UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K



☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934



For the fiscal year ended: December 31, 2022



☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from ____________ to
_____________



Commission File No. 001-39418



|Polished.com
    Inc.                                          
|---------------------------------------------------------------
|(Exact name of registrant as specified in its charter)         
|Delaware                                                       
|(State or other jurisdiction of
 incorporation or organization)
|                                                               
|1870
Bath Avenue, Brooklyn, NY                                 
|(Address of principal executive offices)                       
|                                                               
|800-299-9470                                                   
|(Registrant’s telephone number, including area code)           



Securities registered pursuant to Section 12(b)
of the Act:



|Title
of each class                       |  | Trading
Symbol(s) |  | Name
of each exchange on which registered
|----------------------------------------- |  | ----------------- |  | -----------------------------------------
|Common Stock, par value $0.0001 per share |  | POL               |  | NYSE American LLC                        
|Warrants to Purchase Common Stock         |  | POL WS            |  | NYSE American LLC                        



Securities registered pursuant to Section 12(g)
of the Act: None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒



Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☐ No ☒



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



|Large accelerated
    filer ☐ | Accelerated
    filer ☐        
|----------------------------- | -------------------------------
|Non-accelerated filer
    ☒   | Smaller
    reporting company ☒
|                              | Emerging
    growth company ☒  



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐



If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐



Indicate by check mark whether
any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒



The
aggregate market value of the common stock held by non-affiliates of the registrant was approximately $47.3 million computed by
reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2022, the last trading day of the
registrant’s most recently completed second fiscal quarter.



As of July 26, 2023, there were a total of 105,386,867 shares of the
registrant’s common stock issued and outstanding.






















Polished.com
    Inc.



Annual Report on Form 10-K
Year Ended December 31, 2022



TABLE OF CONTENTS



|PART I  
|--------
|ITEM 1. 
|ITEM 1A.
|ITEM 1B.
|ITEM 2. 
|ITEM 3. 
|ITEM 4. 
|PART II 
|ITEM 5. 
|ITEM 6. 
|ITEM 7. 
|ITEM 7A.
|ITEM 8. 
|ITEM 9. 
|ITEM 9A.
|ITEM 9B.
|ITEM 9C.
|PART III
|ITEM 10.
|ITEM 11.
|ITEM 12.
|ITEM 13.
|ITEM 14.
|PART IV 
|ITEM 15.
|ITEM 16.





i







EXPLANATORY NOTE



Polished.com Inc. (the “Company”) is filing this comprehensive
annual report on Form 10-K for the fiscal years ended December 31, 2022 and 2021 and the quarterly periods ended March 31, 2022, June
30, 2022, September 30, 2022 and March 31, 2023 (the “Comprehensive Form 10-K”) as part of its efforts to become current in
its filing obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although we have regularly
made filings through current reports on Form 8-K when deemed appropriate, this Comprehensive Form 10-K is our first periodic filing with
the Securities and Exchange Commission (the “SEC”) since the filing of our quarterly report on Form 10-Q for the quarter ended
March 31, 2022 as a result of the matters related to investigation described in this Annual Report under the heading “Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operation – Investigation”. As a result
of the foregoing, our former auditor withdrew its previously issued audit opinion on our December 31, 2021 consolidated financial statements,
issued on March 31, 2022, and declined to be associated with the quarterly financial statements for the periods ended June 30, 2021, September
30, 2021, and March 31, 2022, filed on August 8, 2021, November 16, 2021 and May 12, 2022, respectively. Included in this Comprehensive
Form 10-K are our audited financial statements for the fiscal year ended December 31, 2022, and our select, unaudited quarterly financial
information for the periods ended June 30, 2022, September 30, 2022 and March 31, 2023, in each case which have not been previously filed
with the SEC.





In addition, the Comprehensive Form 10-K also
restates the Company’s previously issued consolidated financial statements as of and for the fiscal year ended December 31, 2021
(see Note 2, “Summary of Significant Accounting Policies – Restatement,” in “Item 8 Financial Statements
and Supplementary Data”, for additional information), which have been re-audited by our new independent registered public accounting
firm, Sadler, Gibb & Associates, LLC. See Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure. The relevant unaudited interim financial information for the period ended March 31, 2022 has also
been restated. See Note 2, “Summary of Significant Accounting Policies – Restatement,” in “Item 8 Financial
Statements and Supplementary Data”, for such restated information.



The impact of the restatement is discussed in detail in this Annual
Report under the headings “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation –
Investigation.”



Control Considerations



Management has determined that the Company’s
ineffective internal control over financial reporting and resulting material weaknesses were attributed to: the Company’s lack of
structure and responsibility, insufficient number of qualified resources and inadequate oversight and accountability over the performance
of controls; ineffective assessment and identification of changes in risk impacting internal control over financial reporting; inadequate
selection and development of effective control activities, general controls over technology and effective policies and procedures; ineffective
evaluation and determination as to whether the components of internal control were present and functioning; and the lack of an accounting
system that is required for a company or our size. See Item 9A, Controls and Procedures, for additional information related to these material
weaknesses in internal control over financial reporting and the related remedial measures.





INTRODUCTORY NOTES



Use of Terms



Except as otherwise indicated by the context and
for the purposes of this Annual Report on Form 10-K, the terms “Company,” “we,” “us,” or “our”
refer to Polished.com Inc., a Delaware corporation, and its consolidated subsidiaries, including but not limited to, 1 Stop Electronics
Center, Inc., a New York corporation (“1 Stop”), Gold Coast Appliances, Inc., a New York corporation (“Gold Coast”),
Superior Deals Inc., a New York corporation (“Superior Deals”), Joe’s Appliances LLC, a New York limited liability company
(“Joe’s Appliances”), and YF Logistics LLC, a New Jersey limited liability company (“YF Logistics” and together
with 1 Stop, Gold Coast, Superior Deals, and Joe’s Appliances, “Appliances Connection”), and AC Gallery Inc., a Delaware
corporation (“AC Gallery”).



Cautionary Statement Regarding Forward-Looking
Statements



This report contains forward-looking statements
that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than
statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance
and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. Forward-looking statements include, but
are not limited to, statements about:



| | ● | delinquency in connection with the filing of our
    ongoing SEC reports and the risk that the SEC will initiate an administrative proceeding to suspend or revoke the registration of our
    common stock under the Exchange Act due to our previous failure to file such reports or of the NYSE American to delist our stock from
    the exchange;                                                                                                                                    
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ● | cybersecurity or data security breaches such as
    the hacking attack we disclosed in May 2023, the improper disclosure of confidential, personal or proprietary data and changes to laws
    and regulations governing cybersecurity and data privacy, including any related costs, fines or lawsuits, and our ability to continue
    ongoing operations and safeguard the integrity of our information technology infrastructure, data, and employee, customer and vendor information;



| | ● | our
                                            ability to acquire new customers and sustain and/or manage our growth;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | ● | the
                                            effect of supply chain delays and disruptions on our operations and financial condition;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| | ● | our
                                            goals and strategies;
| | - | ---------------------------------------------------------------------







ii







| | ● | the
                                            identification of material weaknesses in our internal control over financial reporting and
                                            disclosure controls and procedures that, if not corrected, could affect the reliability of
                                            our consolidated financial statements and have other adverse consequences such as a failure
                                            to meet reporting obligations;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | our
                                            future business development, financial condition and results of operations;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | ● | expected
                                            changes in our revenue, costs or expenditures;
| | - | ---------------------------------------------------------------------------------------------------



| | ● | growth
                                            of and competition trends in our industry;
| | - | ---------------------------------------------------------------------------------------------



| | ● | our
                                            expectations regarding demand for, and market acceptance of, our products;
| | - | --------------------------------------------------------------------------------------------------------------------------







| | ● | our
                                            expectations regarding our relationships with investors, institutional funding partners and
                                            other parties we collaborate with;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | fluctuations
                                            in general economic and business conditions in the markets in which we operate; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | ● | relevant
                                            government policies and regulations relating to our industry.
| | - | ------------------------------------------------------------------------------------------------------------------



In
some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,”
“should,” “would,” “expect,” “plan,” “intend,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “project” or “continue”
or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance
on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current
expectations include, among other things, those listed under Item 1A “Risk Factors” and elsewhere in this report.
If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results
may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee
of future performance.



The forward-looking statements made in this report
relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the
federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason.





Risk Factors Summary



We are subject to a variety of risks and uncertainties
that could adversely affect our business, financial condition and operating results. These risks are discussed in more detail under “Risk
Factors” in Item 1A of this report, but are not limited to, risks related to:



Risks Related to Our Business and Industry



| | ● | Prior to the filing of this annual report on Form
    10-K, we have been delinquent in our SEC reporting obligations for over 12 months. Although we expect to file our periodic reports in
    a timely fashion going forward, we cannot provide assurance that our business and the price of our common stock will not be materially
    adversely affected by our previous failure to file required periodic reports.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ● | The Investigation and subsequent restatement of our financial statements
has consumed a significant amount of our time and resources and may lead to, among other things, shareholder litigation, loss of investor
confidence, negative impacts on our stock price, a material adverse effect on our reputation, business and stock price and certain other
risks.                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ● | Macroeconomic trends including inflation and rising
    interest rates may adversely affect our financial condition and results of operations.                                                                                                                                                                                                                                                                          



| | ● | Our continued revenue growth will depend upon, among other
factors, our ability to acquire more customers, build our brands and launch new brands, introduce new products or offerings and
improve existing products, and successfully compete in the products and services retail industry, especially in the e-commerce sector.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our business model and growth strategy depend on our marketing
efforts and ability to maintain our brand and attract customers to our platform in a cost-effective manner, including our ability to
develop new features to enhance the consumer experience on our websites, mobile-optimized websites and mobile applications, which we
collectively refer to as our “sites.”
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We may be unsuccessful in launching or marketing new products
or services, or launching existing products and services into new markets, or may be unable to successfully integrate new offerings into
our existing platform, which would result in significant expense and could adversely affect our results.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We have experienced rapid growth since inception, which may
not be indicative of future growth, and, if we continue to grow rapidly, we may experience difficulties in managing our growth and expanding
our operations and service offerings.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







iii







| | ● | We depend on our relationships with third parties, and changes
in our relationships with these parties could adversely affect our revenues and profits. We may be unable to expand our relationships
with existing suppliers or source new or additional suppliers, negotiate acceptable pricing and other terms with third-party service
providers, suppliers and outsourcing partners and maintain our relationships with such entities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our suppliers have imposed conditions in our business arrangements
with them. If we are unable to continue satisfying these conditions, or such suppliers impose additional restrictions with which we cannot
comply, it could have a material adverse effect on our business.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We may be unable to optimize, operate and manage the expansion of the capacity of our fulfillment
                                                                                       centers, and our plans to expand capacity and develop new facilities may be adversely affected by global events.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | ● | Our business is dependent upon our ability to acquire, accurately
value and manage inventory.
| | - | ---------------------------------------------------------------------------------------------



| | ● | If we fail to maintain adequate cybersecurity with respect
to our systems and ensure that our third-party service providers do the same with respect to their systems, our business may be harmed.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | ● | Our internal information technology systems may fail or suffer
security breaches, loss or leakage of data, and other disruptions, which could disrupt our business or result in the loss of critical
and confidential information.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our limited operating history makes it difficult to evaluate
our current business and future prospects and the risk of your investment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | ● | Certain of our directors and officers could be in a position
of conflict of interest.
| | - | -------------------------------------------------------------------------------------



| | ● | We have identified a material weakness in our internal control
over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system
of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting
obligations or fail to prevent fraud, which would harm our business and could negatively impact the price of our common stock.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our business, financial condition and results
    of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia
    and Ukraine.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                              
| | ● | The ongoing global COVID-19 pandemic and any future pandemics or other public health emergencies, could materially affect our operations, liquidity, financial condition and operating results.              



Risks Related
to Our Indebtedness and Liquidity



| | ● | If we require additional financing to fuel our continued
business growth, this additional financing may not be available on reasonable terms or at all.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our current debt and our ability to increase future leverage
could limit our operating flexibility and ability to grow, and adversely affect our financial condition and cash flows.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Risks Related to Laws and Regulations



| | ● | Government regulation of the internet and e-commerce is evolving,
and unfavorable changes or failure by us to comply with existing or future regulations in a cost-efficient manner could substantially
harm our business and results of operations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Failure to comply with applicable laws and regulations relating
to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating
to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We may be subject to product liability and other similar
claims if people or property are harmed by the products we sell. The market price, trading volume and marketability of our common stock
may, from time to time, be significantly affected by numerous factors beyond our control, which may materially adversely affect the market
price of our common stock, the marketability of our common stock and our ability to raise capital through future equity financings.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Risks Related to Ownership of Our Common
Stock



| | ● | We
                                            have a limited number of shares of common stock available for issuance, which may limit our
                                            ability to raise capital.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We have not paid in the past and do not expect to declare
or pay dividends in the foreseeable future.
| | - | -----------------------------------------------------------------------------------------------------



| | ● | For as long as we are an “emerging growth company,”
or a “smaller reporting company” we will not be required to comply with certain reporting requirements that apply to some
other public companies, and such reduced disclosures requirement may make our common stock less attractive.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We may not be able to maintain a listing of our common stock and warrants on NYSE American.
| | - | -------------------------------------------------------------------------------------------





iv







PART
I



ITEM 1. BUSINESS.



Overview



Our Company is a content-driven
and technology-enabled shopping destination for appliances, furniture and home goods.



Our goal is to give
customers a wide array of choices and a premium experience through detail on the best brands, volume purchasing, and rebates with
manufacturer discounts, supported by human customer service agents.



Corporate History and Structure



Our Company was incorporated in the State of
Delaware on January 10, 2019, to form an acquisition platform. In April 2019, we acquired substantially all of the assets of
Goedeker Television, a brick and mortar operation with an online presence serving the St. Louis metro area. Since that acquisition,
we have grown into a nationwide omnichannel retailer. Through our June 2021 acquisition of Appliances Connection, we have evolved
into a growth-oriented e-commerce platform, offering an expansive selection of household appliances throughout the United States. In
July 2021, we added to our platform by acquiring Appliances Gallery. On July 20, 2022, we changed our corporate name from 1847
Goedeker Inc. to Polished.com Inc. With warehouse fulfillment centers in the Northeast and Midwest, as well as showrooms in
Brooklyn, New York, Largo, Florida and St. Louis, Missouri, we offer one-stop shopping for national and global brands. We carry many
household name-brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and many major luxury appliance brands
such as Miele, Thermador, La Cornue, Dacor, Ilve, Jenn-Air and Viking, among others. We also sell furniture, fitness equipment,
plumbing fixtures, televisions, outdoor appliances, and patio furniture, as well as commercial appliances for builder and business
clients.



Key Acquisitions



Acquisition of Goedeker Television



On April 5, 2019, we acquired substantially all
of the assets of Goedeker Television (the “Goedeker Television Acquisition”). As a result of this transaction, we acquired
the former business of Goedeker Television, which was founded in 1951, and continue to operate this business. Prior to the Goedeker Television
Acquisition, we had no operations other than operations relating to our incorporation and organization.



Acquisition of Appliances Connection



Appliances Connection was founded in 1998 and
is one of the leading retailers of household appliances. In addition to selling appliances, it also sells furniture, fitness equipment,
plumbing fixtures, televisions, outdoor appliances, and patio furniture, as well as commercial-grade appliances for builder and business
clients. It also provides appliance installation services and appliance removal services. Appliances Connection serves retail customers,
builders, architects, interior designers, restaurants, schools and other businesses. We completed the acquisition of Appliances Connection
on June 2, 2021, for an aggregate purchase price of $224.7 million, consisting of (i) $180.0 million in cash, (ii) 5,895,973 shares of
the Company’s common stock valued at $12.3 million, and (iii) $32.4 million as a result of the post-closing net working capital
adjustment provision (such acquisition, the “Appliances Connection Acquisition”). We recorded $0.9 million in acquisition-related expenses.



Acquisition of AC Gallery



On July 29, 2021, we acquired substantially all
of the assets of, and assumed substantially all of the liabilities of, Appliance Gallery, Inc., a retail appliance store in Largo, Florida
(“Appliance Gallery”), for a total purchase price of $1.4 million (such acquisition, the “Appliance Gallery Acquisition”).



Name Change



On July 20, 2022, we changed our corporate name from 1847
Goedeker Inc. to Polished.com Inc., pursuant to a Certificate of Amendment to the Amended and Restated Certificate of Incorporation
(the “Certificate of Amendment”) filed with the Delaware Secretary of State on July 20, 2022 (the “Name
Change”). Pursuant to Delaware law, a shareholder vote was not necessary to effectuate the Name Change and the Name Change
does not affect the rights of the Company’s stockholders. The only change in the Certificate of Amendment was the change of
the Company’s corporate name. We also amended and restated our Bylaws on July 20, 2022 to reflect the Name Change and to make
other minor cleanup and conforming changes thereto.



In connection with the Name Change, our common
stock and warrants to purchase common stock ceased trading under the ticker symbols “GOED” and “GOED WS,” respectively,
and began trading on the NYSE American under the new ticker symbols “POL” and “POL WS,” respectively.





1







Investigation



On August 15, 2022, the Company filed a Form 12b-25
with the Securities and Exchange Commission related to its 10-Q for the six months ended June 30, 2022 reporting that the Audit Committee
had begun an independent investigation regarding certain allegations made by certain former employees related to the Company’s business
operations.



On December 22, 2022, the Company issued a press release stating that
the Board had completed its assessment of the results of the Audit Committee’s previously disclosed investigation. The investigation,
which was supported by independent legal counsel and advisors, produced the following key findings pertaining to the Company’s business
operations under former management during the 2021-2022 period:





| | ● | The Company was charged by its former Chief Executive Officer approximately $800,000 for expenses unrelated to the Company and its operations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The Company appears to not have had in place all the necessary documentation for all of its employees and, in turn, may have failed to comply with certain legal requirements. The Company subsequently put in place enhanced controls to remedy any labor issues, including but not limited to hiring a controller with significant relevant experience, hiring a new human resources director who is leading an overhaul of certain employee policies and initiating the installation of enhanced payroll software that requires all new employees to provide I-9 information and verifies the validity of key information, and believes it is now in full compliance with legal requirements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The Company’s controls, software and procedures for managing and tracking inventory, including damaged inventory, were insufficient. The Company subsequently put in place enhanced controls to remedy such issues, including but not limited to initiating the installation of enhanced software and systems for inventory management, ensuring the implementation of standardized policies for the handling and sale of damaged inventory and developing a plan to convert the Company to a new ERP and system for accounting.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company entered into a settlement agreement
with Albert Fouerti, our former Chief Executive Officer, regarding matters relating to the investigation. Among other things, Mr. Fouerti
agreed not to compete for a period of two years following the execution of the settlement agreement.





Resignation of Auditors



On December 20, 2022, the Company received a letter (the “Letter”)
from the Company’s independent registered public accounting firm, Friedman LLP (“Friedman”), informing the Company of
its decision to resign effective December 20, 2022 as the auditors of the Company.



In the Letter, Friedman advised the Company that
based on the results of the Board’s internal investigation as reported to Friedman, it appeared there may be material adjustments
and/or disclosures necessary to previously reported financial information. Additionally, the Board’s internal investigation identified
facts, that if further investigated by Friedman, might cause Friedman to no longer to be able to rely on the representations of (i) management
that was in place at the time Friedman issued its audit report for the year ended December 31, 2021, or (ii) management that was in place
at the time of Friedman’s association with the quarterly financial statements for the periods ended June 30, 2021, September 30,
2021 and March 31, 2022. Prior to the Letter, in the past two years, the Company had not received from Friedman an adverse opinion or
a disclaimer of opinion, and Friedman’s opinion was not qualified or modified as to uncertainty, audit scope, or accounting principles.
The resignation by Friedman was neither recommended nor approved by the Audit Committee or the Board and there were no disagreements with
management and Friedman. Friedman had previously reported a material weakness to the Audit Committee, which was included on the Company’s
Form 10-K for the year ended December 31, 2021, filed on March 31, 2022, regarding the ineffectiveness of the Company’s internal
controls over financial reporting.



In connection with the Letter, Friedman advised
the Company that it was withdrawing its previously issued audit opinion on our December 31, 2021 consolidated financial statements, issued
on March 31, 2022, and declined to be associated with the quarterly financial statements for the periods ended June 30, 2021, September
30, 2021, and March 31, 2022, filed on August 8, 2021, November 16, 2021 and May 12, 2022, respectively.



Engagement of New Independent Registered
Public Accounting Firm



On December 26, 2022, the Audit Committee approved
the engagement of Sadler, Gibb & Associates, LLC (“Sadler”) as the Company’s independent registered public accounting
firm for the fiscal years ended December 31, 2022 and 2021.



Cybersecurity Incident



On March 16, 2023, we experienced a hacking attack
that impacted the check-out page on the Company’s e-commerce website. In response, the Company deployed containment measures, launched
an investigation with assistance from third-party cybersecurity experts and notified appropriate law enforcement authorities. The Company
considers the matter remediated. The investigation determined that certain personal information, including names, addresses, zip codes,
payment card numbers, expiration dates, and CVVs, was extracted from the Company’s systems as part of this incident. The investigation
could not determine with precision which payment card data was included in the timeframe of exposure. Out of an abundance of caution,
the Company notified all payment card users who made transactions on the Company’s e-commerce website within the window of exposure.
As of May 24, 2023, the Company provided appropriate notice to approximately 9,290 individuals, as well as to regulatory authorities in
accordance with applicable law. The Company has incurred, and may continue to incur, certain expenses related to this attack. Further,
the Company remains subject to risks and uncertainties as a result of the incident, including as a result of the data that was extracted
from the Company’s network as noted above. Additionally, security and privacy incidents have led to, and may continue to lead to,
additional regulatory scrutiny. Although we are unable to predict the full impact of this incident, including how it could negatively
impact our operations or results of operations on an ongoing basis, we presently do not expect that it will have a material effect on
the Company’s operations.









2







The Company has engaged outside consultants through
its outside counsel to help assess and expand the Company’s cyber defenses and payment card protections and policies.



Credit Agreement Amendment



In July 2023, the Company’s lender amended
the credit agreement to waive defaults on the May 9, 2022 credit agreement. The amendment establishes a new EBITDA covenant and requires
the Company to maintain minimum liquidity of $8 million including restricted cash and $3 million excluding restricted cash. Liquidity
as defined in the credit agreement amendment includes cash and certain qualifying customer accounts receivable. The credit agreement amendment
requires the Company to pay the existing loan by August 31, 2024. The Company has begun discussions with investment bankers to place financing
to replace the existing credit agreement by August 31, 2024. See Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Debt.”





Industry



The U.S. major home appliances market is highly
fragmented with big box retailers, online retailers, and thousands of local and regional retailers competing for share in what has historically
been a high touch sale process. According to Statista, revenue in the U.S. major household appliances market (excluding small appliances)
is projected to reach $23.2 billion in 2022 and grow at an annual growth rate of 3.08% from 2022 to 2026.



According to the U.S. Census Bureau, there are
approximately 76 million households in the United States with annual incomes over $25,000 aged between 25 and 65 years, many of whom are
accustomed to purchasing goods online. As younger generations age, start new families and move into new homes, we expect online sales
of household appliances to increase. In addition, we believe the online household appliances market will further grow as older generations
of consumers become increasingly comfortable purchasing online, particularly if the process is easy and efficient.



Our
Products



We sell a vast assortment of household appliances,
including refrigerators, ranges, ovens, dishwashers, microwaves, freezers, washers and dryers. In addition to appliances, we also offer
a broad assortment of products in the furniture, décor, bed & bath, lighting, outdoor living, electronics categories, fitness
equipment, plumbing fixtures, air conditioners, fireplaces, fans, dehumidifiers, humidifiers, air purifiers and televisions. While these
are not individually high-volume categories, they complement the appliance to produce a one-stop home goods offering for customers.



Vendor/Supplier Relationships



We offer more than 400 vendors and over 500,000
SKUs available for purchase through our website. We believe that this depth of vendor relationships gives consumers numerous options in
all product categories resulting in a true one-stop shopping destination. Our principal vendors and suppliers are Dynamic Marketing Inc
(a buying coop), Frigidaire, General Electric, LG, Whirlpool, Bosch, Viking, Miele, Samsung, Fisher Paykel and Ilve.



We are a member and 1.6% equity interest holder
of Dynamic Marketing, Inc. (“DMI”), a 60-member appliance purchasing cooperative. DMI purchases consumer electronics and appliances
at wholesale prices from various vendors, and then makes such products available to its members, who sell such products to end consumers.
DMI’s purchasing group arrangement provides its members with leverage and purchasing power with appliance vendors, and increases
our ability to compete with competitors, including big box appliance and electronics retailers. For the years ended December 31, 2022
and 2021, the Company purchased a substantial portion of finished goods from DMI, representing 69% and 72% of purchases, respectively.



During the year ended December 31, 2022, Dynamic
Marketing Inc accounted for approximately 69% of our purchases; no other vendor accounted for more than 10% of our purchases during the
same period.



Our business model allows us to constantly review
and evaluate each supplier relationship, and we are open to building new supplier/vendor relationships. Products are purchased from all
suppliers on an at-will basis. Relationships with suppliers are subject to change from time to time. Please see Item 1A “Risk
Factors” for a description of the risks related to our supplier relationships.



Marketing



Our marketing efforts drive new and repeat customers
and promote our websites as online communities relating to major appliances and other products. Our strategy is to inspire the customer
at each point of their shopping journey, delivering curated messaging, content and advice in an effort to increase engagement and repeat
purchasing. We utilize a combination of paid and earned media, including search engine marketing, email, digital display, social media,
retargeting, radio and events, in our media strategy. We also have programs to engage appliance enthusiasts and build community through
design and customer portals that are intended both to inspire and provide help the business-to-business (“B2B”) and business-to-consumer
(“B2C”) customers with their projects.





3







Customers and Markets



We have physical stores and warehouses located in Brooklyn, New York,
Somerset, New Jersey, Hamilton, New Jersey, St. Charles, Missouri and Largo, Florida. Our internal logistics network and third-party distribution,
delivery and installation agreements allow us to serve, sell and ship to customers nationwide. The diagram below represents our sales
by region for 2022:







Logistics



In our fulfillment of large durable goods, we have
created an infrastructure that allows us to deliver products in most states. We want to scale this infrastructure by continuing to improve
execution, fulfillment center locations, and delivery timing. This proprietary logistic process enables us to provide our customers’
products quickly and to provide a better shipping and delivery experience than they might otherwise experience. Additionally, we believe
this logistics network will help us reduce expenses, touchpoints, damages and returns.



Technology



We are continuing to build out our custom-built,
proprietary technology and operational platform to deliver the best experience for both our customers and suppliers. Our success has been
built on a culture of data-driven decision-making and proprietary software for order management and customer fulfillment. We believe that
control of our technology systems, which gives us the ability to update them often, is a competitive advantage. Our team of engineers
has built a technology solution for durable goods. Our software consists of a large set of tools and systems with which our customers
directly interact, that are specifically tuned for shopping the major appliance category by mixing lifestyle imagery with easy-to-use
navigation tools and personalization features designed to increase customer conversion. We have designed operations software to deliver
the reliable and consistent experience consumers desire, with proprietary software enhancing our performance in areas such as integration
with our suppliers, our warehouse and logistics network and our customer service operation. Much of our customer marketing technology
was internally developed, including campaign management and bidding algorithms for online advertising. This allows us to leverage our
internal data and target customers efficiently across various channels. We also partner with select marketing and trade partners where
we find solutions that meet our marketing objectives and inspire our B2B and B2C customers.



Competition



While we are primarily focused on the online U.S.
appliances, furniture and other home goods market, we compete across all segments of the market. Our competition includes online retailers
and marketplaces, furniture stores, big box retailers, department stores and specialty retailers.





4







Competitive Strengths



The U.S. appliance market is
highly fragmented, with thousands of local and regional retailers competing for a share. We believe this fragmented market presents an
opportunity to streamline business and make brands and products available to everyone across the country. We are standardizing a consistent
end-to-end experience to provide products to the consumer no matter where they are located in the country.



We are strengthening our e-commerce
platform and increasing our showroom and distribution center model to provide a smooth path to purchase. We are also investing in our
brand presence and marketing efforts to drive customer acquisition and engagement. Our goal is to be the appliance destination for our
customers from inspiration to installation.



Our competitive strengths include:



| | ● | Name and reputation. In 2022, we introduced our Polished name and continue to build off our
                                                                                       Goedeker legacy in offering competitively priced name-brand products and services, which has been recognized over 50+ years in the
                                                                                       business.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Product selection and pricing. Our comprehensive product
selection and competitive pricing model, with support from inspiration to delivery and installation, means we provide a complete solution
for customers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Strong customer relationships. We focus on the needs
and experience of customers, whether they are in the market for a replacement, renovation or new construction project. This customer-centric
approach is evidenced by our repeat customers, over-indexing the industry.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Highly trained and professional staff. Our team is
trained to educate and support customers when selecting and buying products. A large percentage of customer orders involve a phone conversation
with a sales team member—a differentiator when competing with online-only companies as well as brick-and-mortar outlets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Website ease of use. Our proprietary, purpose-built
technology platform is designed to provide consumers a compelling user experience as they browse, research and purchase our products.
We use personalization, based on past browsing and shopping patterns, to create a more engaging consumer interaction.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Proprietary technology and content. Investments in
our technology platform create a scalable process and support the customer at every point in the journey, including call center tools,
digital marketing optimization, B2B design portals, product reviews and lifestyle content.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Growth Strategies







Our mission is to change the way consumers buy appliances
and, in doing so, become the leading online retailer of home appliances. The strategies of the Company to achieve this mission, while
increasing value for our stockholders, will include:



| | ● | Rebrand the combined company.We plan to drive brand awareness through strategic omni-channel marketing.
| | - | -------------------------------------------------------------------------------------------------------





| | ● | Strengthening
    the Company’s Leadership Team.We have made significant executive and senior management hires and are continuing to
    build our talent pool and hire highly-skilled employees. Recruiting top-tier talent at all levels remains a priority, especially as
    the Company evolves and grows.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Secure design and builder trade business.We have created new tools and benefits to engage and simplify appliance shopping and buying for B2B projects with builders, contractors, architects and interior designers who are making or influencing the purchasing decision for their clients.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





5







| | ● | Category expansion and Deeper Connectivity with Customers.We will be adding new, complementary categories and services to our selection to meet our customers’ ever-changing needs. We are in the process of enhancing the content and resources available on our site that will ultimately help us create more meaningful relationships with customers.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Drive continued operational excellence.We are committed
to improving productivity and profitability through operational initiatives designed to grow revenue and expand margins. Some of our
key initiatives for operational excellence include:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Logistics
    and shipping optimization. We have identified the geographic areas in which we want to establish a presence to reach more
    customers and further penetrate markets that are experiencing high levels of housing development and home remodeling. Although we
    currently are holding off on entering into agreements due to inventory and supply chain issues, we expect to add at least two new
    fulfillment centers over the next year. We believe that adding fulfillment centers in other parts of the country will
    minimize product touchpoints and damage, as well as expedite delivery. With access to vendor warehouse operations, we expect to
    capitalize on buying opportunities and capture time-sensitive customers more frequently.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Price optimization. We are building a data-based understanding of price elasticity dynamics, promotional
strategies and other price management tools to drive optimized pricing for our products.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Intellectual Property



We own several registered domain names, including
for our www.polished.com website and the Appliances Connection websites www.appliancesconnection.com, 1stopcamera.com, goldcoastappliances.com,
and joesappliances.com. The agreements with our suppliers generally provide us with limited, nonexclusive licenses to use the supplier’s
trademarks, service marks and trade names for the sole purpose of promoting and selling their products.



