Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | May 26, 2020 | Jun. 30, 2019 | |
Entity Registrant Name | RumbleON, Inc. | ||
Entity Central Index Key | 0001596961 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 001-38248 | ||
Entity Public Float | $ 69,400,000 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 | ||
Class B Common Stock | |||
Entity Common Stock, Shares Outstanding | 2,162,716 | ||
Class A Common Stock | |||
Entity Common Stock, Shares Outstanding | 50,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | |
Current assets: | |||
Cash | $ 49,660 | $ 9,134,902 | |
Restricted cash | [1] | 6,676,622 | 6,650,000 |
Accounts receivable, net | 8,482,707 | 8,465,810 | |
Inventory | 57,381,281 | 52,191,523 | |
Prepaid expense and other current assets | 1,210,474 | 1,096,945 | |
Total current assets | 73,800,744 | 77,539,180 | |
Property and equipment, net | 6,427,674 | 5,177,877 | |
Right-of-use assets | 6,040,287 | 0 | |
Goodwill | 26,886,563 | 26,107,146 | |
Other assets | 237,823 | 102,178 | |
Total assets | 113,393,091 | 108,926,381 | |
Current liabilities: | |||
Accounts payable and accrued liabilities | 12,421,094 | 10,554,913 | |
Accrued interest payable | 749,305 | 206,037 | |
Current portion of convertible debt | 1,363,590 | 0 | |
Current portion of long-term debt | 59,160,970 | 58,555,006 | |
Total current liabilities | 73,694,959 | 69,315,956 | |
Long term liabilities: | |||
Notes payable | 1,924,733 | 8,792,919 | |
Convertible debt | 20,136,229 | 0 | |
Derivative liabilities | 27,500 | 0 | |
Other long-term liabilities | 4,722,101 | 0 | |
Total long term liabilities | 26,810,563 | 8,792,919 | |
Total liabilities | 100,505,522 | 78,108,875 | |
Commitments and contingencies (Notes 4, 7, 8, 9, 13, 16) | |||
Stockholders' equity: | |||
Class B preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 1,317,329 shares issued and outstanding as of December 31, 2019 and 2018, respectively | 0 | 1,317 | |
Additional paid in capital | 92,268,213 | 65,016,379 | |
Accumulated deficit | (79,381,806) | (34,201,114) | |
Total stockholders' equity | 12,887,569 | 30,817,506 | |
Total liabilities and stockholders' equity | 113,393,091 | 108,926,381 | |
Class A Common Stock | |||
Stockholders' equity: | |||
Common stock | 50 | 50 | |
Class B Common Stock | |||
Stockholders' equity: | |||
Common stock | $ 1,112 | $ 874 | |
[1] | Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Class B preferred stock, par value | $ 0.001 | $ 0.001 |
Class B preferred stock, authorized | 10,000,000 | 10,000,000 |
Class B preferred stock, issued | 0 | 1,317,329 |
Class B preferred stock, outstanding | 0 | 1,317,329 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 5,000,000 | 5,000,000 |
Class A Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 50,000 | 50,000 |
Common stock, issued | 50,000 | 50,000 |
Common stock, outstanding | 50,000 | 50,000 |
Class B Common Stock | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 4,950,000 | 4,950,000 |
Common stock, issued | 1,111,681 | 874,315 |
Common stock, outstanding | 1,111,681 | 874,315 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue: | ||
Revenue | $ 840,629,347 | $ 156,398,231 |
Cost of revenue | 790,011,371 | 142,851,427 |
Gross profit | 50,617,976 | 13,546,804 |
Selling, general and administrative | 86,624,249 | 35,963,930 |
Depreciation and amortization | 1,786,426 | 984,006 |
Operating loss | (37,792,699) | (23,401,132) |
Interest expense | (7,187,604) | (1,780,685) |
Decrease in derivative liability | 1,302,500 | 0 |
Loss on early extinguishment of debt | (1,499,250) | 0 |
Net loss before benefit for income taxes | (45,177,053) | (25,181,817) |
Benefit for income taxes | 0 | 0 |
Net loss | $ (45,177,053) | $ (25,181,817) |
Weighted average number of common shares outstanding - basic and fully diluted | 1,114,714 | 741,659 |
Net loss per share - basic and fully diluted | $ (40.53) | $ (33.95) |
Powersports | ||
Revenue: | ||
Revenue | $ 101,008,976 | $ 61,204,416 |
Cost of revenue | 88,673,515 | 54,334,066 |
Automotive | ||
Revenue: | ||
Revenue | 717,042,511 | 91,369,996 |
Cost of revenue | 685,313,894 | 85,761,505 |
Transportation and Vehicle Logistics | ||
Revenue: | ||
Revenue | 22,577,860 | 3,823,819 |
Cost of revenue | $ 16,023,962 | $ 2,755,856 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity - USD ($) | Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 0 | 50,000 | 596,427 | |||
Beginning balance, amount at Dec. 31, 2017 | $ 0 | $ 50 | $ 596 | $ 23,384,643 | $ (9,019,297) | $ 14,365,992 |
Issuance of common stock, shares | 267,938 | |||||
Issuance of common stock, amount | $ 268 | 33,101,711 | 33,101,979 | |||
Issuance of common stock for restricted stock units exercise, shares | 9,950 | |||||
Issuance of common stock for restricted stock units exercise, amount | $ 10 | (10) | 0 | |||
Stock-based compensation | 1,657,680 | 1,657,680 | ||||
Issuance of warrants in connection with loan agreement | 221,160 | 221,160 | ||||
Issuance of preferred stock in connection with acquisition, shares | 1,317,329 | |||||
Issuance of preferred stock in connection with acquisition, amount | $ 1,317 | 6,651,195 | 6,652,512 | |||
Net loss | (25,181,817) | (25,181,817) | ||||
Ending balance, shares at Dec. 31, 2018 | 1,317,329 | 50,000 | 874,315 | |||
Ending balance, amount at Dec. 31, 2018 | $ 1,317 | $ 50 | $ 874 | 65,016,379 | (34,201,114) | 30,817,506 |
Cumulative effect of accounting change (see Note 1) | (3,639) | (3,639) | ||||
Equity component of convertible senior notes, net of issuance costs | 7,745,625 | 7,745,625 | ||||
Issuance of common stock, shares | 158,825 | |||||
Issuance of common stock, amount | $ 159 | 15,173,268 | 15,173,427 | |||
Issuance of common stock for restricted stock units exercise, shares | 12,675 | |||||
Issuance of common stock for restricted stock units exercise, amount | $ 13 | (13) | 0 | |||
Beneficial conversion feature on convertible notes | 495,185 | 495,185 | ||||
Conversion of preferred shares to common stock, shares | (1,317,329) | 65,886 | ||||
Conversion of preferred shares to common stock, amount | $ (1,317) | $ 66 | 1,251 | 0 | ||
Stock-based compensation | 3,836,518 | 3,836,518 | ||||
Issuance of preferred stock in connection with acquisition, amount | 0 | |||||
Net loss | (45,177,053) | (45,177,053) | ||||
Ending balance, shares at Dec. 31, 2019 | 0 | 50,000 | 1,111,681 | |||
Ending balance, amount at Dec. 31, 2019 | $ 0 | $ 50 | $ 1,112 | $ 92,268,213 | $ (79,381,806) | $ 12,887,569 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (45,177,053) | $ (25,181,817) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,786,426 | 984,006 |
Amortization of debt discount | 1,664,000 | 510,139 |
Bad debt expense | 1,123,739 | 33,326 |
Stock based compensation expense | 3,836,518 | 1,657,680 |
Loss from extinguishment of debt | 1,499,250 | 0 |
Goodwill impairment | 1,850,000 | 0 |
Gain from change in value of derivatives | (1,302,500) | 0 |
Changes in operating assets and liabilities: | ||
Decrease (increase) in accounts receivable | 2,037,023 | (319,335) |
(Increase) in inventory | (2,327,754) | (1,717,504) |
(Increase) decrease in prepaid expenses and other current assets | (113,529) | 340,483 |
(Increase) in other assets | (135,645) | (51,485) |
(Decrease) increase in accounts payable and accrued liabilities | (5,031,073) | 152,336 |
Increase in accrued interest payable | 543,268 | 172,083 |
Decrease in other liabilities | 0 | (32,665) |
Net cash used in operating activities | (39,747,330) | (23,452,753) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Net cash used for acquisitions | (835,000) | (15,395,251) |
Proceeds from sales of property and equipment | 169,268 | 0 |
Technology development | (3,085,743) | (2,162,707) |
Purchase of property and equipment | (119,748) | (6,409) |
Net cash used in investing activities | (3,871,223) | (17,564,367) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from notes payable and convertible debt | 27,455,537 | 9,227,035 |
Repayments for notes payable | (10,857,500) | 0 |
Net proceeds from lines of credit | 2,788,469 | 5,302,355 |
Proceeds from sale of common stock | 15,173,427 | 33,101,980 |
Net cash provided by financing activities | 34,559,933 | 47,631,370 |
NET CHANGE IN CASH | (9,058,620) | 6,614,250 |
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD | 15,784,902 | 9,170,652 |
CASH AND RESTRICTED CASH AT END OF PERIOD | $ 6,726,282 | $ 15,784,902 |
DESCRIPTION OF BUSINESS AND SIG
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | Organization RumbleOn, Inc. (the "Company") was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. ("Smart Server"). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc. Description of Business In July 2016, Berrard Holdings Limited Partnership ("Berrard Holdings") acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company's goal is to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. While the Company's initial customer facing emphasis through most of 2018 was on motorcycles and other powersports, the Company continues to enhance its platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks, and via its acquisition of Wholesale, Inc. in October 2018, the Company is making a concerted effort to grow its cars and light truck categories. On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder," and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving the merger as a wholly-owned subsidiary of the Company (the "Wholesale Transaction"). On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement. Also, on October 26, 2018, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the "Express Transaction," and together with the Wholesale Transaction, the "Transactions") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express"). The Transactions were both completed on October 30, 2018 (the "Acquisition Date"). As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of the Company's Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the "Series B Preferred"). As consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Wholesale Inc. is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express, LLC is a related logistics company. On February 3, 2019, the Company completed the acquisition (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) a fifteen-month $500,000 promissory note (the "Promissory Note") in favor of the Seller, plus (iii) a three-year $1,536,000 convertible promissory note (the "Convertible Note") in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock (the "Earn-Out Shares") for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to a promissory note payable to Seller (the "Second Convertible Note"). Serving both consumers and dealers, through its online marketplace platform, the Company makes cash offers for the purchase of pre-owned vehicles. In addition, the Company offers a large inventory of pre-owned vehicles for sale along with third-party financing and associated products. The Company's operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with its regional partners, which are primarily auctions. The Company utilizes regional partners in the acquisition of pre-owned vehicles to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. Our business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC ("NextGen"). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure. The COVID-19 situation has created an unprecedented and challenging time. The Company’s current focus is on positioning the Company for a strong recovery when this crisis is over. The Company has taken steps to reduce its inventory and align its operating expenses to the state of the business. The Company plans to continue to operate as permitted to support its customers’ needs for reliable vehicles and to provide as many jobs as possible for its associates. Effective April 9, 2020, 169 associates were temporarily laid-off, however the Company’s receipt of PPP funds, as discussed in Note 19 - Subsequent Events will allow the Company to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation, future government mandates, as well as future business conditions. The Company will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce its operating expenses as the Company is able. However, the Company expects that the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, revenue, results of operations, financial condition, and liquidity. Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All of the Company’s subsidiaries are wholly owned. All intercompany accounts and material intercompany transactions have been eliminated. Liquidity We have incurred losses and negative cash flow from operations since inception through December 31, 2019 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit and Note 9 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. As of May 28, 2020, we had approximately $15,000,000 available under our NextGear Credit Line that we may draw against through December 31, 2020 to fund future vehicle inventory purchases, as described further in Note 8 — Notes Payable and Lines of Credit. Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line, proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including temporarily laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of May 28, 2020, the Company has $9,000,000 of unrestricted cash and has approximately $15,000,000 of remaining availability under the NextGear Credit. The Company’s consolidated financial statements have been prepared assuming that will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that we will be able to generate sufficient liquidity from the measures described above, our current circumstances including uncertainties due to Covid-19 pandemic raise substantial doubt about our ability to operate as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Use of Estimates The preparation of these 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. 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 novel COVID-19 pandemic and the resulting adverse impacts to global economic conditions, as well as our operations, may impact future estimates including, but not limited to inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions. Earnings (Loss) Per Share The Company follows the FASB Accounting Standards Codification ("ASC") Topic 260-Earnings per share. Basic earnings per common share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Common share and dilutive common share equivalents include: (i) Class A common: (ii) Class B common; (iii) Class B participating preferred shares; (iv) restrictive stock units; (v) stock options; (vi) warrants to acquire Class B common stock; and (vii) shares issued in connection with convertible debt. Revenue Recognition Revenue for our powersports and automotive segments is derived from our online marketplace and auctions and primarily includes the sale of pre-owned vehicles to consumer and dealers Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States. We adopted ASC 606, Revenue from Contracts with Customers For vehicles sold at wholesale to dealers we satisfy our performance obligation when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle. For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers. Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage 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. freight brokerage 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. Purchase Accounting for Business Combinations The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. During the year ended December 31, 2019, the Company finalized the preliminary purchase price allocation recorded at the acquisition date for Wholesale Express and made a measurement period adjustment to the preliminary purchase price allocation which resulted in a decrease in goodwill of $334,861. The Company made this measurement period adjustment to reflect facts and circumstances related to accounts receivable and accounts payable that existed as of the acquisition date and did not result from intervening events subsequent to such date. Goodwill Goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged. Goodwill is not amortized but tested for impairment at the reporting unit level annually on December 31 and upon the occurrence of an indicator of impairment. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting: (1) Each of these segments are considered separate reporting units for purposes of goodwill testing. Our reportable segment has been determined to represent one operating segment and reporting unit. During 2019, for the three reporting units we performed quantitative impairment testing of the fair value of our reporting units using an income and market valuation approach. The income valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows of our business using the weighted average cost of capital as the discount rate. The market valuation approach estimates our enterprise value by applying a cash earnings multiple and selecting a multiple that is reasonable compared to recent market transactions completed in the industry. As part of that assessment, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization. We believe this reconciliation process is consistent with a market participant perspective. This consideration would also include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest, and other significant assumptions including revenue and profitability growth, profit margins, residual values and the cost of capital. For the year ended December 31, 2019, we recognized an impairment loss on goodwill of $1,850,000, which is recorded in selling, general and administrative expenses in the Consolidated Statement of Operations. No impairment charges related to intangible assets were recognized in 2018. Leases Effective January 1, 2019, the Company adopted ASC 842, Leases. In accordance with ASC 842, the Company first determines if an arrangement contains a lease and the classification of that lease, if applicable, at inception. This standard requires the recognition of right-of-use ("ROU") assets and lease liabilities for the Company's operating leases. