrative | 16,392 | 4,339 | 28,008 | 14,929 | ||||||||||||
| $ | 37,564 | $ | 13,279 | $ | 69,077 | $ | 42,510 | |||||||||
Selling, general and administrative expenses increased by $24,285 and $26,567, respectively,$64,675 for the three and nine-monthsmonths ended September 30, 2021March 31, 2022 compared to the same periodsperiod in 2020.2021. In each case other than technology development and software, the increases were the result of the Acquisition Effect, with over 1,8002,000 additional employees, marketing initiatives at the store level, general and administrative costs associated with a larger team, and lease/facility expense related to 40+55+ new locations from the RideNow acquisition.Transaction and Freedom Transaction. In the case of technology and development, in the third quarter of 2021 we began some strategic technology projects focused on inventory management, infrastructure, and integration efforts. Notwithstandingefforts which continued to progress during the preceding, both the Nashville Tornado and the nationwide economic slowdown of Covid-19 late in the first quarter of 2020 lasting until the spring of 2021, resulted in artificially lower costs incurred in 2020.
Depreciation and Amortization
Depreciation and amortization increased by $1,181 and $1,381, respectively,$3,875 for the three and nine-monthsmonths ended September 30, 2021,March 31, 2022, compared to the same periods of 2020.period in 2021. Of the increase, in both periods, $170approximately $2,219 is associated with the various non-compete agreements related to the
Interest Expense
Interest expense increased by $3,089 and $2,920, respectively,$9,572 for the three and nine-monthsmonths ended September 30, 2021March 31, 2022 compared to the same periodsperiod in 2021. Interest expense consists of 2020. In each such period, the primary driver of such increase is an increase of $125 of floor plan interest and deferred financing costs on the: (i) term loan credit agreement (the “Oaktree Credit Facility”); (ii) various floorplan facilities; (iii) private placement notes); (iv) convertible senior notes; and (v) the interest expense of $2,666 for the Oaktree Credit Facility, which included debt amortization of $509.
Loss Contingencies and Insurance Recoveries
On March 3, 2020, the Nashville Tornado caused significant damage to the Company’s facilities including contents and inventory held for sale. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The loss was comprised of three components: (1) inventory loss, assessed by the insurance carrier at approximately $13,000; (2) building and personal property loss, primarily impacting our leased facilities, assessed by the insurance carrier at $2,783; and (3) loss of business income, for which the company has coverage in the amount of $6,000.
All three components of the Company’s loss claim have been submitted to its insurers. The Company’s inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss; however, the insurer advanced $5,615 in July 2020 and $3,134 in July 2021. Therefore, the total payments received thus far against the final settlement are $8,750. The insurer has agreed to pay $2,778 on the building and personal property loss, reflecting limits of $2,783 net of a $5 deductible. The insurer has made interim payments on the building and personal property loss of $2,626. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
As a result of the damage caused by the Nashville Tornado the Company concluded that the utility of the inventory damaged by the storm was impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or market and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss of the current period. For the nine-months ended September 30, 2020, the Company recorded an impairment loss on inventory of $11,738 comprised of $4,454 for vehicles that were a total loss and $7,285 in loss in value for vehicles partially damaged and subject to repair. The impairment loss is reported in cost of revenue in the September 30, 2020, Condensed Consolidated Statements of Operations. Additionally, $178 of the net book value of the property and equipment destroyed by the Nashville Tornado was expensed.
Derivative Liability
In connection with our various financings, we undertake an analysis of each financial instrument to determine the appropriate accounting treatment, including which, if any require bifurcation into liability and equity components. We have determined that each of the New Notesconvertible senior notes issued on January 10, 2020 (the “New Notes”) and the Warrant have a liability component that needs to be remeasured each reporting period with the change in value recorded in the Condensed Consolidated Statements of Operations.
New Notes
In connection with the issuance of the New Notes, a derivative liability was recorded at issuance with an interest make-whole provision of $21$20,673 based on a lattice model using a stock price of $14.60, and estimated volatility of 55.0% and risk-free rates over the entire 10-year yield curve.
The change in value of the derivative liability for the three months ended March 31, 2022 and nine-months ended September 30, 2021 was $6,518were $39 and $8,774,$(21), respectively, and is included in change in derivative liability in the Condensed Consolidated Statement of Operations. The value of the derivative liability as of September 30, 2021March 31, 2022 and December 31,202031, 2021 was $41$26 and $17,$66, respectively.