To protect our intellectual property, we rely
on a combination of laws and regulations, as well as contractual restrictions. We rely on the protection of laws regarding unregistered
copyrights for certain content we create. We also rely on trade secret laws to protect our proprietary technology and other intellectual
property. To further protect our intellectual property, we enter into confidentiality agreements with our executive officers and directors.



As of December 31, 2022, in an effort to protect
our brand, we had three registered trademarks in the United States.



Human Capital



As of December 31, 2022, we employed 391 total
employees, all of which were full-time employees.



We have not experienced any work stoppages and
we consider our relationship with our employees to be good. None of our employees are subject to a collective bargaining agreement or
represented by a labor union. Our people are integral to our business, and we are highly dependent on our ability to attract and retain
qualified personnel.



Government Regulation



Our business is subject to the laws of the U.S.
jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions as to
how, or whether, laws governing personal privacy, data security, consumer protection or sales and other taxes, among others, apply to
the Internet and e-commerce. These laws are continually evolving. For example, certain applicable privacy laws and regulations require
us to provide customers with our policies on sharing information with third parties, and advance notice of any changes to these policies.
Related laws may govern the manner in which we store or transfer sensitive information or impose obligations on us in the event of a security
breach or inadvertent disclosure of such information. Additionally, tax regulations in jurisdictions where we do not currently collect
state or local taxes may subject us to the obligation to collect and remit such taxes, or to additional taxes, or to requirements intended
to assist jurisdictions with their tax collection efforts. New legislation or regulation, the application of laws from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and e-commerce generally
could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures
to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that
impose additional compliance burdens on e-commerce companies.





6







Emerging Growth Company and Smaller Reporting
Company



We qualify as an “emerging growth company”
under the JOBS Act and a “smaller reporting company” within the meaning of the Securities Act. As a result, we are permitted
to, and intend to, rely on exemptions from certain disclosure requirements.



For so long as we are an emerging growth company,
we will not be required to:



| | ● | have an auditor report on our internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | ● | comply with any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional
information about the audit and the consolidated financial statements (i.e., an auditor discussion and analysis);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | submit certain executive compensation matters to stockholder
advisory votes, such as “say-on-pay” and “say-on-frequency;” and
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | ● | disclose certain executive compensation related items such
as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation
to median employee compensation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain
accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits
of this extended transition period. Our consolidated financial statements may therefore not be comparable to those of companies that comply
with such new or revised accounting standards.



We will remain an emerging growth company until
the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day
of the first fiscal year in which our total annual gross revenues are $1.235 billion or more, (ii) the date that we become a “large
accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that
is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv)
the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.



We may continue to qualify as a smaller reporting
company if either (i) the market value of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue
was less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates
is less than $700 million. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, including,
but not limited to presenting only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K
and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.



Additional Information About the Company



The following documents are available free of
charge through the Company’s website, www.polished.com: the Company’s annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and any amendments to those reports that are filed with or furnished to the Securities and Exchange
Commission (“SEC”) pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”).
These materials are made available through the Company’s website as soon as reasonably practicable after they are electronically
filed with, or furnished to, the SEC. In addition to its reports filed or furnished with the SEC, the Company publicly discloses material
information from time to time in its press releases, at annual meetings of stockholders, in publicly accessible conferences and investor
presentations, and through its website (principally in its News and Investor Relations pages). References to the Company’s website
in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the
information contained on, or available through, the website, and such information should not be considered part of this Form 10-K.





7







ITEM
1A. RISK FACTORS.



An
investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with
the other information contained in this report, before purchasing our common stock. We have listed below (not necessarily in order of
importance or probability of occurrence) what we believe to be the most significant risk factors, but additional risks and uncertainties
not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business. Any of
the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial
or complete loss of your investment. Some statements in this report, including statements in the following risk factors, constitute forward-looking
statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”



Risks
Related to our Business and Industry



Prior to the filing of this annual report
on Form 10-K, we have been delinquent in our SEC reporting obligations for over 12 months. Although we expect to file our periodic reports
in a timely fashion going forward, we cannot provide assurance that our business and the price of our common stock will not be materially
adversely affected by our previous failure to file required periodic reports.



Despite the filing of this annual report on Form
10-K, we face a continuing risk that the SEC will initiate an administrative proceeding to suspend or revoke the registration of our common
stock under the Exchange Act due to our previous failure to file quarterly reports on Form 10-Q since March 31, 2022.



Furthermore, the Company is not in compliance
with the continued listing standards of NYSE American LLC (the “Exchange”), as set forth in Sections 134 and 1101 of the NYSE
American Company Guide (the “Company Guide”), since the Company failed to timely file (the “Filing Delinquency”)
its Form 10-Qs for the periods ended June 30, 2022 and September 30, 2022 (collectively, the “Delayed Reports”). The Filing
Delinquency will be cured via the filing of the Delayed Reports.   Pursuant to Section 1007 of the Company Guide, the Company
submitted to NYSE Regulation on February 13, 2023 an extension request as the Company was unable to cure the Filing Delinquency within
the initial six-month cure period automatically granted to the Company when it became delinquent. On February 21, 2023, NYSE Regulation
notified the Company that it had accepted the Company’s request to extend the cure period through July 31, 2023. NYSE Regulation
staff will review the Company periodically for compliance with adherence to the milestones in the Company’s plan to regain compliance 
If the Company does not make progress consistent with the plan during the plan period or if the Company does not complete its Delayed
Filings with the Securities and Exchange Commission by the end of the maximum 12-month cure period on August 22, 2023, Exchange staff
will initiate delisting proceedings as appropriate. The Company may appeal an Exchange staff delisting determination in accordance with
Section 1010 and Part 12 of the Company Guide.



In addition, there may be continued concern on
the part of customers, investors and employees about our financial condition and extended filing delay status, which may result in the
loss of business opportunities, limitations on our ability to raise capital, including the temporal unavailability of the abbreviated
Form S-3, and general reputational harm. Any of the foregoing could materially adversely affect our business, results of operations, financial
condition and stock price.



The Investigation and subsequent restatement of our financial
statements has consumed a significant amount of our time and resources and may lead to, among other things, shareholder litigation, loss
of investor confidence, negative impacts on our stock price, a material adverse effect on our reputation, business and stock price and
certain other risks.





As described in this Annual Report under the headings
“Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation – Investigation”
and elsewhere herein, the Company launched an investigation (the “Investigation”) due to certain of the Company’s business
operations under former management during the 2021-2022 period, which resulted in our former auditor withdrawing its previously issued
audit opinion on our December 31, 2021 consolidated financial statements, issued on March 31, 2022, and declining to be associated with
the quarterly financial statements for the periods ended June 30, 2021, September 30, 2021, and March 31, 2022, filed on August 8, 2021,
November 16, 2021 and May 12, 2022, respectively. Consequently, we have restated our previously issued consolidated financial statements
as of and for the year ended December 31, 2021 and for the quarter ended March 31, 2022. See Note 2, “Summary of Significant
Accounting Policies – Restatement,” in “Item 8 Financial Statements and Supplementary Data”, for additional
information.



The Investigation and subsequent restatement process was highly time
and resource-intensive and involved substantial attention from management and significant legal and accounting costs. Furthermore, as
a result of the circumstances giving rise to the restatement, we have become subject to a number of additional risks and uncertainties,
including unanticipated costs for accounting and legal fees in connection with or related to the restatement, shareholder litigation and
government investigations, including potential inquires from the Securities and Exchange Commission (“SEC”) regarding our
financial statements or matters relating thereto. Any such proceeding could result in substantial defense costs regardless of the outcome
of the litigation or investigation and any future inquiries from the SEC as a result of our historical financial statements will, regardless
of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with
the Investigation and restatement itself. If we do not prevail in any such litigation, we could be required to pay substantial damages
or settlement costs. In addition, the restatement and related matters could impair our reputation and could cause our counterparties to
lose confidence in us. Each of these occurrences could have an adverse effect on our business, results of operations, financial condition
and stock price.







8







Macroeconomic trends including inflation and rising interest
rates may adversely affect our financial condition and results of operations.



Macroeconomic trends, including increases in inflation
and rising interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States
has recently accelerated and is currently expected to continue at an elevated level in the near-term. Rising inflation could have an adverse
impact on our operating expenses and our credit facilities. There is no guarantee we will be able to mitigate the impact of rising inflation.
The Federal Reserve has started raising interest rates to combat inflation and restore price stability and it is expected that rates will
continue to rise throughout the remainder of 2023. Increases in interest rates on any of our debt will result in higher debt service costs,
which will adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become
constrained, which could adversely affect the availability and terms of future borrowings. Such future constraints could increase our
borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and
commitments, which could slow or deter future growth.





Our
business is dependent on general economic conditions and consumer discretionary spending, and reductions in such spending might adversely
affect the Company’s business, operations, liquidity, financial results and stock price.



Our
business depends on consumer discretionary spending, and our results are highly dependent on U.S. consumer confidence and the health
of the U.S. economy. Consumer spending may be affected by many factors outside of the Company’s control, including general economic
conditions; consumer disposable income; consumer confidence and perception of economic conditions; the threat or outbreak of war, terrorism
or public unrest (including, without limitation, the conflict in Ukraine) which may cause supply chain disruptions, increase fuel costs
and transportation costs, and create general economic instability; wage and unemployment levels; consumer debt and inflationary pressures;
the costs of basic necessities and other goods; effects of weather and natural disasters caused by climate change or otherwise; and epidemics,
contagious disease outbreaks, and other public health concerns including the COVID-19 pandemic. Adverse economic changes in any
of the regions in which we sell our products could reduce consumer confidence and could negatively affect net revenue and have a material
adverse effect on our operating results.



Consumers
may view a substantial portion of the products we offer as discretionary items rather than necessities. As a result, our results of operations
are sensitive to changes in macro-economic conditions that impact consumer spending, including discretionary spending. Decreases in consumer
discretionary spending may result in a decrease in comparable sales, and average value per transaction, which might cause us to increase
promotional activities, which will have a negative impact on our gross margins, all of which could negatively affect the Company’s
business, operations, liquidity, financial results and stock price, particularly if consumer spending levels are depressed for a prolonged
period of time.



Our
business model and growth strategy depend on our marketing efforts and ability to maintain our brand and attract customers to our platform
in a cost-effective manner, including our ability to develop new features to enhance the consumer experience on our websites, mobile-optimized
websites and mobile applications.



Our
success depends on our ability to acquire and retain customers in a cost-effective manner through marketing efforts and maintenance of
our brand. In order to expand our customer base, we must appeal to and acquire customers who have historically used other means of commerce
to purchase home goods and may prefer alternatives to our offerings, such as the websites of our competitors or our suppliers’
own websites. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts
to acquire additional customers. Our advertising efforts consist primarily of email marketing, online advertisements and promotions,
digital marketing and social media. These efforts are expensive and may not result in the cost-effective acquisition of customers. We
cannot assure you that the net profit from new customers we acquire will ultimately exceed the cost of acquiring those customers through
enhancements to the customer experience on our websites, mobile-optimized websites and mobile operations. If we fail to deliver a quality
shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire
new customers. If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not
be able to generate the scale necessary to drive beneficial network effects with our suppliers or efficiencies in our logistics network,
our net revenue may decrease, and our business, financial condition and operating results may be materially adversely affected.



We
believe that many of our new customers originate from word-of-mouth and other non-paid referrals from existing customers. Therefore,
we must ensure that our existing customers remain loyal to us in order to continue receiving those referrals. If our efforts to satisfy
our existing customers are not successful, we may not be able to acquire new customers in sufficient numbers to continue to grow our
business, or we may be required to incur significantly higher marketing expenses in order to acquire new customers.



Our
success depends in part on our ability to increase our net revenue per active customer. If our efforts to increase customer loyalty and
repeat purchasing as well as maintain high levels of customer engagement are not successful, our growth prospects and revenue will be
materially adversely affected.



Our
ability to grow our business depends on our ability to retain our existing customer base and generate increased revenue and repeat purchases
from this customer base, and maintain high levels of customer engagement. To do this, we must continue to provide our customers and potential
customers with a unified, convenient, efficient and differentiated shopping experience by:



| | ● | providing
                                            imagery, tools and technology that attract customers who historically would have bought elsewhere;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | maintaining
                                            a high-quality and diverse portfolio of products;
| | - | ---------------------------------------------------------------------------------------------------------



| | ● | delivering
                                            products on time and without damage; and
| | - | -----------------------------------------------------------------------------------------------



| | ● | maintaining
                                            and further developing our online and mobile platforms.
| | - | ---------------------------------------------------------------------------------------------------------------



If
we fail to increase net revenue per active customer, generate repeat purchases or maintain high levels of customer engagement, our growth
prospects, operating results and financial condition could be materially adversely affected.





9









Our
continued revenue growth will depend upon, among other factors, our ability to acquire more customers, build our brands and launch new
brands, introduce new products or offerings and improve existing product.



Maintaining
and enhancing our brands is critical to acquiring and expanding our base of customers and suppliers. Our ability to maintain and enhance
our brands depends largely on our ability to maintain customer confidence in our product and customer service offerings, including by
delivering products on time and without damage. If customers do not have a satisfactory shopping experience, they may seek out alternative
offerings from our competitors and may not return to our sites as often in the future, or at all. In addition, unfavorable publicity
regarding, for example, our practices relating to privacy and data protection, product quality, delivery problems, competitive pressures,
litigation or regulatory activity could seriously harm our reputation. Such negative publicity also could have an adverse effect on the
size, engagement, and loyalty of our customer base and result in decreased revenue, which could adversely affect our business and financial
results. A significant portion of our customers’ brand experience also depends on third parties outside of our control, including
suppliers and logistics providers such as R+L Carriers, AM Home Delivery and other third-party delivery agents. If these third parties
do not meet our or our customers’ expectations, our brands may suffer irreparable damage.



In
addition, maintaining and enhancing these brands may require us to make substantial investments in launching new brands or introducing
new products or offerings, and these investments may not be successful. If we fail to promote, maintain, and improve our brands and products,
or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely
affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands or products may become
increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to provide high quality
products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be able to do successfully.



Customer
complaints or negative publicity about our sites, products, delivery times, customer data handling and security practices or customer
support, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and
consumer and supplier confidence in us and result in harm to our brands.



We
may be unsuccessful in launching or marketing new products or services, or launching existing products and services into new markets,
or may be unable to successfully integrate new offerings into our existing platform, which would result in significant expense and may
not achieve desired results.



Our
business success depends to some extent on our ability to expand our customer offerings by launching new brands, products and services
and by expanding our existing offerings into new markets. Launching new brands and services or expanding geographically requires significant
upfront investments, including investments in marketing, information technology and additional personnel. We may not be able to generate
satisfactory revenue from these efforts to offset these costs. Any lack of market acceptance of our efforts to launch new brands, products
and services or to expand our existing offerings, or failure to successfully integrate new offerings into our existing offerings, platforms,
and markets, could have a material adverse effect on our business, prospects, financial condition and results of operations. Further,
as we continue to expand our fulfillment capability or add new businesses with different requirements, our logistics networks become
increasingly complex and operating them becomes more challenging. There can be no assurance that we will be able to operate our networks
effectively.



We
have also entered and may continue to enter into new markets in which we have limited or no experience, which may not be successful or
appealing to our customers. These activities may present new and difficult technological and logistical challenges, and resulting service
disruptions, failures or other quality issues may cause customer dissatisfaction and harm our reputation and brand. Further, our current
and potential competitors in new market segments may have greater brand recognition, financial resources, longer operating histories
and larger customer bases than we do in these areas. As a result, we may not be successful enough in these newer areas to recoup our
investments in them. If this occurs, our business, financial condition and operating results may be materially adversely affected.



We
have experienced rapid growth since inception, which may not be indicative of future growth. If we fail to manage our growth effectively,
we may experience difficulties in expanding our operations and service offerings and our business, financial condition and operating
results could be harmed.



To
manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure
of people and information systems and expand, train and manage our employee base. We have rapidly increased employee headcount since
our inception to support the growth in our business. To support continued growth, we must effectively integrate, develop and motivate
a large number of new employees. We face significant competition for personnel and increased labor shortages. Failure to manage our hiring
needs effectively or successfully integrate our new hires may have a material adverse effect on our business, financial condition and
operating results.





10







Additionally,
the growth of our business places significant demands on our operations, as well as our management and other employees. Surges in online
traffic and orders associated with any promotional activities or new brand or product offerings could place increased strain on our operations,
including our logistics network, and may cause or exacerbate slowdowns or interruptions. The growth of our business may require significant
additional resources to meet these daily requirements, which may not scale in a cost-effective manner or may negatively affect the quality
of our sites and customer experience. We are also required to manage relationships with a growing number of suppliers, customers and
other third parties. Our information technology systems and our internal controls and procedures may not be adequate to support future
growth of our supplier and employee base. If we are unable to manage the growth of our organization effectively, our business, financial
condition and operating results may be materially adversely affected.



Our
business, and e-commerce generally, is highly competitive. Competition presents an ongoing threat to the success of our business.



Our
business is rapidly evolving and intensely competitive, and we have many competitors in different industries. Our competition includes
furniture stores, big box retailers, department stores, specialty retailers, and online retailers and marketplaces in the United States.



We
expect competition in e-commerce generally to continue to increase. We believe that our ability to compete successfully depends upon
many factors both within and beyond our control, including:



| | ● | the
                                            size and composition of our customer base;
| | - | ------------------------------------------------------------------------------------------



| | ● | the
                                            number of suppliers and products we feature on our sites;
| | - | ---------------------------------------------------------------------------------------------------------



| | ● | our
                                            selling and marketing efforts;
| | - | ------------------------------------------------------------------------------



| | ● | the
                                            quality, price and reliability of products we offer;
| | - | ----------------------------------------------------------------------------------------------------



| | ● | the
                                            convenience of the shopping experience that we provide;
| | - | -------------------------------------------------------------------------------------------------------



| | ● | our
                                            ability to distribute our products and manage our operations; and
| | - | -----------------------------------------------------------------------------------------------------------------



| | ● | our
                                            reputation and brand strength.
| | - | ------------------------------------------------------------------------------



Many
of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment
infrastructures, greater technical capabilities, faster and less costly shipping, significantly greater financial, marketing and other
resources and larger customer bases than we do. These factors may allow our competitors to derive greater net revenue and profits from
their existing customer base, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and
changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching
marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate net revenue
from their customer bases more effectively than we do.



Our
success depends, in substantial part, on our continued ability to market our products through search engines and social media platforms.



The
marketing of our products depends on our ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with
search engines and social media platforms, including those operated by Google, Facebook, Bing and Yahoo! These platforms could change
their terms and conditions of use at any time (and without notice) and/or significantly increase their fees. No assurances can be provided
that we will be able to maintain cost-effective and otherwise satisfactory relationships with these platforms and our inability to do
so in the case of one or more of these platforms could have a material adverse effect on our business, financial condition and results
of operations.



We
obtain a significant number of visits via search engines such as Google, Bing and Yahoo! Search engines frequently change the algorithms
that determine the ranking and display of results of a user’s search and may make other changes to the way results are displayed,
which can negatively affect the placement of links and, therefore, reduce the number of visits to our website. The growing use of online
ad-blocking software may also impact the success of our marketing efforts because we may reach a smaller audience and fail to bring more
customers to our website, which could have a material adverse effect on our business, financial condition and results of operations.





11







Our
internal information technology systems may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could
disrupt our business or result in the loss of critical and confidential information.



The
satisfactory performance, reliability and availability of our websites, transaction processing systems, logistics network, and technology
infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as maintain adequate customer
service levels.



For
example, if one of our data centers fails or suffers an interruption or degradation of services, we could lose customer data and miss
order fulfillment deadlines, which could harm our business. Our systems and operations, including our ability to fulfill customer orders
through our logistics network, are also vulnerable to damage or interruption from inclement weather, fire, flood, power loss, telecommunications
failure, terrorist attacks, labor disputes, cybersecurity-attacks, data loss, acts of war, break-ins, earthquake and similar events.
In the event of a data center failure, the failover to a back-up could take substantial time, during which time our sites could be completely
shut down. Further, our back-up services may not effectively process spikes in demand, may process transactions more slowly and may not
support all of our site’s functionality.



We
use complex proprietary software in our technology infrastructure, which we seek to continually update and improve. We may not always
be successful in executing these upgrades and improvements, and the operation of our systems may be subject to failure. In particular,
we have in the past and may in the future experience slowdowns or interruptions on some or all of our sites when we are updating them,
and new technologies or infrastructures may not be fully integrated with existing systems on a timely basis, or at all. Additionally,
if we expand our use of third-party services, including cloud-based services, our technology infrastructure may be subject to increased
risk of slowdown or interruption as a result of integration with such services and/or failures by such third parties, which are out of
our control. Our net revenue depends on the number of visitors who shop on our sites and the volume of orders we can handle. Unavailability
of our websites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect
consumer perception of our brand.



We
may experience periodic system interruptions from time to time. In addition, continued growth in our transaction volume, as well as surges
in online traffic and orders associated with promotional activities or seasonal trends in our business, place additional demands on our
technology platform and could cause or exacerbate slowdowns or interruptions. If there is a substantial increase in the volume of traffic
on our sites or the number of orders placed by customers, we may be required to further expand and upgrade our technology, logistics
network, transaction processing systems and network infrastructure. There can be no assurance that we will be able to accurately project
the rate or timing of increases, if any, in the use of our sites or expand and upgrade our systems and infrastructure to accommodate
such increases on a timely basis. In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality
and features of our sites, which is particularly challenging given the rapid rate at which new technologies, customer preferences and
expectations and industry standards and practices are evolving in the e-commerce industry. Accordingly, we redesign and enhance various
functions on our sites on a regular basis, and we may experience instability and performance issues as a result of these changes.



Any
slowdown, interruption or performance failure of our sites and the underlying technology and logistics infrastructure could harm our
business, reputation and our ability to acquire, retain and serve our customers, which could materially adversely affect our results
of operations.



If
we fail to maintain adequate cybersecurity with respect to our systems and ensure that our third-party service providers do the same
with respect to their systems, our business may be harmed.



We
collect, maintain, transmit and store data about our customers, employees, contractors, suppliers, vendors and others, including credit
card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party
service providers that store, process and transmit certain proprietary, personal and confidential information on our behalf. We rely
on encryption and authentication technology licensed from third parties in an effort to securely transmit, encrypt, anonymize or pseudonymize
certain confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new technological discoveries
or other developments may result in the whole or partial failure of this technology to protect transaction and personal data or other
confidential and sensitive information from being breached or compromised. Our security measures, and those of our third-party service
providers, may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins,
phishing attacks, social engineering, cybersecurity breaches or other attacks and similar disruptions that may jeopardize the security
of information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise
maintain, including payment card systems and human resources management platforms. We and our service providers may not anticipate or
prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage
systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security
breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons
with whom we have commercial relationships.





12







Breaches of our security measures or those of our third-party service
providers or cyber security incidents could result in unauthorized access to our sites, networks and systems; unauthorized access to and
misappropriation of personal information, including consumers’ and employees’ personally identifiable information, or other
confidential or proprietary information of ourselves or third parties; limited or terminated access to certain payment methods or fines,
penalties, assessments or higher transaction fees to use such methods; viruses, worms, spyware or other malware being served from our
sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption
or malfunction of operations; costs relating to breach remediation, deployment or training of additional personnel and protection technologies,
responses to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; litigation,
regulatory action and other potential liabilities. If any of these breaches of security occur, and/or our cybersecurity processes, procedures
or policies are found to be deficient, our reputation and brand could be damaged, our business may suffer, we could be required to expend
significant capital and other resources to alleviate problems caused by such breaches and we could be exposed to a risk of loss, litigation
or regulatory action and possible liability. In addition, any party who is able to illicitly obtain a customer’s password or other
relevant information could access that customer’s transaction data or personal information. Any compromise or breach of our security
measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant
legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse
effect on our business, financial condition and operating results. We may need to devote significant resources to protect against cybersecurity
breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business.



On March 16, 2023, we experienced a cybersecurity incident. See Item
7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments –
Cybersecurity Incident.”



Our
suppliers have imposed conditions in our business arrangements with them. If we are unable to continue satisfying these conditions, or
such suppliers impose additional restrictions with which we cannot comply, it could have a material adverse effect on our business, financial
condition and operating results.



Our
suppliers place restrictive conditions on our doing business with them. If we cannot satisfy these conditions or if they impose additional
or more restrictive conditions that we cannot satisfy, our business would be materially adversely affected. It would be materially detrimental
to our business if these suppliers decided to no longer do business with us, increased the pricing at which they allow us to purchase
their goods or impose other restrictions or conditions that make it more difficult for us to work with them. Any of these events could
have a material adverse effect on our business, financial condition and operating results.



We
may be unable to source new suppliers or source additional, or strengthen our existing relationships with, suppliers, negotiate acceptable
pricing and other terms with third-party service providers, suppliers and outsourcing partners and maintain our relationships with such
entities.



We have relationships with numerous suppliers.
Our agreements with suppliers are generally terminable at will by either party upon short notice. If we do not maintain our existing relationships
or build new relationships with suppliers on acceptable commercial terms, we may not be able to maintain a broad selection of merchandise,
and our business and prospects would suffer severely. Part of our business with our suppliers is conducted through our participation in
DMI’s purchasing group arrangement. For the years ended December 31, 2022 and 2021, we purchased a substantial portion of finished
goods from DMI, representing 69.2% and 72.1% of purchases, respectively. Our participation in this consortium provides us with leverage
and purchasing power with appliance vendors, and increases our ability to compete with competitors. If the relationship between DMI and
suppliers materially changes, or if we are unable to participate in DMI on materially the same terms as we currently participate, then
there is a risk that the prices of finished goods may increase or the availability of finished goods to the Company would decrease.







In
order to attract quality suppliers, we must:



| | ● | demonstrate
                                            our ability to help our suppliers increase their sales;
| | - | ---------------------------------------------------------------------------------------------------------------



| | ● | offer
                                            suppliers a high-quality, cost-effective fulfillment process; and
| | - | -------------------------------------------------------------------------------------------------------------------



| | ● | continue
                                            to provide suppliers with a dynamic and real-time view of our demand and inventory needs.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------





13







If
we are unable to provide our suppliers with a compelling return on investment and an ability to increase their sales, we may be unable
to maintain and/or expand our supplier network, which would negatively impact our business.



Our
agreements with most of our suppliers do not provide for the long-term availability of merchandise or the continuation of particular
pricing practices, nor do they usually restrict such suppliers from selling products to other buyers. There can be no assurance that
our current suppliers will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise
extend current supply relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms.
Our ability to develop and maintain relationships with reputable suppliers and offer high quality merchandise to our customers is critical
to our success. If we are unable to develop and maintain relationships with suppliers that would allow us to offer a sufficient amount
and variety of quality merchandise on acceptable commercial terms, our ability to satisfy our customers’ needs, and therefore our
long-term growth prospects, would be materially adversely affected.



Further,
we rely on our suppliers’ representations of product quality, safety and compliance with applicable laws and standards. If our
suppliers or other vendors violate applicable laws, regulations or our supplier code of conduct, or implement practices regarded as unethical,
unsafe, or hazardous to the environment, it could damage our reputation and negatively affect our operating results. Further, concerns
regarding the safety and quality of products provided by our suppliers could cause our customers to avoid purchasing those products from
us, or avoid purchasing products from us altogether, even if the basis for the concern is outside of our control. As such, any issue,
or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand,
reputation, operations and financial results.



Moreover, we depend on our ability to provide
our customers with a wide range of products from qualified suppliers in a timely and efficient manner. Political and economic instability,
the financial stability of suppliers, suppliers’ ability to meet our standards, labor problems experienced by suppliers, the availability
or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost,
transport security, inflation, the COVID-19 pandemic and other factors relating to our suppliers are beyond our control. For example,
the COVID-19 pandemic adversely affected supplier facilities and operations due to factory closures, raw material and labor inflation
and risks of labor shortages, among other things. Similar disruptions may materially and adversely affect our business, financial condition
and operating results.



We
also are unable to predict whether any of the countries in which our suppliers’ products are currently manufactured or may be manufactured
in the future will be subject to new, different, or additional trade restrictions imposed by the U.S. or foreign governments or the likelihood,
type or effect of any such restrictions. Any event causing a disruption or delay of imports from suppliers with international manufacturing
operations, including the imposition of additional import restrictions, restrictions on the transfer of funds or increased tariffs or
quotas, could increase the cost or reduce the supply of merchandise available to our customers and materially adversely affect our financial
performance as well as our reputation and brand. Furthermore, some or all of our suppliers’ foreign operations may be adversely
affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer
of funds or other trade disruptions.