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component. The Company has also elected not to recognize a lease liability or ROU asset for leases with a term of 12 months or less and recognize lease payments for those short-term leases on a straight-line basis over the lease term in the Consolidated Statements of Operations. Operating leases are included in Right-of-use assets, Accounts payable and accrued liabilities and Operating lease liabilities, long-term portion in the Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments under the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within the Company's leases is generally not determinable and therefore the incremental borrowing rate at the lease commencement date is utilized to determine the present value of lease payments. The determination of the incremental borrowing rate requires judgment. Management determines the incremental borrowing rate for each lease using the Company's estimated borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The ROU asset also includes any lease prepayments, offset by lease incentives. Certain of the Company's leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when the Company is reasonably certain that the option will be exercised. An option to terminate is considered unless the Company is reasonably certain the option will not be exercised. Other Assets Included in "Other assets" on the Company's Consolidated Balance Sheets are amounts related to acquired internet domain names which are considered to be an indefinite lived intangible assets. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. There was no impairment of indefinite lived assets as of December 31, 2019 and 2018. Long-Lived Assets Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. The Company recorded no impairment charges on property and equipment during the years ended December 31, 2019 and 2018. See Note 5 — Property and Equipment, Net for additional information on property and equipment. Technology Development Costs Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. Vehicle Inventory Vehicle inventory is accounted for pursuant to ASC 330, Inventory Accounts Receivable, Net Accounts receivable, net of an allowance for doubtful accounts, includes certain amounts due from customers. Cash and Cash Equivalents The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of December 31, 2019, and 2018, the Company did not have any investments with maturities greater than three months. At times, the Company has cash balances in domestic bank accounts that exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses related to these cash concentrations. Restricted Cash In connection with the execution of the Inventory Financing and Security Agreement (the "Credit Facility") by and among the Company's subsidiary, RMBL Missouri, LLC ("RMBL MO"), Ally Bank ("Ally") and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10.0% of the amount of the Company's approved and available credit line under the Credit Facility and 2) no greater than 25.0% of the total principal amount owed to Ally for inventory financed under the Credit Facility. In connection with the inventory financing contract (the "NextGear Facility"), entered into by the Company, its wholly owned subsidiary RMBL Tennessee, Inc, Wholesale, Inc. and NextGear Capital, Inc. ("NextGear"), dated October 30, 2018, Wholesale, Inc and NextGear entered into a Reserve Agreement requiring Wholesale, Inc to pay to NextGear $5,500,000 (the "Reserve") to be collateral and security for Wholesale Inc.'s liability under the NextGear Facility as well as any amounts owed by Wholesale, Inc. to NextGear and its Affiliates, and each of their respective directors, officers, principals, trustees, partners, shareholders or other holders of any ownership interest, as the case may be, employees, representatives, attorneys and agents. NextGear is not required to pay Wholesale Inc. interest on the Reserve balance. Upon the satisfaction of all obligations and the termination by NextGear of the NextGear Facility, NextGear will return to Wholesale, Inc., upon its written request to NextGear no earlier than ten (10 business days from the date the obligations were indefeasibly paid and satisfied in full and the NextGear Facility and terminated by Lender. Property and Equipment, Net Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2019 and December 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820-10-30-2 -Fair Value Measurement Level 1: The preferred inputs to valuation efforts are "quoted prices in active markets for identical assets or liabilities," with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as "unobservable," and limits their use by saying they "shall be used to measure fair value to the extent that observable inputs are not available." This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date". Earlier in the standard, FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20; Debt with Conversion and Other Options. Under the ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost. The effect of ASC 470-20 on the accounting for our convertible debt instruments is that the equity component is required to be included in the additional paid-in capital section of stockholders' equity on the consolidated balance sheets and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the convertible debt to their face amount over the term of the convertible debt. From time to time, the Company has issued convertible notes that have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20. The Beneficial Conversion Feature ("BCF") of a convertible security is normally characterized as the convertible portion or feature of certain securities that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible security when issued and also records the estimated fair value of any conversion feature issued with those securities. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. Common Stock Warrants The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in Accounting Standards Codification (ASC) 815, Derivatives and Hedging – Contracts in Entity's Own Equity In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity Debt Issuance Costs Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , "Simplifying the Presentation of Debt Issuance Costs" Cost of Revenue Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of revenue also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value. Selling, General and Administrative Expenses Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 12 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
ACCOUNTS RECEIVABLE, NET | Accounts receivable consists of the following as of December 31: 2019 2018 Trade $ 9,369,733 $ 8,264,045 Finance 147,893 148,378 Other — 229,577 9,517,626 8,642,000 Less: allowance for doubtful accounts 1,034,919 176,190 $ 8,482,707 $ 8,465,810 |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORY | Inventory consists of the following as of December 31, 2019 2018 Pre-owned vehicles: Powersport vehicles $ 10,365,050 $ 9,783,093 Automobiles and trucks 47,599,433 43,081,136 57,964,483 52,864,229 Less: Reserve 583,202 672,706 $ 57,381,281 $ 52,191,523 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
ACQUISITIONS | On February 3, 2019, the Company completed the Autosport Acquisition pursuant to the Stock Purchase Agreement, by and among the Buyer, the Seller and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) the Promissory Note in favor of the Seller, plus (iii) the Convertible Note in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed debt of $257,933 pursuant to the Second Convertible Note. The fair value of the contingent earn-out payment was considered immaterial at the date of acquisition and was excluded from the purchase price allocation. As of December 31, 2019, there have been no payments earned under the performance threshold. See Note 1 – Description of Business and Significant Accounting Policies for additional information on the Autosport Acquisition. The allocation of the purchase price is based on the best information available to management. This allocation is provisional, as the Company is required to recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of February 3, 2019 that, if known, would have resulted in the recognition of those assets or liabilities as of that date. The Company may adjust the preliminary purchase price allocation after obtaining additional information regarding asset valuation, liabilities assumed and revisions of previous estimates. The following table summarizes the allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities of Autosport as of December 31, 2019: Purchase price consideration: Cash $ 835,000 $1,536,000 convertible note 1,536,000 $500,000 promissory note 500,000 $257,933 Promissory note 257,933 Total purchase price consideration $ 3,128,933 Estimated fair value of assets: Accounts receivable 3,177,660 Inventory 2,862,004 6,039,664 Estimated fair value of accounts payable and other 5,875,009 Excess of assets over liabilities 164,655 Goodwill 2,964,278 Total net assets acquired $ 3,128,933 On October 26, 2018, we entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder", and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and, for the limited purposes of Section 5.8, Marshall Chesrown and Steven R. Berrard, providing for the merger (the "Wholesale Merger") of Holdings with and into Merger Sub, with Merger Sub surviving the Wholesale Merger as a wholly-owned subsidiary of the Company. Also on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), with Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express"). On October 30, 2018, the Company completed the Wholesale Merger and Express Acquisition. Also, on October 26, 2018, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which we acquired all of the membership interests (the "Express Acquisition") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express. The Wholesale Merger and the Express Acquisition were both completed on October 30, 2018 (the "Wholesale Closing Date"). As consideration for the Wholesale Merger, we (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of our Series B Non-Voting Convertible Preferred Stock, par value $0.001. As consideration for the Express Acquisition, we paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. The following tables summarize the consideration paid in cash and equity securities for the acquisitions and the amount of identified assets acquired and liabilities assumed as of the acquisition date: Wholesale Express Issuance of shares $ 6,652,512 $ — Cash paid 12,353,941 4,000,000 Total purchase price $ 19,006,453 $ 4,000,000 Estimated fair value of assets: Cash 183,846 774,844 Accounts receivable 5,130,788 2,663,077 Inventory 47,639,354 — Prepaid expenses 186,659 59,377 Property & equipment 617,422 14,702 Due from Related party — 720,000 Other Assets 1,026,203 — 54,784,272 4,232,000 Estimated fair value of liabilities assumed: Accounts payable and other 8,144,040 1,079,509 Floor plan liability 49,988,553 — Due to related party 720,000 — 58,852,593 1,079,509 Excess of (liabilities over assets) assets over liabilities (4,068,321 ) 3,152,491 Goodwill 23,074,774 847,509 Total net assets acquired $ 19,006,453 $ 4,000,000 The Company finalized the purchase price allocation for Express which resulted in a decrease in goodwill of $334,861 during the year ended December 31, 2019. The Company made this measurement period adjustment to reflect facts and circumstances that related to accounts receivable and accounts payable that existed at the acquisition date and did not result from intervening events subsequent to such date. Supplemental pro forma unaudited information (unaudited) The results of operations of Wholesale and Express since the acquisition date are included in the accompanying Consolidated Financial Statements. The following unaudited supplemental pro forma information presents the financial results as if the acquisitions of Wholesale, Express and Autosport were made as of January 1, 2019 for the year ended December 31, 2019 and as of January 1, 2018 for the year ended December 31, 2018. Pro forma adjustments for the year ended December 31, 2019 primarily include adjustments to reflect the: (i) amortization of stock compensation expense of $ 34,859 Year Ended December 31, Unaudited 2019 2018 Pro forma revenue $ 846,947,956 $ 788,428,970 Pro forma net loss $ (45,296,568 ) $ (24,062,816 ) Loss per share - basic and fully diluted $ (40.37 ) $ (24.42 ) Weighted-average common shares and common stock equivalents outstanding basic and fully diluted 1,122,058 985,332 |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, Net [Abstract] | |
PROPERTY AND EQUIPMENT, NET | The following table summarizes property and equipment, net of accumulated depreciation and amortization as of December 31, 2019 and 2018: 2019 2018 Vehicles $ 158,327 $ 417,666 Furniture and equipment 448,074 474,546 Technology development and software 8,863,247 5,777,504 Leasehold improvements 246,135 136,386 Total property and equipment 9,715,783 6,806,102 Less: accumulated depreciation and amortization 3,288,109 1,628,225 Total $ 6,427,674 $ 5,177,877 Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from 3 to 5 years. At December 31, 2019, capitalized technology development costs were $ 8,655,236 2,900,000 5,494,081 3,085,743 2,408,338 1,786,426 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS AND GOODWILL | Following is a summary of the changes in the carrying amount of goodwill and other indefinite-lived asset during the years ended December 31, 2019, 2018 and 2017, net of a $334,861 measurement period adjustment recorded during the year ended December 31, 2019. Goodwill Indefinite Lived Intangible Assets Balance at December 31, 2017 $ 1,850,000 $ 45,515 Acquisitions 24,257,146 — Balance at December 31, 2018 26,107,146 45,515 Acquisitions 2,964,278 — Impairment (1,850,000 ) — Measurement period adjustment (334,861 ) — Balance at December 31, 2019 $ 26,886,563 $ 45,515 The following is a summary of the changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2019 and 2018. Powersports Automotive Vehicle Logistics Total Balance at December 31, 2018 $ 1,850,000 $ 23,074,775 $ 1,182,371 $ 26,107,146 Acquisitions — 2,964,278 — 2,964,278 Impairment (1,850,000 ) — — (1,850,000 ) Measurement period adjustment — — (334,861 ) (334,861 ) Balance at December 31, 2019 $ — $ 26,039,053 $ 847,510 $ 26,886,563 We test for impairment of our intangible assets at least annually. During the year ended December 31, 2019, we recognized an impairment loss on goodwill of $1,850,000 related to powersports, which is recorded in selling, general and administrative expenses in the Consolidated Statement of Operations. There were no impairment charges in 2018. During the quarter ended September 30, 2019, the Company finalized the preliminary purchase price allocation recorded at the acquisition date for Wholesale Express and made a measurement period adjustment to the preliminary purchase price allocation which resulted in a decrease in goodwill of $334,861. The Company made this measurement period adjustment to reflect facts and circumstances related to accounts receivable and accounts payable that existed as of the acquisition date and did not result from intervening events subsequent to such date. |
ACCOUNTS PAYABLE AND OTHER ACCR
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES | The following table summarizes accounts payable and other accrued liabilities as of December 31, 2019 and 2018: 2019 2018 Accounts payable $ 8,730,624 $ 7,528,003 Operating lease liability-current portion 1,423,610 — Accrued payroll 715,658 877,180 State and local taxes 912,062 1,073,649 Other accrued expenses 639,140 1,076,081 Total $ 12,421,094 $ 10,554,913 |
NOTES PAYABLE AND LINES OF CRED