Oaktree Warrant
At inception of the Commitment Letter, the Company accounted for the Oaktree Warrant as a liabilityIn connection with the initial offset as a deferred financing charge as the Oaktree Warrant was issued in lieu of a commitment fee connected toproviding the debt financing offor the RideNow Transaction.Transaction, and pursuant to the commitment letter executed on March 15, 2021, the Company issued warrants to purchase $40,000 of shares of Class B common stock to Oaktree Capital Management, L.P. and its lender affiliates (the “Warrant”). The initial warrant liability and deferred financing charge recognized was $10,950. The warrant liability was subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of change in derivative liability in the Condensed Consolidated Statements of Operations. The fair value of the Warrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 2 inputs. There was no gain or loss recorded related to the Warrant liability during the three-months ended March 31, 2021 as there was no significant changes in the fair value between March 12, 2021 and March 31, 2021. For the three months ended June 30, 2021, the fair value of the warrant liability was increased $2,224 to $13,174. On August 31, 2021, the fair value of the warrant liability was increased $6,526 to $19,700. Upon closing of the RideNow Transaction, the Oaktree Warrantswarrants were considered equity linked contracts indexed to RumbleOn’sthe Company’s stock and therefore met the equity classification guidance. As a result, the $19,700 was reclassified to additional paid-in-capital. The $10,950 deferred financing charge was reclassified as part of the debt discount related to the Term LoanOaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.
Stock Based Compensation
In connection with the closing of the RideNow Transaction and the execution of the Executive Employment Agreements, the Company accelerated the vesting of and/or waived certain market-based share price hurdles for all then outstanding RSUs for all participants, which resulted in excess of $22,000 of incremental shares based compensation for both the three and nine-month periods ending on September 30, 2021.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.
Adjusted EBITDA is defined as net income (loss) adjusted to add back interest expense (including debt extinguishment), depreciation and amortization, changes in derivative liabilitiesliability and certain recoveries, charges and expenses, such as an insurance recovery, non-cash stock-based compensation costs, acquisition related costs, PPP loan forgiveness,litigation expenses, and other non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, The following tables reconcile Adjusted EBITDA to net income (loss) for the periods presented: Liquidity and Capital Resources Our primary sources of liquidity are available cash, amounts available under our floor plan lines of credit, and monetization of our retail loan portfolio. In 25because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.For the three months ended March 31, 2022 and 2021, adjustments to Adjusted EBITDA are primarily comprised of:•Non-cash stock-based compensation expense recorded in the Condensed Consolidated Statement of Operations,•Acquisition costs associated with the RideNow Transaction and Freedom Transaction, which primarily include professional fees and third-party costs, and•Other non-recurring costs, which include one-time expenses incurred. For the three months ended March 31, 2022, the balance was primarily related to technology implementation, establishment of the ROF secured loan facility, and various integration costs associated with the Freedom Transaction and the RideNow Transaction. For the three months ended March 31, 2021, the balance was primarily related to litigation expenses. Three-months Ended
September 30 Nine-months Ended