In
addition, our business with foreign suppliers may be affected by changes in the value of the U.S. dollar relative to other foreign currencies.
For example, any movement by any other foreign currency against the U.S. dollar may result in higher costs to us for those goods. Declines
in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of
our foreign suppliers. This, in turn, might cause such foreign suppliers to demand higher prices for merchandise in their effort to offset
any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to us altogether, any
of which could ultimately reduce our sales or increase our costs.



We
depend on our suppliers to perform certain services regarding the products that we offer.



As
part of offering our suppliers’ products for sale on our sites, suppliers are often responsible for conducting a number of traditional
retail operations with respect to their respective products, including maintaining inventory and preparing merchandise for shipment to
our customers. In these instances, we may be unable to ensure that suppliers will perform these services to our or our customers’
satisfaction in a manner that provides our customer with a unified brand experience or on commercially reasonable terms. If our customers
become dissatisfied with the services provided by our suppliers, our business, reputation and brands could suffer.





14







We
depend on our relationships with third parties, and changes in our relationships with these parties could adversely affect our revenue
and profits.



We
rely on third parties to operate certain elements of our business. For example, we rely on a variety of regional and national carriers
for our larger shipping services and small parcel products. As a result, we may be subject to shipping delays or disruptions caused by
factors beyond our and our carriers’ control, including inclement weather, natural disasters, system interruptions and technology
failures, labor shortages, increased fuel costs, health epidemics or bioterrorism. We are also subject to risks of breakage or other
damage during delivery by any of these third parties. We also use and rely on other services from third parties, such as retail partner
services, telecommunications services, customs, consolidation and shipping services, as well as warranty, installation and design services.



We
may be unable to maintain these relationships, and these services may also be subject to outages and interruptions that are not within
our control. For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to
provide phone support to our customers. Third parties may in the future determine they no longer wish to do business with us take other
actions that could harm our business. We may also determine that we no longer want to do business with them. If products are not delivered
in a timely fashion or are damaged during the delivery process, or if we are not able to provide adequate customer support or other services
or offerings, our customers could become dissatisfied and cease buying products through our sites, which would adversely affect our operating
results.



We
may be unable to optimize, operate and manage the expansion of the capacity of our fulfillment centers, and our plans to expand capacity
and develop new facilities may be adversely affected by global events.



If
we do not optimize and operate our fulfillment centers successfully and efficiently, it could result in excess or insufficient
fulfillment capacity, an increase in costs or impairment charges or harm our business in other ways. In addition, if we do not have
sufficient fulfillment capacity or experience a problem fulfilling orders in a timely manner, our customers may experience delays in
receiving their purchases, which could harm our reputation and our relationship with our customers. For example, the COVID-19
pandemic has disrupted and strained our fulfillment center labor pool and may continue to do so. Any unanticipated occurrences with
respect to the COVID-19 pandemic, including any potential outbreak of cases or the development of a vaccine-resistant strain during
the reopening of the U.S. economy by state and local governments, or certain other global events could cause us to experience
disruptions to the operations of our fulfillment centers, including an insufficient and strained labor pool from time to time, which
may negatively impact our ability to fulfill orders in a timely manner, which could harm our reputation, relationship with customers
and results of operations. Failure to successfully address such challenges in a cost-effective and expedient manner could impair our
ability to timely deliver our customers’ purchases and could harm our reputation and ultimately, our business, financial
condition, and results of operations.



We
anticipate the need to add additional fulfillment centers as our business continues to grow. We cannot assure you that we will be
able to locate suitable facilities on commercially acceptable terms in accordance with our expansion plans, nor can we assure you
that we will be able to recruit qualified managerial and operational personnel to support our expansion plans. If we are unable to
secure new or expanded facilities for the expansion of our fulfillment operations, recruit qualified personnel to support any such
facilities, or effectively control expansion-related expenses, our business, financial condition, and results of operations could be
materially and adversely affected. If demand for our product offerings grow faster than we anticipate, we may exceed our fulfillment
center capacity sooner than we anticipate, we may experience problems fulfilling orders in a timely manner or our customers may
experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we
would need to increase our capital expenditures more than anticipated and in a shorter time frame than we currently anticipate. Our
ability to expand our fulfillment center capacity, including our ability to secure suitable facilities and recruit qualified
employees, may be substantially affected by global events such as the spread of COVID-19. Many of the expenses and investments with respect to our fulfillment centers are fixed, and any expansion
of such fulfillment centers will require additional capital investment. We expect to incur higher capital expenditures in the future
for our fulfillment center operations as our business continues to grow. We would incur such expenses and make such investments in
advance of expected sales, and such expected sales may not occur. Any of these factors could materially and adversely affect our
business, financial condition, and results of operations.





15







Our
business is dependent upon our ability to acquire, accurately value and manage inventory.



We
purchase inventory to stock both current sales and future sales to satisfy consumer demand more quickly. Our purchases of inventory consist
of products for resale and are based in large part on our estimates of projected demand. If actual sales are materially less than our
forecasts, we would experience an over-supply of inventory. An over-supply of inventory will generally cause downward pressure on our
liquidity, sales prices and margins and increase our average days to sale. If we have excess inventory or our average days to sale increases,
our liquidity and the results of our operations may be adversely affected because we may be unable to sell such inventory at prices that
allow us to meet margin targets or to recover our costs. Inventory
valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through
sales to individual customers, liquidations and expected recoverable values of each disposition category.



Supply
chain disruptions and shortages, disruptions in the availability of labor, and increased transportation costs can also significantly
impair our ability to accurately manage inventory. As a result of these factors, we may be unable to acquire or sell inventory at attractive
prices or to manage inventory effectively, and accordingly our revenue, gross margins and results of operations would be affected, which
could have a material adverse effect on our business, financial condition and results of operations.



Seasonal
trends in our business create variability in our financial and operating results and place increased strain on our operations.



Historically,
we have experienced surges in online traffic and orders associated with promotional activities and seasonal trends, primarily during
holidays such as Presidents Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day, Christmas, Black Friday, and Cyber Monday.
This activity may place additional demands on our technology systems and logistics network and could cause or exacerbate slowdowns
or interruptions. Any such system, site or service interruptions could prevent us from efficiently receiving or fulfilling orders,
which may reduce the volume or quality of goods or services we sell and may cause customer dissatisfaction and harm our reputation
and brand.  For example, the COVID-19 pandemic disrupted the historical seasonality of our business and  created additional variability in our financial and operating
results. There can be no assurance that a similar disruption will not occur again in the future.



Our
business may be adversely affected if we are unable to provide our customers a cost-effective shopping platform that is able to respond
and adapt to rapid changes in technology.



The
number of people who access the Internet through devices other than personal computers, including mobile phones, smartphones, handheld
computers such as notebooks and tablets, video game consoles, and television set-top devices, has increased dramatically in the past
few years. We continually upgrade existing technologies and business applications to keep pace with these rapidly changing and continuously
evolving technologies, and we may be required to implement new technologies or business applications in the future. The implementation
of these upgrades and changes requires significant investments and as new devices and platforms are released, it is difficult to predict
the problems we may encounter in developing applications for these alternative devices and platforms. Additionally, we may need to devote
significant resources to the support and maintenance of such applications once created. Our results of operations may be affected by
the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure
to accommodate such alternative devices and platforms. Further, in the event that it is more difficult or less compelling for our customers
to buy products from us on their mobile or other devices, or if our customers choose not to buy products from us on such devices or to
use mobile or other products that do not offer access to our sites, our customer growth could be harmed and our business, financial condition
and operating results may be materially adversely affected.



Significant
merchandise returns could harm our business.



We
allow our customers to return products, subject to our return policy. If merchandise returns are significant, our business, prospects,
financial condition and results of operations could be harmed. Further, we may modify our policies relating to returns from time to time,
which could result in customer dissatisfaction or an increase in the number of product returns. Many of our products are large and require
special handling and delivery. From time to time our products are damaged in transit, which can increase return rates and harm our brand.





16







We
are subject to risks related to online payment methods.



We accept payments using a variety of methods, including credit card,
debit card, PayPal, credit accounts and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations,
compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which
may increase over time and raise our operating costs and lower profitability. We are also subject to payment card association operating
rules and certification requirements, including the current and future Payment Card Industry Data Security Standard (“PCI”)
and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply,
including in connection with any possible payment card data breach. As our business changes, we may also be subject to different rules
under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. If we fail
to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits
or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may,
among other things, be subject to fines, penalties, assessments or higher transaction fees and may lose, or face restrictions placed upon,
our ability to accept credit card and debit card payments from consumers or to facilitate other types of online payments. In addition,
the card brands and our bank could compel the Company to complete more robust PCI questionnaires and reports, especially in the event
of a data breach. If any of these events were to occur, our business, financial condition and operating results could be materially adversely
affected.





We occasionally receive orders placed with fraudulent credit card data.
We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved
payment of the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions. If we are unable
to detect or control credit card fraud, our liability for these transactions could harm our business, financial condition and results
of operations.



We
rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and
retain well qualified employees, our business could be harmed.



We
believe our success has depended, and continues to depend, on the members of our senior management team. The loss of any of our senior
management or other key employees could materially harm our business. Our future success also depends on our continuing ability to attract,
develop, motivate and retain highly qualified and skilled employees. The market for such positions is competitive. Qualified individuals
are in high demand, and we may incur significant costs to attract them. Our inability to recruit and develop highly-skilled personnel
could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements. All
of our officers and other U.S. employees are at-will employees, meaning that they may terminate their employment relationship with us
at any time, and their knowledge of our business and industry would be extremely difficult to replace. If we do not succeed in attracting
well-qualified employees or retaining and motivating existing employees, our business, financial condition and operating results may
be materially adversely affected.





17







Our
limited operating history makes it difficult to evaluate our current business and future prospects and the risk of your investment.



We
were incorporated in 2019, and, as such, have a limited operating history. We have limited historical financial data upon which to base
our projected revenue, planned operating expenses or upon which to evaluate our commercial prospects. Our operating results are not predictable
and our historical results may not be indicative of our future results as our business expands. Our limited operating history makes it
difficult for potential investors to evaluate our prospective operations and business prospects. Investors should consider our future
prospects in light of the risks and uncertainties of early-stage companies operating in a competitive environment. We may encounter unanticipated
problems as we continue to refine our business model and may be forced to make significant changes to our anticipated sales and revenue
models to compete with our competitors’ offerings, which may adversely affect our results of operations and profitability.



We have identified a material weakness in
our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain
an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to
meet our reporting obligations or fail to prevent fraud, which would harm our business and could negatively impact the price of our common
stock.



Effective
internal control over financial reporting is necessary for us to provide reliable financial reports and prevent or detect fraud. If we
cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. In connection with
management’s evaluation of the effectiveness of our internal control over financial reporting and the audit of our consolidated
financial statements for the year ended December 31, 2022, we identified a material weakness in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis.



The
following material weaknesses, which were discovered to be material during 2022, were present at December 31, 2022: lack of structure
and responsibility, insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls;
ineffective assessment and identification of changes in risk impacting internal control over financial reporting; inadequate selection
and development of effective control activities, general controls over technology and effective policies and procedures; and ineffective
evaluation and determination as to whether the components of internal control were present and functioning. The material weaknesses described
or any newly identified material weakness could result in a material misstatement of our annual or interim consolidated financial statements
that would not be prevented or detected. To remediate the material weaknesses identified above, we are implementing or plan to implement
the following measures: enhancing reporting structure and increasing the number of qualified resources in roles over internal control
over financial reporting; establishing formal risk assessment procedures to identify and monitor changes in the organization that could
have an impact on internal control over financial reporting; and developing and documenting policies and procedures, including related
business process and technology controls, assessing their effectiveness and establishing a program for continuous assessment of their
effectiveness.See also Item 9A “Controls and
Procedures— Management’s Annual Report on Internal Control Over Financial Reporting”for more information.



In
addition, our independent registered public accounting firm has not performed an evaluation of our internal control over financial reporting
in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had our independent registered
public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of
the Sarbanes-Oxley Act, additional material weaknesses may have been identified. If we are unable to successfully remediate our existing
or any future material weakness in our internal control over financial reporting, or identify any additional material weaknesses that
may exist, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with
securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements,
we may be unable to prevent fraud, our business could be harmed, investors may lose confidence in our financial reporting and the trading
price of our common stock may decline as a result. Additionally, our reporting obligations as a public company will place a significant
strain on our management, operational and financial resources and systems for the foreseeable future and may cause us to fail to timely
achieve and maintain the adequacy of our internal control over financial reporting. The requirements of being a public company, including
compliance with the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act, may strain our resources,
increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.





18







Certain
of our directors and officers could be in a position of conflict of interest.



Our
Executive Chairman, Ellery W. Roberts, is the controlling principal of 1847 Partners LLC (our “Manager”), which provides
certain services to us, including administrative supervision and oversight of our day-to-day business operations, for a quarterly management
fee equal to $62,500. He may obtain compensation and other benefits in transactions relating to us that involve our Manager. Consequently,
Mr. Roberts may be in a position of conflict. Additionally, Edward J. Tobin, a member of our board of directors, also serves as a director
of our Manager.



These
conflicts may not be resolved in our favor. Such conflicts of interest could have a material adverse effect on our business and operations.
Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors.
In the case of transactions with affiliates, there may be an absence of arms’ length negotiations with respect to the terms, conditions
and consideration with respect to goods and services provided to or by us.



Our business, financial condition and results
of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia
and Ukraine.



The global economy has been negatively impacted
by increasing tension, uncertainty and tragedy resulting from ongoing military conflict between Russia and Ukraine. The adverse and uncertain
economic conditions resulting therefrom have impacted and may further negatively impact global demand, cause supply chain disruptions
and increase costs for transportation, energy and other raw materials. Furthermore, governments in the United States, the European Union,
the United Kingdom, Canada and others have imposed financial and economic sanctions on certain industry segments and various parties in
Russia and Belarus. We are monitoring the conflict including the potential impact of financial and economic sanctions on the global economy.
Increased trade barriers, sanctions and other restrictions on global or regional trade could adversely affect our business, financial
condition and results of operations. The length and impact of the ongoing military conflict is highly unpredictable, and resulted in market
disruptions, including significant volatility in commodity prices, credit and capital markets, an increase in cyber security incidents
as well as supply chain disruptions. Further escalation of geopolitical tensions related to this military conflict and/or its expansion
could result in increased volatility and disruption to the global economy and the markets in which we operate adversely impacting our
business, financial condition or results of operations.



The ongoing COVID-19 pandemic, and any future
outbreaks or other public health emergencies, may cause a material adverse effect on our results of operations, financial position and
liquidity.



The COVID-19 pandemic continues to evolve. At
this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and
the various responses to it will impact our business, operations and financial results.



While the COVID-19 pandemic recently appeared to be trending downward,
new variants of COVID-19 continue to emerge and spread throughout the U.S. and globally. The global economy, our employees, patients,
centers, communities, and business operations have been, and may continue to be, significantly affected by the COVID-19 pandemic and new
variants. As new variants continue to emerge, the full extent to which the COVID-19 pandemic will impact our business, results of operations,
financial condition and liquidity will depend on future developments that are highly uncertain and cannot be accurately predicted.



The COVID-19 pandemic has also significantly increased
economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility
to capital. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if
at all. The COVID-19 pandemic has caused and could continue to cause periods of significant economic slowdown, which could lead to reduced
discretionary consumer spending and a corresponding reduction in demand for our products and could result in a material adverse effect
on our business, financial condition and operating results.



To counteract the effects of COVID-19, governments
around the world have implemented fiscal stimulus measures and vaccination rollouts, however, the magnitude and overall effectiveness
of these actions remain uncertain and certain U.S. federal and state laws and regulations intended to reduce the spread of COVID-19 are
in direct conflict, which means we may be unable to comply with all applicable laws and regulations in some of the jurisdictions in which
we operate. Further, the full extent of the impact of COVID-19, including the extent of its impact on our business and financial condition,
will depend on numerous evolving factors that we may not be able to accurately predict, including, but not limited to: the length of time
that the pandemic continues; the availability, distribution and continued efficacy of available treatments and vaccines; vaccination rates
among the general public and our employees; its effect on our suppliers, logistics providers and the demand for our products; the effect
of governmental regulations imposed in response to the pandemic; the effect on our customers, their communities and customer demand and
ability to pay for our products and services, which may be affected by increased consumer debt levels, changes in net worth due to market
conditions and other factors that impact consumer confidence; disruptions or restrictions on our employees’ ability to work and
travel, as well as uncertainty regarding all of the foregoing.





19









While the home industry has fared much better
during the COVID-19 pandemic than other sectors of the economy, periodic surges in COVID-19 cases due to new variants and the resurgence
of inflation brought on by labor and supply shortages have had and may continue to have an adverse impact upon our business. Much is still
unknown, including the duration and severity of the COVID-19 pandemic, the emergence of variants of COVID-19 that may continue to prolong
the pandemic, the amount of time it will take for normal economic activity to resume, and future government actions that may be taken.
Accordingly, the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that
may materially affect the operations of our suppliers, logistics providers and customers, which ultimately could result in material adverse
effects on our business, financial condition and operating results. We cannot at this time predict the full impact of the COVID-19 pandemic,
but it could have a larger material adverse effect on our business, liquidity, financial condition and operating results beyond what is
discussed within this report. We will continue to actively monitor the COVID-19 situation and may take further actions that alter our
business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests
of our customers, employees, suppliers, partners, stockholders and communities. We cannot predict with any certainty whether and to what
degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue, and we expect to face difficulty in accurately
forecasting our financial condition and operational results.



Additionally, to the extent the COVID-19 pandemic adversely affects
our business, results of operations or financial condition, it may heighten other risks described in this “Risk Factors”
section.







Risks
Related to Our Indebtedness and Liquidity



If
we require additional financing to fuel our continued business growth, such additional financing may not be available on reasonable terms
or at all.



Our
future growth, including the potential for future market expansion may require additional capital. We will consider raising additional
funds through various financing sources, including the procurement of additional commercial debt financing. However, there can be no
assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory
terms, we may be unable to execute our growth strategy, and operating results may be adversely affected. Any additional debt financing
will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.



Our
ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in our industry,
which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities,
together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace
of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.



Our
third-party loans contain certain terms that could materially adversely affect our financial condition.



We
are party to third party loans that are secured by our assets. See Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”
and “—Recent Developments” for a description of these loans. The loan documents
contain customary representations, warranties and affirmative and negative covenants. If an event of default were to occur under these
loans, the lenders thereto may pursue all remedies available to them, including declaring the obligations under the loans immediately
due and payable, which could materially adversely affect our financial condition.



Our
debt and our ability to increase future leverage could limit our operating flexibility and ability to grow, and adversely affect our
financial condition and cash flows.



We currently have and have in the past had periods
of significant leverage and any future increased leverage could adversely affect our ability to fund our operations, limit our ability
to react to changes in the economy or our industry (placing us at a competitive disadvantage compared to competitors that are less highly
leveraged), reduce our ability to use cash flows for operating, investing and financing opportunities (including working capital, capital
expenditures, mergers and acquisitions and equity or debt repurchases), and prevent us from meeting our obligations under the agreements
governing our indebtedness. Our ability to make scheduled payments on our debt obligations will depend on our ability to generate sufficient
cash flows. We cannot assure you that our business will generate cash flow from operations, or that additional capital will be available
to us, in an amount sufficient to enable us to meet our payment obligations under the Term Loan and Revolving Loan and to fund other liquidity
needs. Failure to generate sufficient cash flow would require us to refinance or restructure our debt or seek to raise additional capital
(which could be dilutive to stockholders). If we are unable to implement one or more of these alternatives, we may not be able to meet
our payment obligations under the Term Loan and Revolving Loan. Furthermore, the Term Loan and Revolving Loan contain covenants that may
restrict our ability to implement our business plan, finance future operations, pay dividends, respond to changing business and economic
conditions, secure additional financing, and engage in certain transactions (including mergers, acquisitions and dispositions).





If
we default under the Term Loan and Revolving Loan because of an inability to meet our payment obligations, a covenant breach or otherwise,
all outstanding amounts thereunder could become immediately due and payable. We cannot assure you that we would have sufficient funds
to repay all the outstanding amounts under the Term Loan and Revolving Loan, and any acceleration of amounts due would have a material
adverse effect on our business, growth strategy, liquidity, financial condition and ability to continue as a going concern. We and our
subsidiaries also may be able to incur substantial additional indebtedness in the future, subject to the foregoing restrictions, which
could exacerbate the leverage risks noted above.



From
time to time, based on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and subject
to compliance with applicable laws and regulations, we may seek to utilize cash on hand, borrowings or raise capital to retire, repurchase
or redeem our notes, repay debt, repurchase shares of our common stock or otherwise enter into similar transactions to support our capital
structure and business or utilize excess cash flow on a strategic basis.





20







Risks
Related to Laws and Regulations



Government
regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could
substantially harm our business and results of operations.



We
are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce.
Existing and future regulations and laws could impede the growth of the Internet, e- commerce or mobile commerce. These regulations and
laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer
protection, Internet neutrality and gift cards. It is not clear how existing laws governing issues such as property ownership, sales
and other taxes and consumer privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the
Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. It is possible that general business
regulations and laws, or those specifically governing the Internet or e-commerce, may be interpreted and applied in a manner that is
inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices
have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with
any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by
governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense
of these proceedings, distract our management, increase our costs of doing business, decrease the use of our sites by consumers and suppliers
and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties
from the costs or consequences of non-compliance with any such laws or regulations. Adverse legal or regulatory developments could substantially
harm our business. Further, if we enter into new market segments or geographical areas and expand the products and services we offer,
we may be subject to additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it,
in certain jurisdictions. We will incur additional costs complying with these additional obligations and any failure or perceived failure
to comply would adversely affect our business and reputation.







Failure
to comply with applicable laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current
or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our
business and our financial condition.



A
variety of laws and regulations govern the collection, use, retention, sharing, export and security of personal information. Laws and
regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations.
These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with
other rules or our practices. As a result, our practices may not comply, or may not comply in the future with all such laws, regulations,
requirements and obligations. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any applicable
privacy or consumer protection- related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct,
regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely
affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities or others
or other liabilities or require us to change our operations and/or cease using certain data sets. Any such claim, proceeding or action
could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management,
increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with
any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or
disclosure of data that we store or handle as part of operating our business.



In
addition, various federal, state and foreign legislative and regulatory bodies, or self-regulatory organizations, may expand current
laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer
protection. Any such changes may force us to incur substantial costs or require us to change our business practices. This could compromise
our ability to pursue our growth strategy effectively and may adversely affect our ability to acquire customers or otherwise harm our
business, financial condition and operating results.



If
the use of “cookie” tracking technologies is further restricted, regulated, or blocked, or if changes in technology cause
cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of Internet user information
we collect would decrease, which could harm our business and operating results.



Federal,
state and international governmental authorities continue to evaluate the privacy implications inherent in the use of proprietary or
third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. U.S. and foreign
governments have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability
of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before
a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers
of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to
prevent the placement of cookies or to block other tracking technologies, which could if widely adopted significantly reduce the effectiveness
of such practices and technologies. The regulation of the use of cookies and other current online tracking and advertising practices
or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit
our ability to acquire new customers on cost-effective terms and consequently, materially adversely affect our business, financial condition
and operating results.





21







Changes
in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our sites and our business, financial
condition and operating results.



Due
to the global nature of the Internet, it is possible that various states or foreign countries might attempt to impose additional or new
regulation on our business or levy additional or new sales, income or other taxes relating to our activities. Tax authorities at the
international, U.S. federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce.
New or revised international, U.S. federal, state or local tax regulations or court decisions may subject us or our customers to additional
sales, income and other taxes. For example, on June 21, 2018, the U.S. Supreme Court rendered a 5-4 majority decision in South Dakota
v. Wayfair, Inc., 138 S. Ct. 2080 (2018) where the Court held, among other things, that a state may require an out-of-state seller
with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers in the state, overturning
existing court precedent. Other new or revised taxes and, in particular, sales taxes, value added taxes and similar taxes could increase
the cost of doing business online and decrease the attractiveness of selling products over the Internet. New taxes and rulings could
also create significant increases in internal costs necessary to capture data and collect and remit taxes. In addition, we may charge
sales taxes in jurisdictions where our competitors do not, resulting in our product prices potentially being higher than those of our
competitors. As a result, we may lose sales to our competitors in these jurisdictions. Any of these events or a successful assertion
by one or more states or foreign countries requiring us to collect taxes where we currently do not do so, or to collect more taxes in
a jurisdiction in which we currently collect some taxes, could have a material adverse effect on our business, financial condition and
operating results.



Changes
to applicable tax laws and regulations or exposure to additional income tax liabilities could adversely affect our results of business,
financial condition and operating results.



We are subject to various complex and evolving
U.S. federal, state and local taxes. U.S. federal, state and local tax laws, policies, statutes, rules, regulations or ordinances could
be interpreted, changed, modified or applied adversely to us, possibly with retroactive effect, and may have an adverse effect on our
business and future profitability. For example, several tax proposals have been set forth that would, if enacted, make significant changes
to U.S. tax laws. Such proposals have included an increase in the U.S. federal income tax rate applicable to corporations (such as us)
from 21%, the imposition of a minimum tax on book income for certain corporations, and the imposition of an excise tax on certain corporate
stock repurchases that would be borne by the corporation repurchasing such stock. Congress could consider, and could include some or all
of these proposals in connection with tax reform that may be undertaken. It is unclear whether these or similar changes will be enacted
and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other
similar changes in U.S. federal income tax laws could adversely affect us, which, in turn, could adversely affect our business, financial
condition and operating results.





We
may not be able to adequately protect our intellectual property rights.



We
regard our customer lists, domain names, trademarks, trade dress, trade secrets, proprietary technology and similar intellectual property
as critical to our success, and we rely on trade secret protection, agreements and other methods with our employees and others to protect
our proprietary rights. We might not be able to obtain broad protection for all of our intellectual property. For example, we are the
registrant of the Internet domain names for our websites. However, we might not be able to prevent third parties from registering, using
or retaining domain names that interfere with our consumer communications or infringe or otherwise decrease the value of our marks, domain
names and other proprietary rights.



The
protection of our intellectual property rights may require the expenditure of significant financial, managerial and operational resources.
We may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights
or proprietary rights or to establish the validity of such rights. Any litigation, whether or not it is resolved in our favor, could
result in significant expense to us and divert the efforts of our technical and management personnel, which may materially adversely
affect our business, financial condition and operating results. Moreover, the steps we take to protect our intellectual property may
not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may not
be able to broadly enforce all of our intellectual property rights. Any of our intellectual property rights may be challenged by others
or invalidated through administrative process or litigation. Additionally, the process of obtaining intellectual property protections
is expensive and time-consuming, and we may not be able to pursue all necessary or desirable actions at a reasonable cost or in a timely
manner. Even if issued, there can be no assurance that these protections will adequately safeguard our intellectual property, as the
legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are
uncertain. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology
or intellectual property rights. We may also be exposed to claims from third parties claiming infringement of their intellectual property
rights, or demanding the release or license of open source software or derivative works that we developed using such software (which
could include our proprietary code) or otherwise seeking to enforce the terms of the applicable open source license. These claims could
result in litigation and could require us to purchase a costly license, publicly release the affected portions of our source code, be
limited in or cease using the implicated software unless and until we can re-engineer such software to avoid infringement or change the
use of the implicated open source software.





22







We
may be accused of infringing intellectual property rights of third parties.



The
e-commerce industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted
and expensive litigation for many companies. We may be subject to claims and litigation by third parties that we infringe their intellectual
property rights. The costs of supporting such litigation and disputes are considerable, and there can be no assurances that favorable
outcomes will be obtained. As our business expands and the number of competitors in our market increases and overlaps occur, we expect
that infringement claims may increase in number and significance. Any claims or proceedings against us, whether meritorious or not, could
be time-consuming, result in considerable litigation costs, require significant amounts of management time or result in the diversion
of significant operational resources, any of which could materially adversely affect our business, financial condition and operating
results.



We
have received in the past, and we may receive in the future, communications alleging that certain items posted on or sold through our
sites violate third-party copyrights, designs, marks and trade names or other intellectual property rights or other proprietary rights.
Brand and content owners and other proprietary rights owners have actively asserted their purported rights against online companies.
In addition to litigation from rights owners, we may be subject to regulatory, civil or criminal proceedings and penalties if governmental
authorities believe we have aided and abetted in the sale of counterfeit or infringing products.



Such
claims, whether or not meritorious, may result in the expenditure of significant financial, managerial and operational resources, injunctions
against us or the payment of damages by us. We may need to obtain licenses from third parties who allege that we have violated their
rights, but such licenses may not be available on terms acceptable to us, or at all. These risks have been amplified by the increase
in third parties whose sole or primary business is to assert such claims.



We
may be subject to product liability and other similar claims if people or property are harmed by the products we sell.



Some
of the products we sell may expose us to product liability and other claims and litigation (including class actions) or regulatory action
relating to safety, personal injury, death or environmental or property damage. Some of our agreements with members of our supply chain
may not indemnify us from product liability for a particular product, and some members of our supply chain may not have sufficient resources
or insurance to satisfy their indemnity and defense obligations. Although we maintain liability insurance, we cannot be certain that
our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically
reasonable terms, or at all.



We
are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s
time and attention.



From time to time, we are subject to litigation
or claims that could negatively affect our business operations and financial position. Litigation disputes could cause us to incur unforeseen
expenses, result in site unavailability, service disruptions, and otherwise occupy a significant amount of our management’s time
and attention, any of which could negatively affect our business operations and financial position. We also from time to time receive
inquiries and subpoenas and other types of information requests from government authorities and we may become subject to related claims
and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests and
related legal proceedings is difficult to predict, such matters can be expensive, time consuming and distracting, and adverse resolutions
or settlements of those matters may result in, among other things, modification of our business practices, reputational harm or costs
and significant payments, any of which could negatively affect our business operations and financial position. See Item 3, “Legal
Proceedings” for a description of our pending litigation and claims.



Risks
Related to Ownership of Our Common Stock





We have a limited number of shares of common stock available
for issuance, which may limit our ability to raise capital.