NOTES PAYABLE AND LINES OF CREDIT | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE AND LINES OF CREDIT | Notes payable consisted of the following as of December 31, 2019 and 2018: 2019 2018 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is January 31, 2021. $ 1,333,334 $ 1,333,334 Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through September 30, 2019 and 8.5% through maturity which is January 31, 2021. Unamortized debt discount of $75,601 and $334,998 as of December 31, 2019 and December 31, 2018, respectively. 667,000 667,000 Line of credit-floor plan Ally dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 7.05 %. Principal and interest are payable on demand. 8,419,897 8,866,894 Loan Agreement with Hercules Capital Inc. dated April 30, 2018 and as amended for tranche II on October 30, 2018. Tranche I- Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on June 1, 2019 through maturity which is May 1, 2021. Trance II-Interest payable monthly at 11.0%. Principal payable at maturity on October 1, 2021. Unamortized debt issuance costs as of December 31, 2018 of $1,547,412. — 10,857,500 Line of credit-floor plan NextGear dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 4.25%. Principal and interest is payable on demand. 50,741,073 47,505,607 Less: Debt discount (75,601 ) (1,882,410 ) Total notes payable and lines of credit 61,085,703 67,347,925 Less: Current portion 59,160,970 58,555,006 Long-term portion $ 1,924,733 $ 8,792,919 As of December 31, 2019, future principal debt payments are due as follows: 2020 - $59,085,369; 2021 - $2,000,334. Line of Credit-Floor Plan-NextGear On October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the "NextGear Credit Line") with NextGear. As of the date of this filing, based on on-going discussions with NextGear, we will limit our advances under the NextGear Credit Line for Wholesale and Autosport to $55,000,000. Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full. Interest expense on the line of credit-floor plan for the years ended December 31, 2019 and 2018, was $2,697,591 and $513,306, respectively. Line of Credit-Floor Plan-Ally On February 16, 2018, the Company, through its wholly-owned subsidiary RMBL MO entered into an Inventory Financing and Security Agreement (the "Credit Facility") with Ally and Ally Financial, Inc., a Delaware corporation ("Ally" together with Ally Bank, the "Lender"), pursuant to which the Lender may provide up to $25,000,000 in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require that the Company maintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, RMBL MO's obligation to pay upon demand any outstanding liabilities of the Credit Facility), the Lender may, at its option and without notice to the RMBL MO, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the Lender and secured by the Company pursuant to a General Security Agreement. Interest expense on the Credit Facility for the years ended December 31, 2019 and 2018 was $541,702 and $149,776, respectively. The Ally Line of Credit ended in February 2020. Loan Agreement-Hercules Capital Inc. On May 14, 2019, the Company made a payment to Hercules Capital Inc. ("Hercules") of $11,134,695, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the "Loan Agreement") with Hercules dated April 30, 2018 (the "Hercules Indebtedness"). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement has been terminated. The Company used a portion of the net proceeds from the Note Offering (described below) to pay the Hercules Indebtedness. In accordance with the guidance in ASC 470-50, Debt year ended December 31, 2019 in the Notes Payable NextGen On 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 $1,333,334. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date. Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable upon election of the holder. The Company's obligations under the NextGen Note are secured by substantially all the assets of NextGen 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. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all the Company's obligations under the NextGen Note. Interest expense on the Credit Facility for the years ended December 31, 2019 and 2018 was $ and $87,617, respectively. Private Placement On March 31, 2017, the Company completed funding of the second tranche of the 2016 Private Placement (as defined below). 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 $667,000, in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amounts until paid in full. The Private Placement Notes mature on January 31, 2021. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. 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 $667,000 with the corresponding amounts recorded as an addition to paid-in capital. The debt discount is amortized to interest expense until the scheduled maturity of the Private Placement Notes in January 2021 using the effective interest method. The effective interest rate at December 31, 2019 was 26.0%. Interest expense on the Private Placement Notes was $316,091 and $259,177, respectively for the years ended December 31, 2019 and 2018, which included debt discount amortization of $70,565 and $205,926, respectively for the years ended December 31, 2019 and 2018. Exchange of Notes Payable Certain 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 (the "Investors"), including Halcyon, an entity affiliated with Kartik Kakarala, a director of the Company, such New Investor Note for an aggregate principal amount of $833,333 (after taking account of a $500,000 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 $99,114, and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amount of approximately $1,500,000, will mature on January 31, 2021, and will be convertible at any time at the Investor's option at a price of $60.00 per share. For additional information see Note 19 – Subsequent Events – Investor Note Exchange. Convertible Notes As of December 31, 2019, the outstanding convertible promissory notes net of debt discount and issue costs are summarized as follows: Face Amount Debt Discount Carrying Amount Convertible senior notes $ 30,000,000 $ 10,402,024 $ 19,597,976 Convertible notes-Autosport $1,536,000 unsecured note 1,536,000 379,616 1,156,384 $500,000 unsecured note 500,000 6,092 493,908 $257,933 unsecured note 257,933 6,382 251,551 32,293,933 10,794,114 21,499,819 Less: Current portion (1,461,933 ) (98,343 ) (1,363,590 ) Long-term portion $ 30,832,000 $ 10,695,771 $ 20,136,229 Convertible Senior Notes On May 9, 2019, the Company entered into a purchase agreement (the "Purchase Agreement") with JMP Securities LLC ("JMP Securities") to issue and sell $30,000,000 in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the "Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Note Offering"). The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the Note Offering. The proceeds for the Note Offering after deducting the initial purchaser's discounts, advisory fees, and related offering expenses, were $27,385,500. The Notes were issued on May 14, 2019 pursuant to an Indenture (the "Indenture") by and between the Company and Wilmington Trust, National Association, as trustee. The Purchase Agreement included customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company agreed to indemnify JMP Securities against certain liabilities. The Notes bore interest at 6.75% per annum, payable semiannually on May 1 and November 1 of each year, beginning on November 1, 2019. The Notes could bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the Indenture or if the Notes were not freely tradeable as required by the Indenture. The Notes would have matured on May 1, 2024, unless earlier converted, redeemed or repurchased pursuant to their terms. The initial conversion rate of the Notes was 8.6956 shares of Class B Common Stock, per $1,000 principal amount of the Notes, subject to adjustment (which is equivalent to an initial conversion price of approximately $115.00 per share, subject to adjustment). The conversion rate was subject to adjustment in some events but would not have been adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture), the Company would, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elected to convert its Notes in connection with such make-whole fundamental change. The Notes were not redeemable by the Company prior to the May 6, 2022. The Company could have redeemed for cash all or any portion of the Notes, at its option, on or after May 6, 2022 if the last reported sale price of the Company's Class B Common Stock had been at least 150.0% 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 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund was provided for the Notes. If redeemed, the Company would have made an interest make-whole payment to the converting holder equal to the sum of the present values of the scheduled payments of interest that would have been made on the Notes to be converted had such Notes remained outstanding from the conversion date through the earlier of the date that is two years after the conversion date and June 15, 2022. In connection with the Note Offering, the Company entered into a registration rights agreement with JMP Securities, pursuant to which the Company has agreed to file with the SEC an automatic shelf registration statement, if the Company is eligible to do so and has not already done so, and, if the Company is not eligible for an automatic shelf registration statement, then in lieu of the foregoing the Company shall file a shelf registration statement for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Notes pursuant to Rule 415 or any similar rule that may be adopted by the Commission, and use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act on the day that is 120 days after May 9, 2019. As of December 31, 2019, the conditions allowing holders of the Notes to convert have not been met and therefore the Notes are not yet convertible. We account for the Notes in accordance with FASB ASC 470, Debt Derivatives and Hedging We allocate transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the debt component were $1,790,088 and are being amortized to interest expense using the effective interest method over the term of the Notes. Transaction costs attributable to the equity component were $754,375 and are netted with the equity component of the Notes in stockholders' equity. Transactions costs attributable to the derivative liability were $118,038 and were expensed during the year ended December 31, 2019. The interest expense recognized related to the Notes for the year ended December 31, 2019 was as follows: 2019 Contractual interest expense $ 1,305,000 Amortization of debt discounts 1,218,064 Total $ 2,523,064 On January 10, 2020, the Company entered into a note exchange and subscription agreement (the "Note Exchange & Subscription Agreement"), as amended by that certain Joinder and Amendment effective January 13, 2020 (the "Joinder Agreement," and together with the Note Exchange & Subscription Agreement, the "Note Agreement"), with the investors in the 2019 Note Offering (the "Note Investors"), pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 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 (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering (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, Convertible Notes-Autosport USA On February 3, 2019, in connection with the Autosport Acquisition, the Company issued (i) the Promissory Note, and (ii) the Convertible Note in favor of the Seller. In connection with the Autosport Acquisition, the Buyer also assumed additional debt of $257,933 pursuant to the Second Convertible Note. The Promissory Note has a term of fifteen months and will accrue interest at a simple rate of 5.0% per annum. Interest under the Promissory Note is payable upon maturity. Any interest and principal due under the Promissory Note is convertible, at the Buyer's option into shares of the Company's Class B Common Stock at a conversion price equal to the weighted average trading price of the Company's Class B Common Stock on the Nasdaq Stock Exchange for the twenty (20) consecutive trading days preceding the conversion date. The number of shares of the Company's Class B Common Stock issuable pursuant to the Promissory Note is indeterminate at this time. The Convertible Note has a term of three years and will accrue interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company's Class B Common Stock at a conversion price of $115.00 per share, (i) at 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 pursuant to the Convertible Note is 15,962 shares of the Company's Class B Common Stock. The Second Convertible Note has a term of one year and will accrue interest at a simple rate of 5.0% per annum. Monthly payments of amortized principal and interest will be due under the Second Convertible Note. Any interest and principal due under the Second Convertible Note is convertible into shares of the Company's Class B Common Stock at a conversion price of $115.00 per share, (i) at the Seller's option, or (ii) at the Buyer's option, on any day that (a) any portion of the principal of the Second 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 pursuant to the Second Convertible Note is 2,336 shares of the Company's Class B Common Stock. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
STOCKHOLDERS' EQUITY | Share-Based Compensation On June 30, 2017 the Company's shareholders approved a Stock Incentive Plan (the "Plan") reserving for issuance under the Plan in the form of restricted stock units ("RSUs"), stock options ("Options"), Performance Units, and other equity awards (collectively "Awards") for our employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual") of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstanding shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment"). To date, the vesting of RSU and Option awards for most employees is service / time based, however some senior level employees have been granted awards that include a mix of service based, performance based and market condition-based vesting. Substantially all service/time based RSU and Option awards issued typically vest over a three-year period approximating the following vesting schedule: (i) 20.0% vesting anywhere from eight-months to thirteen month after grant date, (ii) an additional 30.0% during the subsequent twelve months of the initial vesting, and (iii) the final 50.0% during the following twelve months. For the Years Ended December 31, 2019 2018 Restricted Stock Units $ 3,812,993 $ 1,657,680 Options 23,525 — Total stock-based compensation $ 3,836,518 $ 1,657,680 As of December 31, 2019, unrecognized stock-based compensation related to outstanding RSU and stock awards and the related weighted-average period over which it is expected to be recognized subsequent to December 31, 2019 is presented in the table below. Total unrecognized equity will be adjusted for actual forfeitures. Unrecognized Stock Based Compensations Related to Outstanding Awards Remaining Weighted-Average Amortization Period (in years) Restricted Stock Units $ 5,300,737 0.8 Options 149,272 1.2 Total Unrecognized stock-based Compensation $ 5,450,009 0.8 Restricted Stock Units RSU activity during the years ending December 31, 2019 and December 31, 2018 was as follows: Number of RSUs Weighted -Average Grant Date Fair Value Outstanding at December 31, 2017 35,800 $ 82.82 Granted 51,414 116.63 Vested (9,950 ) 81.20 Forfeited (1,875 ) 124.05 Outstanding at December 31, 2018 75,389 104.63 Granted 80,050 60.81 Vested (9,000 ) 86.54 Forfeited (16,501 ) 61.45 Outstanding at December 31, 2019 129,938 $ 99.00 Non-qualified Stock Options Non-qualified stock options allow recipients to purchase shares of Class B common stock at a fixed exercise price. The fixed exercise price is equal to the price of a share of Class B common stock at the time of grant. The options expire ten years after the grant date and typically vest 20.0% between nine-months and one-year after the grant date and thereafter in quarterly installments of 7.5% and 12.5% during the 2nd and 3rd vesting years, respectively. Number of Options Weighted Average Exercise Price Weighted-Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at December 31, 2017 — n/a n/a Options Granted — n/a n/a Options exercised — n/a n/a Options forfeited or expires — n/a n/a Outstanding at December 31, 2018 — n/a n/a n/a Options Granted 5,608 $ 34.20 $ — Options exercised — n/a n/a Options forfeited or expires (521 ) 34.20 $ — Outstanding at December 31, 2019 5,087 $ 34.20 9.6 $ — Vested / exercisable at December 31, 2019 — — n/a $ — Expected to vest as of December 31, 2019 3,944 $ 34.20 9.6 $ — Fair value of all awards is based on the share price of the Class B Common Stock on the date of the award, and in the case of options, which were only issued in 2019, is calculated using the Black-Scholes option valuation model using the assumptions in the following table: 2019 2018 Risk-free rate 1.5 % — % Expected volatility 85.0 % — % Expected life (in years) 5.75 — Expected dividend yield — — Weighted average grant date fair value per option $ 34.20 $ — Security Offerings On July 20, 2018, the Company completed an underwritten public offering of 116,438 shares of its Class B Common Stock at a price of $121.00 per share for net proceeds to the Company of $13,015,825. The completed offering included 15,188 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option. The Company will use the net proceeds from the offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business. On October 25, 2018, the Company filed the Certificate of Designation, Preferences, and Rights of Series B Non-Voting Convertible Preferred Stock ("Certificate of Designation") with the Secretary of State for the State of Nevada, designating 2,500,000 shares of the Company's preferred stock, par value $0.001 per share, as Series B Preferred. Shares of Series B Preferred rank pari passu On October 30, 2018, the Company completed the private placement of an aggregate of 151,500 shares of its Class B Common Stock (the "Private Placement"), at a price of $142.00 per share for non-affiliates of the Company, and, with respect to directors participating in the Private Placement, at a price of $162.00 per share. The gross proceeds for the Private Placement were $21,553,000. National Securities Corporation, a wholly owned subsidiary of National Holdings Corporation, and Craig-Hallum Capital Group (together the "Placement Agents") served as the placement agents for the Private Placement. The Company paid the Placement Agents a fee of 6.5% of the gross proceeds in the Private Placement. Net proceeds from the Private Placement and $5,000,000 funded under the Tranche II Advance were used to partially fund the cash consideration of the Wholesale Merger and the Express Acquisition and the balance will be used for working capital purposes. Denmar Dixon, a member of the Company's Board of Directors, invested through Blue Flame Capital, LLC (an entity controlled by Mr. Dixon) $243,000 in the Private Placement for 1,500 shares of Class B Common Stock. Also, Joseph Reece, a member of the Company's Board of Directors at the time, individually invested $81,000 in the Private Placement for 500 shares of Class B Common Stock. These purchases were approved by the Company's Board of Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act. Messrs. Dixon and Reece abstained from the Company's Board of Directors' vote in favor of the Private Placement. On February 11, 2019, the Company completed an underwritten public offering of 63,825 shares of its Class B Common Stock at a price of $111.00 per share for net proceeds to the Company of $6,543,655. The completed offering included 8,325 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option. On May 9, 2019, the Company entered into a Securities Purchase Agreement with certain accredited investors (the "Investors") pursuant to which the Company agreed to sell in a private placement (the "Private Placement") an aggregate of 95,000 shares of its Class B Common Stock, at a purchase price of $100.