September 30 2021 2020 2021 2020 Net income (loss) $ (22,544 ) $ 1,487 $ (30,385 ) $ (19,507 ) Add back: Interest expense (including debt extinguishment) 4,577 1,488 8,107 4,999 Depreciation and amortization 1,717 536 2,948 1,567 Income tax benefit (10,681 ) — (10,681 ) — Change in derivative liabilities 6,518 14 8,774 (7 ) EBITDA (20,413 ) 3,525 (21,237 ) (12,948 ) Adjustments: Impairment loss on automotive inventory — — — 11,738 Insurance recovery — — — 178 Insurance proceeds (3,135 ) — (3,135 ) (5,615 ) Stock-based compensation1 24,730 863 26,457 2,425 Acquisition costs associated with the RideNow Transaction 1,558 — 3,515 — Other non-recurring costs 1,448 332 1,651 1,080 PPP loan forgiveness (572 ) — (572 ) — Adjusted EBITDA $ 3,616 $ 4,720 $ 6,679 $ (3,142 ) (1)Stock based compensation includes the vesting of all then outstanding RSU awards upon the closing of the RideNow Transaction.Three-Months Ended March 31, 2022 2021 Net income (loss) $ 9,141 $ (4,452) Add back: Interest expense (including debt extinguishment) 11,181 1,609 Depreciation and amortization 4,474 599 Income tax provision 2,380 — Change in derivative and warrant liabilities (39) 21 EBITDA 27,137 (2,223) Adjustments: Stock based compensation 1,879 1,026 Transaction costs - RideNow and Freedom 716 1,097 Other non-recurring costs 1,697 121 Adjusted EBITDA $ 31,429 $ 21 addition,2021, we completed two public offerings that provided net proceeds of $191,000 and obtained the Oaktree Credit Facility, which initially provided net proceeds of $261,000 that was used to finance a portion of the cash consideration for the RideNow Transaction. On February 18, 2022, in conjunction the beginning six-months after the Closing Date that may be used for acquisitions and up to an additional $100,000 in incremental financing that may be used for acquisitions and working capital purposes, under the terms set forth in such agreement. As previously disclosed, we took certain measures in response to the COVID-19 pandemic that included, rationalizing costs and expenses and adjusting inventory levels to align with sales trends. During the nine-months ended September 30, 2021, we completed two public offerings that provided net proceeds of $191,240 and obtained the Oaktree Credit Facility and initially provided net proceeds of $261,451 that was used to finance a portion of the cash consideration for the RideNow Transaction. Given these activities, and the acquisition of RideNow, we believe we have appropriate liquidity, access to capital and financial resources to support our operations and continue to expand our business.
Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as conditions evolve as a result of the Covid-19COVID-19 pandemic and the resulting Demand/Supply Imbalances.
We had the following liquidity resources available as of September 30, 2021March 31, 2022 and December 31, 2020:
| March 31, 2022 | December 31, 2021 | |||||||||||||
| Cash | $ | 59,362 | $ | 48,974 | ||||||||||
Restricted cash (1) | 9,500 | 3,000 | ||||||||||||
| Total cash and restricted cash | 68,862 | 51,974 | ||||||||||||
| Availability under short-term revolving facilities | 132,318 | 124,116 | ||||||||||||
| Committed liquidity resources available | $ | 201,180 | $ | 176,090 | ||||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Cash | $ | 68,268 | $ | 1,467 | ||||
| Restricted cash (1) | 3,049 | 2,049 | ||||||
| Total cash, cash equivalents, and restricted cash | 71,317 | 3,516 | ||||||
| Availability under short-term revolving facilities | 130,542 | 2,188 | ||||||
| Committed liquidity resources available | $ | 201,859 | $ | 5,704 | ||||
| (1) | Amounts included in restricted cash represent the deposits required under the Company’s short-term revolving facilities. | |||||||
As of September 30, 2021March 31, 2022, and December 31, 2020,2021, excluding operating lease liabilities and the derivative liability, the outstanding principal amount of indebtedness was $373,492$503,276 and $53,109,$384,585, respectively, summarized in the table below. See “Note 9 —Note 3 - Notes Payable” “Note 10 –Convertible Notes,” and “Note 11 – Stockholders Equity”Lines of Credit and Note 4 - Stockholders' Equity to our Condensed Consolidated financial statementsFinancial Statements included above.