We have historically relied on the equity markets
to raise capital to fund our business and operations. As of December 31, 2022, we had only 2,220,201 shares of common stock available
for issuance, of which all shares were reserved for issuance upon vesting or exercise of equity awards and options, under our employee
stock purchase and equity incentive plans, and under our at-the-market offering program. The limited number of shares available for issuance
may limit our ability to raise capital in the equity markets and satisfy obligations with shares instead of cash, which could adversely
impact our ability to fund our business and operations.







23







We
may not be able to maintain a listing of our common stock and warrants on NYSE American.



As a result of the matters relating to the investigation
(See “Item 7 Management’s Discussion and Analysis of Financial
Condition and Results of Operation – Investigation”)  our former auditor withdrew its previously issued audit opinion on our December 31, 2021
consolidated financial statements, issued on March 31, 2022, and declined to be associated with the quarterly financial statements for
the periods ended June 30, 2021, September 30, 2021, and March 31, 2022, filed on August 8, 2021, November 16, 2021 and May 12, 2022,
respectively. If the Company does not make progress consistent with the plan discussed under the Risk Factor “Prior to the filing
of this annual report on Form 10-K, we have been delinquent in our SEC reporting obligations for over 12 months. Although we expect to
file our periodic reports in a timely fashion going forward, we cannot provide assurance that our business and the price of our common
stock will not be materially adversely affected by our previous failure to file required periodic reports.” during the plan period
discussed therein or if the Company does not complete its Delayed Filings with the Securities and Exchange Commission by the end of the
maximum 12-month cure period on August 22, 2023, Exchange staff will initiate delisting proceedings as appropriate.



Our
common stock and warrants are currently traded on NYSE American. We must meet certain financial and liquidity criteria to maintain the
listing of our common stock and warrants. If we fail to meet any listing standards or if we violate any listing requirements, our common
stock or warrants may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national
securities exchange outweighs the benefits of such listing. A delisting of our common stock and warrants from NYSE American may materially
impair our stockholders’ ability to buy and sell our common stock and warrants and could have an adverse effect on the market price
of, and the efficiency of the trading market for, our common stock and warrants. The delisting of our common stock or warrants could
significantly impair our ability to raise capital and the value of your investment.



The
market price, trading volume and marketability of our common stock and warrants may, from time to time, be significantly affected by
numerous factors beyond our control, which may materially adversely affect the market price of your common stock and warrants, the marketability
of your common stock and warrants and our ability to raise capital through future equity financings.



The
market price and trading volume of our common stock and warrants may fluctuate significantly. Many factors that are beyond our control
may materially adversely affect the market price of your common stock and warrants, the marketability of your common stock and warrants
and our ability to raise capital through equity financings. These factors include the following:



| | ● | actual
                                            or anticipated variations in our periodic operating results;
| | - | ---------------------------------------------------------------------------------------------------------------



| | ● | increases
                                            in market interest rates that lead investors of our securities to demand a higher investment
                                            return;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | changes
                                            in earnings estimates or financial projections we may provide to the public and any changes
                                            in these estimates or projections or our failure to meet these estimates or projections;
                                            failure of securities analysts to initiate or maintain coverage of our company, changes in
                                            financial estimates or ratings by any securities analysts who follow us or our failure to
                                            meet these estimates or the expectations of investors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | changes
                                            in market valuations of similar companies;
| | - | ----------------------------------------------------------------------------------------------



| | ● | actions
                                            or announcements by us or our competitors of new businesses, services or products, significant
                                            technical innovations, acquisitions, strategic partnerships, joint ventures, operating results
                                            or capital commitments;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | adverse
                                            market reaction to any increased indebtedness we may incur in the future;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | ● | changes
                                            in operating performance and stock market valuations of other technology or retail companies
                                            generally, or those in our industry in particular;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | price
                                            and volume fluctuations in the overall stock market, including as a result of trends in the
                                            economy as a whole;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | changes
                                            in laws or regulations applicable to our business;
| | - | ------------------------------------------------------------------------------------------------------



| | ● | additions
or departures of key personnel;
| | - | -----------------------------------------



| | ● | actions
                                            by stockholders, including sales of large blocks of our common stock;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | ● | speculation
                                            in the media, online forums, or investment community; and
| | - | -----------------------------------------------------------------------------------------------------------------



| | ● | our
                                            ability to maintain the listing of our common stock and warrants on NYSE American.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



In
addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices
of equity securities of many technology companies, including e-commerce companies. Stock prices of many technology companies, including
e-commerce companies, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. Volatility
in our stock price could adversely affect our business and financing opportunities and expose us to litigation. Securities litigation
can subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect
our business, financial condition and operating results.





24







Our
warrants may not have any value.



Our outstanding warrants have a weighted average
remaining contractual life of 3.4 years with a weighted average exercise price of $2.30. There can be no assurance that the market price
of our common stock will ever equal or exceed the exercise price of the warrants. In the event that the stock price of our common stock
does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any
value.





Holders
of our warrants will have no rights as stockholders until such holders exercise their warrants and acquire our common stock.



Until
holders of our warrants acquire common stock upon exercise thereof, such holders will have no rights with respect to the common stock
underlying the warrants. Upon exercise of the warrants, the holders will be entitled to exercise the rights of a common stockholder only
as to matters for which the record date occurs after the exercise date.



An
active, liquid trading market for our common stock may not be sustained, which may make it difficult to sell our common stock and warrants.



We
cannot predict the extent to which investor interest in us will sustain a trading market or how active and liquid that market may remain.
If an active and liquid trading market is not sustained, holders of our common stock and warrants may have difficulty selling any of
our common stock that they purchased at a price above the price they purchased it or at all. The failure of an active and liquid trading
market to continue would likely have a material adverse effect on the value of our common stock. The market price of our common stock
and warrants may decline, and holders of our common stock and warrants may not be able to sell their shares of our common stock and warrants
at or above the price they paid or at all. An inactive market may also impair our ability to raise capital to continue to fund operations
by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.



We
have not paid in the past and do not expect to declare or pay dividends in the foreseeable future.



We
have not paid in the past and do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest
future earnings in the development and growth of our business. In addition, under our Credit Agreement, we are restricted from paying
cash dividends, and we expect these restrictions to continue in the future, which may in turn limit our ability to pay cash dividends
on our common stock. Our ability to pay cash dividends may also be restricted by the terms of any future credit agreement or any future
debt or preferred equity securities that we or our subsidiaries may issue. Therefore, holders of our common stock may not receive any
return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or
at all.



If
securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market
trading volume of our common stock and warrants could be negatively affected.



Any
trading market for our common stock and warrants may be influenced in part by any research reports that securities industry analysts
publish about us, our business, our market and our competitors. We do not currently have and may never obtain research coverage by securities
industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common
stock and warrants could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade
our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of
our common stock and warrants could be negatively affected.



Future
issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock could cause the market
price of our common stock to decline and would result in the dilution of our stockholders’ holdings.



Future
issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, could cause the market
price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities on the price of our
common stock. In all events, future issuances of our common stock would result in the dilution of our stockholders’ holdings. In
addition, the perception that new issuances of our securities could occur could adversely affect the market price of our common stock.





25







Future
issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of
preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely
affect the level of return holders of our common stock may be able to achieve from an investment in our common stock.



In
the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of
our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior
to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred
stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating
distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend
in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any
such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings
we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.



If
our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.



The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized
for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions
in such securities is provided by the exchange or system. If we do not retain a listing on NYSE American or another national securities
exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules
require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction
in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure
statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability
statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common
stock, and therefore stockholders may have difficulty selling their shares.



For
as long as we are an “emerging growth company,” or a “smaller reporting company” we will not be required to comply
with certain reporting requirements that apply to some other public companies, and such reduced disclosures requirement may make our
common stock less attractive.



As
an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), we may take
advantage of exemptions from certain disclosure requirements applicable to other public companies that are not emerging growth companies.
We are an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross
revenues of $1.235 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the first sale of
common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities
Act”); (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt;
or (iv) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC.



For
so long as we remain an “emerging growth company,” we will not be required to, among other things:



| | ● | have
                                            an auditor report on our internal control over financial reporting pursuant to Sarbanes-Oxley;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | ● | comply
                                            with any new requirements adopted by the Public Company Accounting Oversight Board requiring
                                            mandatory audit firm rotation or a supplement to the auditor’s report providing additional
                                            information about our audit and our financial statements;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | include
                                            detailed compensation discussion and analysis in our filings under the Exchange Act and instead
                                            may provide a reduced level of disclosure concerning executive compensation; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | hold
                                            a non-binding stockholder advisory vote on executive compensation and stockholder approval
                                            of any “golden parachute” payments not previously approved.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Notwithstanding
the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed
issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have either: (i) a public float
of less than $250 million, or (ii) annual revenues of less than $100 million during the most recently completed fiscal year and: (A)
no public float, or (B) a public float of less than $700 million. In the event that we are still considered a smaller reporting company,
at such time we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase
but will still be less than it would be if we were not considered either an “emerging growth company” or a smaller reporting
company. Specifically, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation
disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered
public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain
other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years
of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an emerging growth company
or smaller reporting company may make it harder for investors to analyze the Company’s results of operations and financial prospects.





26







Because
of these exemptions, some investors may find our common shares less attractive, which may result in a less active trading market for
our common stock, and our share price may be more volatile.



Anti-takeover
provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, and limit attempts
by our stockholders to replace or remove our current management.



Certain
provisions of Delaware law and our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of
control or changes in our management. Our certificate of incorporation and bylaws include provisions that:



| | ● | permit
                                            the board of directors to establish the number of directors and fill any vacancies and newly
                                            created directorships;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | provide
                                            that the Board is expressly authorized to adopt, amend or repeal our bylaws;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | ● | providing
                                            indemnification to our directors and officers;
| | - | ----------------------------------------------------------------------------------------------------



| | ● | controlling
                                            the procedures for the conduct and scheduling of board of directors and stockholder meetings;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | do
                                            not give the holders of our common stock cumulative voting rights with respect to the election
                                            of directors;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | provide
                                            that directors may only be removed by the majority of the shares of voting stock then outstanding;
                                            and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | establish
                                            advance notice requirements for nominations for election to our board of directors or for
                                            proposing matters that can be acted upon by stockholders at annual stockholder meetings.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult
for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. They
may also make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by
many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.



These
provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.



ITEM
1B. UNRESOLVED STAFF COMMENTS.



Not
applicable.



ITEM
2. PROPERTIES.



We
operate the following facilities:



|                          |  | Description
    of Use                   |  | Leased Square
 Footage (1) |        
|------------------------- |  | ---------------------------------------- |  | -------------------------- | -------
|Property Location:        |  |                                          |  |                            |        
|Brooklyn,
    New York    |  | Headquarters;
    Office Space; Showroom |  |                            | 21,000 
|Brooklyn,
    New York    |  | Office Space                             |  |                            | 5,835  
|Brooklyn,
    New York    |  | Showroom                                 |  |                            | 3,800  
|Somerset,
    New Jersey  |  | Warehouse                                |  |                            | 129,785
|Hamilton,
    New Jersey  |  | Warehouse                                |  |                            | 135,000
|St.
    Charles, Missouri |  | Office Space; Showroom;
    Warehouse    |  |                            | 86,800 
|Ballwin, Missouri(2)      |  | Office Space; Showroom;
    Warehouse    |  |                            | 50,000 
|Largo,
    Florida        |  | Showroom;
    Warehouse                  |  |                            | 5,800  
|Total                     |  |                                          |  |                            | 438,020



| | (1) | Represents
the total leased space.
| | --- | ----------------------------------

| | (2) | On
June 30, 2021, we closed this warehouse and retail showroom in anticipation of relocating to a new facility. We intend to sub-lease this
space.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



We
believe that all our current facilities have been adequately maintained, are generally in good condition, and are suitable and capable
of supporting our operations for the foreseeable future.





27







ITEM
3. LEGAL PROCEEDINGS.



Derivative Actions



At
the Company’s annual meeting on December 21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended
and Restated Certificate of Incorporation, dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number
of authorized shares of the Company’s common stock, par value $0.0001 per share (“Common Stock” and such proposal,
the “Share Increase Proposal”) by 50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021,
the Share Increase Proposal was adopted and a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment
adopted pursuant to the Share Increase Proposal (the “Certificate of Amendment”) was filed with the Secretary of State of
the State of Delaware (the “Delaware Secretary of State”). To date, none of these newly authorized shares has actually been
issued.



Three purported beneficial owners of Common
Stock subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase
Proposal, specifically questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote
shares of Common Stock held by them for the benefit of their customers in the absence of instructions from the beneficial owners.
Based on an examination of the situation performed following receipt of these demands, the Company believes that the vote at the
annual meeting was properly tabulated and that the proposed amendment was properly adopted in accordance with Delaware law. In light
of the demands, however, and to ensure against any future question as to the validity of these newly authorized shares, the Company
elected to seek validation of its Certificate of Amendment through a Petition to the Court of Chancery of the State of Delaware
(the “Court of Chancery”) pursuant to Section 205 of the Delaware General Corporation Law (the “205
Petition”). The action, styled In re 1847 Goedeker Inc., C.A. 2022-0219-SG (the “Action”), sought entry by the
Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating the additional shares
of Common Stock authorized under the Share Increase Proposal. Two purported stockholders objected to the 205 Petition. One such objecting, purported stockholder (the “Stockholder
Plaintiff”) filed his own lawsuit (which was then consolidated with the 205 Petition) requesting that such relief not be granted
and asserting two claims for relief: first, against the Company for alleged violation of the Delaware General Corporation Law Section
225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal; and second, asserting that the Company’s
directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment
to the Certificate of Incorporation to be filed with the Delaware Secretary of State. The Court of Chancery held a hearing on May 27,
2022, to consider the Company’s motion for entry of an order under Section 205 and subsequently entered an order denying the motion
without prejudice on June 30, 2022. On July 7, 2022, the Company filed a Certificate of Correction with the Secretary of State of the
State of Delaware, voiding the Charter Amendment and causing the number of authorized shares of Common Stock to remain at 200,000,000.



On June 12, 2023, the Company submitted to
the Court of Chancery a Stipulation and [Proposed] Order Regarding Notice and Closing of the Case regarding the Action (the
“Dismissal Order”). As stated in the Dismissal Order, the Company and the other parties to the Action negotiated at
arm’s length and resolved the stockholders’ claims to entitlement to a mootness fee award, and the Company agreed to pay
$475,000 for attorneys’ fees and expenses to the stockholders’ counsel (the “Attorneys’ Fees”).
Pursuant to Court of Chancery Rules 23(e) and 41(a), the parties to the Action stipulated to voluntary dismissal of the Action with
prejudice as to the Stockholder Plaintiff and without prejudice as to any actual or potential claims of any other members of the
putative class, and such dismissal was granted by the Court on June 13, 2023. As stipulated in the Dismissal Order, the Company paid
the Attorneys’ Fees to the stockholders’ counsel on June 28, 2023 and such payment fully satisfied and resolved the stockholders’
and the stockholders’ counsel’s entitlement to any fees or expenses in the Action.



On October 31, 2022, a putative shareholder class
action was filed against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as
well as certain underwriters of the Company’s 2020 initial public offering (the “IPO”).  The action was commenced
in the United States District Court for the Eastern District of New York court and is captioned Maschhoff v. Polished.com Inc., et
al., No. 1:22-cv-06606. The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as
Sections 10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements
and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about December 20, 2022, plaintiffs
filed a motion for the appointment of lead plaintiff and lead counsel. Although that motion is fully briefed, to date, oral argument has
yet to be scheduled.





28







On January 26, 2023, a derivative stockholder
complaint was filed against certain of the Company’s current and former officers and directors, naming the Company as a nominal
defendant. The action was commenced in the United States District Court for the Eastern District of New York court and is captioned Wong
v. Moore et al., No. 1:23-cv-00559. The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duty,
unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, arising from alleged misstatements and omissions
made in certain of the Company’s SEC filings made in connection with the IPO. On or about March 7, 2023, plaintiff filed a stipulation
and proposed order to stay proceedings until any motions to dismiss in the related class action (captioned Maschhoff v. Polished.com
Inc. et al., No. 1:22-cv-06606) are decided. On March 23, 2023, the stipulation was so-ordered.



On February 13, 2023, a derivative stockholder
complaint was filed against certain of the Company’s current and former officers and directors as well as the Company’s external
manager, naming the Company as a nominal defendant. The action was commenced in the United States District Court for the Eastern District
of New York court and is captioned Gossett v. Moore, et al., No. 1:23-cv-1168. The complaint asserts claims for breach of fiduciary
duty against the former officers and directors and aiding and abetting breaches of fiduciary of duty against the external manager, arising
from alleged misstatements and omissions made in certain of the Company’s SEC filings made in connection with the IPO. On or about
April 24, 2023, plaintiffs filed a joint stipulation and proposed order consolidating the related derivative actions and appointing co-lead
counsel. To date, the stipulation has yet to be ordered.



Action Against Former Employee



On February 22, 2023, the Company filed an action
against a former employee asserting a claim for conversion based on the individual’s retention of profits from sales to the Company’s
customers. The action was commenced in the Supreme Court of the State of New York, County of Kings and is captioned Polished.com, Inc.
v. Naoulo, No. 505712/2023. On March 5, 2023, the defendant filed an answer and asserted counterclaims for breach of contract, breach
of implied contract and defamation. On May 25, 2023, the defendant filed an amended answer and added a counterclaim for tortious interference
with prospective business relations. On June 14, 2023, the Company moved to dismiss the amended counterclaims. The opposition has not
been filed yet.



From
time to time, we may be subject to various legal proceedings and claims arising in the ordinary course of business. All other litigation
currently pending against the Company relates to matters that have arisen in the ordinary course of business and we believe that such
matters will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.



ITEM
4. MINE SAFETY DISCLOSURES.



Not
applicable.



29







PART
II



ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.



Market
Information



Our
common stock and warrants are traded on the NYSE American under the symbols “POL” and “POL WS,” respectively.



Holders
of Record



As of July 26, 2023, there were approximately
52 stockholders of record of our common stock and 1 holder of record of our warrants. For our common stock, the actual number of holders
is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street
name by brokers or held by other nominees. The number of holders of record of common stock also does not include stockholders whose shares
may be held in trust by other entities.





Dividend
Policy



We
have never declared or paid cash dividends on our common stock. We do not anticipate declaring or paying any cash dividends to holders
of our common stock in the foreseeable future. Holders of our warrants are not entitled to participate in any dividends declared by our
board of directors. We currently intend to retain future earnings, if any, to finance the growth of our business. Our future dividend
policy is within the discretion of our board of directors and will depend upon then-existing conditions, including our results of operations,
financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other
factors our board of directors may deem relevant. In addition, under our Credit Agreement, we are restricted from paying cash dividends,
and we expect these restrictions to continue in the future, which may in turn limit our ability to pay cash dividends on our common stock.
Our ability to pay cash dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred
equity securities that we or our subsidiaries may issue. See also Item 1A “Risk Factors—Risks Related Ownership of Our
Common Stock—We do not expect to declare or pay dividends in the foreseeable future.”



Securities
Authorized for Issuance under Equity Compensation Plans



See
Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”



Recent
Sales of Unregistered Securities



None.



Issuer’s
Purchases of Equity Securities



On December 17, 2021 the Company’s board
of directors authorized the repurchase of up to $25.0 million of the Company’s common stock. Subject to certain conditions, repurchases
may be made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from
time to time, depending on market conditions.



During the year ended December 31, 2022, the
Company purchased 1,229,222 shares of its common stock at a total purchase price of $2 million or $1.63 per share. Effective
December 31, 2022, the board of directors authorized the retirement of these shares. The Company has $23.0 million remaining under its current share repurchase authorization.



ITEM
6. [Reserved.]



Part
II, Item 6 is no longer required due to amendments to Regulation S-K that eliminate Item 301.





30







ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS



The following discussion and analysis summarizes
the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented
below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related
notes thereto included Part II, Item 8 of this report. This report restates amounts as of and for the year ended December 31, 2021 included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and for the period ended March 31, 2022 included in our
Quarterly Report on Form 10-Q for the period ended March 31, 2022. See Note 2, “Summary of Significant Accounting Policies –
Restatement,” in “Item 8 Financial Statements and Supplementary Data”, for additional information. The restatement
also includes corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated
financial statements. The impact of the restatement is reflected in Management’s Discussion and Analysis of Financial Condition
and Results of Operations below.





Overview



We operate a content-driven and technology-enabled
shopping destination for appliances, furniture and home goods. With warehouse fulfillment centers in the Northeast and Midwest, as well
as showrooms in Brooklyn, New York, and Largo, Florida. We offer one-stop shopping for national and global brands. We carry many household
name-brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and also carry many major luxury appliance brands such
as Miele, Thermador, La Cornue, Dacor, Ilve, Jenn-Air and Viking, among others. We also sell furniture, fitness equipment, plumbing fixtures,
televisions, outdoor appliances, and patio furniture, as well as commercial appliances for builder and business clients.



Recent
Developments



Investigation



On August 15, 2022, the Company filed a form 12b-25
with the Securities and Exchange Commission related to its 10-Q for the six months ended June 30, 2022, reporting that the Audit Committee
had begun an independent investigation regarding certain allegations made by certain former employees related to the Company’s business
operations.



On December 22, 2022, the Company issued a press
release stating that the Board had completed its assessment of the results of the
Audit Committee’s previously disclosed investigation. The investigation, which was supported by independent legal counsel
and advisors, produced the following key findings pertaining to the Company’s business operations under former management during
the 2021-2022 period:



| | ● | The Company was charged by its former Chief Executive Officer
approximately $800,000 for expenses unrelated to the Company and its operations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The Company appears to not have had in place all the necessary
documentation for all of its employees and, in turn, may have failed to comply with certain legal requirements. The Company subsequently put in place enhanced controls to remedy any
labor issues, including but not limited to hiring a controller with significant relevant experience, hiring a new human resources director
who is leading an overhaul of certain employee policies and initiating the installation of enhanced payroll software that requires all
new employees to provide I-9 information and verifies the validity of key information, and believes it is now in full compliance with
legal requirements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The Company’s controls, software and procedures for managing and tracking inventory, including
                                                                                       damaged inventory, were insufficient. The Company subsequently put in place enhanced controls to remedy such issues, including but
                                                                                       not limited to initiating the installation of enhanced software and systems for inventory management, ensuring the implementation of
                                                                                       standardized policies for the handling and sale of damaged inventory and developing a plan to convert the Company to a new ERP and
                                                                                       system for accounting.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company entered into a settlement agreement with Albert Fouerti
regarding matters relating to the investigation. Among other things, Mr. Fouerti agreed not to compete for a period of two years following
the execution of the settlement agreement.



Resignation of Auditors



On December 20, 2022, the
Company received a letter from the Company’s independent registered public accounting
firm, Friedman LLP, informing the Company of its decision to resign effective December 20, 2022 as the auditors
of the Company.





31









In the Letter, Friedman advised the Company that
based on the results of the Board’s internal investigation as reported to Friedman,
it appears there may be material adjustments and/or disclosures necessary to previously reported financial information. Additionally,
the Board’s internal investigation has identified facts, that if further investigated by Friedman, might cause Friedman to no longer
to be able to rely on the representations of (i) management that was in place at the time Friedman issued its audit report for the year
ended December 31, 2021, or (ii) management that was in place at the time of Friedman’s association with the quarterly financial
statements for the periods ended June 30, 2021, September 30, 2021 and March 31, 2022. Prior to the Letter, in the past two years, the
Company had not received from Friedman an adverse opinion or a disclaimer of opinion, and their opinion was not qualified or modified
as to uncertainty, audit scope, or accounting principles. The resignation by Friedman was neither recommended nor approved by the Audit Committee or the Board and there were no disagreements with management and Friedman.
Friedman had previously reported a material weakness to the Audit Committee, which was included on the Company’s Form 10-K for the
year ended December 31, 2021, filed on March 31, 2022, regarding the ineffectiveness of the Company’s internal controls over financial
reporting.



In connection with the Letter, Friedman advised us that it was withdrawing
its previously issued audit opinion on our December 31, 2021 consolidated financial statements, issued on March 31, 2022, and declined
to be associated with the quarterly financial statements for the periods ended June 30, 2021, September 30, 2021, and March 31, 2022,
filed on August 8, 2021, November 16, 2021 and May 12, 2022, respectively.



Engagement of New Independent Registered
Public Accounting Firm



On December 26, 2022, the Audit Committee approved the engagement of
Sadler, Gibb & Associates, LLC as the Company’s independent registered public accounting firm for the fiscal years ended December
31, 2022 and 2021.



Cybersecurity Incident



On March 16, 2023, we experienced a hacking attack
that impacted the check-out page on the Company’s e-commerce website. In response, the Company deployed containment measures, launched
an investigation with assistance from third-party cybersecurity experts and notified appropriate law enforcement authorities. The Company
considers the matter remediated. The investigation determined that certain personal information, including names, addresses, zip codes,
payment card numbers, expiration dates, and CVVs, was extracted from the Company’s systems as part of this incident. The investigation
could not determine with precision which payment card data was included in the timeframe of exposure. Out of an abundance of caution,
the Company notified all payment card users who made transactions on the Company’s e-commerce website within the window of exposure.
As of May 24, 2023, the Company provided appropriate notice to approximately 9,290 individuals, as well as to regulatory authorities in
accordance with applicable law. The Company has incurred, and may continue to incur, certain expenses related to this attack. Further,
the Company remains subject to risks and uncertainties as a result of the incident, including as a result of the data that was extracted
from the Company’s network as noted above. Additionally, security and privacy incidents have led to, and may continue to lead to,
additional regulatory scrutiny. Although we are unable to predict the full impact of this incident, including how it could negatively
impact our operations or results of operations on an ongoing basis, we presently do not expect that it will have a material effect on
the Company’s operations.



The Company has engaged outside consultants through its outside counsel
to help assess and expand the Company’s cyber defenses and payment card protections and policies.



Impact of COVID-19 Pandemic



In 2022, we experienced only minor impact to our operations, primarily
due to staffing challenges brought on by COVID-19. We continue to monitor the current COVID-19 situation in each market in which we operate
and will react accordingly. In May 2023, the US Government declared an end
to the pandemic.



Trends
and Principal Factors Affecting Our Financial Performance



Our
operating results are primarily affected by the following factors:



| | ● | our
                                            ability to offer competitive product pricing;
| | - | ---------------------------------------------------------------------------------------------



| | ● | our
                                            ability to broaden product offerings;
| | - | -------------------------------------------------------------------------------------



| | ● | industry
                                            demand and competition;
| | - | ----------------------------------------------------------------------------



| | ● | market
                                            conditions and our market position; and
| | - | ------------------------------------------------------------------------------------------



Supply chain constraints also impacted our order
fulfillment timing, further amplifying order cancellations and refunds caused by the outbreak of the COVID-19 pandemic. While switching to the authorization
model in July 2021 helped mitigate order cancellations, we continued to experience order cancellations related to customer deposits collected
in 2020 and early 2021 throughout third and fourth quarter 2021, resulting in negative operating cash flow.





32









Factors Affecting Comparability of Our
Future Results of Operations to Our Historical Results of Operations



The comparability of our results of operations between the periods discussed below is affected
by the acquisitions we have completed during such periods. We may also evaluate and pursue acquisitions in the future, and such acquisitions,
if completed, will continue to impact the comparability of our financial results. Our acquisitions may have materially different characteristics
than our historical results, and such differences in economics may impact the comparability of our future results of operations to our
historical results.



| | ● | On June 2, 2021, we completed the Appliances Connection acquisition.
| | - | --------------------------------------------------------------------



| | ● | On July 29, 2021, we completed the Appliance Gallery Acquisition.
| | - | -----------------------------------------------------------------



The Company accounted for the above acquisitions using the acquisition
method of accounting in accordance with FASB ASC Topic 805 “Business Combinations.” In accordance with ASC 805, the Company
used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at
the acquisition date.