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the Private Placement. The Private Placement closed on May 17, 2019. The proceeds for the Private Placement, were $8,665,000. 2020 Public Offering On January 10, 2020, the Company entered into an underwriting agreement (the "Underwriting Agreement") with National Securities Corporation, as representative to the several underwriters named on Schedule 1-A to the Underwriting Agreement (the "Underwriters"), relating to the Company's public offering (the "2020 Public Offering") of 900,000 shares of Class B Common Stock (the "Firm Shares") and an additional 135,000 shares of Class B Common Stock (the "Additional Shares"). The Underwriters agreed to purchase the Firm Shares at a price of $11.40 per share. The issuance and closing of the Firm Shares took place on January 14, 2020, and of the Additional Shares on January 17, 2020. For additional information see Note 19 – Subsequent Events – Public Offering. |
COMMON STOCK WARRANTS
COMMON STOCK WARRANTS | 12 Months Ended |
Dec. 31, 2019 | |
Warrants and Rights Note Disclosure [Abstract] | |
COMMON STOCK WARRANTS | In connection with the October 23, 2017 public offering of 145,500 shares of Class B common stock the Company issued to underwriters warrants to purchase 10,913 shares of Class B common stock, which was equal to 7.5% of the aggregate number of shares of Class B common stock sold in the Offering. The Warrants are exercisable at a per share price of $126.50, which was equal to 115.0% of the Offering price per share of the shares sold in the Offering and mature on April 20, 2023. In April, 2018, pursuant to the Loan Agreement by and among Hercules Capital, the Company, and its wholly owned subsidiaries, the Company issued Hercules a warrant to purchase 4,091 (increasing to 5,455 if a fourth tranche in the principal amount of up to $5,000,000 is advanced at the parties agreement) shares of the Company's Class B Common Stock (the "Hercules April Warrant") at an exercise price of $110.00 per share (the "Hercules April Warrant Price"). The Hercules April Warrant is immediately exercisable and expires on April 30, 2023. In October, 2018, under an amendment to the Loan Agreement, the company issued Hercules a warrant to purchase 1,048 shares of the Company's Class B Common Stock (the "Hercules October Warrant") at an exercise price of $143.13 per share (the "Hercules October Warrant Price"). The Hercules October Warrant is immediately exercisable and expires on October 30, 2023. The Hercules warrants contain anti-dilutive provisions that increase the number of shares covered by the warrants in the event the Company makes a New Issuance (as defined in the Loan Agreement) for no consideration or consideration that is less than the Warrant Prices. The following table summarizes the warrants outstanding as of December 31, 2019 and 2018: 2019 2018 Warrants outstanding at the beginning of the year 16,051 10,913 New warrant issuances to Hercules — 5,138 Adjustment to the Hercules warrants due to the anti-dilutive provisions 479 — Warrants outstanding at the end of the year 16,530 16,051 The Company has classified the warrants as equity in accordance with ASC 815. The fair value of the warrants were valued at issuance using the Black-Scholes option pricing model with the following assumptions: Underwriter Warrants Hercules April Warrants Hercules October Warrants Warrants exercise price $ 126.50 $ 110.00 $ 143.20 Fair value price per share of common stock $ 110.00 $ 101.40 $ 114.60 Volatility 62.0 % 70.0 % 70.0 % Expected term remaining (years) 5.0 5.0 5.0 Risk-free interest rate 1.31 % 2.79 % 2.94 % Discount for Lack of Marketability 20.0 % 20.0 % 20.0 % Dividend yield — — — Fair value at initial valuation date $ 505,273 $ 208,369 $ 59,292 |
SELLING, GENERAL AND ADMINISTRA
SELLING, GENERAL AND ADMINISTRATIVE | 12 Months Ended |
Dec. 31, 2019 | |
General and Administrative Expense [Abstract] | |
SELLING, GENERAL AND ADMINISTRATIVE | The following table summarizes the detail of selling, general and administrative expense for the years ended December 31, 2019 and 2018: 2019 2018 Compensation and related costs $ 33,502,020 $ 10,656,107 Advertising and marketing 18,228,262 11,457,572 Professional fees 2,542,357 1,788,425 Technology development 2,408,338 1,152,108 General and administrative 29,943,272 10,909,718 $ 86,624,249 $ 35,963,930 |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | The following table includes supplemental cash flow information, including noncash investing and financing activity for the years ended December 31, 2019 and 2018: 2019 2018 Cash paid for interest $ 4,888,070 $ 1,226,292 Convertible notes payable issued in acquisition $ 2,293,933 $ — Issuance of shares for acquisition $ — $ 6,652,512 The following table provides a reconciliation of cash and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of the same amounts shown in the accompanying consolidated statements of cash flows as of December 31: December 31, 2019 2018 Cash and cash equivalents $ 49,660 $ 9,134,902 Restricted cash (1) 6,676,622 6,650,000 Total cash, cash equivalents, and restricted cash $ 6,726,282 $ 15,784,902 (1) Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | U.S. Tax Reform On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Act, was signed in to law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35.0% to 21.0%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. On December 31, 2019, the Company did not have any foreign subsidiaries and the international aspects of the Tax Act are not applicable. In connection with the initial analysis of the impact of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 26.1% including state income taxes. The remeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted in response to the novel coronavirus (COVID-19) . Deferred income taxes reflect the net tax effect of temporary difference between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows: 2019 2018 Deferred tax assets: Net operating loss and interest limitation carryforward $ 18,025,898 $ 8,091,718 Stock-based compensation 1,287,424 564,700 Accounts receivable allowance 269,403 — Operating lease liabilities 1,599,651 — Goodwill 385,570 — Inventory reserve 151,815 — Property and equipment 191,259 — Total deferred income taxes 21,911,020 8,656,418 Deferred tax liabilities: Property and equipment — 15,045 Right-of-use assets 1,572,368 — Goodwill — 64,423 Debt discounts 28,818 464,324 Total deferred tax liabilities 1,601,186 543,792 Net deferred tax asset 20,309,834 8,112,626 Valuation allowance (20,309,834 ) (8,112,626 ) Net deferred taxes $ — $ — A reconciliation of the statutory U.S. Federal income tax rate to the Company's effective income tax rate on income tax rate on continuing operations for the years ended December 31, 2019 and 2018. 2019 2018 U.S. Federal statutory rate 21.0 % 21.0 % State and local, net of Federal benefit 5.0 % 5.1 % Permanent difference (1.1 )% (0.2 )% Valuation allowance (24.9 )% (25.9 )% Effective tax rate — % — % No current provision for Federal income taxes was recorded for the years ended December 31, 2019 and 2018 due to the Company's operating losses. At December 31, 2019 and 2018, the Company has operating loss carryforwards of $66,717,013 and $30,961,231, respectively, a portion of which begin to expire in 2033. We have provided a valuation allowance on the deferred tax assets of $20,309,834 and $8,112,626 for the periods ended December 31, 2019 and 2018, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. |
LOSS PER SHARE
LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
LOSS PER SHARE | The Company computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighed-average number of shares of common stock outstanding during the period. The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, 129,938 of RSUs, 5,087 of stock options, 16,530 of warrants to purchase shares of Class B Common Stock and 279,182 shares of Class B Common Stock issuable in connection with convertible debt are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive. In connection with the Company's acquisition of Wholesale, the Company issued 1,317,329 shares of Series B Non-Voting Convertible Preferred Stock. The rights of the holder of the Series B Preferred and Class A and Class B Common Stock are identical, except with respect to voting. The Series B Preferred automatically converts to Class B Common Stock 21 days after the mailing of a definitive information statement prepared in accordance with Regulation 14C of the Exchange Act, without further action on the part of the Company, to the holders of Series B Preferred and has no expiration date. The conversion of Series B Preferred to Class B Common was effected on March 4, 2019. The Company applies the two-class method of calculating earnings per share, but as the rights of the Series B Non-Voting Convertible Preferred Stock and Class A and Class B Common Stock are identical, except in respect of voting, basic and diluted earnings per share are the same for all classes. Weighted average number of shares outstanding of Class A Common Stock, Class B Common Stock, and Series B Preferred Stock at December 31, 2019 were 50,000, 1,114,714, and 0, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | A key component of the Company's business model is to use regional partners in the acquisition of pre-owned vehicles as well as utilize these regional partners to provide inspection, reconditioning and distribution services. Correspondingly, the Company will earn fees and transaction income, and the regional partner may earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. In connection with the development of the regional partner program, the Company tested various aspects of the program by utilizing a dealership to which Mr. Chesrown, the Company's Chief Executive Officer has provided financing in the form of a $400,000 convertible promissory note. The note, which could be converted into a 25.0% ownership interest in the Dealer at any time, was to mature on May 1, 2019, with interest payable monthly at 5.0% per annum. This financing arrangement was terminated in April 2018. In addition, the Company previously subleased warehouse space from the Dealer that is separate and distinct from the location of the dealership, on the same terms as paid by the Dealer. This subleased facility serves as the northwestern regional distribution center for the Company. The lease was For the year ended December 31, 2018, the Company paid $90,000 in rent under the sublease In connection with the NextGen acquisition, the Company entered into a Services Agreement (the "Services Agreement") with Halcyon Consulting, LLC ("Halcyon"), to provide development and support services to the Company. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company paid Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees may increase on an annual basis, provided that the rates were not higher than 110.0% of the immediately preceding year's rates. The Company reimbursed Halcyon for any reasonable travel and pre-approved out-of-pocket expenses in connection with its services to the Company. The Services Agreement was terminated on March 31, 2018. For the year ended December 31, 2018 the Company paid $54,159 under the Services Agreement. As of December 31, 2019 and 2018, the Company had promissory notes of $370,556 and accrued interest of $23,731 and $7,939, respectively, due to Blue Flame, an entity controlled by a Denmar Dixon, a director of the Company. The promissory notes were issued in connection with the completion of the 2016 Private Placement on March 31, 2017. Interest expense on the promissory notes due to Blue Flame, for the years ended December 31, 2019 and 2018 was $183,286 and $143,987, respectively, which included debt discount amortization of $144,409 and $114,404, respectively. The interest was charged to interest expense in the Consolidated Statements of Operations. On October 30, 2018, an entity controlled by Mr. Dixon invested $243,000 in the Private Placement for 1,500 shares of Class B Common Stock. Joseph Reece, a member of the Company's Board of Directors at the time, individually invested $81,000 in the Private Placement for 500 shares of Class B Common Stock. These purchases were approved by the Company's Board of Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act. Messrs. Dixon and Reece abstained from the Company's Board of Directors' vote in favor of the Private Placement. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Lease Commitments We determine whether an arrangement is a lease at inception and whether such leases are operating or financing leases. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. We use these options in determining our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determine the present value of the lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. Total operating lease expenses for the year ended December 31, 2019 and 2018 was $1,661,649 and $414,238, respectively. The current portion of our operating lease liabilities as of December 31, 2019 is $1,423,610 and is included in accounts payable and accrued liabilities. The long-term portion of our operating lease liabilities as of December 31, 2019 is $4,722,101. The weighted-average remaining lease term and discount rate for our operating leases are as follows: 2019 Weighted-average remaining lease term 4 Years Weighted-average discount rate 7.0 % Supplemental cash flow information related to operating leases for the year ended December 31, 2019 was as follows: 2019 Cash payments for operating leases $ 1,019,027 New operating lease assets obtained in exchange for operating lease liabilities $ 6,040,287 The following table summarizes the future minimum payments for operating leases at December 31, 2019 due in each year ending December 31, 2020 $ 1,805,899 2021 1,785,519 2022 1,920,543 2023 744,370 2024 310,200 thereafter 568,700 Total lease payments 7,135,231 Less imputed interest (989,520 ) Present value of lease liabilities $ 6,145,711 Legal Matters From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of December 31, 2019 and 2018, the Company does not believe that the ultimate resolution of any legal actions, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, and capital resources. Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third-party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | The Company is dependent on third-party providers of wholesale vehicle auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of these principal providers or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationships with these providers are satisfactory. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | Business The following table summarizes revenue, operating income (loss), Depreciation and Amortization and interest expense which are the measure by which management allocates resources to its segments to each of our reportable segments. Powersports Automotive Vehicle Logistics and Transportation Eliminations (1) Total Year Ended December 31, 2019 Total assets $ 55,992,165 $ 77,033,326 $ 7,921,578 $ (27,553,978 ) $ 113,393,091 Revenue $ 101,008,976 $ 717,042,511 31,931,488 $ (9,353,628 ) $ 840,629,347 Operating income (loss) $ (34,402,724 ) $ (5,318,549 ) $ 1,928,574 $ — $ (37,792,699 ) Depreciation and amortization $ 1,543,023 $ 235,998 $ 7,405 $ — $ 1,786,426 Interest expense $ 4,453,549 $ 2,732,869 $ 1,186 $ — $ 7,187,604 Loss on early extinguishment of debt $ (1,499,250 ) $ — $ — $ — $ (1,499,250 ) Year Ended December 31, 2018 Total assets $ 55,825,600 $ 73,642,034 $ 5,555,397 $ (26,096,650 ) $ 108,926,381 Revenue $ 61,204,416 $ 91,369,996 $ 4,931,558 $ (1,107,739 ) $ 156,398,231 Operating income (loss) $ (22,546,622 ) $ (892,306 ) $ 37,796 $ — $ (23,401,132 ) Depreciation and amortization $ 958,282 $ 24,490 $ 1,234 $ — $ 984,006 Interest expense $ 1,267,379 $ 513,306 $ — $ — $ 1,780,685 (1) Intercompany investment balances related to the acquisitions of Wholesale, Inc. and Wholesale Express, and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Consolidated Statements of Operations. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Public Offering On January 10, 2020, the Company entered into the Underwriting Agreement with the Underwriters relating to the Company's 2020 Public Offering of the 900,000 Firm Shares and the 135,000 Additional Shares. The Underwriters agreed to purchase the Firm Shares at a price of $11.40 per share. The Firm Shares were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (Registration No. 333-234340) under the Securities Act. On January 14, 2020, the Company issued the Firm Shares and closed the 2020 Public Offering at a public price of $11.40 per share. On January 16, 2020, the Company received notice of the Underwriters' intent to exercise the over-allotment option in full (the "Over-allotment Exercise"). On January 17, 2020, the Company issued the Additional Shares and closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, net proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,898,070. Certain of the Company's officers and directors participated in the 2020 Public Offering. The Company intends to use the net proceeds of the 2020 Public Offering for working capital and general corporate purposes, which may include further technology development, increased spending on marketing and advertising and capital expenditures necessary to grow the business. Convertible Note Exchange and Offer Also on January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering, pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public 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 $8,272,375. The New Notes were issued on The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 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. The New Indenture contains a "blocker provision" which provides that no holder (other than the depositary 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 the January 14, 2023. 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 100.0% 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 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 25.0% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable. In connection with the 2020 Note Offering, on January 14, 2020, the Company entered into a registration rights agreement with the Note Investors, pursuant to which the Company has agreed to file with the SEC a shelf registration statement registering the sale, on a continuous or delayed basis, of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than the day that is 120 days after January 14, 2020. Investor Note Exchange Also, in connection with the closing of the 2020 Public Offering and the 2020 Note Offering, the Company repaid $500,000 plus accrued interest related to the note payable to Halcyon, and certain of the Company's investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for the New Investor Notes, pursuant to the Investor Note Exchange Agreement, by and between the Company and each Investor, including Halcyon, an entity affiliated with Kartik Kakarala, a director of the Company, such New Investor Note for an aggregate principal amount of $833,333, Blue Flame, an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114 and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amount of approximately $1,502,352, will mature on January 31, 2021, and will be convertible at any time at the Investor's option at a price of $60.00 per share. In connection with the issuance of the New Investor Notes, the Company also entered into a Security Agreement, dated as of January 14, 2020 with the Investors, pursuant to which the Company granted to the Investors a security interest in certain collateral to secure, on a pro rata basis based on the percentage equal to the amount of principal outstanding on each New Investor Note divided by the amount of principal outstanding on all of the New Investor Notes to each Investor. The New Investor Notes and the New Notes were sold to the investors pursuant to the Investor Note Exchange Agreement and the Note Agreement, respectively, in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. To the extent that any shares of Class B Common Stock are issued upon conversion of the New Investor Notes and the New Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof, because no commission or other remuneration is expected to be paid in connection with conversion of the New Investor Notes and the New Notes, and any resulting issuance of shares of Class B Common Stock. Nasdaq Notices On January 17, 2020, the Company received a notice from the Listing Qualifications department of the Nasdaq Stock Market ("Nasdaq") indicating that the Company is not in compliance with the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rule 5450(a)(1) based upon the closing bid price for the 30 consecutive business days ended January 16, 2020. The Nasdaq notice does not impact the Company's listing at this time and the Company's stock will continue to trade on Nasdaq while the Company works to regain compliance with the Nasdaq. As a result of the Reverse Stock Split, as defined below, the Company believes it has regained compliance with Rule 5450(a)(1). Nashville Tornado In the early morning hours of March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities in Nashville. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The Company continues in the process of reviewing damages and coverages with its insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, currently assessed by the insurance carrier at $3,369,087; and (3) loss of business income, for which the company has coverage in the amount of $6,000,000. 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. The building insurer has agreed to pay $3,369,087 on the building and personal property loss, reflecting a complete recovery, net of $5,000 reflecting the Company's deductible. The insurer has made an interim payment on the building and personal property loss of $2,269,507 and has an outstanding balance of $1,904,580 which is expected to be paid during the second quarter of 2020. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a full recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered. COVID-19 Pandemic On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. The Company has experienced significant disruption to its business, both in terms of disruption of its operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of the Company’s business. The Company’s business is also dependent on the continued health and productivity of its associates throughout this crisis. Individually and collectively, the Company expects the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, sales, results of operations, financial condition, and liquidity. The COVID-19 situation has created an unprecedented and challenging time. The Company’s current focus is on positioning the Company for a strong recovery when this crisis is over. The Company has taken steps to reduce its inventory and align its operating expenses to the state of the business. The Company plans to continue to operate as permitted to support its customers’ needs for reliable vehicles and to provide as many jobs as possible for its associates. Effective April 9, 2020, 169 associates were temporarily laid-off, however the Company’s receipt of PPP funds, as discussed below will allow it to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation future government mandates, as well as future business conditions. The Company will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce its operating expenses as the Company is able, however, the Company expects the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, sales, results of operations, financial condition, and liquidity. PPP Loan On May 1, 2020, the Company, and its wholly-owned subsidiaries Wholesale, Inc. and Wholesale Express, LLC (together, the “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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), in the aggregate amount of $5,176,845 (the “Loan Proceeds”). The Borrowers received the Loan Proceeds on May 1, 2020. Under the SBA Loan Documents, the SBA Loans have a fixed interest rate of 1%, repayment begins six months from the date of disbursement of each SBA Loan, and the SBA Loans mature two years from the date of first disbursement. There is no prepayment penalty. Pursuant to the terms of the SBA Loan Documents, the Borrowers may apply for forgiveness of the amount due on the SBA Loans in an amount equal to the sum of the following costs incurred by the Borrowers during the eight-week period (or any other period that may be authorized by the U.S. Small Business Administration) beginning on the date of first disbursement of the SBA Loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of SBA Loan forgiveness shall be calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, although no more than 25% of the amount forgiven can be attributable to non-payroll costs. No assurance is provided that forgiveness for any portion of the SBA Loans will be obtained. The promissory notes evidencing the SBA Loans contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory notes. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Borrowers, and/or filing suit and obtaining judgment against the Borrowers. Reverse Stock Split On May 18, 2020, the Company filed a Certificate of Change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the nearest whole share. The authorized preferred stock of the Company was not impacted by the Reverse Stock Split. Following the Reverse Stock Split, the Company has outstanding 50,000 shares of Class A Common Stock and approximately 2,162,696 shares of Class B Common Stock. On May 20, 2020, the Company’s Class B Common Stock commenced trading on the Nasdaq Capital Market on a split-adjusted basis. The Company has retrospectively adjusted the 2018 and 2019 financial statements for loss per share and share amounts as a result of the reverse stock split. |
DESCRIPTION OF BUSINESS AND S_2
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization | RumbleOn, Inc. (the "Company") was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. ("Smart Server"). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc. |
Description of Business | In July 2016, Berrard Holdings Limited Partnership ("Berrard Holdings") acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company's goal is to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. While the Company's initial customer facing emphasis through most of 2018 was on motorcycles and other powersports, the Company continues to enhance its platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks, and via its acquisition of Wholesale, Inc. in October 2018, the Company is making a concerted effort to grow its cars and light truck categories. On October 26, 2018, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with the Company's newly-formed acquisition subsidiary RMBL Tennessee, LLC, a Delaware limited liability company ("Merger Sub"), Wholesale Holdings, Inc., a Tennessee corporation ("Holdings"), Wholesale, LLC, a Tennessee limited liability company ("Wholesale"), Steven Brewster and Janelle Brewster (each a "Stockholder," and together the "Stockholders"), Steven Brewster, a Tennessee resident, as the representative of each Stockholder (the "Representative"), and Marshall Chesrown and Steven R. Berrard, providing for the merger of Holdings with and into Merger Sub, with Merger Sub surviving the merger as a wholly-owned subsidiary of the Company (the "Wholesale Transaction"). On October 29, 2018, the Company entered into an Amendment to the Merger Agreement making a technical correction to the definition of "Parent Consideration Shares" contained in the Merger Agreement. Also, on October 26, 2018, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Steven Brewster and Justin Becker (together the "Express Sellers"), and Steven Brewster as representative of the Express Sellers, pursuant to which the Company acquired all of the membership interests (the "Express Transaction," and together with the Wholesale Transaction, the "Transactions") in Wholesale Express, LLC, a Tennessee limited liability company ("Wholesale Express"). The Transactions were both completed on October 30, 2018 (the "Acquisition Date"). As consideration for the Wholesale Transaction, the Company (i) paid cash consideration of $12,353,941, subject to certain customary post-closing adjustments, and (ii) issued to the Stockholders 1,317,329 shares (the "Stock Consideration") of the Company's Series B Non-Voting Convertible Preferred Stock, par value $0.001 (the "Series B Preferred"). As consideration for the Express Transaction, the Company paid cash consideration of $4,000,000, subject to certain customary post-closing adjustments. Wholesale Inc. is one of the largest independent distributors of pre-owned vehicles in the United States and Wholesale Express, LLC is a related logistics company. On February 3, 2019, the Company completed the acquisition (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) a fifteen-month $500,000 promissory note (the "Promissory Note") in favor of the Seller, plus (iii) a three-year $1,536,000 convertible promissory note (the "Convertible Note") in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock (the "Earn-Out Shares") for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to a promissory note payable to Seller (the "Second Convertible Note"). Serving both consumers and dealers, through its online marketplace platform, the Company makes cash offers for the purchase of pre-owned vehicles. In addition, the Company offers a large inventory of pre-owned vehicles for sale along with third-party financing and associated products. The Company's operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with its regional partners, which are primarily auctions. The Company utilizes regional partners in the acquisition of pre-owned vehicles to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. Our business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC ("NextGen"). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives were modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool; (vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure. The COVID-19 situation has created an unprecedented and challenging time. The Company’s current focus is on positioning the Company for a strong recovery when this crisis is over. The Company has taken steps to reduce its inventory and align its operating expenses to the state of the business. The Company plans to continue to operate as permitted to support its customers’ needs for reliable vehicles and to provide as many jobs as possible for its associates. Effective April 9, 2020, 169 associates were temporarily laid-off, however the Company’s receipt of PPP funds, as discussed in Note 19 - Subsequent Events will allow the Company to gradually recall these associates over time. All ongoing employment determinations are subject to change due to the COVID-19 situation, future government mandates, as well as future business conditions. The Company will continue to monitor the COVID-19 situation and look for ways to preserve cash and reduce its operating expenses as the Company is able. However, the Company expects that the consequences of the COVID-19 outbreak will likely have a significant negative impact on its business, revenue, results of operations, financial condition, and liquidity. |
Basis of Presentation | The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All of the Company’s subsidiaries are wholly owned. All intercompany accounts and material intercompany transactions have been eliminated. |