| March 31, 2022 | December 31, 2021 | ||||||||||
| Asset-Based Financing: | |||||||||||
| Inventory | $ | 122,994 | $ | 97,278 | |||||||
| Total asset-based financing | 122,994 | 97,278 | |||||||||
| Term loan facility | 363,800 | 279,300 | |||||||||
| Unsecured senior convertible notes | 38,814 | 39,006 | |||||||||
| Line of credit | 6,853 | — | |||||||||
| PPP and other loans | 4,314 | 4,472 | |||||||||
| Total debt | 536,775 | 420,056 | |||||||||
| Less: unamortized discount and debt issuance costs | (33,499) | (35,471) | |||||||||
| Total debt, net | $ | 503,276 | $ | 384,585 | |||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Asset-Based Financing: | ||||||||
| Inventory | $ | 87,175 | $ | 17,812 | ||||
| Total asset-based financing | 87,175 | 17,812 | ||||||
| Secured notes payable | 280,000 | 2,391 | ||||||
| Unsecured senior convertible notes | 39,198 | 39,774 | ||||||
| PPP and other loans | 6,718 | 5,177 | ||||||
| Total debt | 413,091 | 65,154 | ||||||
| Less: unamortized discount and debt issuance costs | (37,494 | ) | (12,045 | ) | ||||
| Total debt, net | $ | 375,597 | $ | 53,109 | ||||
The following table sets forth a summary of our cash flows for the nine-monthsthree months ended September 30, 2021March 31, 2022 and September 30, 2020:
| Nine-months Ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Net cash (used in) provided by operating activities | $ | (29,779 | ) | $ | 26,198 | |||
| Net cash used in investing activities | (374,825 | ) | (1,773 | ) | ||||
| Net cash provided by financing activities | 472,405 | (22,193 | ) | |||||
| Net increase in cash | $ | 67,801 | $ | 2,232 | ||||
| Three-Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net cash provided by (used in) operating activities | $ | 31,274 | $ | (12,937) | |||||||
| Net cash (used in) investing activities | (67,987) | (395) | |||||||||
| Net cash provided by financing activities | 53,601 | 11,946 | |||||||||
| Net increase (decrease) in cash | $ | 16,888 | $ | (1,386) | |||||||
Operating Activities
Our primary sources of operating cash flows result from the sales of used vehicles and ancillary products and floor plan borrowings for our inventory purchases.products. Our primary use of cash from operating activities are purchases of inventory, cash used to acquire customers, and personnel-related expenses. For the nine-monthsthree months ended September 30, 2021,March 31, 2022, net cash provided by operating activities was $31,274, an increase of $44,211 compared to net cash used in operating activities was $29,779, anof $(12,937) for the three-months ended March 31, 2021. The increase of $55,977 in cash used in operating activities compared toour net cash provided by operating activities of $26,198 for the nine-months ended September 30, 2020. This increase was principallyprimarily due to thea $13,593 increase in inventory of $33,343our net income, a $3,370 increase in 2021 compared tonon-cash adjustments, and a decrease of $34,219$27,248 increase in inventory in 2020.
Investing Activities
Net cash used in investing activities increased $373,052 to $374,825 for the nine-months ended September 30, 2021 compared to $1,773 for the same period in 2020. Our primary use of cash for investing activities is for technology development to expand our operations. Net cash used in investing activities increased $67,592 to $(67,987) for the nine-monthsthree months ended September 30, 2021 wasMarch 31, 2022 compared to $(395) for the $365,946
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities was $472,405increased $41,655 to $53,601 for the nine-months September 30, 2021,three months ended March 31, 2022 compared to net cash used inprovided by financing activities of $22,193. For$11,946 for the nine-monthssame period of 2021. The increase in net cash provided by financing activities for the three months ended September 30, 2021, theMarch 31, 2022 is primarily attributable to an increase of $494,598$84,500 in cash providedproceeds from financing activities was primarily due to the net proceeds of $36,796 received in connection with the April 2021 Offering, and the $261,451 and $154,438 in new senior secured debt and $6,541 in proceeds from the August 2021 Offering, respectively that were obtained to financeissuance of notes, primarily driven by proceeds from the cash considerationROF secured lending facility for the RideNow Transaction,three months ended March 31, 2022 as compared to the same period of 2021. The increases were partially offset by an outflow of $(31,597) in repayments of debt and additionalmortgage notes and lower increases in borrowings under ourfrom non-trade floor plans.
Off-Balance Sheet Arrangements
As of September 30, 2021,March 31, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Other matters
On September 30, 2021, the Audit Committee approved the issuance of 154,731 shares of the Company’s Class B common stock as a gift of a death benefit to the estate of Mr. Berrard, or as instructed by the estate of Mr. Berrard. Also, on August 30, 2021, the Audit Committee approved a gift of a death benefit to the estate of Mr. Berrard, or as instructed by the estate of Mr. Berrard, in an amount equal to (1) $1,500, which shall be paid in equal weekly installments beginning October 1, 2021 and ending June 30, 2024 and (2) the cash bonus paid to the Company’s Chief Executive Officer each quarter over the same period ending June 30, 2024, if and when paid to the Chief Executive Officer in accordance with the Company’s Executive Incentive Program. The Company accrued the liability for such amounts during the three-months ended September 30, 2021.