Results
of Operations



Comparison of Years Ended December 31, 2022 and 2021



Restatement



The Company restated its previously issued financial
statements as of and for the year ended December 31, 2021, to reflect the following adjustments:



Consolidated Statement of Operations



| | 1. | Reduction in revenue of $16.6 million, which comprised the following: (1) an increase in the allowance for sales returns of $7.4 million, (2) revenue of $8.1 million that should be recognized in 2022, and (3) sales tax collections of $1.1 million improperly recognized as revenue.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Net reduction in cost of goods of $6.7 million, which comprised of the following: (1) reduction in product cost of sales due to an increase in the allowance for sales returns of $4.0 million, (2) reduction in product cost of sales of $6.0 million relating to revenue cutoff that should be recognized in 2022, and (3) an offsetting increase in cost of goods sold from an over accrual of vendor rebates ($0.4 million), under accrual of vendor purchases ($1.5 million), and an error in inventory cutoff ($1.4 million).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Increase in general and administrative expenses of $0.9 million, resulting from an increase in bad debt expense of $0.6 million in accordance with the Company’s policy for allowance for doubtful accounts, and an over accrual of sales tax receivable of $0.3 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | As a result of the changes above, income tax changed from a tax benefit of $4.4 million to a tax expense of $0.1 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------



Consolidated Balance Sheet



| | 5. | Net increase in current assets of $6.6 million, which comprised the following: (1) increase in inventory of $7.7 million, resulting from the reduction in cost of goods sold attributable to the allowance for sales returns, revenue cutoff, and inventory cutoff, offset by a reduction in showroom inventory of $1.0 million that was reclassified as property and equipment, (2) reduction in receivables of $1.1 million, resulting from an increase to the allowance for doubtful accounts of $0.6 million, and an over accrual of vendor rebates (as detailed in Nos. 1-4 above).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | Net increase in current
    liabilities of $18.3 million, which comprised the following: (1) increase in accounts payable of $10.3 million, as a result of the
    increase in the allowance for sales returns, and an under accrual of sales tax refund receivable (netted with the sales tax
    liability), and (2) increase in customer deposits related to revenue cutoff (as detailed in Nos. 1-4 above).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Increase in long-term liabilities of $4.5 million, relating to an increase to the deferred tax liability as a result of the changes described above.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------





33







POLISHED.COM INC.  CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2021(in thousands)



|                                           |  | As
 Originally |         |   |     |             |   |         | As       | 
|------------------------------------------ |  | -------------- | ------- | - | --- | ----------- | - | ------- | -------- | 
|                                           |  | Reported       |         |   |     | Adjustments |   |         | Restated | 
|Current assets                             |  | $              | 121,318 |   | (5) |             | $ | 6,577   |          | 
|Property and equipment                     |  |                | 3,554   |   | (5) |             |   | 1,031   |          | 
|Total assets                               |  | $              | 375,984 |   |     |             | $ | 7,608   |          | 
|                                           |  |                |         |   |     |             |   |         |          | 
|Current liabilities                        |  | $              | 105,341 |   | (6) |             |   | 18,320  |          | 
|Deferred tax liability                     |  |                | 3,867   |   | (7) |             |   | 4,540   |          | 
|Total liabilities                          |  |                | 170,381 |   |     |             |   | 22,860  |          | 
|Accumulated deficit                        |  |                | (19,056 | ) |     |             |   | (15,252 | )        | 
|Total liabilities and stockholders’ equity |  | $              | 375,984 |   |     |             | $ | 7,608   |          | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands)



|                                           |  | As
 Originally |            |  |     |             |   |         | As       | 
|------------------------------------------ |  | -------------- | ---------- |  | --- | ----------- | - | ------- | -------- | 
|                                           |  | Reported       |            |  |     | Adjustments |   |         | Restated | 
|Product sales, net                         |  | $              | 362,314    |  | (1) |             | $ | (16,589 | )        | 
|Cost of goods sold                         |  |                | 282,655    |  | (2) |             |   | (6,733  | )        | 
|Operating expense                          |  |                | 71,339     |  | (3) |             |   | 918     |          | 
|Income taxes                               |  |                | 4,376      |  | (4) |             |   | (4,478  | )        | 
|Net income (loss)                          |  | $              | 7,670      |  |     |             | $ | (15,252 | )        | 
|                                           |  |                |            |  |     |             |   |         |          | 
|Net income (loss) per common share         |  |                |            |  |     |             |   |         |          | 
|BASIC                                      |  | $              | 0.12       |  |     |             |   |         |          | 
|DILUTED                                    |  | $              | 0.10       |  |     |             |   |         |          | 
|                                           |  |                |            |  |     |             |   |         |          | 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |  |                |            |  |     |             |   |         |          | 
|BASIC                                      |  |                | 64,528,299 |  |     |             |   |         |          | 
|DILUTED                                    |  |                | 76,460,460 |  |     |             |   |         |          | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands)



|                                                                             |  | Common Stock |             |  | Additional
 Paid-Inc |   |    | Accumulated |  |   | Stockholders’ | 
|---------------------------------------------------------------------------- |  | ------------ | ----------- |  | -------------------- | - | -- | ----------- |  | - | ------------- | 
|                                                                             |  | Shares       |             |  | Amount               |   |    | Capital     |  |   | Deficit       | 
|Balance at December 31, 2021 as originally filed                             |  |              | 106,387,322 |  |                      | $ | 11 |             |  | $ | 224,648       | 
|Adjustments to result of operations for the year
    ended December 31, 2021 |  |              | -           |  |                      |   | -  |             |  |   | -             | 
|Balance at December 31, 2021 as restated                                     |  |              | 106,387,322 |  |                      | $ | 11 |             |  | $ | 224,648       | 





34







POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands)



|                                                                                   |  | As

    Originally
    Reported |          |   |       | Adjustments |   |         | As

    Restated | 
|---------------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ----- | ----------- | - | ------- | ---------------- | 
|Cash
    Flows from Operating Activities                                           |  |                                 |          |   |       |             |   |         |                  | 
|Net
    income (loss)                                                              |  | $                               | 7,670    |   | (1-4) |             | $ | (15,252 | )                | 
|Receivables                                                                        |  |                                 | (5,603   | ) | (5)   |             |   | 444     |                  | 
|Inventory                                                                          |  |                                 | (18,459  | ) | (5)   |             |   | (8,121  | )                | 
|Accounts
    payable and accrued expenses                                          |  |                                 | 14,178   |   | (6)   |             |   | 10,207  |                  | 
|Customer
    deposits                                                              |  |                                 | (18,968  | ) | (6)   |             |   | 8,113   |                  | 
|Deferred
    tax expense (benefit)                                                 |  |                                 | (4,908   | ) | (7)   |             |   | 4,540   |                  | 
|Miscellaneous
    other accounts                                                   |  |                                 | 1,116    |   |       |             |   | 69      |                  | 
|                                                                                   |  |                                 |          |   |       |             |   |         |                  | 
|Net
                                            cash used in operating activities  |  |                                 | (18,328  | ) |       |             |   | -       |                  | 
|                                                                                   |  |                                 |          |   |       |             |   |         |                  | 
|Net
    cash used in investing activities                                          |  |                                 | (204,834 | ) |       |             |   | -       |                  | 
|                                                                                   |  |                                 |          |   |       |             |   |         |                  | 
|Net
    cash provided by financing activities                                      |  |                                 | 247,041  |   |       |             |   | -       |                  | 
|                                                                                   |  |                                 |          |   |       |             |   |         |                  | 
|Net
                                            change in cash and restricted cash |  |                                 | 23,879   |   |       |             |   |         |                  | 
|Cash
    and restricted cash at beginning of year                                  |  |                                 | 9,912    |   |       |             |   | -       |                  | 
|                                                                                   |  |                                 |          |   |       |             |   |         |                  | 
|Cash
    and restricted cash at end of year                                        |  | $                               | 33,791   |   |       |             | $ | -       |                  | 



35







The following table sets forth key components
of our results of operations for the years ended December 31, 2022 and 2021 in thousands and as a percentage of our revenue.



|                                                       |  | For the Year Ended |          |   | (As Restated)
For the Year Ended | 
|------------------------------------------------------ |  | ------------------ | -------- | - | -------------------------------- | 
|                                                       |  | December 31, 2022  |          |   | December 31, 2021                | 
|                                                       |  | Amount             |          |   | % of   Net Sales                 | 
|Product sales, net                                     |  | $                  | 534,474  |   |                                  | 
|Cost of goods sold                                     |  |                    | 444,957  |   |                                  | 
|Gross profit                                           |  |                    | 89,517   |   |                                  | 
|                                                       |  |                    |          |   |                                  | 
|Operating Expenses                                     |  |                    |          |   |                                  | 
|Personnel                                              |  |                    | 28,800   |   |                                  | 
|Advertising                                            |  |                    | 25,461   |   |                                  | 
|Bank and credit card fees                              |  |                    | 18,776   |   |                                  | 
|Depreciation and amortization                          |  |                    | 11,456   |   |                                  | 
|Impairment of goodwill and intangible assets           |  |                    | 109,140  |   |                                  | 
|Loss on abandonment of right-of-use asset              |  |                    | -        |   |                                  | 
|General and administrative                             |  |                    | 24,226   |   |                                  | 
|                                                       |  |                    |          |   |                                  | 
|Total Operating Expenses                               |  |                    | 217,859  |   |                                  | 
|                                                       |  |                    |          |   |                                  | 
|LOSS FROM OPERATIONS                                   |  |                    | (128,342 | ) |                                  | 
|                                                       |  |                    |          |   |                                  | 
|Other Income (Expenses)                                |  |                    |          |   |                                  | 
|Interest income                                        |  |                    | 518      |   |                                  | 
|Adjustment in value of contingency                     |  |                    | (2       | ) |                                  | 
|Interest expense                                       |  |                    | (3,940   | ) |                                  | 
|Gain on change in fair value of derivative instruments |  |                    | 3,178    |   |                                  | 
|Loss on settlement of debt                             |  |                    | (3,240   | ) |                                  | 
|Other income (expense)                                 |  |                    | (2,546   | ) |                                  | 
|                                                       |  |                    |          |   |                                  | 
|Total Other Expenses                                   |  |                    | (6,032   | ) |                                  | 
|                                                       |  |                    |          |   |                                  | 
|NET LOSS BEFORE INCOME TAXES                           |  |                    | (134,374 | ) |                                  | 
|                                                       |  |                    |          |   |                                  | 
|INCOME TAX (EXPENSE) BENEFIT                           |  |                    | 8,409    |   |                                  | 
|                                                       |  |                    |          |   |                                  | 
|NET LOSS                                               |  | $                  | (125,965 | ) |                                  | 





36







Product sales, net. We
                                                                                              generate revenue from the retail sales of appliances, furniture, home goods and related products. Our product sales were $534.5
                                                                                              million for the year ended December 31, 2022, an increase of $188.8 million, or 54.6% when compared to the year ended December 31,
                                                                                              2021. This increase was primarily due to the impact of the Appliances Connection Acquisition.





Cost
of goods sold. Our cost of goods sold are comprised of product costs and freight costs. Product costs represent the amount we
pay the manufacturer for their products. We negotiate special terms and pricing with the manufacturer, which are generally based on the
number of products we purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time.
Vendor funding might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to customers.
Our cost of goods sold was $445.0 and $275.9 million for the years ended December 31, 2022, and 2021, respectively, an increase of $169.0
million, or 61.3%.



As a percentage of net sales, cost of goods
sold was 83.3% and 79.8% for the years ended December 31, 2022, and 2021, respectively. The increase in product costs as a percentage
of nets sales results from aggressive pricing to drive revenue growth, purchase disruptions resulting from increased customer
cancellations, increased damages and returns and a decrease in vendor rebates as the Company did not meet some of its purchasing
commitments set by each vendor, a key component of vendor rebates. Freight costs remained consistent  as a percentage of
sales for each period.



Gross profit and gross margin.As
a result of the foregoing, our gross profit was $89.5 million for the year ended December 31, 2022, compared to $69.8 million for the
year ended December 31, 2021, which included $61.4 million from Appliances Connection for the period from June 2, 2021 to December 31,
2021. Our gross margin (gross profit as a percentage of net sales) was 16.7% for the year ended December 31, 2022, compared to 20.2% (or
17.6% excluding Appliances Connection) for the year ended December 31, 2021. The gross profit percentage declined by 3.4% from the
year ended December 31, 2021 to the year ended December 31, 2022. As noted above, the principal driver of such decline was aggressive
pricing to drive revenue growth and the reduction in vendor rebates.



Personnel expenses. Personnel
expenses include employee salaries and bonuses, as well as related payroll taxes, insurance premiums, training costs, and stock
compensation expense. Our personnel expenses were $28.8 million for the year ended December 31, 2022, and $21.7 million for the year
ended December 31, 2021, which included $11.5 million from Appliances Connection for the period from June 2, 2021 to December 31,
2021. As a percentage of net sales, personnel expenses were 5.4% for the year ended December 31, 2022, and 6.3% (or 21.4% excluding
Appliances Connection) for the year ended December 31, 2021. These increases were primarily due to the impact of the Appliances
Connection Acquisition. The decrease in personnel expenses as a percentage of sales is attributed to the efforts made to right-size
  the business following the Appliances Connection Acquisition.



Advertising expenses. Advertising
expenses include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were
$25.5 million for the year ended December 31, 2022. For the year ended December 31, 2021, advertising expense was $12.0 million, which
included $7.9 million from Appliances Connection for the period from June 2, 2021 to December 31, 2021. As a percentage of net sales,
advertising expenses were 4.8% for the year ended December 31, 2022, and 3.5% for the year ended December 31, 2021 (or 8.5% excluding
Appliances Connection). The increase in advertising expenses for 2022 resulted from a decision made by management at the time to augment
spending on search engine advertisements.







37







Bank and credit card fees. Bank and credit card fees comprise the expenses incurred in payment
to credit card processors for processing credit card transactions made by customers and to third-party sellers operating on the platforms
where we sell parts and other items. Our bank and credit card fees were $18.8 million for the year ended
December 31, 2022, and $13.6 million for the year ended December 31, 2021, which included $12.2 million from Appliances Connection for
the period from June 2, 2021 to December 31, 2021. As a percentage of net sales, bank and credit card fees were 3.5% for the year ended
December 31, 2022, and 3.9% for the year ended December 31, 2021 (or 2.8% excluding Appliances Connection).



The increase in bank and credit card fees in 2022
resulted primarily from the inclusion of Appliances Connection sales for the entire year. The slight decline in bank and credit card fees
as a percentage of sales was due to a shift in the mix of credit cards used by customers and third-party sales, which typically have higher
fees compared to credit cards.



Depreciation and amortization expense.
Depreciation and amortization expense was $11.5 million, or 2.1% of sales, for the year ended December 31, 2022, and $6.6 million, or
1.9% of sales, for the year ended December 31, 2021. The increase is the result of amortizing intangible assets acquired in the Appliances
Connection Acquisition for the entire year.



Loss on abandonment of right-of-use asset.
During the year ended December 31, 2021, we incurred a loss in the amount of $1.4 million, or 0.4% of net sales, related to the closure
of our old warehouse and showroom, and write-off of related leasehold improvements. There was no loss on abandonment of an asset in the
year ended December 31, 2022.





Impairment of goodwill and intangible
assets. Effective as of December 31, 2022, the Company determined that goodwill and intangible assets had been impaired.
Accordingly, the Company recorded a total impairment charge of $109.1 million or 20.4% of sales. Out of the total impairment charge,
$85.4 million was attributed to goodwill and $23.7 million was attributed to intangible assets.



General and administrative expenses.
Our general and administrative expenses consist primarily of professional fees, rent expense, insurance, and other expenses incurred in
connection with general operations. Our general and administrative expenses were $24.2 million or 4.5% of sales for the year ended December
31, 2022, and $17.0 million or 4.9% of sales for the year ended December 31, 2021, which included $8.2 million from Appliances Connection
for the period from June 2, 2021 to December 31, 2021. The increase in general and administrative expenses for the year was $7.3 million
or 42.9% As a percentage of sales, the increase is primarily related to increased directors and officers insurance and health insurance
costs, an increased  allowance for doubtful accounts, and the accrual of non-recurring expenses for settling the Delaware lawsuit
and other contract disputes. See “Item 3 — Legal Proceedings”. As a percentage of sales, general and administrative
expenses were essentially unchanged.



Total other income (expense). We
had $6.0 million or 1.1% of sales of net other expenses for the year ended December 31, 2022, and $5.0 million or 1.5% of sales in total
other expenses, net, for the year ended December 31, 2021, which included $0.3 million of other expense, net, from Appliances Connection
for the period from June 2, 2021 to December 31, 2021. Total other expenses, net, for the year ended December 31, 2022, consisted primarily
of interest expense of $3.9 million, loss on settlement of debt of $3.2 million, and estimated potential penalties of $2.1 million on
late filing of sales tax returns. Those items were partially offset by a gain of $3.2 million resulting from the change in the fair value
on derivative instruments. Total other expenses, net, for the year ended December 31, 2021, consisted primarily of interest expense of
$3.7 million, loss on settlement of debt of $1.7 million.



Income tax benefit (expense). We
had an income tax net benefit of $8.4 million for the year ended December 31, 2022, as compared to an income tax expense of $0.1 million
for the year ended December 31, 2021.



Net loss. As a result of the cumulative
effect of the factors described above, we had net loss of $126.0 million or 23.6% of sales for the year ended December 31, 2022, compared
to a net loss of $7.6 million or 2.2% of sales for the year ended December 31, 2021, which included net income of $14.9 million from Appliances
Connection for the period from June 2, 2021 to December 31, 2021.



Liquidity and Capital Resources



Management assesses liquidity and going concern uncertainty in the
Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including
available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued
or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment,
based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections,
estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability
to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on
this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature
and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the
proper authority to execute them within the look-forward period.



As of December 31, 2022, we had cash and cash
equivalents of $19.5 million, restricted cash of $1.0 million, and vendor deposits of $25.0 million, and total working capital of $25.8
million. For the year ended December 31, 2022, the Company incurred an operating loss of $134.4 million, cash flows used in operations
of $46.7 million. The operating loss for 2022 included non-cash charges for depreciation and amortization ($11.5 million) and an impairment
charge ($109.1 million)



The Company performed an assessment to determine
whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability
to continue as a going concern within one year after the filing date of this report, when the accompanying financial statements are being
issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully
implemented.







38







The Company considered several conditions and
events including (1) financial results and operations, (2) the investigation of certain allegations made by certain former employees related
to the Company’s business operations, (3) technical non-compliance with certain loan covenants of our term loan with Bank of America,
based in part due to our failure to timely deliver financial statements, and (4) the Company not being in compliance with the continued
listing standards of NYSE American LLC (the “Exchange”) since the Company failed to timely file certain required filings,
which if not successfully remediated could lead to the potential delisting of the Company from the Exchange



Based on the circumstances discussed above in the initial
assessment, substantial doubt exists regarding our ability to continue as a going concern. Management then assessed the mitigating
effect of its plans to determine if it is probable that the plans (1) would be effectively implemented within one year after the
filing date of this report, when the accompanying financial statements are being issued and (2) when implemented, would mitigate the
relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. See
Note 2, “Summary of Significant Accounting Policies – Liquidity and Going Concern Assessment.”



Summary of Cash Flow



The following table provides detailed information
about our net cash flow for all consolidated financial statement periods presented in this report.





|                                                          |  | For the Years Ended |        
|--------------------------------------------------------- |  | ------------------- | -------
|                                                          |  | December 31,        |        
|                                                          |  | 2022                |        
|Net cash used in operating activities                     |  | $                   | (46,681
|Net cash used in investing activities                     |  |                     | (1,420 
|Net cash provided by in financing activities              |  |                     | 34,809 
|                                                          |  |                     |        
|Net change in cash, cash equivalents, and restricted cash |  | $                   | (13,292



Cashflows used in operating
activities. Our net cash used in operating activities was $46.7 million for the year ended December 31, 2022, as compared to
$18.3 million for the year ended December 31, 2021. Significant changes in operating assets and liabilities affecting cash flows
during these years included:



| | ● | Net loss was $126.0 million and $7.6 million for the years ended December
31, 2022 and 2021, respectively,
| | - | ----------------------------------------------------------------------------------------------------------



| | ● | Cash used by receivables was $3.5 million and $5.2 million for the years ended December 31, 2022 and 2021, respectively, due primarily to increases in sales volume as a result of the Acquisition of Appliances Connection,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash provided  by inventories was $ 9.7 million and $26.6 million
for the years ended December 31, 2022 and 2021, respectively, due primarily to efforts to manage inventory levels to a more reasonable
level, and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash used
    by customer deposits was $21.5 million and $10.8 million for the years ended December 31, 2022 and 2021,
    respectively.  The decrease in customer deposits is attributed to the change in the Company’s practice, wherein
    customers’ cards were charged at the time of order placement, as opposed to charging them when the product shipped. This new
    policy was adopted in July 2021.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cashflows used in investing activities.
Our net cash used in investing activities was $1.4 million for the year ended December 31, 2022, and $204.8 million for the year ended
December 31, 2021. The 2021 amount was a primarily a result of $202.9 million net cash paid in the acquisitions of Appliances Connection
and Appliance Gallery.



Cashflows provided by financing activities.
Our net cash provided by financing activities was $34.8 million and $247.0 million for the years ended December 31, 2022 and 2021, respectively
Significant changes in financing activities affecting cash flows during these years included:



| | ● | Net cash received from public offerings (including warrant exercises) of
$194.4 million for the years ended December 31, 2021, and
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | ● | Net cash received from debt issuances of $43.0 million and $60.8 million
for the year ended December 31, 2022 and 2021, respectively.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



Public
Offerings



On June 2, 2021, the Company sold 91,111,111 units,
consisting of one share of common stock and a warrant to purchase one share of common stock, at a public offering price of $2.25 per unit
to ThinkEquity, a division of Fordham Financial Management, Inc. (the “Underwriter”), pursuant to an underwriting agreement
dated May 27, 2021, for total gross proceeds of $205.0 million. Under the underwriting agreement, the Company granted the Underwriter
a 30-day option to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $2.0832 per share, and/or warrants
to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $0.0093 per warrant, in any combination thereof,
solely to cover over-allotments, if any. The Underwriter exercised its option to purchase 2,000,000 additional warrants and 2,000,000
additional shares for total gross proceeds of $4.5 million. After deducting the underwriting commission and expenses, the Company received
net proceeds of approximately $194.4 million. The Company used the proceeds from the offering to fund a portion of the purchase price for
the AC Acquisition.



From June 25 through July 16, 2021, 1,052,248 shares of common stock
were issued as a result of the exercise of 1,052,248 warrants for proceeds of $2.4 million.





39







Debt







Credit Facilities



M&T



On June 2, 2021, the
Company entered into a credit and guaranty agreement (the “M&T Credit Agreement”) with the financial institutions party
thereto from time to time (“M&T Lenders”), and Manufacturers and Traders Trust Company, as sole lead arranger, sole book
runner, administrative agent and collateral agent (“M&T”), pursuant to which the M&T Lenders agreed to make available
to the Company and ACI senior secured credit facilities in the aggregate initial amount of $70.0 million, including (i) a $60.0 million
term loan (the “M&T Term Loan”) and (ii) a $10.0 million revolving credit facility (the “M&T Revolving Loan”).
The M&T Loans beared interest on the unpaid principal amount at a rate determined by the Base Rate (as defined in the Credit Agreement),
then at the Base Rate plus the Applicable Margin. Each of the M&T Loans were set to mature on June 2, 2026.



On June 2, 2021, the
Company borrowed the entire amount of the Term Loan and issued term loan notes to the M&T Lenders in the aggregate principal amount
of $60.0 million. As of December 31, 2021, the carrying value of the M&T Term Loan was $55.2 million, comprised of principal of $58.5
million, net of unamortized loan costs of $3.3 million. Loan costs before amortization included $3.5 million of lender and placement agent
fees and $0.3 million of legal other fees. The Company did not borrow any amounts under the M&T Revolving Loan.



On May 9, 2022, the Company repaid the M&T
Term Loan, through the proceeds of a new loan issuance. As a result, the obligations under the M&T Credit Agreement were terminated.



Bank of America



On May 9, 2022,
the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”)
and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to
which the Lenders agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140.0
million, including (i) a $100.0 million term loan (the “Term Loan”) and (ii) a $40.0 million revolving credit facility (the
“Revolving Loan”), which revolving credit facility included a $2.00 million swingline sublimit (the “Swing Line Loan”
and together with the Term Loan and the Revolving Loan, the “Loans”) and, separately, a $10.0 million letter of credit commitment,
in each case, on the terms and conditions contained in the Credit Agreement.



On May 9, 2022, the Company
borrowed the entire amount of the Term Loan in the aggregate principal amount of $100.0 million. A portion of the proceeds of the Term
Loan were to repay and terminate the M&T Credit Agreement. Commencing on September 30, 2022, through and including June 30, 2023,
the Borrowers repaid the principal amount of the Term Loan in quarterly installments of $1,250,000 each, payable on the last business
day of each March, June, September and December.



As of December 31, 2022,
the carrying value of the Term Loan was $96.5 million, comprised of principal of $97.5 million, net of unamortized loan costs of $1.0
million. Loan costs before amortization included $1.1 million of lender and other fees. During the year-ended December 31 2022, Bank of
America froze the $40.0 million Revolving Loan before any borrowings had been made against the facility as a result of our technical non-compliance
with specified loan covenants, based in part due to our failure to timely deliver financial statements.



Subsequent to year-end,
on July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “Amendment”), in part, to waive events
of defaults on its existing credit agreement. The Amendment requires the Company to pay the existing Term Facility and Revolving Facility
by August 31, 2024 (the “Maturity Date”). The Revolving Loan decreased to $10,000,000 from and after July 25, 2023. The Letter
of Credit commitments decreased to $2,000,000 and the Swing Line Loan was eliminated. The amendment also establishes a new EBITDA covenant
and requires the Company to maintain minimum liquidity of $8 million including restricted cash and $5 million excluding restricted cash.
Liquidity as defined in the Amendment includes Cash and certain qualifying customer and credit card accounts receivable.



The Term Loan and
Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate
determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest
at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or
convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate
benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also
select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with
the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively,
for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment.
Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing,
following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than
the interest rate then in effect for the applicable loan.



Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed
at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving
Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from
time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited
circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset
sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon
receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically
set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.



As a result of the reduced term, the Company has begun discussions
with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.





40







Vehicle Loans



The Company has financed purchases of transportation
vehicles with notes payable, which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging
from 3.8% to 5.7%. As of December 31, 2022, the outstanding balance of these vehicle loans is $0.9 million.



Management
Services Agreement



On April 5, 2019, the Company entered into a management
services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts, the Company’s
chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to the offsetting management services
agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500;
provided, however, that under certain circumstances specified in the management services agreement, the quarterly fee may be reduced if
similar fees payable to the Manager by subsidiaries of the Company’s former parent company, 1847 Holdings LLC, exceed a threshold
amount.



The Company shall also reimburse the Manager for
all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket
costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing
services under the management services agreement.



The Company expensed management fees of $0.3 million
for each of the years ended December 31, 2022 and 2021, respectively.



Earn
Out Payments



On January 18, 2019, the Company entered into
an asset purchase agreement with Goedeker Television, Steve Goedeker, and and Mike Goedeker, pursuant to which on April 5, 2019, the Company
acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (the “Goedeker
Business”).



Pursuant to the asset purchase agreement, Goedeker
Television is entitled to receive an earn out payment of $0.2 million if the EBITDA (as defined in the asset purchase agreement) of the
Goedeker Business for the trailing twelve (12) month period from April 5, 2022 is $2.5 million or greater, and may be entitled to receive
a partial earn out payment if the EBITDA of the Goedeker Business is less than $2.5 million but greater than $1.5 million. The Company
expects to meet this target and adjusted the contingent note payable in the consolidated balance sheet to the present value of the amount
due to $0.2 million as of December 31, 2021.



The contingent not payable balance was repaid
in 2022.



Leases



On April 5, 2019, the Company entered into a lease
agreement with S.H.J., L.L.C for its prior principal office in Ballwin, Missouri. The lease is for a term of five years and provides for
a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term.
The lease agreement contains customary events of default, representations, warranties, and covenants.





41







On May 31, 2019, YF Logistics entered into a sublease
agreement with DMI for its warehouse space in Hamilton, NJ. The initial term of the sublease was
for a period commencing on June 1, 2019, and terminating on April 30, 2020, with automatic renewals for successive one-year terms until
the earlier of (i) termination by either upon thirty days’ prior written notice or (ii) April 30, 2024. The sublease provides for
a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses,
additional charges, or any other amounts due by DMI, for a total of $56,250 per month. The initial right-of-use (“ROU”) asset and liability associated with
this lease is $3.0 million.



On January 13, 2021, the Company entered
into a lease agreement with Westgate 200, LLC, which was amended on March 31, 2021, for its new principal office and showroom in St.
Charles, Missouri. The lease terminates on April 30, 2027, with two options to renew for an additional five-year periods. The base
rent is $20,977 per month until September 30, 2021, and increases to $31,465 per month until April 30, 2022, after which time the
base rent increases at approximately 2.5% per year thereafter. The Company must also pay its 43.4% pro rata portion of the property
taxes, operating expenses and insurance costs and is also responsible for  paying for the utilities used on the premises. The lease
contains customary events of default. The initial ROU asset and liability associated with this lease is $2.0 million.



On June 2, 2021, 1 Stop entered into a new
lease agreement with 1870 Bath Ave. LLC, a related party, for the premises located at 1870 Bath Avenue, Brooklyn, New York. The lease
is for a term of ten years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896
during the last year of the term. 1 Stop is also responsible for all property taxes, insurance costs and the utilities used on the
premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties on
September 1, 2018. The initial ROU asset and liability associated with this lease is $8.4 million.



On June 2, 2021, Joe’s Appliances entered
into a new lease agreement with 7812 5th Ave Realty LLC, a related party, for the premises located at 7812 5th Avenue, Brooklyn, New York.
The lease is for a term of ten years and provides for a base rent of $6,365 per month during the first year with annual increases to $8,305
during the last year of the term. Joe’s Appliances is also responsible for all property taxes, insurance costs and the utilities
used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties
on September 1, 2018. The initial ROU asset and liability associated with this lease is $0.7 million.



On June 30, 2021, the Company closed an old warehouse
and retail showroom in anticipation of relocating to a new facility. Accordingly, the Company wrote off $1.4 million representing the
remaining ROU asset and related leasehold improvements as of that date.



On July 29, 2021, AC Gallery entered into a lease
agreement with Tom’s Flooring, LLC for the showroom and warehouse located in Largo, Florida. The lease is for a term of four months
commencing on September 1, 2021, and ending on December 31, 2021, and provides for a base rent of $6,500 per month. AC Gallery must also
pay its one-third pro rata portion of the common area maintenance charges, utilities, and sales taxes. The lease contains customary events
of default. The lease is short term and therefore not recorded as a ROU asset and liability.



On September 9, 2021, the Company entered into a warehouse
agreement for a new warehouse in Somerset, New Jersey. The warehouse agreement is for a term of 26 months commencing on October 1, 2021,
and ending November 29, 2023, unless the master lease for the premises is terminated earlier. The monthly storage fee is $136,274 for
the first year, $140,362 for the second year, and $144,573 for the last two months. The Company also paid a security deposit of $272,549.
The lease agreement contains customary events of default, representations, warranties, and covenants. The initial ROU and liability associated
with this operating lease is $3.4 million.



On March 15, 2022, the Company entered into
a lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie
Fouerti. The Company contends that the lease required the Landlord do certain work at Landlord’s expense to improve the
building at a cost of approximately $1.2 million.  Landlord has refused to pay for this work, contending that this expense was
the Company’s responsibility.  In addition, the total remaining amount due on the lease at December 31, 2022 is also
approximately $1.2 million.  Landlord contends that the Company is in default of the lease for failing to pay rent.  The
Company disagrees that its rent obligations have been triggered and further contends that Landlord has violated the lease by failing
to pay for the work.  The Company and the Landlord remain in dispute over these issues.