Liquidity | We have incurred losses and negative cash flow from operations since inception through December 31, 2019 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit and Note 9 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. As of May 28, 2020, we had approximately $15,000,000 available under our NextGear Credit Line that we may draw against through December 31, 2020 to fund future vehicle inventory purchases, as described further in Note 8 — Notes Payable and Lines of Credit. Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line, proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including temporarily laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of May 28, 2020, the Company has $9,000,000 of unrestricted cash and has approximately $15,000,000 of remaining availability under the NextGear Credit. The Company’s consolidated financial statements have been prepared assuming that will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that we will be able to generate sufficient liquidity from the measures described above, our current circumstances including uncertainties due to Covid-19 pandemic raise substantial doubt about our ability to operate as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Use of Estimates | The preparation of these 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. 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 novel COVID-19 pandemic and the resulting adverse impacts to global economic conditions, as well as our operations, may impact future estimates including, but not limited to inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions. |
Earnings (Loss) Per Share | The Company follows the FASB Accounting Standards Codification ("ASC") Topic 260-Earnings per share. Basic earnings per common share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Common share and dilutive common share equivalents include: (i) Class A common: (ii) Class B common; (iii) Class B participating preferred shares; (iv) restrictive stock units; (v) stock options; (vi) warrants to acquire Class B common stock; and (vii) shares issued in connection with convertible debt. |
Revenue Recognition | Revenue for our powersports and automotive segments is derived from our online marketplace and auctions and primarily includes the sale of pre-owned vehicles to consumer and dealers Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States. We adopted ASC 606, Revenue from Contracts with Customers For vehicles sold at wholesale to dealers we satisfy our performance obligation when the wholesale purchaser obtains control of the underlying vehicle, which is upon delivery when the transfer of title, risks and rewards of ownership and control pass to the dealer. We recognize revenue at the amount we expect to receive for the used vehicle, which is the fixed price determined at the auction. The purchase price of the wholesale vehicle is typically due and collected within 30 days of delivery of the wholesale vehicle. For vehicles sold to consumers the purchase price is set forth in the customer contracts at a stand-alone selling price which is agreed upon prior to delivery. We satisfy our performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. We recognize revenue at the agreed upon purchase price stated in the contract, including any delivery charges, less an estimate for returns. Our return policy allows customers to initiate a return during the first three days after delivery. Estimates for returns are based on an analysis of historical experience, trends and sales data. Changes in these estimates are reflected as an adjustment to revenue in the period identified. The amount of consideration received for used vehicle sales to consumers includes noncash consideration representing the value of trade-in vehicles, if applicable, as stated in the contract. Prior to the delivery of the vehicle, the payment is received, or financing has been arranged. Payments from customers that finance their purchases with third parties are typically due and collected within 30 days of delivery of the used vehicle. In future periods additional provisions may be necessary due to a variety of factors, including changing customer return patterns due to the maturation of the online vehicle buying market, macro- and micro-economic factors that could influence customer return behavior and future pricing environments. If these factors result in adjustments to sales returns, they could significantly impact our future operating results. Revenue exclude any sales taxes, title and registration fees, and other government fees that are collected from customers. Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage 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. freight brokerage 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. |
Purchase Accounting for Business Combinations | The Company accounts for acquisitions by allocating the fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period. During the year ended December 31, 2019, the Company finalized the preliminary purchase price allocation recorded at the acquisition date for Wholesale Express and made a measurement period adjustment to the preliminary purchase price allocation which resulted in a decrease in goodwill of $334,861. The Company made this measurement period adjustment to reflect facts and circumstances related to accounts receivable and accounts payable that existed as of the acquisition date and did not result from intervening events subsequent to such date. |
Goodwill | Goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets. Other identifiable intangible assets, such as domain names, are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold, transferred, licensed or exchanged. Goodwill is not amortized but tested for impairment at the reporting unit level annually on December 31 and upon the occurrence of an indicator of impairment. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting: (1) Each of these segments are considered separate reporting units for purposes of goodwill testing. Our reportable segment has been determined to represent one operating segment and reporting unit. During 2019, for the three reporting units we performed quantitative impairment testing of the fair value of our reporting units using an income and market valuation approach. The income valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows of our business using the weighted average cost of capital as the discount rate. The market valuation approach estimates our enterprise value by applying a cash earnings multiple and selecting a multiple that is reasonable compared to recent market transactions completed in the industry. As part of that assessment, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization. We believe this reconciliation process is consistent with a market participant perspective. This consideration would also include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest, and other significant assumptions including revenue and profitability growth, profit margins, residual values and the cost of capital. For the year ended December 31, 2019, we recognized an impairment loss on goodwill of $1,850,000, which is recorded in selling, general and administrative expenses in the Consolidated Statement of Operations. No impairment charges related to intangible assets were recognized in 2018. |
Leases | Effective January 1, 2019, the Company adopted ASC 842, Leases. In accordance with ASC 842, the Company first determines if an arrangement contains a lease and the classification of that lease, if applicable, at inception. This standard requires the recognition of right-of-use ("ROU") assets and lease liabilities for the Company's operating leases. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component. The Company has also elected not to recognize a lease liability or ROU asset for leases with a term of 12 months or less and recognize lease payments for those short-term leases on a straight-line basis over the lease term in the Consolidated Statements of Operations. Operating leases are included in Right-of-use assets, Accounts payable and accrued liabilities and Operating lease liabilities, long-term portion in the Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments under the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within the Company's leases is generally not determinable and therefore the incremental borrowing rate at the lease commencement date is utilized to determine the present value of lease payments. The determination of the incremental borrowing rate requires judgment. Management determines the incremental borrowing rate for each lease using the Company's estimated borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The ROU asset also includes any lease prepayments, offset by lease incentives. Certain of the Company's leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when the Company is reasonably certain that the option will be exercised. An option to terminate is considered unless the Company is reasonably certain the option will not be exercised. |
Other Assets | Included in "Other assets" on the Company's Consolidated Balance Sheets are amounts related to acquired internet domain names which are considered to be an indefinite lived intangible assets. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired. There was no impairment of indefinite lived assets as of December 31, 2019 and 2018. |
Long-Lived Assets | Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets. The Company recorded no impairment charges on property and equipment during the years ended December 31, 2019 and 2018. See Note 5 — Property and Equipment, Net for additional information on property and equipment. |
Technology Development Costs | Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. |
Vehicle Inventory | Vehicle inventory is accounted for pursuant to ASC 330, Inventory |
Accounts Receivable, Net | Accounts receivable, net of an allowance for doubtful accounts, includes certain amounts due from customers. |
Cash and Cash Equivalents | The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of December 31, 2019, and 2018, the Company did not have any investments with maturities greater than three months. At times, the Company has cash balances in domestic bank accounts that exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses related to these cash concentrations. |
Restricted Cash | In connection with the execution of the Inventory Financing and Security Agreement (the "Credit Facility") by and among the Company's subsidiary, RMBL Missouri, LLC ("RMBL MO"), Ally Bank ("Ally") and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10.0% of the amount of the Company's approved and available credit line under the Credit Facility and 2) no greater than 25.0% of the total principal amount owed to Ally for inventory financed under the Credit Facility. In connection with the inventory financing contract (the "NextGear Facility"), entered into by the Company, its wholly owned subsidiary RMBL Tennessee, Inc, Wholesale, Inc. and NextGear Capital, Inc. ("NextGear"), dated October 30, 2018, Wholesale, Inc and NextGear entered into a Reserve Agreement requiring Wholesale, Inc to pay to NextGear $5,500,000 (the "Reserve") to be collateral and security for Wholesale Inc.'s liability under the NextGear Facility as well as any amounts owed by Wholesale, Inc. to NextGear and its Affiliates, and each of their respective directors, officers, principals, trustees, partners, shareholders or other holders of any ownership interest, as the case may be, employees, representatives, attorneys and agents. NextGear is not required to pay Wholesale Inc. interest on the Reserve balance. Upon the satisfaction of all obligations and the termination by NextGear of the NextGear Facility, NextGear will return to Wholesale, Inc., upon its written request to NextGear no earlier than ten (10 business days from the date the obligations were indefeasibly paid and satisfied in full and the NextGear Facility and terminated by Lender. |
Property and Equipment, Net | Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred. |
Fair Value of Financial Instruments | Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2019 and December 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. ASC Topic 820-10-30-2 -Fair Value Measurement Level 1: The preferred inputs to valuation efforts are "quoted prices in active markets for identical assets or liabilities," with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs. Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as "unobservable," and limits their use by saying they "shall be used to measure fair value to the extent that observable inputs are not available." This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date". Earlier in the standard, FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. |
Embedded Conversion Feature | The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20; Debt with Conversion and Other Options. Under the ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost. The effect of ASC 470-20 on the accounting for our convertible debt instruments is that the equity component is required to be included in the additional paid-in capital section of stockholders' equity on the consolidated balance sheets and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the convertible debt to their face amount over the term of the convertible debt. From time to time, the Company has issued convertible notes that have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20. The Beneficial Conversion Feature ("BCF") of a convertible security is normally characterized as the convertible portion or feature of certain securities that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible security when issued and also records the estimated fair value of any conversion feature issued with those securities. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation. |
Common Stock Warrants | The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in Accounting Standards Codification (ASC) 815, Derivatives and Hedging – Contracts in Entity's Own Equity In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity |
Debt Issuance Costs | Debt issuance costs are accounted for pursuant to FASB ASU 2015-03 , "Simplifying the Presentation of Debt Issuance Costs" |
Cost of Revenue | Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of revenue also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value. |
Selling, General and Administrative Expenses | Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, transportation cost associated with selling vehicles, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. |
Advertising and Marketing Costs | Advertising and marketing costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Advertising and marketing expenses was $18,228,262 and $11,457,572 for the years ended December 31, 2019 and 2018, respectively. |
Stock-Based Compensation | On June 30, 2017 the Company's shareholders approved a Stock Incentive Plan (the "Plan") reserving for issuance under the Plan in the form of restricted stock units ("RSUs"), stock options ("Options"), Performance Unites, and other equity awards (collectively "Awards") for our employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual") of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstanding shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment"). To date, the vesting of RSU and Option awards for most employees is service / time based, however some senior level employees have been granted awards that include a mix of service based, performance based and market condition-based vesting. Substantially all service/time based RSU and Option awards issued typically vest over a three-year period approximating the following vesting schedule: (i) 20.0% vesting anywhere from eight-months to thirteen month after grant date, (ii) an additional 30.0% during the subsequent twelve months of the initial vesting, and (iii) the final 50.0% during the following twelve months. All performance-based awards and market condition-based awards granted to date have vesting schedules dependent on achieving a particular objective within sixteen (16) months. The Company estimates the fair value of awards granted under the Plan on the date of grant. During the year ended December 31, 2019, the Company granted 80,050 RSUs under the Plan to members of the Board of Directors, officers and employees. and is included in selling, general and administrative expenses in the consolidated statements of operations. 1,657,680 and is included in selling, general and administrative expenses in the consolidated statements of operations |
Income Taxes | The Company follows ASC Topic 740, Income Taxes, The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2019, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a fifty percent likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. The Company does not anticipate any significant changes to its total unrecognized tax positions within the next 12 months. |