Critical Accounting Policies and Estimates
See “NoteNote 1 —- Description of Business and Significant Accounting Policies,” included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies since December 31, 2020.2021. There have been no other material changes to our critical accounting policies and use of estimates from those described under “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2020our 2021 Form 10-K, other than the use of estimates for the Oaktree Warrant, as described above.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q, 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 our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that 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 our Annual Report on2021 Form 10-K for the year ended December 31, 2020,2021, which was filed with the SEC on March 31, 2021,April 8, 2022, and the risks discussed under the caption “Risk Factors” included in our definitive Proxy Statement on Schedule 14A filed with the SEC on July 1, 2021,May 2, 2022, and this Quarterly Report on Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise or any forward-looking statements, except as required by law.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
This item is not applicable as we are currently considered a smaller reporting company.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021.March 31, 2022. Based on this evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), our Chief Executive Officer and Chief Financial Officer concluded that the material weaknesses identified in the 2021 Form 10-K were under ongoing remediation and therefore continue to exist, and as such the Company’s disclosure controls and procedures were not effective as of September 30, 2021.
•Documentation and design of controls over the recording and reconciliation of inventory.•Review of key assumptions and estimates related to purchase accounting for significant acquisitions.•The control environment, risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated in a timely manner.As set forth below, management has taken and will continue to take steps to remediate the identified material weaknesses identified. Notwithstanding these material weaknesses, we have performed additional analyses and procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition and results of operations as of and for the periods presented.Management’s Remediation PlanIn response to the material weaknesses discussed above, we plan to continue efforts already underway to remediate internal control over financial reporting, which include the following:•In February 2022, we hired a new Chief Financial Officer.•We have engaged third-party resources to support our internal control testing and remediation efforts and act as subject matter experts, and we intend to bring in additional resources to oversee remediation efforts.•We are in the process of hiring a Head of Internal Audit, a senior level position reporting directly to the Audit Committee, to implement and oversee a newly established Internal Audit department.•We are in the process of hiring other key accounting and financial reporting positions, including a Director of Financial Reporting, to augment our accounting staff as needed. We believe these additional accounting personnel will enhance our compliance and oversight regarding internal control over financial reporting.•We are in the process of conducting a risk assessment over our internal control environment, and we are reviewing and prioritizing individual control deficiencies for remediation, including those which aggregated to the above material weaknesses.•We are in the process of documenting and executing remediation action items, including expansion of mitigating controls where appropriate.29•We are exploring tools to enhance and centralize general information technology components.Management and our Audit Committee will monitor these specific remedial measures and the effectiveness of our overall control environment. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We can provide no assurance as to when the remediation of these material weaknesses will be completed to provide for an effective control environment.Changes in Internal Control Over Financial Reporting
On August 31, 2021, the Company completed the RideNow Transaction. In accordance with the general guidance issued by the staff of the SEC, the RideNow Entities will be excluded from the scope of management’s report on internal control over financial reporting for the year ending December 31, 2021. As part of the ongoing integration of the RideNow Entities, weWe are in the process of incorporating the controls and related procedures of the acquired RideNow Entities.and Freedom entities. Other than incorporating the RideNow Entities’ controls and procedures of these acquired entities and addressing the remediation actions described above, there were no changes in our internal control over financial reporting (as defined in RulesRule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We have performed additional analyses and other procedures to enable management to conclude that our condensed consolidated financial statements included in this report fairly, in all material respects, our financial condition and results of operations as of and for the three and nine-months ended September 30, 2021.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that require management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
PART II - OTHER INFORMATION
On July 29, 2021, William Miller (the “Plaintiff”) filed a Complaint against the Company and its Board (collectively, the “Defendants”). Plaintiff alleged violations of Sections 14(a) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78n(a) and 78t(a), and Rule 14a-9 promulgated thereunder, 17 C.F.R. § 240.14a-9, in connection with the RideNow Transaction. The Plaintiff sought injunctive relief preliminarily and permanently enjoining Defendants from proceeding with, consummating, or closing the RideNow Transaction and any vote on the RideNow Transaction, unless and until Defendants disclosed and disseminate additional disclosures to Company shareholders. Plaintiff also sought rescission and rescissory damages if the RideNow Transaction closes, attorneys’ fees and costs, as well as a declaration that Defendants violated Sections 14(a) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder. On July 30, 2021, the Company’s shareholders approved the issuance of the shares of Class B common stock in connection with the RideNow Transaction and related proposals. The Plaintiff did not serve Defendants with the Complaint and, on October 13, 2021, the Plaintiff voluntarily dismissed the Complaint without prejudice.