Subsequent to December 31, 2022, the Company signed a letter of intent
for a sublease from DMI, a related party for a new warehouse in a building  leased by DMI. The new lease will allow the Company to
close its two existing New Jersey warehouses and consolidate operations into one new warehouse. The lease, which is expected to be finalized
in the fourth quarter of 2023 or the first quarter of 2024, will be for leased space of approximately 228,000 square feet for seven years
at a cost of approximately $15 per square foot, including common area charges with annual increases of 3.75%.









42







Critical
Accounting Policies and Estimates



The
following discussion relates to critical accounting policies and estimates for our company. The preparation of consolidated
financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the
amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified
certain accounting policies that are significant to the preparation of our consolidated financial statements. These accounting
policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are
those that are most important to the portrayal of our financial condition and results of operations and require management’s
difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ
significantly from management’s current judgments. We believe the following critical accounting policies involve the most
significant estimates and judgments used in the preparation of our consolidated financial statements:





Revenue Recognition



The Company records revenue in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue
from Contracts with Customers”. Revenue is recognized to depict the transfer of goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires
additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders,
including significant judgments.



Substantially all the Company’s sales are
to individual retail consumers (homeowners), builders and designers. The Company’s performance obligation is to deliver the customer’s
order. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which
time revenue is recognized.



Control of the delivery transfers to customers
when the customer can direct the use of, and obtain substantially all the benefits from, the Company’s products, which generally
occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method
of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products
through a third-party carrier from the Company’s warehouse to the customer (a “Company Shipment”). The second way is
through a shipment of the products through a third-party carrier from a warehouse other than the Company’s warehouse to the customer
(a “Drop Shipment”) and the third way is where the Company itself delivers the products to the customer and often also installs
the product (a “Local Delivery”). In the case of a Local Delivery, the Company loads the product onto its own trucks and
delivers and installs the product at the customer’s location. When a product is delivered through a Local Delivery, risk of loss
passes to the customer at the time of installation and revenue is recognized upon installation at the customer’s location. In the
case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether from
the Company’s warehouse or a third party’s warehouse). Therefore, risk of loss and title transfers to the customer once the
products are shipped (i.e., leaves the Company’s warehouse or a third-party’s warehouse). After shipment and prior to delivery,
the customer is able to redirect the product to a different destination, which demonstrates the customer’s control over the product
once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and the Company
recognizes revenue.



The Company agrees with customers on the selling
price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company’s contracts
with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative
standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects
concurrently with revenue-producing activities are excluded from revenue.



We offer promotional financing and credit cards
issued by third-party banks that manage and directly extend credit to our customers. The banks are the sole owners of the accounts receivable
generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in
the financing transactions with customers. We frequently offer sales incentives that entitle our customers to discounts at the time of
purchase (if 3rd party financing is obtained or a seasonal sale discounts). This is not a performance obligation but is recognized
as a reduction of the transaction price when the transaction occurs.



The Company also sells extended warranty contracts,
acting as an agent for the warranty company and earns a commission on the warranty contracts purchased by customers; therefore, the cost
of the warranty contracts is netted against warranty revenue in the accompanying consolidated statements of operations. The Company assumes
no liability for repairs to products on which it has sold a warranty contract or products for which no warranty is sold, as the warranty
obligations associated with the sale of our products are assurance-type warranties that are a guarantee of the product’s intended
functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.



Sales returns are estimated based on historical
return levels and our expectation of future returns. We also recognize a return asset, and corresponding adjustment to cost of sales,
for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery
cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets.





43









Goodwill



Goodwill represents the excess of consideration
transferred over the fair value of tangible and identifiable intangible net assets acquired and the liabilities assumed in a business
combination. Substantially all of the Company’s goodwill was recognized in the purchase price allocations when the Company was acquired
in 2019 and when ACI was acquired in June 2021. Goodwill is not amortized, but is tested for impairment at the reporting unit level annually
or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting
unit is less than its carrying amount. In conducting the impairment test, the Company first reviews qualitative factors to determine whether
it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as a single
reporting unit.



When testing goodwill for impairment, the Company
has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the
reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates
it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative
goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based
on that difference.



The Company conducts its annual goodwill impairment
test on December 31 or whenever an indicator of impairment exists. As a result of the quantitative impairment assessment, the carrying
value of the single reporting unit exceeded its fair value, and the Company recorded $85.4 million of non-cash goodwill impairment charge
during the year-ended December 31, 2022. At December 31, 2021, there was no impairment of goodwill.



Impairment of Long-Lived Assets



The Company reviews the carrying value of long-lived
assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets for impairment whenever
events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. These events and circumstances
may include significant decreases in the market price of an asset or asset group, significant changes in the extent or manner in which
an asset or asset group is being used by the Company or in its physical condition, a significant change in legal factors or in the business
climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company’s
share price, a significant decline in revenue or adverse changes in the economic environment. If such facts indicate a potential impairment,
the Company will assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum
of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic
life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable,
the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an
estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its
estimated fair value.



During the fourth quarter of 2022, the Company
recognized an impairment charge of $23.7 million related to our marketing-related and customer relationships intangible assets, which
is primarily composed of intangible assets recognized in the acquisition of ACI. During 2021, we identified changes in events and circumstances
relating to a certain ROU operating lease asset, that was abandoned as a result of the Company closing its warehouse and retail showroom
in anticipation of relocating to a new facility that was acquired in the acquisition of ACI. Consequently, the lease facility was abandoned,
and we recorded an impairment loss during the year ended December 31, 2021 of $1.4 million.



Income Taxes



Income taxes are accounted for under the asset
and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases.



Deferred income tax assets and liabilities are
recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax
purposes. Where, based on the weight of available evidence, it is more likely than not that some amount of recorded deferred tax assets
will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce
the deferred tax asset to an amount that is more likely than not to be realized. A tax position must meet a minimum probability threshold
before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is
greater than fifty percent likely of being realized upon ultimate settlement.



Results of Operations



The comparability of our results of operations between the periods discussed below is affected
by the acquisitions we have completed during such periods. We may also evaluate and pursue acquisitions in the future, and such acquisitions,
if completed, will continue to impact the comparability of our financial results. Our acquisitions may have materially different characteristics
than our historical results, and such differences in economics may impact the comparability of our future results of operations to our
historical results.



| | ● | On June 2, 2021, we completed the Appliances Connection Acquisition.
| | - | --------------------------------------------------------------------





44







| | ● | On July 29, 2021, we completed the AC Gallery Acquisition.
The Company accounted for the above acquisitions using the acquisition method of accounting in accordance with FASB ASC Topic 805 “Business
Combinations.” In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible
and intangible assets acquired and liabilities assumed at the acquisition date.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Results of Operations



Comparison of the three months ended March
31, 2023 and 2022



Restatement



The Company restated its previously issued financial
statements as of and for the three months ended March 31, 2022, to reflect the following adjustments:



Consolidated Statements
of Operations



| | 1. | Revenue
declined by $4.1 million because of an understatement of a returns allowance and revenue cutoff issues.
| | -- | ---------------------------------------------------------------------------------------------------------------



| | 2. | Cost
of goods sold increased $1.0 million, net of reclassification of expenses from operating expenses to cost of goods sold offset by the
reduction in product cost associated with the reduction in revenue.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Operating expense declined by $1.9 million primarily by reclassification of operating expense to cost of goods sold.
| | -- | --------------------------------------------------------------------------------------------------------------------



| | 4. | Other income (expense) various miscellaneous adjustments totaling $0.2 million.
| | -- | -------------------------------------------------------------------------------



| | 5. | Income tax expense declined by $3.3 million.
| | -- | --------------------------------------------



| | 6. | As a result of the above adjustments, net income declined by $0.1 million.
| | -- | --------------------------------------------------------------------------



Consolidated Balance Sheet



| | 7. | Current assets declined by $13.2 million from a $3.8 million reduction in vendor rebate accrual, inventory declined by $6.7 million, net from changes to sales returns allowance and revenue cutoff adjustments, and prepaid expenses declined by $2.7 million by to adjust for charging some items to expense, rather than prepaid expense.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8. | Reclassification of showroom inventory to property and equipment.
| | -- | -----------------------------------------------------------------



| | 9. | Eliminate a right-of-use asset on a property that was not occupied.
| | -- | -------------------------------------------------------------------



| | 10. | Reflect the issuance of shares granted to two directors.
| | --- | --------------------------------------------------------



| | 11. | Reflect adjustments made to 2021 accumulated deficit and adjustment to net income for the three months ended March 31, 2022.
| | --- | ----------------------------------------------------------------------------------------------------------------------------





45







POLISHED.COM INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2022

(in thousands)



|                                            |  | As
Originally
    Reported |         |   | Adjustments |   |         | As
 Restated | 
|------------------------------------------- |  | -------------------------- | ------- | - | ----------- | - | ------- | ------------ | 
|Current assets                              |  | $                          | 134,010 |   | (7)         | $ | (13,223 | )            | 
|Property and equipment                      |  |                            | 3,688   |   | (8)         |   | 978     |              | 
|Operating lease right-of-use assets         |  |                            | 15,262  |   | (9)         |   | (1,127  | )            | 
|Total assets                                |  | $                          | 386,581 |   |             | $ | (13,372 | )            | 
|                                            |  |                            |         |   |             |   |         |              | 
|Total liabilities                           |  | $                          | 175,037 |   |             |   | 1,849   |              | 
|Common stock and additional paid in capital |  |                            | 224,678 |   | (10)        |   | 134     |              | 
|Accumulated deficit                         |  |                            | (13,134 | ) | (11)        |   | (15,354 | )            | 
|Total liabilities and stockholders’ equity  |  | $                          | 386,581 |   |             | $ | (13,371 | )            | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(in thousands)



|                                           |  | As 
originally |             |   |             |   |        | As       | 
|------------------------------------------ |  | -------------- | ----------- | - | ----------- | - | ------ | -------- | 
|                                           |  | Reported       |             |   | Adjustments |   |        | Restated | 
|Product sales, net                         |  | $              | 152,752     |   | (1)         | $ | (4,071 | )        | 
|Cost of goods sold                         |  |                | 116,883     |   | (2)         |   | 1,036  |          | 
|Operating expense                          |  |                | 25,802      |   | (3)         |   | (1,915 | )        | 
|Other expenses                             |  |                | (762        | ) | (4)         |   | (186   | )        | 
|Income taxes                               |  |                | (3,383      | ) | (5)         |   | 3,275  |          | 
|Net income (loss)                          |  | $              | 5,922       |   | (6)         | $ | (103   | )        | 
|                                           |  |                |             |   |             |   |        |          | 
|Net income per common share                |  |                |             |   |             |   |        |          | 
|BASIC                                      |  | $              | 0.06        |   |             |   |        |          | 
|DILUTED                                    |  | $              | 0.06        |   |             |   |        |          | 
|                                           |  |                |             |   |             |   |        |          | 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |  |                |             |   |             |   |        |          | 
|BASIC                                      |  |                | 106,387,332 |   |             |   |        |          | 
|DILUTED                                    |  |                | 106,387,332 |   |             |   |        |          | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(in thousands)



|                                                                               |  |              |             |  | Additional |   |    |             |  |   | Total         | 
|------------------------------------------------------------------------------ |  | ------------ | ----------- |  | ---------- | - | -- | ----------- |  | - | ------------- | 
|                                                                               |  | Common Stock |             |  | Paid-Inc   |   |    | Accumulated |  |   | Stockholders’ | 
|                                                                               |  | Shares       |             |  | Amount     |   |    | Capital     |  |   | Deficit       | 
|Balance March 31, 2022, as originally filed                                    |  |              | 106,386,332 |  |            | $ | 11 |             |  | $ | 224,667       | 
|Adjustment to reflect issuance of vested stock                                 |  |              | 69,766      |  |            |   | -  |             |  |   | 134           | 
|Adjustments to results of operations for the year ended December 31, 2021      |  |              |             |  |            |   |    |             |  |   |               | 
|Adjustments to results of operations for the three months ended March 31, 2022 |  |              | -           |  |            |   | -  |             |  |   | -             | 
|                                                                               |  |              |             |  |            |   |    |             |  |   |               | 
|Balance March 31,2022, as restated                                             |  |              | 106,456,098 |  |            | $ | 11 |             |  | $ | 224,801       | 





46







POLISHED.COM INC

CONSOLDIATED STATESMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2022

(UNAUDITED)

(in thousands)



|                                                                      |  | As
 originally 
Filed |        |   | Adjustments |   |        | As
 Restated | 
|--------------------------------------------------------------------- |  | --------------------- | ------ | - | ----------- | - | ------ | ------------ | 
|Cash Flows from Operating Activities                                  |  |                       |        |   |             |   |        |              | 
|Net income (loss)                                                     |  | $                     | 5,922  |   |             | $ | (103   | )            | 
|Deferred tax expense (benefit)                                        |  |                       | 1,785  |   |             |   | (1,810 | )            | 
|Receivables                                                           |  |                       | (1,694 | ) |             |   | 2,693  |              | 
|Merchandise inventory                                                 |  |                       | (8,209 | ) |             |   | 14,343 |              | 
|Prepaid expenses and other assets                                     |  |                       | (2,312 | ) |             |   | 2,751  |              | 
|Accounts payable and accrued expenses                                 |  |                       | 11,368 |   |             |   | (9,450 | )            | 
|Customer deposits                                                     |  |                       | (7,622 | ) |             |   | (8,603 | )            | 
|Various other changes                                                 |  |                       | (2,985 | ) |             |   | 372    |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Net cash used in operating activities                                 |  |                       | (3,747 | ) |             |   | 193    |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Cash Flows from Investing Activities                                  |  |                       |        |   |             |   |        |              | 
|Purchases of property and equipment                                   |  |                       | (6     | ) |             |   | (31    | )            | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Net cash used in investing activities                                 |  |                       | (6     | ) |             |   | (31    | )            | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Net cash used in financing activities                                 |  |                       | (1,634 | ) |             |   | -      |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Net change in cash and restricted cash                                |  |                       | (5,387 | ) |             |   | 162    |              | 
|Cash and restricted cash at beginning of year                         |  |                       | 33,791 |   |             |   | -      |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Cash and restricted cash at end of year                               |  | $                     | 28,404 |   |             | $ | 162    |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|Cash, cash equivalents, and restricted cash consist of the following: |  |                       |        |   |             |   |        |              | 
|End of the period                                                     |  |                       |        |   |             |   |        |              | 
|Cash and cash equivalents                                             |  | $                     | 25,821 |   |             | $ | 162    |              | 
|Restricted cash                                                       |  |                       | 2,583  |   |             |   | -      |              | 
|                                                                      |  |                       |        |   |             |   |        |              | 
|                                                                      |  | $                     | 28,404 |   |             | $ | 28,404 |              | 





47







The
following unaudited table sets forth key components of our results of operations for the three months ended March 31, 2023 and 2022,
in thousands and as a percentage of our revenue.



|                                                           |  | For
                                            the Three
                                            Months Ended |        |   | (As
    Restated)
    For the Three
    Months Ended | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | ------ | - | ---------------------------------------------------- | 
|                                                           |  | March 31,                                                                                                          |        |   |                                                      | 
|                                                           |  | 2023                                                                                                               |        |   | %
    of Sales                                       | 
|Product
    sales, net                                     |  | $                                                                                                                  | 95,439 |   |                                                      | 
|Cost
    of goods sold                                     |  |                                                                                                                    | 74,292 |   |                                                      | 
|Gross
    profit                                           |  |                                                                                                                    | 21,147 |   |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|Operating
    Expenses                                     |  |                                                                                                                    |        |   |                                                      | 
|Personnel                                                  |  |                                                                                                                    | 6,484  |   |                                                      | 
|Advertising                                                |  |                                                                                                                    | 5,121  |   |                                                      | 
|Bank
    and credit card fees                              |  |                                                                                                                    | 3,373  |   |                                                      | 
|Depreciation
    and amortization                          |  |                                                                                                                    | 1,070  |   |                                                      | 
|General
    and administrative                             |  |                                                                                                                    | 4,987  |   |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|Total Operating Expenses                                   |  |                                                                                                                    | 21,035 |   |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|INCOME
    FROM OPERATIONS                                 |  |                                                                                                                    | 112    |   |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|Other
    Income (Expenses)                                |  |                                                                                                                    |        |   |                                                      | 
|Interest
    income                                        |  |                                                                                                                    | 357    |   |                                                      | 
|Adjustment in value of
    contingency                     |  |                                                                                                                    | -      |   |                                                      | 
|Interest
    expense                                       |  |                                                                                                                    | (1,882 | ) |                                                      | 
|Loss
    on change in fair value of derivative instruments |  |                                                                                                                    | (1,325 | ) |                                                      | 
|Other
    income (expense)                                 |  |                                                                                                                    | 81     |   |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|Total Other Expenses                                       |  |                                                                                                                    | (2,769 | ) |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|NET INCOME
    (LOSS) BEFORE INCOME TAXES                  |  |                                                                                                                    | (2,657 | ) |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|INCOME
    TAX EXPENSE                                     |  |                                                                                                                    | (104   | ) |                                                      | 
|                                                           |  |                                                                                                                    |        |   |                                                      | 
|NET
    INCOME (LOSS)                                      |  | $                                                                                                                  | (2,761 | ) |                                                      | 



Product sales, net. We generate
                                                                                                                                                                               revenue from the retail sales of appliances, furniture, home goods and related products. Our product sales were $95.4 million for the
                                                                                                                                                                               three months ended March 31, 2023, compared to $148.7 million for the three months ended March 31, 2022, a decrease of $53.2 million,
                                                                                                                                                                               or 35.8%. The decrease can be partially attributed to the reduction in pandemic-driven   pent-up demand as well as a decision
                                                                                                                                                                               by management to focus on profitability as opposed to volume.







48







Cost of goods sold. Our cost of goods
sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their products. We
negotiate special terms and pricing with the manufacturer, which are generally based on the number of products we purchase. Periodically,
manufacturers offer special pricing for purchasing a certain volume of products at one time. Vendor funding might also be offered to support
our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our cost of goods sold was $74.3 million
for the three months ended March 31, 2023, as compared to $117.9 million for the three months ended March 31, 2022, a decrease of $43.6
million, or 37.0%, the decrease was attributable to the decline in sales during the same period, although the percentage decline was greater
than the percentage decline in sales.







Gross profit and gross margin. As a result
of the foregoing, our gross profit was $21.1 million for the three months ended March 31, 2023, as compared to $30.8 million for the three
months ended March 31, 2022, a decrease of $9.6 million, or 31.3%. Our gross margin (gross profit as a percentage of net sales) was 22.2%
for the three months ended March 31, 2023, and 20.7% for the three months ended March 31, 2022. The decrease in the amount of gross profit
was driven by reduced sales offset by an increased gross margin as management placed an emphasis on profitable sales rather than growing
revenue.





Personnel expenses. Personnel
expenses include employee salaries and bonuses, as well as related payroll taxes, health insurance premiums, training costs, and
stock compensation expense. Our personnel expenses were $6.5 million for the three months ended March 31, 2023, compared to $6.6
million for the three months ended March 31, 2022, a decrease of $0.2 million, or 2.4%. As a percentage of net sales, personnel
expenses were 6.8% and 4.5% for the three months ended March 31, 2023 and 2022, respectively. The decline is related to the reduction of sales, which offset the
impact of a higher headcount in comparison to sales during the period.



Advertising
expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our
advertising expenses were $5.1 million for the three months ended March 31, 2023, compared to $5.6 million for the three months ended
March 31, 2022, an increase of $0.5 million, or 8.2%. As a percentage of net sales, advertising expenses were 5.4% and 3.8% for the three
months ended March 31, 2023 and 2022, respectively. The decline is related to the reduction in sales, offset by increased costs from new marketing strategies.



Bank and credit card fees. Bank and credit
card fees are primarily the fees comprise the expenses incurred in payment to credit card processors for processing credit card transactions
made by customers and to third-party sellers operating on the platforms where we sell parts and other items. Our bank and credit card
fees were $3.4 million for the three months ended March 31, 2023, and $4.6 million for the three months ended March 31, 2022, a decrease
of $1.2 million, or 26.5%. As a percentage of net sales, bank and credit card fees were 3.5% and 3.1% for the three months ended March
31, 2023 and 2022, respectively. The decline is related to the reduction in sales, offset by a shift in the mix of credit cards used
by customers and third-party sales, which typically have higher fees compared to credit cards.





Depreciation and amortization
expense. Depreciation and amortization expense was $1.1 million or 1.1% of sales, for the three months ended March 31, 2023, and
$2.8 million, or 1.9% of net sales, for the three months ended March 31, 2022. The decrease is the result of the 2022
impairment charge of intangible assets, reducing the amount of amortization.



General and administrative expenses. Our
general and administrative expenses consist primarily of advisor fees, rent expense, insurance,  and other expenses
incurred in connection with general operations. Our general and administrative expenses were $5.0 million for the three months ended March
31, 2023, as compared to $4.3 million for the three months ended March 31, 2022, an increase of $0.7 million, or 17.2%. As a percentage
of net sales, general and administrative expenses were 5.2% and 2.9% for the three months ended March 31, 2023 and 2022, respectively.
Such changes were primarily due to increased professional related fees.



Total other income (expense). We had $2.8
million in total net other expenses, for the three months ended March 31, 2023, as compared to total other expenses, net, of $0.09 million
for the three months ended March 31, 2022. Total other expense, net, for the three months ended March 31, 2023, consisted primarily of
interest expense of $1.9 million and a loss of $1.3 million on the change in fair value on derivative instruments. Total other expenses,
net, for the three months ended March 31, 2022, consisted primarily of interest expense of $0.9 million.



Income tax expense. We had an
income tax expense of $0.1 million for both the three months ended March 31, 2023, and 2022, respectively.



Net income (loss). As a result of the
cumulative effect of the factors described above, we had net loss of $2.8 million for the three months ended March 31, 2023, as compared
to net income of $5.8 million for the three months ended March 31, 2022, a decrease of $8.6 million, or 147.4%.





49







Liquidity and Capital Resources



Management assesses liquidity and going concern
uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working
capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial
statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As
part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios,
forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures
or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among
other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments
or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved
and management has the proper authority to execute them within the look-forward period.



As of March 31, 2023, we had cash and cash equivalents
of $25.6 million and restricted cash of $0.95 million. For the three months ended March 31, 2023, the Company had operating income of
$0.1 million, cash flows from operations of $7.6 million, and had working capital of $23.9 million.



Management has prepared estimates of operations
for fiscal years 2023 and 2024 and believes that sufficient funds will be generated from operations to fund its operations, and to service
its debt obligations for one year from the date of the filing of these consolidated financial statements in the Company’s 10-K.
The continuing impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to
know the full impact of COVID-19 or its timing on a return to more normal operations.



The accompanying consolidated financial statements
have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities
in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable
that its forecasts, for one year from the date of the filing of these consolidated financial statements, indicate improved operations
and the Company’s ability to continue operations as a going concern.



Summary of Cash Flow



The following table provides detailed information
about our net cash flow for the three months ended March 31, 2023 and 2022 (in thousands).



|                                                          |  | Three Months Ended |       
|--------------------------------------------------------- |  | ------------------ | ------
|                                                          |  | March 31,          |       
|                                                          |  | 2023               |       
|Net cash provided by (used in) operating activities       |  | $                  | 7,577 
|Net cash used in investing activities                     |  |                    | (124  
|Net cash used in financing activities                     |  |                    | (1,387
|                                                          |  |                    |       
|Net change in cash, cash equivalents, and restricted cash |  | $                  | 6,066 



Cashflows provided by (used) in operating
activities. Our net cash provided in operating activities was $7.6 million for the three months ended March 31, 2023, as
compared to net cash used in operating activities of $3.6  million for the three months ended March 31, 2022. Significant
changes in operating assets and liabilities affecting cash flows during these periods included:





| | ● | During the three months ended March 31, 2023, the Company incurred
a net loss of $2.8 million, as compared to net income of $5.8 million for the three months ended
March 31, 2022,
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash provided by receivables was $10.0 million and $1.0 million for
the three months ended March 31, 2023 and 2022, respectively,
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash provided by inventories was $5.4 million and $6.1 million for
the three months ended March 31, 2023 and 2022, respectively, due primarily to efforts to manage inventory levels to support the growth
in sales as a result of the Appliances Connection Acquisition, and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash used by customer deposits was $2.2 million and $16.2 million for the three months ended March 31, 2023 and 2022, respectively.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



Cashflows used in investing activities.
Our net cash used in investing activities was $0.1 million for the three months ended March 31, 2023, as compared to $0.04 million for
the three months ended March 31, 2022.



Cashflows used in financing activities. Our net
cash used in financing activities was $1.4 million for the three months ended March 31, 2023, as compared to $1.6 million for the three months ended March 31, 2022.



Significant changes in financing activities affecting
cash flows during these years included:



| | ● | Repayments of notes payable of $1.4 million and $1.6 million for the three months ended March 31, 2023 and 2022, respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------



50







Liquidity and Capital Resources



See Note 2, “Summary of Significant Accounting
Policies – Liquidity and Going Concern Assessment.”



Debt



See Note 11, Notes Payable, Note 12 Leases,and Note 14, Related Partiesfor a discussion of our current debt, leases, and management services agreement.



Comparison of the three months ended June 30,
2022 and 2021





The
unaudited condensed consolidated operating results presented below for the three months ended June 30, 2022, include the results of Appliances
Connection, and, therefore, are not comparable to the consolidated operating results for the three months ended June 30, 2021. The following
table sets forth key components of our results of operations for the three months ended June 30, 2022 and 2021, in thousands and as a
percentage of our revenue.





|                                                       |  | Three Months Ended |         |   | Three Months Ended | 
|------------------------------------------------------ |  | ------------------ | ------- | - | ------------------ | 
|                                                       |  | June 30, 2022      |         |   | June 30, 2021      | 
|                                                       |  | Amount             |         |   | % of Sales         | 
|Product sales, net                                     |  | $                  | 138,463 |   |                    | 
|Cost of goods sold                                     |  |                    | 115,438 |   |                    | 
|Gross profit                                           |  |                    | 23,025  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Operating Expenses                                     |  |                    |         |   |                    | 
|Personnel                                              |  |                    | 7,402   |   |                    | 
|Advertising                                            |  |                    | 5,363   |   |                    | 
|Bank and credit card fees                              |  |                    | 4,600   |   |                    | 
|Depreciation and amortization                          |  |                    | 2,887   |   |                    | 
|Loss on abandonment of right-of-use asset              |  |                    | -       |   |                    | 
|General and administrative                             |  |                    | 3,563   |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Operating Expenses                               |  |                    | 23,815  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|LOSS FROM OPERATIONS                                   |  |                    | (790    | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Other Income (Expenses)                                |  |                    |         |   |                    | 
|Interest income                                        |  |                    | 64      |   |                    | 
|Interest expense                                       |  |                    | (302    | ) |                    | 
|Loss on change in fair value of derivative instruments |  |                    | (936    | ) |                    | 
|Loss on settlement of debt                             |  |                    | (3,241  | ) |                    | 
|Other expense                                          |  |                    | (41     | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Other Expenses                                   |  |                    | (4,456  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|NET LOSS BEFORE INCOME TAXES                           |  |                    | (5,246  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|INCOME TAX BENEFIT                                     |  |                    | 954     |   |                    | 
|                                                       |  |                    |         |   |                    | 
|NET INCOME (LOSS)                                      |  | $                  | (4,292  | ) |                    | 





51







Product sales, net. We generate
revenue from the retail sales of appliances, furniture, home goods and related products. Our product sales were $138.5 million for
the three months ended June 30, 2022, as compared to $64.1 million for the three months ended June 30, 2021, an increase of $74.4
million, or 116.1%. This increase was primarily due to the impact of the Appliances Connection Acquisition.





Cost of goods sold. Our cost of goods sold
are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their products. We negotiate
special terms and pricing with the manufacturer, which are generally based on the number of products we purchase. Periodically, manufacturers
offer special pricing for purchasing a certain volume of products at one time. Vendor funding might also be offered to support our marketing
and advertising efforts. Freight is the cost of delivering products to customers. Our cost of goods sold was $115.4 million for the three
months ended June 30, 2022, as compared to $51.0 million for the three months ended June 30, 2021, an increase of $64.4 million, or 126.3%,
with the increase driven by the impact of the Appliances Connection Acquisition.



Gross profit and gross margin. As a result
of the foregoing, our gross profit was $23.0 million for the three months ended June 30, 2022, as compared to $13.1 million for the three
months ended June 30, 2021, an increase of $1.0 million, or 76.4%. Our gross margin (gross profit as a percentage of net sales) was 16.6%
for the three months ended June 30, 2022, and 20.4% for the three months ended June 30, 2021. The decrease in the amount of gross profit
was driven by the impact of the Appliances Connection Acquisition. The decline in the gross margin percentage is attributable to aggressive
pricing to drive revenue growth, purchase disruptions resulting from increased customer cancellations, and a decrease in vender rebates.



Personnel expenses. Personnel expenses
include employee salaries and bonuses, as well as related payroll taxes, health insurance premiums, training costs and stock compensation expenses. Our personnel expenses were $7.4 million for the three months ended
June 30, 2022, as compared to $4.8 million for the three months ended June 30, 2021, an increase of $2.6 million, or 53.5%. As a
percentage of net sales, personnel expenses were 5.3% and 7.5% for the three months ended June 30, 2022 and 2021, respectively. Such
changes were primarily due to the impact of the Appliances Connection Acquisition.



Advertising expenses. Advertising expenses
include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $5.4 million
for the three months ended June 30, 2022, as compared to $2.9 million for the three months ended June 30, 2021, an increase of $2.4 million,
or 82.9%. As a percentage of net sales, advertising expenses were 3.9% and 4.6% for the three months ended June 30, 2022 and 2021, respectively.
Such changes were primarily due to the impact of the Appliances Connection Acquisition.





52







Bank and credit card fees. Bank and credit card fees comprise the expenses incurred in payment
to credit card processors for processing credit card transactions made by customers and to third-party sellers operating on the platforms
where we sell parts and other items. Our bank and credit card fees were $4.6 million for the three months ended
June 30, 2022, as compared to $2.1 million for the three months ended June 30, 2021, an increase of $2.5 million, or 119.6%. As a percentage
of net sales, bank and credit card fees were 3.3% for the three months ended June 30, 2022 and 2021, respectively. Bank and credit
card fees are based on customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to
the increase in customer orders associated with the Appliances Connection Acquisition.