Recent Pronouncements | Adoption of New Accounting Standards . In January 2017, the FASB issued new guidance, ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the test for Goodwill Impairment The Company adopted ASU 2017-04 on January 1, 2018 and it did not have a material effect on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires that the rights and obligations created by leases with a duration greater than 12 months be recorded as assets and liabilities on the balance sheet of the lessee. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has adopted this standard as of January 1, 2019 using the modified retrospective approach for all leases entered into before the effective date. The Company has also elected the option, as permitted in ASU 2018-11, Leases (Topic 842): Targeted Improvements , whereby initial application of the new lease standard would occur at the adoption date and a cumulative-effect adjustment, if any, would be recognized to the opening balance of retained earnings in the period of adoption. For comparability purposes, the Company will continue to comply with previous disclosure requirements in accordance with existing lease guidance for all periods presented in the year of adoption. The Company has elected the practical expedients permitted under the transition guidance which enabled the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and, (3) not to reassess the treatment of initial direct costs for existing leases. In addition, the Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption of this standard on January 1, 2019, the Company recognized a total operating lease liability in the amount of $3,118,038, representing the present value of the minimum rental payments remaining as of the adoption date and a right-of-use asset in the amount of $3,114,399. The cumulative effect of this accounting change of $3,639 is included in the accumulated deficit for the year ended December 31, 2019. The standard did not have a material impact on the Company's consolidated statements of operations or statements of cash flows. In August 2016, the FASB issued an accounting pronouncement (FASB ASU 2016-15) related to the classification of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, settlement of zero-coupon debt, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We adopted this pronouncement for our fiscal year beginning January 1, 2018, and it did not have a material effect on its consolidated financial statements. In May 2014, the Financial Accounting Standards Board ("FASB") issued a new accounting standard (ASC Topic 606) that amends the accounting guidance on revenue recognition. The new accounting standard is intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard's guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract. The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). The Company adopted ASC 606, Revenue from Contracts with Customers Accounting Standards Issued But Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
Schedule of accounts receivable | 2019 2018 Trade $ 9,369,733 $ 8,264,045 Finance 147,893 148,378 Other — 229,577 9,517,626 8,642,000 Less: allowance for doubtful accounts 1,034,919 176,190 $ 8,482,707 $ 8,465,810 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | 2019 2018 Pre-owned vehicles: Powersport vehicles $ 10,365,050 $ 9,783,093 Automobiles and trucks 47,599,433 43,081,136 57,964,483 52,864,229 Less: Reserve 583,202 672,706 $ 57,381,281 $ 52,191,523 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Schedule of purchase price consideration | The following table summarizes the allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities of Autosport as of December 31, 2019: Purchase price consideration: Cash $ 835,000 $1,536,000 convertible note 1,536,000 $500,000 promissory note 500,000 $257,933 Promissory note 257,933 Total purchase price consideration $ 3,128,933 Estimated fair value of assets: Accounts receivable 3,177,660 Inventory 2,862,004 6,039,664 Estimated fair value of accounts payable and other 5,875,009 Excess of assets over liabilities 164,655 Goodwill 2,964,278 Total net assets acquired $ 3,128,933 The following tables summarize the consideration paid in cash and equity securities for the acquisitions and the amount of identified assets acquired and liabilities assumed as of the acquisition date: Wholesale Express Issuance of shares $ 6,652,512 $ — Cash paid 12,353,941 4,000,000 Total purchase price $ 19,006,453 $ 4,000,000 Estimated fair value of assets: Cash 183,846 774,844 Accounts receivable 5,130,788 2,663,077 Inventory 47,639,354 — Prepaid expenses 186,659 59,377 Property & equipment 617,422 14,702 Due from Related party — 720,000 Other Assets 1,026,203 — 54,784,272 4,232,000 Estimated fair value of liabilities assumed: Accounts payable and other 8,144,040 1,079,509 Floor plan liability 49,988,553 — Due to related party 720,000 — 58,852,593 1,079,509 Excess of (liabilities over assets) assets over liabilities (4,068,321 ) 3,152,491 Goodwill 23,074,774 847,509 Total net assets acquired $ 19,006,453 $ 4,000,000 |
Schedule of pro forma information | Year Ended December 31, Unaudited 2019 2018 Pro forma revenue $ 846,947,956 $ 788,428,970 Pro forma net loss $ (45,296,568 ) $ (24,062,816 ) Loss per share - basic and fully diluted $ (40.37 ) $ (24.42 ) Weighted-average common shares and common stock equivalents outstanding basic and fully diluted 1,122,058 985,332 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, Net [Abstract] | |
Schedule of property and equipment | 2019 2018 Vehicles $ 158,327 $ 417,666 Furniture and equipment 448,074 474,546 Technology development and software 8,863,247 5,777,504 Leasehold improvements 246,135 136,386 Total property and equipment 9,715,783 6,806,102 Less: accumulated depreciation and amortization 3,288,109 1,628,225 Total $ 6,427,674 $ 5,177,877 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill and intangible assets | Goodwill Indefinite Lived Intangible Assets Balance at December 31, 2017 $ 1,850,000 $ 45,515 Acquisitions 24,257,146 — Balance at December 31, 2018 26,107,146 45,515 Acquisitions 2,964,278 — Impairment (1,850,000 ) — Measurement period adjustment (334,861 ) — Balance at December 31, 2019 $ 26,886,563 $ 45,515 |
Schedule of goodwill | Powersports Automotive Vehicle Logistics Total Balance at December 31, 2018 $ 1,850,000 $ 23,074,775 $ 1,182,371 $ 26,107,146 Acquisitions — 2,964,278 — 2,964,278 Impairment (1,850,000 ) — — (1,850,000 ) Measurement period adjustment — — (334,861 ) (334,861 ) Balance at December 31, 2019 $ — $ 26,039,053 $ 847,510 $ 26,886,563 |
ACCOUNTS PAYABLE AND OTHER AC_2
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and other accrued liabilities | 2019 2018 Accounts payable $ 8,730,624 $ 7,528,003 Operating lease liability-current portion 1,423,610 — Accrued payroll 715,658 877,180 State and local taxes 912,062 1,073,649 Other accrued expenses 639,140 1,076,081 Total $ 12,421,094 $ 10,554,913 |
NOTES PAYABLE AND LINES OF CR_2
NOTES PAYABLE AND LINES OF CREDIT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | 2019 2018 Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is January 31, 2021. $ 1,333,334 $ 1,333,334 Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through September 30, 2019 and 8.5% through maturity which is January 31, 2021. Unamortized debt discount of $75,601 and $334,998 as of December 31, 2019 and December 31, 2018, respectively. 667,000 667,000 Line of credit-floor plan Ally dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 7.05 %. Principal and interest are payable on demand. 8,419,897 8,866,894 Loan Agreement with Hercules Capital Inc. dated April 30, 2018 and as amended for tranche II on October 30, 2018. Tranche I- Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on June 1, 2019 through maturity which is May 1, 2021. Trance II-Interest payable monthly at 11.0%. Principal payable at maturity on October 1, 2021. Unamortized debt issuance costs as of December 31, 2018 of $1,547,412. — 10,857,500 Line of credit-floor plan NextGear dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate at December 31, 2019 was 4.25%. Principal and interest is payable on demand. 50,741,073 47,505,607 Less: Debt discount (75,601 ) (1,882,410 ) Total notes payable and lines of credit 61,085,703 67,347,925 Less: Current portion 59,160,970 58,555,006 Long-term portion $ 1,924,733 $ 8,792,919 |
Schedule of convertible notes | Face Amount Debt Discount Carrying Amount Convertible senior notes $ 30,000,000 $ 10,402,024 $ 19,597,976 Convertible notes-Autosport $1,536,000 unsecured note 1,536,000 379,616 1,156,384 $500,000 unsecured note 500,000 6,092 493,908 $257,933 unsecured note 257,933 6,382 251,551 32,293,933 10,794,114 21,499,819 Less: Current portion (1,461,933 ) (98,343 ) (1,363,590 ) Long-term portion $ 30,832,000 $ 10,695,771 $ 20,136,229 |
Schedule of interest expense | 2019 Contractual interest expense $ 1,305,000 Amortization of debt discounts 1,218,064 Total $ 2,523,064 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation | For the Years Ended December 31, 2019 2018 Restricted Stock Units $ 3,812,993 $ 1,657,680 Options 23,525 — Total stock-based compensation $ 3,836,518 $ 1,657,680 |
Schedule of unrecognized stock-based compensation | Unrecognized Stock Based Compensations Related to Outstanding Awards Remaining Weighted-Average Amortization Period (in years) Restricted Stock Units $ 5,300,737 0.8 Options 149,272 1.2 Total Unrecognized stock-based Compensation $ 5,450,009 0.8 |
Schedule of restricted stock unit activity | Number of RSUs Weighted -Average Grant Date Fair Value Outstanding at December 31, 2017 35,800 $ 82.82 Granted 51,414 116.63 Vested (9,950 ) 81.20 Forfeited (1,875 ) 124.05 Outstanding at December 31, 2018 75,389 104.63 Granted 80,050 60.81 Vested (9,000 ) 86.54 Forfeited (16,501 ) 61.45 Outstanding at December 31, 2019 129,938 $ 99.00 |
Schedule of stock option activity | Number of Options Weighted Average Exercise Price Weighted-Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at December 31, 2017 — n/a n/a Options Granted — n/a n/a Options exercised — n/a n/a Options forfeited or expires — n/a n/a Outstanding at December 31, 2018 — n/a n/a n/a Options Granted 5,608 $ 34.20 $ — Options exercised — n/a n/a Options forfeited or expires (521 ) 34.20 $ — Outstanding at December 31, 2019 5,087 $ 34.20 9.6 $ — Vested / exercisable at December 31, 2019 — — n/a $ — Expected to vest as of December 31, 2019 3,944 $ 34.20 9.6 $ — |
Schedule of stock option assumptions | 2019 2018 Risk-free rate 1.5 % — % Expected volatility 85.0 % — % Expected life (in years) 5.75 — Expected dividend yield — — Weighted average grant date fair value per option $ 34.20 $ — |
COMMON STOCK WARRANTS (Tables)
COMMON STOCK WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of common stock warrants outstanding | 2019 2018 Warrants outstanding at the beginning of the year 16,051 10,913 New warrant issuances to Hercules — 5,138 Adjustment to the Hercules warrants due to the anti-dilutive provisions 479 — Warrants outstanding at the end of the year 16,530 16,051 |
Schedule of common stock warrants assumptions | Underwriter Warrants Hercules April Warrants Hercules October Warrants Warrants exercise price $ 126.50 $ 110.00 $ 143.20 Fair value price per share of common stock $ 110.00 $ 101.40 $ 114.60 Volatility 62.0 % 70.0 % 70.0 % Expected term remaining (years) 5.0 5.0 5.0 Risk-free interest rate 1.31 % 2.79 % 2.94 % Discount for Lack of Marketability 20.0 % 20.0 % 20.0 % Dividend yield — — — Fair value at initial valuation date $ 505,273 $ 208,369 $ 59,292 |
SELLING, GENERAL AND ADMINIST_2
SELLING, GENERAL AND ADMINISTRATIVE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
General and Administrative Expense [Abstract] | |
Schedule of selling, general and administrative expense | 2019 2018 Compensation and related costs $ 33,502,020 $ 10,656,107 Advertising and marketing 18,228,262 11,457,572 Professional fees 2,542,357 1,788,425 Technology development 2,408,338 1,152,108 General and administrative 29,943,272 10,909,718 $ 86,624,249 $ 35,963,930 |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule of supplemental cash flow information | 2019 2018 Cash paid for interest $ 4,888,070 $ 1,226,292 Convertible notes payable issued in acquisition $ 2,293,933 $ — Issuance of shares for acquisition $ — $ 6,652,512 |
Schedule of cash, cash equivalents, and restricted cash | December 31, 2019 2018 Cash and cash equivalents $ 49,660 $ 9,134,902 Restricted cash (1) 6,676,622 6,650,000 Total cash, cash equivalents, and restricted cash $ 6,726,282 $ 15,784,902 (1) Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | 2019 2018 Deferred tax assets: Net operating loss and interest limitation carryforward $ 18,025,898 $ 8,091,718 Stock-based compensation 1,287,424 564,700 Accounts receivable allowance 269,403 — Operating lease liabilities 1,599,651 — Goodwill 385,570 — Inventory reserve 151,815 — Property and equipment 191,259 — Total deferred income taxes 21,911,020 8,656,418 Deferred tax liabilities: Property and equipment — 15,045 Right-of-use assets 1,572,368 — Goodwill — 64,423 Debt discounts 28,818 464,324 Total deferred tax liabilities 1,601,186 543,792 Net deferred tax asset 20,309,834 8,112,626 Valuation allowance (20,309,834 ) (8,112,626 ) Net deferred taxes $ — $ — |
Schedule of reconciliation of U.S. federal income | 2019 2018 U.S. Federal statutory rate 21.0 % 21.0 % State and local, net of Federal benefit 5.0 % 5.1 % Permanent difference (1.1 )% (0.2 )% Valuation allowance (24.9 )% (25.9 )% Effective tax rate — % — % |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of weighted-average remaining lease term and discount rate for our operating leases | 2019 Weighted-average remaining lease term 4 Years Weighted-average discount rate 7.0 % |
Schedule of supplemental cash flow information related to operating leases | 2019 Cash payments for operating leases $ 1,019,027 New operating lease assets obtained in exchange for operating lease liabilities $ 6,040,287 |
Schedule of future minimum payments for operating leases | 2020 $ 1,805,899 2021 1,785,519 2022 1,920,543 2023 744,370 2024 310,200 thereafter 568,700 Total lease payments 7,135,231 Less imputed interest (989,520 ) Present value of lease liabilities $ 6,145,711 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of segment information | Powersports Automotive Vehicle Logistics and Transportation Eliminations (1) Total Year Ended December 31, 2019 Total assets $ 55,992,165 $ 77,033,326 $ 7,921,578 $ (27,553,978 ) $ 113,393,091 Revenue $ 101,008,976 $ 717,042,511 31,931,488 $ (9,353,628 ) $ 840,629,347 Operating income (loss) $ (34,402,724 ) $ (5,318,549 ) $ 1,928,574 $ — $ (37,792,699 ) Depreciation and amortization $ 1,543,023 $ 235,998 $ 7,405 $ — $ 1,786,426 Interest expense $ 4,453,549 $ 2,732,869 $ 1,186 $ — $ 7,187,604 Loss on early extinguishment of debt $ (1,499,250 ) $ — $ — $ — $ (1,499,250 ) Year Ended December 31, 2018 Total assets $ 55,825,600 $ 73,642,034 $ 5,555,397 $ (26,096,650 ) $ 108,926,381 Revenue $ 61,204,416 $ 91,369,996 $ 4,931,558 $ (1,107,739 ) $ 156,398,231 Operating income (loss) $ (22,546,622 ) $ (892,306 ) $ 37,796 $ — $ (23,401,132 ) Depreciation and amortization $ 958,282 $ 24,490 $ 1,234 $ — $ 984,006 Interest expense $ 1,267,379 $ 513,306 $ — $ — $ 1,780,685 (1) Intercompany investment balances related to the acquisitions of Wholesale, Inc. and Wholesale Express, and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Consolidated Statements of Operations. |
DESCRIPTION OF BUSINESS AND S_3
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Decrease in goodwill | $ (334,861) | |
Goodwill impairment | 1,850,000 | $ 0 |
Allowance for doubtful accounts | 1,034,919 | 176,190 |
Advertising and marketing expense | $ 18,228,262 | $ 11,457,572 |
RSUs granted | 80,050 | 51,414 |
Stock based compensation expense | $ 3,836,518 | $ 1,657,680 |
Unrecognized stock-based compensation expense | $ 5,450,009 | |
Unrecognized stock-based compensation expense remaining weighted-average period | 9 months 18 days | |
Finance receivables | $ 147,893 | $ 148,378 |
ACCOUNTS RECEIVABLE, NET (Detai
ACCOUNTS RECEIVABLE, NET (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Accounts receivable, gross | $ 9,517,626 | $ 8,642,000 |
Less: allowance for doubtful accounts | 1,034,919 | 176,190 |
Accounts receivable, net | 8,482,707 | 8,465,810 |
Trade | ||
Accounts receivable, gross | 9,369,733 | 8,264,045 |
Finance | ||
Accounts receivable, gross | 147,893 | 148,378 |
Other | ||
Accounts receivable, gross | $ 0 | $ 229,577 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory, gross | $ 57,964,483 | $ 52,864,229 |
Less: valuation allowance | 583,202 | 672,706 |
Inventory, net | 57,381,281 | 52,191,523 |
Powersport Vehicles | ||
Inventory, gross | 10,365,050 | 9,783,093 |
Automobiles and Trucks | ||
Inventory, gross | $ 47,599,433 | $ 43,081,136 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | $ 26,886,563 | $ 26,107,146 | $ 1,850,000 |
Autosport | |||
Cash | 835,000 | ||
$1,536,000 convertible note | 1,536,000 | ||
$500,000 promissory note | 500,000 | ||
$257,933 Promissory note | 257,933 | ||
Total purchase price | 3,128,933 | ||
Accounts receivable | 3,177,660 | ||
Inventory | 2,862,004 | ||
Estimated fair value of assets | 6,039,664 | ||
Estimated fair value of accounts payable and other | 5,875,009 | ||
Excess of assets over liabilities | 164,655 | ||
Goodwill | 2,964,278 | ||
Total | $ 3,128,933 |
ACQUISITIONS (Details 1)
ACQUISITIONS (Details 1) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | $ 26,886,563 | $ 26,107,146 | $ 1,850,000 |
Wholesale | |||
Issuance of shares | 6,652,512 | ||
Cash paid | 12,353,941 | ||
Total purchase price | 19,006,453 | ||
Cash | 183,846 | ||
Accounts receivable | 5,130,788 | ||
Inventory | 47,639,354 | ||
Prepaid expenses | 186,659 | ||
Property & equipment | 617,422 | ||
Due from related party | 0 | ||
Other Assets | 1,026,203 | ||
Estimated fair value of assets | 54,784,272 | ||
Accounts payable and other | 8,144,040 | ||
Floor plan liability | 49,988,553 | ||
Due to related party | 720,000 | ||
Estimated fair value of liabilities assumed | 58,852,593 | ||
Excess of (liabilities over assets) assets over liabilities | (4,068,321) | ||