Item 1A.
Our business, financial condition, operating results, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our 2021 Form 10-K for the year ended December 31, 2021. There have been no material changes to the Risk Factorsrisk factors previously disclosed in our Annual Report on2021 Form 10-K, for the year ended December 31, 2020, except for the risks relating to the RideNow Transaction, which are discussed in our definitive Proxy Statement on Schedule 14A filed with the SEC on July 1, 2021, and as set forth below.
Risks Related to Covid-19 and Economic Activity
The Covid-19 pandemic and associated impacts on economic activity may have material adverse effects on our business, resultsoccurrence of operations, financial condition, and cash flows.
The onsetany of the Covid-19 pandemic in 2020 and associated impacts on economic activity, including lower new vehicle production due to manufacturing slowdowns, computer chip shortages, and logistic/transportation challenges, had adverse effects on our results of operations and financial condition during the nine months ended September 30, 2021 and September 30, 2020. We expect these conditions to continue through the fourth quarter of 2021. The effect of these Demand/Supply Imbalances required that we adjust our inventory management to align with market conditions, resulting in lower levels of inventory and lower unit sales during the period. The Covid-19 pandemic and associated impacts on economic activity may have material adverse effects on our business, results of operations, financial condition, and cash flows, and we can provide no assurance as to the duration of the adverse impacts of Covid-19 and the Demand/Supply Imbalances on our business, operation, or financial results.
Risks Related to the Combined Company following the RideNow Transaction
RumbleOn may experience difficulties integrating RideNow’s businesses.
Achieving the anticipated benefits of the RideNow Transaction will depend in significant part upon RumbleOn integrating the RideNow Entities’ businesses, operations, processes, and systems in an efficient and effective manner. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration 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, accounting and finance, legal and regulatory compliance, inventory intake and control, sales, billing, employee benefits, and payroll. The integration of operations following the RideNow Transaction requires 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 and results of the combined company. Any inability of management to successfully and timely integrate the companies could have a material adverse effect on the business and results of operations of the combined company.
The RideNow Entities were not subject to Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) regulations and, therefore, they may lack the internal controls of a public company, which could ultimately affect our ability to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.
The RideNow Entities were not previously subject to Sarbanes-Oxley Act regulations and accordingly were not required to establish and maintain an internal control infrastructure meeting the standards promulgated under the Sarbanes-Oxley Act. Our assessment of our internal control over financial reporting as of September 30, 2021 did not include the internal control structure of the RideNow Entities, which were acquired during our quarterly period ended September 30, 2021.
Although our management will continue to review and evaluate the effectiveness of our internal control over financial reporting in light of the RideNow Transaction, we cannot provide any assurance that there will be no significant deficiencies or material weaknesses in the internal control environment of the RideNow Entities. Any significant deficiencies or material weaknesses in the internal control environment of the RideNow Entities may cause significant deficiencies or material weaknesses in our internal control over financial reporting, which could have a material adverse effect on our business and our ability to comply with Section 404 of the Sarbanes-Oxley Act.
If we are unable to maintain effective internal control over financial reporting, 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 are in the process of integrating our internal control over financial reporting and our other control environments with those of the RideNow Entities. In the course of integration, we may encounter difficulties and unanticipated issues combining our respective accounting systems due to the complexity of our financial reporting processes. We may also identify errors or misstatements that could require accounting adjustments. If we are unable to integrate and maintain effective internal control over financial reporting of the combined company, timely or at all, 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.
As of September 30, 2021, the Audit Committee approved the issuance of 154,731 shares of the Company’s Class B common stock as a gift of a death benefit to the estate of Steven R. Berrard, the Company’s former Chief Financial Officer and a director, or as instructed by the estate of Mr. Berrard. These shares were issued in lieu of restricted stock units that Mr. Berrard would have received in connection with the consummation of the RideNow Transaction and in recognition of Mr. Berrard’s significant contributions to the RideNow Transaction. These shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
None.
Not Applicable.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RUMBLEON, INC. | ||||||||
| Date: | By: | /s/ Marshall Chesrown | ||||||
| Marshall Chesrown | ||||||||
Chairman of the Board of Directors and Chief Executive Officer | ||||||||
(Principal Executive Officer) | ||||||||
| Date: | By: | /s/ | ||||||
| (Principal Financial Officer and Principal Accounting Officer) | ||||||||
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