Depreciation and amortization expense.
Depreciation and amortization expense was $2.9 million, or 2.1% of net sales, for the three months ended June 30, 2022, as compared
to $0.2 million, or 0.3% of net sales, for the three months ended June 30, 2021. The increase is the result of amortizing intangible
assets acquired in the Appliances Connection Acquisition for the entire year.



Loss on abandonment of right-of-use asset.
During the three months ended June 30, 2021, we incurred a loss in the amount of $1.4 million related to the closure of our old warehouse
and showroom and write-off of related leasehold improvements.



General and administrative expenses. Our general
and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, and other expenses
incurred in connection with general operations. Our general and administrative expenses were $3.6 million for the three months ended June
30, 2022, as compared to $2.9 million for the three months ended June 30, 2021, an increase of $0.7 million, or 24.7%. As a percentage
of net sales, general and administrative expenses were 2.6% and 4.5% for the three months ended June 30, 2022 and 2021, respectively.
Such changes were primarily due to the impact of the Appliances Connection Acquisition.



Total other income (expense). We had
$4.5 million in total net other expense, for the three months ended June 30, 2022, and $2.9 million for the three months ended June
30, 2021. Total other expense, net, for the three months ended June 30, 2022, consisted primarily of loss on the settlement of debt
of $3.2 million, a loss on the change in the fair value of a derivative instrument of $0.9 million and interest expense of $0.3
million. The total other expense, net, for the three months ended June 30, 2021, consisted primarily of loss on the settlement of
debt of $1.7 million and interest expense of $1.0 million.



Income tax benefit. We had an income tax
benefit of $1.0 million for the three months ended June 30, 2022, as compared to an income tax benefit of $8.0 million for the three
months ended June 30, 2021.



Net income. As a result of the cumulative
effect of the factors described above, we had a net loss of $4.3 million for the three months ended June 30, 2022, as compared to net
income of $4.0 million for the three months ended June 30, 2021, a decrease of $8.3 million, or 206.4%.







53











Comparison of the six months ended June 30, 2022 and 2021



The
unaudited condensed consolidated operating results presented below for the six months ended June 30, 2022, include the results of Appliances
Connection, and, therefore, are not comparable to the consolidated operating results for the six months ended June 30, 2021. The following
table sets forth key components of our results of operations for the six months ended June 30, 2022 and 2021, in thousands and as a percentage
of our revenue.





|                                                       |  | Six Months Ended |         |   | Six Months Ended | 
|------------------------------------------------------ |  | ---------------- | ------- | - | ---------------- | 
|                                                       |  | June 30, 2022    |         |   | June 30, 2021    | 
|                                                       |  | Amount           |         |   | % of Net Sales   | 
|Product sales, net                                     |  | $                | 287,144 |   |                  | 
|Cost of goods sold                                     |  |                  | 233,357 |   |                  | 
|Gross profit                                           |  |                  | 53,787  |   |                  | 
|                                                       |  |                  |         |   |                  | 
|Operating Expenses                                     |  |                  |         |   |                  | 
|Personnel                                              |  |                  | 14,048  |   |                  | 
|Advertising                                            |  |                  | 10,941  |   |                  | 
|Bank and credit card fees                              |  |                  | 9,189   |   |                  | 
|Depreciation and amortization                          |  |                  | 5,706   |   |                  | 
|Loss on abandonment of right-of-use asset              |  |                  | -       |   |                  | 
|General and administrative                             |  |                  | 7,818   |   |                  | 
|                                                       |  |                  |         |   |                  | 
|Total Operating Expenses                               |  |                  | 47,702  |   |                  | 
|                                                       |  |                  |         |   |                  | 
|INCOME (LOSS) FROM OPERATIONS                          |  |                  | 6,085   |   |                  | 
|                                                       |  |                  |         |   |                  | 
|Other Income (Expenses)                                |  |                  |         |   |                  | 
|Interest income                                        |  |                  | 108     |   |                  | 
|Adjustment in value of contingency                     |  |                  | (2      | ) |                  | 
|Interest expense                                       |  |                  | (1,243  | ) |                  | 
|Loss on change in fair value of derivative instruments |  |                  | (936    | ) |                  | 
|Loss on settlement of debt                             |  |                  | (3,241  | ) |                  | 
|Other income (expense)                                 |  |                  | (90     | ) |                  | 
|                                                       |  |                  |         |   |                  | 
|Total Other Expenses                                   |  |                  | (5,404  | ) |                  | 
|                                                       |  |                  |         |   |                  | 
|NET INCOME (LOSS) BEFORE INCOME TAXES                  |  |                  | 681     |   |                  | 
|                                                       |  |                  |         |   |                  | 
|INCOME TAX BENEFIT                                     |  |                  | 846     |   |                  | 
|                                                       |  |                  |         |   |                  | 
|NET INCOME                                             |  | $                | 1,527   |   |                  | 





54







Product sales, net. We generate revenue
from the retail sales of appliances, furniture, home goods and related products. Our product sales were $287.1 million for the six months
ended June 30, 2022, as compared to $77.8 million for the six months ended June 30, 2021, an increase of $209.4 million, or 269.2%. This growth was primarily driven by the significant impact of the Appliances
Connection Acquisition during the period.



Cost of goods sold. Our cost of goods
sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their products. We
negotiate special terms and pricing with the manufacturer, which are generally based on the number of products we purchase. Periodically,
manufacturers offer special pricing for purchasing a certain volume of products at one time. Vendor funding might also be offered to support
our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our cost of goods sold was $233.4 million
for the six months ended June 30, 2022, as compared to $62.1 million for the six months ended June 30, 2021, an increase of $171.3 million,
or 275.9%, with the increase driven by the impact of the Appliances Connection Acquisition.



Gross profit and gross margin. As a result
of the foregoing, our gross profit was $53.8 million for the six months ended June 30, 2022, as compared to $15.7 million for the six
months ended June 30, 2021, an increase of $38.1 million, or 242.9%. Our gross margin (gross profit as a percentage of net sales) was
18.7% for the six months ended June 30, 2022, and 20.2% for the six months ended June 30, 2021. The decrease in the amount of gross profit
was driven by the impact of the Appliances Connection Acquisition. The decline in the gross margin percentage is attributable to aggressive
pricing to drive revenue growth, purchase disruptions resulting from increased customer cancellations, and a decrease in vender rebates.





Personnel expenses. Personnel expenses
include employee salaries and bonuses, as well as payroll taxes, health insurance premiums, training
costs, and stock compensation expense. Our personnel expenses were $14.0 million for the six months ended June 30, 2022, as compared to
$6.8 million for the six months ended June 30, 2021, an increase of $7.3 million, or 108.0%. As a percentage of net sales, personnel expenses
were 4.9% and 8.7% for the six months ended June 30, 2022 and 2021, respectively. Such changes were primarily due to the impact of the
Appliances Connection Acquisition.



Advertising
expenses. Advertising expenses include the cost of marketing our products and primarily include online search engine expenses. Our
advertising expenses were $10.9 million for the six months ended June 30, 2022, as compared to $4.0 million for the six months ended
June 30, 2021, an increase of $6.9 million, or 172.5%. As a percentage of net sales, advertising expenses were 3.8% and 5.2% for the
six months ended June 30, 2022 and 2021, respectively. Such changes were primarily due to the impact of the Appliances Connection Acquisition.





55







Bank and credit card fees. Bank and credit card fees comprise the expenses incurred in payment
to credit card processors for processing credit card transactions made by customers and to third-party sellers operating on the platforms
where we sell parts and other items. Our bank and credit card fees were $9.2 million for the six months ended
June 30, 2022, as compared to $2.6 million for the six months ended June 30, 2021, an increase of $6.6 million, or 249.7%. As a percentage
of net sales, bank and credit card fees were 3.2% and 3.4% for the six months ended June 30, 2022 and 2021, respectively. Bank and credit
card fees are based on customer orders that are paid with a credit card (substantially all orders), so the increase was largely due to
the increase in customer orders associated with the Appliances Connection Acquisition.







Depreciation
and amortization. Depreciation and amortization expense was $5.7 million, or 2.0% of net sales, for the six months ended June
30, 2022, as compared to $0.3 million, or 0.4% of net sales, for the six months ended June 30, 2021. The increase is the result of
amortizing intangible assets acquired in the Appliances Connection Acquisition for the entire year.



Loss on abandonment of right-of-use asset.
During the six months ended June 30, 2021, we incurred a loss in the amount of $1.4 million related to the closure of our old warehouse
and showroom and write-off of related leasehold improvements.



General and administrative expenses. Our
general and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, and
other expenses incurred in connection with general operations. Our general and administrative expenses were $7.8 million for the six months
ended June 30, 2022, as compared to $5.1 million for the six months ended June 30, 2021, an increase of $2.7 million, or 53.4%. As a percentage
of net sales, general and administrative expenses were 2.7% and 6.6% for the six months ended June 30, 2022 and 2021, respectively. Such
changes were primarily due to the impact of the Appliances Connection Acquisition.



Total other income (expense). We had
$5.4 million in total net other expense for the six months ended June 30, 2022, as compared to total net other expense of
$3.0 million for the six months ended June 30, 2021. Total other expense, net, for the six months ended June 30, 2022, consisted
primarily of loss on the settlement of debt of $3.2 million, a loss on the change in the fair value of a derivative instruments of
$0.9 million, and interest expense of $1.2 million. Total other expense, net, for the six months ended June 30, 2021, consisted
primarily of loss on the settlement of debt of $1.7 million and interest expense of $1.3 million.



Income
tax benefit. We had an income tax net benefit of $0.8 million for the six months ended June 30, 2022, as compared to an income tax benefit
of $8.0 million for the six months ended June 30, 2021.



Net income. As a result of the cumulative
effect of the factors described above, we had net income of $1.5 million for the six months ended June 30, 2022, as compared to net income
of $0.5 million for the six months ended June 30, 2021, an increase of $1.0 million, or 183.3%.



Summary
of Cash Flow



The following table provides detailed information
about our net cash flow for the six months ended June 30, 2022 and 2021 (in thousands).



|                                                          |  | Six Months Ended |        
|--------------------------------------------------------- |  | ---------------- | -------
|                                                          |  | June 30,         |        
|                                                          |  | 2022             |        
|Net cash used in operating activities                     |  | $                | (22,190
|Net cash used in investing activities                     |  |                  | (256   
|Net cash provided by financing activities                 |  |                  | 37,774 
|                                                          |  |                  |        
|Net change in cash, cash equivalents, and restricted cash |  | $                | 15,328 



Cash
flows used in operating activities. Our net cash used in operating activities was $22.2 million for the six months ended June
30, 2022, as compared to $7.0 million for the six months ended June 30, 2021. Significant changes in operating assets and
liabilities affecting cash flows during these periods included:



| | ● | Net income was $1.5 million and $0.5 million for the six months ended
June 30, 2022 and 2021, respectively,
| | - | -----------------------------------------------------------------------------------------------------------



| | ● | Cash used  by receivables was $2.3 million, as compared to cash provided by receivables of $0.5 million for
                                                                                                                                                                                                                                                                                                                    the six months ended June 30, 2022 and 2021, respectively,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





56









| | ● | Cash used in  inventories was $4.5 million, as compared to cash provided by inventories of  $2.3
million for the six months ended June 30, 2022 and 2021, respectively, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash used by customer deposits was $12.1 million and $1.7 million
for the six months ended June 30, 2022 and 2021, respectively. Prior to July 2021, the Company charged a customer’s card when
an order was placed. After July 2021, the customer’s card was charged when the order shipped. The decline in customer deposits results
from shipping or refunding customer orders that had previously been paid.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cash flows used by investing
activities. Our net cash used in investing activities was $0.3 million for the six months ended June 30, 2022, as compared to
$198.1 million for the six months ended June 30, 2021. Net cash used in investing activities for the six months ended June 30, 2021,
primarily consisted of cash paid in the acquisition of Appliances Connection of $197.6 million.



Cash flows provided by financing
activities. Our net cash provided by financing activities was $37.8 million for the six months ended June 30, 2022, as compared
to net cash provided by financing activities of $248.8 million for the six months ended June 30, 2021.



Significant
changes in financing activities affecting cash flows during these years included:



| | ● | Net cash received from notes payable proceeds of $43.0 million and
$55.2 million for the six months ended June 30, 2022 and June 30, 2021 respectively,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Repayments of notes payable of $3.2 million and $3.3 million for the
six months ended June 30, 2022 and 2021, respectively, and
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | ● | Net proceeds of $194.6 million received from public offering  and proceeds from the exercise of warrants of $2.3
million for the six months ended June 30, 2021.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



Liquidity
and Capital Resources



For a discussion of our current liquidity and capital resources, see
Note 2, “Summary of Significant Accounting Policies – Liquidity and Going Concern Assessment.”



Debt



See Note 11, Notes Payable, Note 12 Leases,and Note 14, Related Partiesfor a discussion of our current debt, leases, and management services agreement.





57







Comparison of the three months ended September
30, 2022 and 2021



The
unaudited condensed consolidated operating results presented below for the three months ended September 30, 2022, include the results
of Appliances Connection, and, therefore, are not comparable to the consolidated operating results for the three months ended September
30, 2021. The following table sets forth key components of our results of operations for the three months ended September 30, 2022 and
2021, in thousands and as a percentage of our revenue.



|                                                       |  | Three Months Ended |         |   | Three Months Ended | 
|------------------------------------------------------ |  | ------------------ | ------- | - | ------------------ | 
|                                                       |  | September 30, 2022 |         |   | September 30, 2021 | 
|                                                       |  | Amount             |         |   | % of Sales         | 
|Product sales, net                                     |  | $                  | 143,566 |   |                    | 
|Cost of goods sold                                     |  |                    | 122,431 |   |                    | 
|Gross profit                                           |  |                    | 21,135  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Operating Expenses                                     |  |                    |         |   |                    | 
|Personnel                                              |  |                    | 8,348   |   |                    | 
|Advertising                                            |  |                    | 7,534   |   |                    | 
|Bank and credit card fees                              |  |                    | 5,932   |   |                    | 
|Depreciation and amortization                          |  |                    | 2,882   |   |                    | 
|General and administrative                             |  |                    | 7,260   |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Operating Expenses                               |  |                    | 31,956  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|INCOME (LOSS) FROM OPERATIONS                          |  |                    | (10,821 | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Other Income (Expenses)                                |  |                    |         |   |                    | 
|Interest income                                        |  |                    | 174     |   |                    | 
|Interest expense                                       |  |                    | (1,351  | ) |                    | 
|Gain on change in fair value of derivative instruments |  |                    | 4,476   |   |                    | 
|Other income (expense)                                 |  |                    | (50     | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Other Income (Expenses)                          |  |                    | 3,249   |   |                    | 
|                                                       |  |                    |         |   |                    | 
|NET INCOME (LOSS) BEFORE INCOME TAXES                  |  |                    | (7,572  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|INCOME TAX (EXPENSE) BENEFIT                           |  |                    | 2,388   |   |                    | 
|                                                       |  |                    |         |   |                    | 
|NET INCOME (LOSS)                                      |  | $                  | (5,184  | ) |                    | 





58







Product sales, net. We generate revenue
from the retail sales of appliances, furniture, home goods and related products. Our product sales were $143.6 million for the three
months ended September 30, 2022, as compared to $141.9 million for the three months ended September 30, 2021, an increase of $1.7 million,
or 1.2%.



Cost
of goods sold. Our cost of goods sold are comprised of product costs and freight costs. Product costs represent the amount we pay
the manufacturer for their products. We negotiate special terms and pricing with the manufacturer, which are generally based on the number
of products we purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time. Vendor funding
might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our
cost of goods sold was $122.4 million for the three months ended September 30, 2022, as compared to $110.5 million for the three months
ended September 30, 2021, an increase of $11.9 million, or 10.8%, is mainly attributed to higher freight and product costs, along with
a decrease in vendor rebates during the period.



Gross profit and gross margin. As a result
of the foregoing, our gross profit was $21.1 million for the three months ended September 30, 2022, as compared to $31.4 million for
the three months ended September 30, 2021, a decrease of $10.2 million, or 32.6%. Our gross margin (gross profit as a percentage of
net sales) was 14.7% for the three months ended September 30, 2022, and 22.1% for the three months ended September 30, 2021. The decline in gross profit is mainly attributed to increased product
and freight costs during the period. Additionally, the decrease in the gross margin percentage is attributable to several factors, including
aggressive pricing strategies aimed at driving revenue growth, purchase disruptions arising from increased customer cancellations, and
a reduction in vendor rebates.



Personnel
expenses. Personnel expenses include employee salaries and bonuses, as well as related payroll taxes,  health insurance
premiums, training costs, and stock compensation expense. Our personnel expenses were $8.3 million for the three
months ended September 30, 2022, as compared to $8.5 million for the three months ended September 30, 2021, a decrease of $0.2 million,
or 2.3%. As a percentage of net sales, personnel expenses were 5.8% and 6.0% for the three months ended September 30, 2022 and 2021,
respectively.



Advertising expenses. Advertising expenses
include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $7.5 million
for the three months ended September 30, 2022, as compared to $3.7 million for the three months ended September 30, 2021, an increase
of $3.8 million, or 102.8%. As a percentage of net sales, advertising expenses were 5.2% and 2.6% for the three months ended September
30, 2022 and 2021, respectively. Such changes were primarily due to an effort to increase revenue through higher advertising spending.





59







Bank and credit card fees. Bank and
credit card fees comprise the expenses incurred in payment to credit card processors for processing credit card transactions made by
customers and to third-party sellers operating on the platforms where we sell parts and other items. Our bank and credit card fees
were $5.9 million for the three months ended September 30, 2022, as compared to $4.9 million for the three months ended September
30, 2021, an increase of $1.0 million, or 20.6%. As a percentage of net sales, bank and credit card fees were 4.1% and 3.5% for the
three months ended September 30, 2022 and 2021, respectively. Bank and credit card fees are based on customer orders that are paid
with a credit card (substantially all orders). The change is related to a shift in the mix of credit cards used by customers and
third-party sales, which typically have higher fees compared to credit cards.





Depreciation and amortization
expense. Depreciation and amortization expense was $2.9 million, or 2.0% of net sales, for the three months ended September 30,
2022, as compared to $3.6 million, or 2.5% of net sales, for the three months ended September 30, 2021. The decrease is the result
of decreased depreciation expense during the period.



Acquisition expenses. During the three
months ended September 30, 2021, we incurred expenses related to the acquisition of Appliances Connection in the amount of $0.06 million.



General
and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, rent expense,
insurance, and other expenses incurred in connection with general operations. Our general and administrative expenses
were $7.3 million for the three months ended September 30, 2022, as compared to $4.1 million for the three months ended September 30,
2021, an increase of $3.2 million, or 77.9%. As a percentage of net sales, general and administrative expenses were 5.1% and 2.9% for
the three months ended September 30, 2022 and 2021, respectively. This increase is primarily driven by higher professional fees incurred
in relation to the investigation of certain allegations made by former employees regarding the Company’s business operations. See
“Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation – Investigation”
initiated by the Board.



Total other income (expense). We had
$3.2 million in total net other income for the three months ended September 30, 2022, as compared to total net other expense of $1.1
million for the three months ended September 30, 2021. Total other income, net, for the three months ended September 30, 2022,
consisted primarily of a gain on the change in the fair value on derivative instruments of $4.5 million, offset by interest expense of
$1.4 million. Total other expense, net, for the three months ended September 30, 2021, consisted primarily of interest expense of
$1.1 million.



Income tax benefit (expense). We had an
income tax net benefit of $2.4 million for the three months ended September 30, 2022, as compared to an income tax expense of $2.1 million
for the three months ended September 30, 2021.



Net income (loss). As a result of the
cumulative effect of the factors described above, we had a net loss of $5.2 million for the three months ended September 30, 2022, as
compared to net income of $3.3 million for the three months ended September 30, 2021, a decrease of $8.5 million, or 256.3%.





60







Comparison of the nine months ended September 30, 2022 and 2021



The unaudited condensed consolidated
operating results presented below for the nine months ended September 30, 2022, include the results of Appliances Connection, and,
therefore, are not comparable to the consolidated operating results for the nine months ended September 30, 2021. The following
table sets forth key components of our results of operations for the nine months ended September 30, 2022 and 2021, in thousands and
as a percentage of our revenue.



|                                                       |  | Nine Months Ended  |         |   | Nine Months Ended  | 
|------------------------------------------------------ |  | ------------------ | ------- | - | ------------------ | 
|                                                       |  | September 30, 2022 |         |   | September 30, 2021 | 
|                                                       |  | Amount             |         |   | % of Sales         | 
|Product sales, net                                     |  | $                  | 430,710 |   |                    | 
|Cost of goods sold                                     |  |                    | 355,788 |   |                    | 
|Gross profit                                           |  |                    | 74,922  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Operating Expenses                                     |  |                    |         |   |                    | 
|Personnel                                              |  |                    | 22,396  |   |                    | 
|Advertising                                            |  |                    | 18,475  |   |                    | 
|Bank and credit card fees                              |  |                    | 15,121  |   |                    | 
|Depreciation and amortization                          |  |                    | 8,588   |   |                    | 
|Loss on abandonment of right-of-use asset              |  |                    | -       |   |                    | 
|General and administrative                             |  |                    | 15,078  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Operating Expenses                               |  |                    | 79,658  |   |                    | 
|                                                       |  |                    |         |   |                    | 
|INCOME (LOSS) FROM OPERATIONS                          |  |                    | (4,736  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Other Income (Expenses)                                |  |                    |         |   |                    | 
|Interest income                                        |  |                    | 282     |   |                    | 
|Adjustment in value of contingency                     |  |                    | (2      | ) |                    | 
|Interest expense                                       |  |                    | (2,594  | ) |                    | 
|Gain on change in fair value of derivative instruments |  |                    | 3,540   |   |                    | 
|Loss on settlement of debt                             |  |                    | (3,241  | ) |                    | 
|Other income (expense)                                 |  |                    | (140    | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|Total Other Expenses                                   |  |                    | (2,155  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|NET LOSS BEFORE INCOME TAXES                           |  |                    | (6,891  | ) |                    | 
|                                                       |  |                    |         |   |                    | 
|INCOME TAX BENEFIT                                     |  |                    | 3,234   |   |                    | 
|                                                       |  |                    |         |   |                    | 
|NET INCOME (LOSS)                                      |  | $                  | (3,657  | ) |                    | 



Product sales, net. We generate revenue
from the retail sales of appliances, furniture, home goods and related products. Our product sales were $430.7 million for the nine months
ended September 30, 2022, as compared to $219.6 million for the nine months ended September 30, 2021, an increase of $211.1 million, or
96.1%. This growth was primarily driven by the significant impact of the Appliances
Connection Acquisition during the period.



61







Cost of goods sold. Our cost of goods
sold are comprised of product costs and freight costs. Product costs represent the amount we pay the manufacturer for their
products. We negotiate special terms and pricing with the manufacturer, which are generally based on the number of products we
purchase. Periodically, manufacturers offer special pricing for purchasing a certain volume of products at one time. Vendor funding
might also be offered to support our marketing and advertising efforts. Freight is the cost of delivering products to customers. Our
cost of goods sold was $355.8 million for the nine months ended September 30, 2022, as compared to $172.6 million for the nine
months ended September 30, 2021, an increase of $183.2 million, or 106.2%, with the increase driven by the impact of the Appliances
Connection Acquisition.



Gross profit and gross margin. As a
result of the foregoing, our gross profit was $74.9 million for the nine months ended September 30, 2022, as compared to $47.1
million for the nine months ended September 30, 2021, a decrease of $27.9  million, or 59.2%. Our gross margin (gross profit as
a percentage of net sales) was 17.4% for the nine months ended September 30, 2022, and 21.4% for the nine months ended September 30,
2021. The decrease in the gross margin percentage is attributable to several
factors, including aggressive pricing strategies aimed at driving revenue growth, purchase disruptions arising from increased customer
cancellations, and a reduction in vendor rebates.



Personnel expenses. Personnel expenses
include employee salaries and bonuses, as well as related payroll taxes, health insurance premiums, training
costs, and stock compensation expense. Our personnel expenses were $22.4 million for the nine months ended September 30, 2022, as compared
to $15.3 million for the nine months ended September 30, 2021, an increase of $7.1 million, or 46.4%.  As a percentage of net sales,
personnel expenses were 5.2% and 7.0% for the nine months ended September 30, 2022 and 2021, respectively. Such changes were primarily
due to the impact of the Appliances Connection Acquisition.



Advertising expenses. Advertising expenses
include the cost of marketing our products and primarily include online search engine expenses. Our advertising expenses were $18.5 million
for the nine months ended September 30, 2022, as compared to $7.7 million for the nine months ended September 30, 2021, an increase of
$10.8 million, or 139.0%. As a percentage of net sales, advertising expenses were 4.3% and 3.5% for the nine months ended September 30,
2022 and 2021, respectively. The change was primarily due to an effort to increase revenue through higher advertising spend.



Bank and credit card fees. Bank and credit
card fees comprise the expenses incurred in payment to credit card processors for processing credit card transactions made by customers
and to third-party sellers operating on the platforms where we sell parts and other items. Our bank and credit card fees were $15.1 million
for the nine months ended September 30, 2022, as compared to $7.5 million for the nine months ended September 30, 2021, an increase of
$7.6 million, or 100.4%. As a percentage of net sales, bank and credit card fees were 3.5% and 3.4% for the nine months ended September
30, 2022 and 2021, respectively.



Depreciation and amortization
expense. Depreciation and amortization expense was $8.6 million, or 2.0% of net sales, for the nine months ended September 30,
2022, as compared to $3.9 million, or 1.8% of net sales, for the nine months ended September 30, 2021. The increase is the result of
amortizing intangible assets acquired in the Appliances Connection Acquisition the entire year.



Loss on abandonment of right-of-use asset.
During the nine months ended September 30, 2021, we incurred a loss in the amount of $1.4 million related to the closure of our old warehouse
and showroom and write-off of related leasehold improvements.



General and administrative expenses. Our
general and administrative expenses consist primarily of professional advisor fees, rent expense, insurance, and
other expenses incurred in connection with general operations. Our general and administrative expenses were $15.1 million for the nine
months ended September 30, 2022, as compared to $9.2 million for the nine months ended September 30, 2021, an increase of $5.9 million,
or 64.3%. As a percentage of net sales, general and administrative expenses were 3.5% and 4.2% for the nine months ended September 30,
2022 and 2021, respectively. Such changes were primarily due to the impact of the Appliances Connection Acquisition and higher professional fees incurred in relation to the investigation of certain
allegations made by former employees regarding the Company’s business operations. See “Item 7 Management’s Discussion and Analysis of Financial
Condition and Results of Operation – Investigation” initiated by the Board.







62







Total other income (expense). We had
$2.2 million in total net other expense for the nine months ended September 30, 2022, as compared to total net other expense, of
$4.0 million for the nine months ended September 30, 2021. Total other expense, net, for the nine months ended September 30, 2022,
consisted primarily of loss on the extinguishment of debt of $3.2 million and interest expense of $2.6 million, offset by a gain
from the change in fair value of a derivative asset of $3.5 million. Total other expense, net, for the nine months ended September
30, 2021, consisted primarily of loss on settlement of debt of $1.7 million and interest expense of $2.4 million.



Income tax benefit. We had an
income tax net benefit of $3.2 million for the nine months ended September 30, 2022, as compared to an income tax benefit of $5.9 million
for the nine months ended September 30, 2021.



Net income (loss). As a result of the
cumulative effect of the factors described above, we had a net loss of $3.7 million for the nine months ended September 30, 2022, as
compared to net income of $3.9 million for the nine months ended September 30, 2021, a decrease of $7.5 million, or 194.8%.



Summary of Cash Flow



The following table provides detailed information
about our net cash flow for the nine months ended September 30, 2022 and 2021 (in thousands).



|                                                          |  | Nine Months Ended |        
|--------------------------------------------------------- |  | ----------------- | -------
|                                                          |  | September 30,     |        
|                                                          |  | 2022              |        
|Net cash used in operating activities                     |  | $                 | (38,693
|Net cash used in investing activities                     |  |                   | (1,318 
|Net cash provided by financing activities                 |  |                   | 36,386 
|                                                          |  |                   |        
|Net change in cash, cash equivalents, and restricted cash |  | $                 | (3,625 



Cash flows used in operating activities.
Our net cash used in operating activities was $38.7 million for the nine months ended September 30, 2022, as compared to $18.3 million for the nine months ended September 30, 2021. Significant changes in operating assets and liabilities
affecting cash flows during these periods included:



| | ● | Net loss was $3.7 million, as compared to net income of $3.9
                                                     million for the nine months ended September 30, 2022 and 2021, respectively,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash used by receivables was $1.8 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively,
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash
    provided by inventories was $7.3 million, as compared to cash used by inventory of $11.7 million for the nine months ended
    September 30, 2022 and 2021, respectively,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cash used by customer deposits was $20.9 million and $16.9 million for the nine months ended September 30, 2022 and 2021, respectively. Prior to July 2021, the Company charged a customer’s card when an order was placed. After July 2021, the customers card was charged when the order shipped. The decline in customer deposits results from shipping or refunding customer orders that had previously been paid.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cash
                                            flows used in investing activities. Our net cash used in investing activities was $1.3
                                            million for the nine months ended September 30, 2022, as compared to $203.6 million for the
                                            nine months ended September 30, 2021. Net cash used in investing activities for the nine
                                            months ended September 30, 2022, consisted of leasehold improvements of $1.3 million. Net
                                            cash used in investing activities for the nine months ended September 30, 2021, primarily consisted
                                            of cash paid in the acquisition of Appliances Connection, net of cash acquired, of $201.5
                                            million.





Cash flows provided by financing
activities. Our net cash provided in financing activities was $36.4 million for the nine months ended September 30, 2022, as
compared to $247.2 million for the nine months ended September 30, 2021.