Goodwill | 23,074,774 | ||
Total | 19,006,453 | ||
Express | |||
Issuance of shares | 0 | ||
Cash paid | 4,000,000 | ||
Total purchase price | 4,000,000 | ||
Cash | 774,844 | ||
Accounts receivable | 2,663,077 | ||
Inventory | 0 | ||
Prepaid expenses | 59,377 | ||
Property & equipment | 14,702 | ||
Due from related party | 720,000 | ||
Other Assets | 0 | ||
Estimated fair value of assets | 4,232,000 | ||
Accounts payable and other | 1,079,509 | ||
Floor plan liability | 0 | ||
Due to related party | 0 | ||
Estimated fair value of liabilities assumed | 1,079,509 | ||
Excess of (liabilities over assets) assets over liabilities | 3,152,491 | ||
Goodwill | 847,509 | ||
Total | $ 4,000,000 |
ACQUISITIONS (Details 2)
ACQUISITIONS (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Business Combinations [Abstract] | ||
Pro forma revenue | $ 846,947,956 | $ 788,428,970 |
Pro forma net loss | $ (45,296,568) | $ (24,062,816) |
Loss per share - basic | $ (40.37) | $ (24.42) |
Loss per share - fully diluted | $ (40.37) | $ (24.42) |
Weighted average common shares and common stock equivalents | 1,122,058 | 985,332 |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 9,715,783 | $ 6,806,102 |
Less: accumulated depreciation and amortization | 3,288,109 | 1,628,225 |
Property and equipment, net | 6,427,674 | 5,177,877 |
Vehicles | ||
Property and equipment, gross | 158,327 | 417,666 |
Furniture and Equipment | ||
Property and equipment, gross | 448,074 | 474,546 |
Technology Development and Software | ||
Property and equipment, gross | 8,863,247 | 5,777,504 |
Leasehold improvements | ||
Property and equipment, gross | $ 246,135 | $ 136,386 |
PROPERTY AND EQUIPMENT, NET (_2
PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment, Net [Abstract] | ||
Capitalized cost technology development costs | $ 8,655,236 | |
Technology development costs | 5,494,081 | $ 3,314,815 |
Technology development costs capitalized | 2,408,338 | 2,162,707 |
Depreciation expense | 1,786,426 | 984,006 |
Capitalized cost amortization | $ 1,436,088 | $ 825,782 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, beginning | $ 26,107,146 | $ 1,850,000 |
Acquisitions | 2,964,278 | 24,257,146 |
Impairment | (1,850,000) | 0 |
Measurement period adjustment | (334,861) | 0 |
Goodwill, ending | 26,886,563 | 26,107,146 |
Indefinite lived intangible assets, beginning | 45,515 | 45,515 |
Acquisitions | 0 | 0 |
Impairment | 0 | 0 |
Measurement period adjustment | 0 | 0 |
Indefinite lived intangible assets, ending | $ 45,515 | $ 45,515 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill, beginning | $ 26,107,146 | $ 1,850,000 |
Acquisitions | 2,964,278 | 24,257,146 |
Impairment | (1,850,000) | 0 |
Measurement period adjustment | (334,861) | 0 |
Goodwill, ending | 26,886,563 | 26,107,146 |
Powersports | ||
Goodwill, beginning | 1,850,000 | |
Acquisitions | 0 | |
Impairment | (1,850,000) | |
Measurement period adjustment | 0 | |
Goodwill, ending | 0 | 1,850,000 |
Automotive | ||
Goodwill, beginning | 23,074,775 | |
Acquisitions | 2,964,278 | |
Impairment | 0 | |
Measurement period adjustment | 0 | |
Goodwill, ending | 26,039,053 | 23,074,775 |
Vehicle Logistics | ||
Goodwill, beginning | 1,182,371 | |
Acquisitions | 0 | |
Impairment | 0 | |
Measurement period adjustment | (334,861) | |
Goodwill, ending | $ 847,510 | $ 1,182,371 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Measurement period adjustment | $ (334,861) | $ 0 |
Goodwill impairment | $ (1,850,000) | $ 0 |
ACCOUNTS PAYABLE AND OTHER AC_3
ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 8,730,624 | $ 7,528,003 |
Operating lease liability-current portion | 1,423,610 | 0 |
Accrued payroll | 715,658 | 877,180 |
State and local taxes | 912,062 | 1,073,649 |
Other accrued expenses | 639,140 | 1,076,081 |
Total accounts payable and accrued liabilities | $ 12,421,094 | $ 10,554,913 |
NOTES PAYABLE AND LINES OF CR_3
NOTES PAYABLE AND LINES OF CREDIT (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Less: debt discount | $ (75,601) | $ (1,882,410) |
Notes payable, net | 61,085,703 | 67,347,925 |
Current portion | 59,160,970 | 58,555,006 |
Long-term portion | 1,924,733 | 8,792,919 |
Notes Payable 1 | ||
Notes payable, gross | 1,333,334 | 1,333,334 |
Notes Payable 2 | ||
Notes payable, gross | 667,000 | 667,000 |
Notes Payable 3 | ||
Notes payable, gross | 8,419,897 | 8,866,894 |
Notes Payable 4 | ||
Notes payable, gross | 0 | 10,857,500 |
Notes Payable 5 | ||
Notes payable, gross | $ 50,741,073 | $ 47,505,607 |
NOTES PAYABLE AND LINES OF CR_4
NOTES PAYABLE AND LINES OF CREDIT (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Debt discount | $ 75,601 | $ 1,882,410 |
Carrying amount, current | (1,363,590) | 0 |
Carrying amount, noncurrent | 20,136,229 | $ 0 |
Convertible Note 1 | ||
Face amount | 30,000,000 | |
Debt discount | 10,402,024 | |
Carrying amount | 19,597,976 | |
Convertible Note 2 | ||
Face amount | 1,536,000 | |
Debt discount | 379,616 | |
Carrying amount | 1,156,384 | |
Convertible Note 3 | ||
Face amount | 500,000 | |
Debt discount | 6,092 | |
Carrying amount | 493,908 | |
Convertible Note 4 | ||
Face amount | 257,933 | |
Debt discount | 6,382 | |
Carrying amount | 251,551 | |
Total Convertible Notes | ||
Face amount | 32,293,933 | |
Face amount, current | (1,461,933) | |
Face amount, noncurrent | 30,832,000 | |
Debt discount | 10,794,114 | |
Debt discount, current | (98,343) | |
Debt discount, noncurrent | 10,695,771 | |
Carrying amount | 21,499,819 | |
Carrying amount, current | (1,363,590) | |
Carrying amount, noncurrent | $ 20,136,229 |
NOTES PAYABLE AND LINES OF CR_5
NOTES PAYABLE AND LINES OF CREDIT (Details 2) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Debt Disclosure [Abstract] | |
Contractual interest expense | $ 1,305,000 |
Amortization of debt discounts | 1,218,064 |
Total | $ 2,523,064 |
NOTES PAYABLE AND LINES OF CR_6
NOTES PAYABLE AND LINES OF CREDIT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Interest expense | $ 7,187,604 | $ 1,780,685 |
Loss on early extinguishment of debt | (1,499,250) | 0 |
Debt discount amortization | 144,409 | 114,404 |
Decrease in derivative liability | 1,302,500 | 0 |
Derivative liabilities | 27,500 | 0 |
Transactions costs attributable to the derivative liability | 118,038 | |
Line of Credit - NextGear | ||
Interest expense | 2,697,591 | 513,306 |
Line of Credit - Ally | ||
Interest expense | 541,702 | 147,256 |
Loan Agreement - Hercules Capital Inc. | ||
Loss on early extinguishment of debt | (1,499,250) | 0 |
Note Payable - NextGen | ||
Interest expense | 110,484 | 87,617 |
Notes Payable - Private Placement | ||
Interest expense | 316,091 | 259,177 |
Debt discount amortization | $ 70,565 | $ 205,926 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Restricted stock units | $ 3,812,993 | $ 1,657,680 |
Options | 23,525 | 0 |
Total stock-based compensation | $ 3,836,518 | $ 1,657,680 |
STOCKHOLDERS' EQUITY (Details 1
STOCKHOLDERS' EQUITY (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Unrecognized stock based compensation related to outstanding awards | $ 5,450,009 |
Remaining weighted-average amortization period | 9 months 18 days |
Restricted Stock Units | |
Unrecognized stock based compensation related to outstanding awards | $ 5,300,737 |
Remaining weighted-average amortization period | 9 months 18 days |
Options | |
Unrecognized stock based compensation related to outstanding awards | $ 149,272 |
Remaining weighted-average amortization period | 1 year 2 months 12 days |
STOCKHOLDERS' EQUITY (Details 2
STOCKHOLDERS' EQUITY (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Restricted stock units outstanding, beginning | 75,389 | 35,800 |
Granted | 80,050 | 51,414 |
Vested | (9,000) | (9,950) |
Forfeited | (16,501) | (1,875) |
Restricted stock units outstanding, ending | 129,938 | 75,389 |
Weighted-average grant date fair value outstanding, beginning | $ 104.63 | $ 82.82 |
Granted | 60.81 | 116.63 |
Vested | 86.54 | 81.20 |
Forfeited | 61.45 | 124.05 |
Weighted-average grant date fair value outstanding, ending | $ 99 | $ 104.63 |
STOCKHOLDERS' EQUITY (Details 3
STOCKHOLDERS' EQUITY (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Stock options outstanding, beginning | 0 | 0 |
Granted | 5,608 | 0 |
Exercised | 0 | 0 |
Forfeited or expired | (521) | 0 |
Stock options outstanding, ending | 5,087 | 0 |
Stock options vested/exercisable | 0 | |
Stock options expected to vest | 3,944 | |
Weighted average exercise price outstanding, beginning | $ .00 | $ .00 |
Granted | 34.20 | .00 |
Exercised | .00 | .00 |
Forfeited or expired | 34.20 | .00 |
Weighted average exercise price outstanding, ending | 34.20 | $ .00 |
Weighted average exercise price vested/exercisable | .00 | |
Weighted average exercise price expected to vest | $ 34.20 | |
Weighted-average remaining contractual life outstanding | 9 years 7 months 6 days | 0 years |
Weighted-average remaining contractual life vested/exercisable | 0 years | |
Weighted-average remaining contractual life expected to vest | 9 years 7 months 6 days | |
Aggregate intrinsic value outstanding | $ 0 | $ 0 |
Aggregate intrinsic value vested/exercisable | 0 | |
Aggregate intrinsic value expected to vest | $ 0 |
STOCKHOLDERS' EQUITY (Details 4
STOCKHOLDERS' EQUITY (Details 4) - Options - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Risk-free rate | 1.50% | 0.00% |
Expected volatility | 85.00% | 0.00% |
Expected life | 5 years 9 months | 0 years |
Expected dividend yield | 0.00% | 0.00% |
Weighted average grant date fair value per option | $ 34.20 | $ .00 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Stock based compensation expense | $ 3,836,518 | $ 1,657,680 |
COMMON STOCK WARRANTS (Details)
COMMON STOCK WARRANTS (Details) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Warrants and Rights Note Disclosure [Abstract] | ||
Warrants outstanding, beginning | 16,051 | 10,913 |
New warrant issuances to Hercules | 0 | 5,138 |
Adjustment to the Hercules warrants due to the anti-dilutive provisions | 479 | 0 |
Warrants outstanding, ending | 16,530 | 16,051 |
COMMON STOCK WARRANTS (Details
COMMON STOCK WARRANTS (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($)$ / shares | |
Underwriter Warrants | |
Warrants exercise price | $ 126.50 |
Fair value price per share of common stock | $ 110 |
Volatility | 62.00% |
Expected term remaining | 5 years |
Risk-free interest rate | 1.31% |
Discount for lack of marketability | 20.00% |
Dividend yield | 0.00% |
Fair value at initial valuation date | $ | $ 505,273 |
Hercules April Warrants | |
Warrants exercise price | $ 110 |
Fair value price per share of common stock | $ 101.40 |
Volatility | 70.00% |
Expected term remaining | 5 years |
Risk-free interest rate | 2.79% |
Discount for lack of marketability | 20.00% |
Dividend yield | 0.00% |
Fair value at initial valuation date | $ | $ 208,369 |
Hercules October Warrants | |
Warrants exercise price | $ 143.20 |
Fair value price per share of common stock | $ 114.60 |
Volatility | 70.00% |
Expected term remaining | 5 years |
Risk-free interest rate | 2.94% |
Discount for lack of marketability | 20.00% |
Dividend yield | 0.00% |
Fair value at initial valuation date | $ | $ 59,292 |
SELLING, GENERAL AND ADMINIST_3
SELLING, GENERAL AND ADMINISTRATIVE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
General and Administrative Expense [Abstract] | ||
Compensation and related costs | $ 33,502,020 | $ 10,656,107 |
Advertising and marketing | 18,228,262 | 11,457,572 |
Professional fees | 2,542,357 | 1,788,425 |
Technology development | 2,408,338 | 1,152,108 |
General and administrative | 29,943,272 | 10,909,718 |
Total | $ 86,624,249 | $ 35,963,930 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Cash Flow Information [Abstract] | ||
Cash paid for interest | $ 4,888,070 | $ 1,226,292 |
Convertible notes payable issued in acquisition | 2,293,933 | 0 |
Issuance of shares for acquisition | $ 0 | $ 6,652,512 |
SUPPLEMENTAL CASH FLOW INFORM_4
SUPPLEMENTAL CASH FLOW INFORMATION (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Supplemental Cash Flow Information [Abstract] | ||||
Cash and cash equivalents | $ 49,660 | $ 9,134,902 | ||
Restricted cash | [1] | 6,676,622 | 6,650,000 | |
Total cash, cash equivalents, and restricted cash | $ 6,726,282 | $ 15,784,902 | $ 9,170,652 | |
[1] | Amounts included in restricted cash represent the deposits required under the Company's short-term revolving facilities. |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Net operating loss and interest limitation carryforward | $ 18,025,898 | $ 8,091,718 |
Stock-based compensation | 1,287,424 | 564,700 |
Accounts receivable allowance | 269,403 | 0 |
Operating lease liabilities | 1,599,651 | 0 |
Goodwill | 385,570 | 0 |
Inventory reserve | 151,815 | 0 |
Property and equipment | 191,259 | 0 |
Total deferred income taxes | 21,911,020 | 8,656,418 |
Deferred tax liabilities: | ||
Property and equipment | 0 | 15,045 |
Right-of-use assets | 1,572,368 | 0 |
Goodwill | 0 | 64,423 |
Debt discounts | 28,818 | 464,324 |
Total deferred tax liabilities | 1,601,186 | 543,792 |
Net deferred tax asset | 20,309,834 | 8,112,626 |
Valuation allowance | (20,309,834) | (8,112,626) |
Net deferred taxed | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
U.S. Federal statutory rate | 21.00% | 21.00% |
State and local, net of Federal benefit | 5.00% | 5.10% |
Permanent difference | (1.10%) | (0.20%) |
Valuation allowance | (24.90%) | (25.90%) |
Effective tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Operating loss carryforwards | $ 66,717,013 | $ 30,961,231 |
Valuation allowance on the deferred tax assets | $ 20,309,834 | $ 8,112,626 |
LOSS PER SHARE (Details Narrati
LOSS PER SHARE (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Class B preferred stock, outstanding | 0 | 1,317,329 |
Class A Common Stock | ||
Common stock, outstanding | 50,000 | 50,000 |
Class B Common Stock | ||
Common stock, outstanding | 1,111,681 | 874,315 |
Restricted Stock Units | ||
Antidilutive shares excluded from computation | 129,938 | |
Options | ||
Antidilutive shares excluded from computation | 5,087 | |
Warrants | ||
Antidilutive shares excluded from computation | 16,530 | |
Class B Common Stock | ||
Antidilutive shares excluded from computation | 279,182 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Revenue generated | $ 619,193 | |
Cost of revenue | 549,813 | |
Accounts receivable | 40,176 | |
Rent paid for sublease | 90,000 | |
Services agreement | 54,159 | |
Promissory notes | $ 370,556 | 370,556 |
Accrued interest | 23,731 | 7,939 |
Interest expense | 183,286 | 143,987 |
Debt discount amortization | $ 144,409 | $ 114,404 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2019 |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted-average remaining lease term | 4 years |
Weighted-average discount rate | 7.00% |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Cash payments for operating leases | $ 1,019,027 |
New operating lease assets obtained in exchange for operating lease liabilities | $ 6,040,287 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details 2) | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 1,805,899 |
2021 | 1,785,519 |
2022 | 1,920,543 |
2023 | 744,370 |
2024 | 310,200 |
Thereafter | 568,700 |
Total lease payments | 7,135,231 |
Less imputed interest | (989,520) |
Present value of lease liabilities | $ 6,145,711 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease expenses | $ 1,661,649 | $ 414,238 |
Operating lease liabilities, current | 1,423,610 | 0 |
Operating lease liabilities, noncurrent | $ 4,722,101 | $ 0 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | ||
Total assets | $ 113,393,091 | $ 108,926,381 | |
Revenue | 840,629,347 | 156,398,231 | |
Operating income (loss) | (37,792,699) | (23,401,132) | |
Depreciation and amortization | 1,786,426 | 984,006 | |
Interest expense | 7,187,604 | 1,780,685 | |
Loss on early extinguishment of debt | (1,499,250) | 0 | |
Powersports | |||
Total assets | 55,992,165 | 55,825,600 | |
Revenue | 101,008,976 | 61,204,416 | |
Operating income (loss) | (34,402,724) | (22,546,622) | |
Depreciation and amortization | 1,543,023 | 958,282 | |
Interest expense | 4,453,549 | 1,267,379 | |
Loss on early extinguishment of debt | (1,499,250) | 0 | |
Automotive | |||
Total assets | 77,033,326 | 73,642,034 | |
Revenue | 717,042,511 | 91,369,996 | |
Operating income (loss) | (5,318,549) | (892,306) | |
Depreciation and amortization | 235,998 | 24,490 | |
Interest expense | 2,732,869 | 513,306 | |
Loss on early extinguishment of debt | 0 | 0 | |
Vehicle Logistics and Transportation | |||
Total assets | 7,921,578 | 5,555,397 | |
Revenue | 31,931,488 | 4,931,558 | |
Operating income (loss) | 1,928,574 | 37,796 | |
Depreciation and amortization | 7,405 | 1,234 | |
Interest expense | 1,186 | 0 | |
Loss on early extinguishment of debt | 0 | 0 | |
Eliminations | |||
Total assets | [1] | (27,553,978) | (26,096,650) |
Revenue | [1] | (9,353,628) | (1,107,739) |
Operating income (loss) | [1] | 0 | 0 |
Depreciation and amortization | [1] | 0 | 0 |
Interest expense | [1] | 0 | 0 |
Loss on early extinguishment of debt | [1] | $ 0 | $ 0 |
[1] | Intercompany investment balances related to the acquisitions of Wholesale, Inc. and Wholesale Express, and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Consolidated Statements of Operations. |