Significant changes in financing activities affecting cash flows during
these years included:



| | ● | Net cash
received from notes payable proceeds of $43.0 million and $55.2 million for the nine months ended September 30, 2022 and September 30,
2021, respectively,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Repayments of notes payable of $4.6 million and $4.9 million for the
nine months ended September 30, 2022 and 2021, respectively,
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | ● | Stock repurchases of $2.0 million for the nine months ended September
30, 2022, and
| | - | -----------------------------------------------------------------------------------



| | ● | Net proceeds of $194.6 million received from public offering and proceeds
from the exercise of warrants of $2.3 million for the nine months ended September 30, 2021.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



As
a smaller reporting company, we are not required to disclose this item.



ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



The
full text of our audited consolidated financial statements begins on page F-1 of this annual report.







63







ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.



Resignation of Independent Registered Public Accounting Firm



On December 20, 2022, the Company
received a letter from the Company’s independent registered public accounting firm, Friedman LLP,
informing the Company of its decision to resign effective December 20, 2022 as the auditors of the Company.



In the Letter, Friedman advised the Company that
based on the results of the Board’s internal investigation as reported to Friedman,
it appeared there may be material adjustments and/or disclosures necessary to previously reported financial information. Additionally,
the Board’s internal investigation identified facts, that if further investigated by Friedman, might cause Friedman to no longer
to be able to rely on the representations of (i) management that was in place at the time Friedman issued its audit report for the year
ended December 31, 2021, or (ii) management that was in place at the time of Friedman’s association with the quarterly financial
statements for the periods ended June 30, 2021, September 30, 2021 and March 31, 2022. Prior to the Letter, in the past two years, the
Company had not received from Friedman an adverse opinion or a disclaimer of opinion, and Friedman’s opinion was not qualified or modified
as to uncertainty, audit scope, or accounting principles. The resignation by Friedman was neither recommended nor approved by the Audit Committee or the Board and there were no disagreements with management and Friedman.
Friedman had previously reported a material weakness to the Audit Committee, which was included on the Company’s Form 10-K for the
year ended December 31, 2021, filed on March 31, 2022, regarding the ineffectiveness of the Company’s internal controls over financial
reporting.



In connection with the Letter, Friedman advised
us that it was withdrawing its previously issued audit opinion on our December 31, 2021 consolidated financial statements, issued on March
31, 2022, and declined to be associated with the quarterly financial statements for the periods ended June 30, 2021, September 30, 2021,
and March 31, 2022, filed on August 8, 2021, November 16, 2021 and May 12, 2022, respectively.



Engagement of New Independent Registered
Public Accounting Firm



On December 26, 2022, the Audit Committee approved
the engagement of Sadler, Gibb & Associates, LLC as the Company’s independent registered public accounting firm for the fiscal
years ended December 31, 2022 and 2021.



ITEM
9A. CONTROLS AND PROCEDURES.



Evaluation
of Disclosure Controls and Procedures



The
Company maintains “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
designed to ensure that information required to be disclosed by a company in the reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives.



Based on the evaluation
performed as of December 31, 2022, as a result of the material weaknesses in internal control over financial reporting that are described
below in “Management’s Report on Internal Control Over Financial Reporting,” our Interim Chief Executive Officer and
Interim Chief Financial Officer determined that our disclosure controls and procedures were not effective as of such date.



Management’s
Report on Internal Control Over Financial Reporting



Management
is responsible for establishing and maintaining adequate “internal control over financial reporting,” as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). A company’s internal control over financial reporting is a process designed by,
or under the supervision of, its Chief Executive Officer and Chief Financial Officer, and effected by such company’s board of directors,
management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and
procedures that:



| | i. | pertain
                                            to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
                                            transactions and dispositions of the assets of the company;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | provide
                                            reasonable assurance that transactions are recorded as necessary to permit preparation of
                                            financial statements in accordance with generally accepted accounting principles and the
                                            receipts and expenditures of the company are being made only in accordance with authorizations
                                            of management and directors of the company; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | provide
                                            reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
                                            use or disposition of the company’s assets that could have a material effect on the
                                            financial statements.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.





64









Management, with the
participation of our interim Chief Executive Officer and interim Chief Financial Officer, has conducted an evaluation of the effectiveness
of our internal control over financial reporting as of December 31, 2022, based on the framework set forth in Internal Control-Integrated
Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
this assessment, management has concluded that the Company did not maintain effective internal control over financial reporting as of
December 31, 2022, due to the material weaknesses described below.







Material
Weaknesses in Internal Control over Financial Reporting



Management
has determined that the Company’s ineffective internal control over financial reporting and resulting material weaknesses, stem
primarily from management’s inability to maintain appropriately designed controls, which impacts the control environment, risk
assessment procedures and ability to detect or prevent material misstatements to the financial statements. The material weaknesses were
attributed to:



| | ● | Lack
                                            of structure and responsibility, insufficient number of qualified resources and inadequate
                                            oversight and accountability over the performance of controls;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Ineffective
                                            assessment and identification of changes in risk impacting internal control over financial
                                            reporting;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Inadequate selection and development of effective control activities,
general controls over technology and effective policies and procedures;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Ineffective evaluation and determination as to whether the components
of internal control were present and functioning; and
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                            
| | ● | The lack of an accounting system that is required for a company or
our size.                                               



Management’s
Remediation Plans



Management
is actively engaged in the implementation of remediation plans to address the controls contributing to the material weaknesses. The Company’s
remediation actions include, but are not limited to, the following:



| | ● | Enhance
                                            reporting structure and increase the number of qualified resources in roles over internal
                                            control over financial reporting;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Establish
                                            formal risk assessment procedures to identify and monitor changes in the organization that
                                            could have an impact on internal control over financial reporting;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Develop and document policies and procedures, including related business
process and technology controls, assess their effectiveness and establish a program for continuous assessment of their effectiveness;
and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                   
| | ● | Implementation of a new ERP.                                                                                                                                                                                      



We
believe these measures will remediate the control deficiencies, but management is assessing the need for any additional steps to remediate
the underlying causes that give rise to these material weaknesses. The material weaknesses will not be considered remediated until the
applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating
effectively. There is no assurance that additional remediation steps will not be necessary.



Management’s
report on internal control over financial reporting was not subject to attestation by the Company’s registered accounting firm
and will not be required to be subject to attestation so long as we are a smaller reporting company under the Securities Act.



Notwithstanding
the identified material weaknesses, management believes the consolidated financial statements included in this Form 10-K fairly present,
in all material respects, our results of operations and cash flows for year ended December 31, 2022 and our financial condition as of
such date, in accordance with GAAP.



Changes
in Internal Control Over Financial Reporting



Except
as set forth above, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2022,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



ITEM
9B. OTHER INFORMATION.



None.



ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.



Not
applicable.





65







PART
III



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.



Directors and Executive Officers



Set forth below is information regarding our directors, executive officers
and significant employees as of the date of this report.



|Name                |  | Age |  | Position                                        
|------------------- |  | --- |  | ------------------------------------------------
|J.E. “Rick” Bunka   |  | 64  |  | Interim Chief Executive Officer                 
|Robert D. Barry     |  | 79  |  | Interim Chief Financial Officer and Secretary   
|Jody Rusnak         |  | 61  |  | Chief Merchandizing and Brand Innovation Officer
|Ellery W. Roberts   |  | 53  |  | Executive Chairman of the Board of Directors    
|Ellette A. Anderson |  | 47  |  | Director                                        
|Clark R. Crosnoe    |  | 54  |  | Director                                        
|Glyn C. Milburn     |  | 52  |  | Director                                        
|James M. Schneider  |  | 70  |  | Director                                        
|G. Alan Shaw        |  | 60  |  | Director                                        
|Alan P. Shor        |  | 64  |  | Director                                        
|Edward J. Tobin     |  | 66  |  | Director                                        
|Houman Akhavan      |  | 45  |  | Director                                        



J.E. “Rick” Bunka. Mr.
Bunka has served as our Interim Chief Executive Officer since October 2022. Since 2019, Mr. Bunka co-founded and has served as Partner
of Park North Capital, LLC, a merchant bank that services companies seeking optimize their growth, capital structures, liquidity and operations.
Also, since 2013, Mr. Bunka has served as the President of Point North LLC, a business advisory service, through which he served in an
advisory role to Polished when it was known as 1847 Goedeker Inc. Formerly, Mr. Bunka held the position of President and Chief Executive
Officer of Dots. Over his 15-year tenure at Dots, Mr. Bunka led a transformation of the regional close out retailer into a national
specialty women’s brand with more than 400 stores across 28 states. He was also appointed Chief Restructuring Officer of Love Culture
in 2014 and of Anna’s Linens in 2015. Early in his career, he was a Management Consultant at PriceWaterhouse, specializing in strategic
planning, merchandising and organizational development in the retail and service sectors.





Robert D. Barry. Mr. Barry has
served as our Interim Chief Financial Officer since October 2022. Mr. Barry previously served as our Chief Accounting Officer from July 2021
through January 2022, and also previously served as our Chief Financial Officer from January 2019 to July 2021. He also served as the
Controller of Neese from July 2017 until the sale of Neese in April 2021. From April 2013 until August 2016, Mr. Barry was Chief Executive
Officer and Chief Financial Officer of Pawn Plus Inc., a chain of retail pawn stores. Prior to that, Mr. Barry served as Executive Vice
President and Chief Financial Officer of Regional Management Corp. (NYSE: RM), a consumer loan business based in Greenville, South Carolina
for several years. Prior to joining Regional Management Corp., he held various executive roles that include Executive Vice President
and Chief Financial Officer for Regional Acceptance Corporation (NASDAQ: REGA) and Financial Institutions Partner at KPMG LLP. Mr. Barry
is a Certified Public Accountant and also serves on the Board of Directors of 1847 Holdings LLC.



Jody Rusnak. Mr. Rusnak has served
as our Chief Merchandizing and Brand Innovation Officer since November 2021. Mr. Rusnak is an accomplished senior executive with more
than three decades of B2C and B2B experience, as well as significant experience growing product assortment and driving growth across
categories. Throughout his career, Mr. Rusnak has held several leadership roles within best-in-class retailer Nebraska Furniture Mart,
Inc., where he was responsible for the P&L of the Appliances & Electronics categories. His leadership abilities include driving
innovative approaches to merchandise, customer engagement and category expansion. In addition, Mr. Rusnak excels in vendor management,
builder channel development and optimization, building and developing teams, and mentorship. He holds two bachelor’s degrees in
Computer Science and Business Management.







66







Ellery W. Roberts. Mr. Roberts has
served as the Chairman of our board of directors since our inception and the Executive Chairman of our Board of Directors since August
30, 2021. Mr. Roberts brings over 20 years of private equity investing experience to our company. Mr. Roberts has been the Chairman, Chief
Executive Officer, President and Chief Financial Officer of 1847 Holdings since its inception on January 22, 2013 and is also the sole
manager of our manager. Mr. Roberts has also been a director of Western Capital Resources, Inc., a public company, since May 2010. In
July 2011, Mr. Roberts formed The 1847 Companies LLC, a company that is No longer active, where he began investing his own personal capital
and capital of high net worth individuals in select transactions. Prior to forming The 1847 Companies LLC, Mr. Roberts was the co-founder
and was co- managing principal from October 2009 to June 2011 of RW Capital Partners LLC, the recipient of a “Green Light”
letter from the U.S. Small Business Administration permitting RW Capital Partners LLC to raise capital in pursuit of the Small Business
Investment Company license with the preliminary support of the Small Business Administration. Mr. Roberts was a founding member of Parallel
Investment Partners, LP (formerly SKM Growth Investors, LP), a Dallas-based private equity fund focused on re-capitalizations, buyouts
and growth capital investments in lower middle market companies throughout the United States. Previously, Mr. Roberts served as Principal
with Lazard Group LLC, a Senior Financial Analyst at Colony Capital, Inc., and a Financial Analyst with the Corporate Finance Division
of Smith Barney Inc. (now known as Morgan Stanley Smith Barney LLC). Mr. Roberts received his B.A. degree in English from Stanford University.
We believe Mr. Roberts is qualified to serve on our board of directors due to his extensive investment experience.



Ellette A. Anderson. Ms. Anderson
has served on our board of directors since July 2020. In 2013, Ms. Anderson founded Griffin Archer LLC, a full-service advertising agency
that offers a comprehensive range of services addressing both the traditional and digital marking aspects of business. As the Chief Executive
Officer of Griffin Archer, Ms. Anderson is responsible for overseeing new business acquisitions, strategic planning, and creative direction
for their entire client portfolio. From April 2004 to August 2013, she served as a Writer and Associate Creative Director at Carmichael
Lynch Advertising in Minneapolis where she received multiple industry awards for her creative work on several iconic brands. She holds
a B.A. degree in English Literature from the University of Kansas. We believe Ms. Anderson is qualified to serve on our board of directors
due to her deep experience in the advertising and marketing industry.



Clark R. Crosnoe. Mr. Crosnoe has
served on our board of directors since July 2020. In 2009, Mr. Crosnoe founded CRC Capital LLC, a registered investment advisor and manager
of the CRC Investment Fund LP, a private investment partnership focused on publicly-traded equity securities. As managing member of CRC
Capital LLC, Mr. Crosnoe is responsible for strategy, oversight and the day-to-day investment decisions of the fund. The portfolio typically
includes investments in the consumer, financial, healthcare, industrial and energy sectors. In 1999, Mr. Crosnoe was a founding employee
of Parallel Investment Partners where he was named partner in 2003. As a partner, he was responsible for sourcing, evaluating, structuring,
executing and monitoring investments, and also dedicated a substantial portion of his time to marketing activities for the firm. Mr. Crosnoe
began his career in investment banking at Wasserstein Perella & Co. and also gained valuable experience at multi-billion dollar hedge
fund HBK Investments. Mr. Crosnoe holds undergraduate degrees from the University of Texas at Austin and earned an MBA from Harvard Business
School in 1996. We believe Mr. Crosnoe is qualified to serve on our board of directors due to his approximately 24 years of private and
public investment and advisory experience.



Glyn C. Milburn. Mr. Milburn has
served on our board of directors since July 2020. Since January 2021, Mr. Milburn has served as the Senior Director of Government Affairs
at Ygrene Energy Fund, an energy finance vehicle with offices in California and Florida. From February 2016 to January 2021, Mr. Milburn
has served as a Partner at Jimmy Blackman & Associates, a full- service Government and Public Affairs firm, where he is responsible
for business strategy, client management, communications and campaign management for a client portfolio comprised of large public safety
labor unions, banking/finance companies, and hotel operators across the State of California. From April 2013 to January 2016, Mr. Milburn
served as a Special Assistant in the City of Los Angeles where he held two positions in the City of Los Angeles, one in the Office of
Los Angeles Mayor Eric Garcetti’s Office of Economic Development and another in the Office of Los Angeles Councilman Dennis Zine.
From August 2012 to March 2013, Mr. Milburn co-Founded Provident Investment Advisors LLC, a special investment vehicle for energy, technology
and healthcare ventures, where he served as Managing Member. Mr. Milburn holds a B.A. degree in Public Policy from Stanford University.
We believe Mr. Milburn is qualified to serve on our board of directors due to his valuable background in policy development, regulatory
and strategic planning experience.





67







James M. Schneider. Mr. Schneider
has served on our board of directors since January 2022. Since 2006, Mr. Schneider has served as Chairman of Horizon Bank SSB, a privately
held bank in Texas. Prior to that, he was the CFO of Dell, Inc. Since 2010, Mr. Schneider has been employed by private equity firm Lead
Edge Capital, currently serving as an operating partner. Mr. Schneider holds a bachelor’s degree in accounting from Carroll University
and is a Certified Public Accountant and former partner at PricewaterhouseCoopers LLP. Mr. Schneider serves as a director of Frontier
Bancshares Inc., a provider of commercial banking services for retail and intuitional customers, and Lohman Technologies, LLC, a provider
of medical equipment. Mr. Schneider served as a director of General Communications Inc., a publicly-held telecommunications corporation
from 1994 until 2018 and Zilliant Inc. from 2011 until 2021. We believe Mr. Schneider is qualified to serve on our board of directors
due to his extensive experience on public company boards and accounting experience.





G. Alan Shaw. Mr. Shaw has served
on our board of directors since October 2021. Mr. Shaw brings expansive appliance industry knowledge and valuable supplier relationships
to our Board. He has been a leader in the industry for more than twenty years, beginning his career with Whirlpool and finishing it as
the Chief Executive Officer of Electrolux’s North American business, a position he held from January 2016 until his retirement in
January 2020. He has held President and c-level positions with several North American-based durable goods companies since 2003, including
Char-Broil and Husqvarna Group. He holds a B.S. degree in Economics and Political Science from the University of Idaho and an MBA in Marketing
from Indiana University. We believe Mr. Shaw is qualified to serve on our board of directors due to his extensive appliance industry and
executive leadership experience.





Alan P. Shor. Mr. Shor has served
on our board of directors since June 2021. Mr. Shor is a co-founder of The Retail Connection, L.P., a retail real estate company, and
has served as its President and Co-Chairman of the Board of Directors since its launch in January 2004. Mr. Shor is deeply involved in
the strategic direction and day-to-day operations of the company and also leads its investment and merchant banking business. He has served
as an operating partner with leading private equity firms which have deep experience in consumer and multi-unit based investments. He
is an investor in and a board member of four high-growth retail chains: Diamonds Direct, a diamond retailer, (since 2015), WSS, a shoe
retailer, (since 2016), Neighborhood Goods, a department store, (since 2018) and Obsession Fragrance (since 2019). Prior to launching
The Retail Connection, Mr. Shor served as President, Chief Operating Officer and a member of the Board of Zale Corporation, a publicly-held
specialty retailer of fine jewelry. Prior to joining Zale, he spent 12 years with Troutman Sanders, an international law firm, where he
built a strong track record of advising senior management teams of Fortune 1000 companies. Mr. Shor is also active in a number of professional
and charitable organizations. Mr. Shor graduated with honors from both the University of Georgia and University of Georgia School of Law.
We believe Mr. Shor is qualified to serve on our board of directors due to his valuable background in the retail and investment industries.



Edward J. Tobin. Mr. Tobin has served
on our board of directors since April 2020. Mr. Tobin has served as Managing Director of 1847 Partners LLC, our manager, since January
2014. From 1997 until November 2014, Mr. Tobin was a Director of Global Emerging Markets North America, Inc., where he managed Special
Situations and Venture investing. In this role, he oversaw structured finance transactions in industries such as clean tech, media, telecommunications,
manufacturing, real estate and life sciences. Prior to that, Mr. Tobin was Managing Director of Lincklaen Partners, a private family investment
office. Previously, he had been a portfolio manager with Neuberger and Berman and a Vice President of Nordberg Capital, Inc. Mr. Tobin
received his MBA from the Wharton School, as well as a Master of Science in Engineering and a Bachelor of Science in Economics from the
University of Pennsylvania. We believe Mr. Tobin is qualified to serve on our board of directors due to his extensive investment experience.



Houman Akhavan. Mr. Akhavan has
served on our board of directors since January 2023. Mr. Akhavan is currently the Chief Marketing Officer of CarParts.com, Inc., and has
been since February 2019. Prior to his role as CarParts.com’s Chief Marketing Officer, Mr. Akhavan was the Chief Executive
Officer of Growth Rocket (d/b/a Idea Launch, Inc.) from January 2015 to February 2019. Mr. Akhavan previously served as CarParts.com’s
Vice President of Marketing from January 2006 to December 2014. We believe Mr. Akhavan is qualified to serve on our Board due to extensive
experience growing revenue and market share in start-up and public company environments.



Our directors currently have terms which will
end at our next annual meeting of the stockholders or until their successors are elected and qualify, subject to their prior death, resignation
or removal. Officers serve at the discretion of the board of directors. There is no arrangement or understanding between any director
or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee or officer.





68







Family Relationships



There are no family relationships among any of
our executive officers or directors.



Involvement in Certain Legal Proceedings



To the best of our knowledge, except as described
below, none of our directors or executive officers has, during the past ten years:



| | ● | been convicted in a criminal proceeding or been subject to
a pending criminal proceeding (excluding traffic violations and other minor offences);
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | had any bankruptcy petition filed by or against the business
or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive
officer, either at the time of the bankruptcy filing or within two years prior to that time;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his involvement in (i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities,
or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in connection with such activity, (ii) any type of business practice, or (iii) the
purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities
laws;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | been the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity acting as a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission,
or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity, or to be associated with persons engaged in any such activity;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | been found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities
or commodities law, and the judgment has not been reversed, suspended, or vacated;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | been the subject of, or a party to, any federal or state
judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement
of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law
or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary
or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order,
or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;
or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | been the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any self- regulatory organization (as defined in Section 3(a)(26) of the Exchange
Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))),
or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated
with a member.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





69







Corporate Governance



Governance Structure



We chose to appoint a separate Chairman of the
Board of Directors who is not our Chief Executive Officer. Our board of directors has made this decision based on their belief that a
separate Chairman of the Board of Directors can act as a balance to the Chief Executive Officer.



The Board of Directors’ Role in Risk
Oversight



The board of directors oversees that the assets
of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted
wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board of
directors’ oversight of the various risks facing our company. In this regard, our board of directors seeks to understand and oversee
critical business risks. Our board of directors does not view risk in isolation. Risks are considered in virtually every business decision
and as part of our business strategy. Our board of directors recognizes that it is neither possible nor prudent to eliminate all risk.
Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.



While the board of directors oversees risk management,
company management is charged with managing risk. Management communicates routinely with the board of directors and individual directors
on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with
senior management.



Our board of directors administers its risk oversight
function as a whole by making risk oversight a matter of collective consideration. Much of this work has been delegated to committees,
which will meet regularly and report back to the full board of directors. The audit committee oversees risks related to our consolidated
financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and
rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee evaluates risk
associated with management decisions and strategic direction.



Independent Directors



The rules of NYSE American generally require that
a majority of an issuer’s board of directors must consist of independent directors. Our board of directors currently consists of
nine (9) directors, seven (7) of whom, Ellette A. Anderson, Clark R. Crosnoe, Glyn C. Milburn, James M. Schneider, G. Alan Shaw, Alan
P. Shor and Houman Akhavan, are independent within the meaning of the rules of NYSE American.



Committees of the Board of Directors



Our board of directors has established an audit
committee, a compensation and nominating and corporate governance committee, each with its own charter approved by the board of directors.
Each committee’s charter is available on our website at www.polished.com.



In addition, our board of directors may, from
time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.



Audit Committee



Clark R. Crosnoe, Glyn C. Milburn, James M. Schneider
and G. Alan Shaw, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and the rules
of NYSE American, serve on our audit committee, with Mr. Crosnoe serving as the chairman. Our board of directors has determined that Messrs.
Crosnoe and Schneider qualify as “audit committee financial experts.” The audit committee oversees our accounting and financial
reporting processes and the audits of the consolidated financial statements of our company.





70







The audit committee is responsible for oversight
of, among other things: (i) the integrity of our consolidated financial statements and financial reporting process and systems of internal
accounting and financial controls; (ii) the performance of the internal audit services function; (iii) the annual independent audit of
our consolidated financial statements; (iv) the engagement of the independent auditors, including the pre-approval any audit and/or permissible
non-audit services provided by our independent auditors, and the evaluation of the independent auditors’ qualifications, independence
and performance; (v) our compliance with legal and regulatory requirements, including our disclosure of controls and procedures; (vi)
the evaluation of enterprise risk issues; and (vii) reviewing and assessing annually the audit committee’s performance and the adequacy
of its charter.



Compensation Committee



Alan P. Shor, Clark R. Crosnoe and Ellette A.
Anderson, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and the rules of NYSE
American, serve on our compensation committee, with Mr. Shor serving as the chairman. The members of the compensation committee are also
“outside directors” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and “non-employee
directors” within the meaning of Section 16 of the Exchange Act. The compensation committee assists the board of directors in reviewing
and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.



The compensation committee is responsible for,
among other things: (i) reviewing and approving the compensation of our executive officers; (ii) evaluating and making recommendations
to the board of directors regarding the compensation of our directors; (iii) evaluating and making recommendations to the board of directors
regarding equity-based and incentive- compensation plans, policies and programs that are subject to our board of directors’ approval;
and (iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.



Nominating and Corporate Governance Committee



Ellette A. Anderson, G. Alan Shaw and Glyn C.
Milburn, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and the rules of NYSE
American, serve on our nominating and corporate governance committee, with Mr. Milburn serving as the chairman. The nominating and corporate
governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the
composition of the board of directors and its committees. The nominating and corporate governance committee will be responsible for, among
other things: (i) identifying and evaluating individuals qualified to become members of the board of directors by reviewing nominees for
election to the board of directors submitted by stockholders and recommending to the board director nominees for each annual meeting of
stockholders and for election to fill any vacancies on the board; (ii) advising the board of directors with respect to board organization,
desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee
authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance
and monitoring developments in the law and practice of corporate governance; (iv) overseeing compliance with our code of ethics; and (v)
approving any related party transactions.



The nominating and corporate governance committee
will seek to identify potential director candidates who will strengthen the board of directors, including by establishing procedures for
soliciting and reviewing potential nominees from directors and stockholders (as discussed below) and for notifying those who suggest nominees
of the outcome of such review. The nominating and corporate governance committee shall have sole authority to retain and terminate any
search firm to be used to identify director candidates, including sole authority to approve any such search firm’s fees and other
terms of retention.





In making director recommendations, the nominating
and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience
with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the
interplay of the candidate’s experience with the experience of other members of the board of directors; (iii) the extent to which
the candidate would be a desirable addition to the board of directors and any committee thereof; (iv) whether or not the person has any
relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management
of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills
and knowledge of the industry in which we operate.





71







A stockholder may nominate one or more persons
for election as a director at an annual meeting of stockholders if the stockholder complies with the notice and information provisions
contained in our bylaws. Such notice must be in writing to the secretary of our company not less than 90 days and not more than 120 days
prior to the anniversary date of the preceding year’s annual meeting of stockholders or as otherwise required by requirements of
the Exchange Act. In addition, stockholders furnishing such notice must be a holder of record on both (i) the date of delivering such
notice and (ii) the record date for the determination of stockholders entitled to vote at such meeting.



Code of Ethics



We have adopted a code of ethics that applies
to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance
with laws, rules, regulations and policies, including full, fair, accurate, timely, and understandable disclosures in reports required
under the federal securities laws, and reporting of violations of the code.



We are required to disclose any amendment to,
or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal
accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this
disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website, www.polished.com, within four (4)
business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.



Insider Trading Policy



We maintain an insider trading policy that prohibits
trading our common shares when in possession of material non-public information. It also prohibits directors, officers and other employees
from engaging in hedging transactions and, unless approved in advance by our Chief Financial Officer (or such other individual designated
by the board of directors), holding our securities in a margin account or otherwise pledging our shares as collateral for a loan. Since
the adoption of our insider trading policy, we have granted one waiver to the policy’s general prohibition on pledging. See “Item
12 — Security Ownership of Certain Beneficial Owners and Management”.



Delinquent Section 16(a) Reports



| | ● | On July 31, 2023, Ellette A. Anderson filed a late Form 5 with respect
to one transaction.
| | - | ------------------------------------------------------------------------------------------



ITEM 11. EXECUTIVE COMPENSATION.



Summary Compensation Table - Years Ended December
31, 2022 and 2021



The following table sets forth information concerning
all cash and non-cash compensation awarded to, earned by or paid to our named executive officers for services rendered in all capacities
during the noted periods.



|Name and Principal Position                             |  | Year |      |  | Salary
    ($) |  |         | Bonus
    ($)(1) |  |  | Stock
                                            Awards ($)(2) |  |  | Option
    Awards ($)(2) |        |  | All
    Other Compensation ($) |  |         | Total
    ($) | 
|------------------------------------------------------- |  | ---- | ---- |  | -------------- |  | ------- | ---------------- |  |  | --------------------------------------------------------------- |  |  | ------------------------ | ------ |  | ------------------------------ |  | ------- | ------------- | 
|J.E. “Rick” Bunka,                                      |  |      | 2022 |  |                |  | 194,231 |                  |  |  | --                                                              |  |  |                          | --     |  |                                |  | --      |               | 
|Interim Chief Executive Officer(3)                      |  |      | 2021 |  |                |  | --      |                  |  |  | --                                                              |  |  |                          | --     |  |                                |  | --      |               | 
|                                                        |  |      |      |  |                |  |         |                  |  |  |                                                                 |  |  |                          |        |  |                                |  |         |               | 
|Robert D. Barry,                                        |  |      | 2022 |  |                |  | 245,577 |                  |  |  | --                                                              |  |  |                          | --     |  |                                |  | --      |               | 
|Interim Chief Financial Officer(4)                      |  |      | 2021 |  |                |  | 290,793 |                  |  |  | 25,000                                                          |  |  |                          | 25,000 |  |                                |  | --      |               | 
|                                                        |  |      |      |  |                |  |         |                  |  |  |                                                                 |  |  |                          |        |  |                                |  |         |               | 
|Jody Rusnak,                                            |  |      | 2022 |  |                |  | 350,000 |                  |  |  | --                                                              |  |  |                          | --     |  |                                |  | --      |               | 
|Chief Merchandising and Brand
    Innovation Officer(5) |  |      | 2021 |  |                |  | 26,923  |                  |  |  | --                                                              |  |  |                          | --     |  |                                |  | --      |               | 
|                                                        |  |      |      |  |                |  |         |                  |  |  |                                                                 |  |  |                          |        |  |                                |  |         |               | 
|Maria Johnson,                                          |  |      | 2022 |  |                |  | 310,961 |                  |  |  | 134,750                                                         |  |  |                          | --     |  |                                |  | --      |               | 
|Former Chief Financial Officer(6)                       |  |      | 2021 |  |                |  | 162,885 |                  |  |  | 149,750                                                         |  |  |                          | --     |  |                                |  | 315,600 |               | 
|                                                        |  |      |      |  |                |  |         |                  |  |  |                                                                 |  |  |                          |        |  |                                |  |         |               | 
|Albert Fouerti,                                         |  |      | 2022 |  |                |  | 306,308 |                  |  |  | 175,000                                                         |  |  |                          | --     |  |                                |  | --      |               | 
|Former Chief Executive Officer(7)                       |  |      | 2021 |  |                |  | 210,000 |                  |  |  | 175,000                                                         |  |  |                          | --     |  |                                |  | --      |               | 














|(1) | Amounts represent cash bonuses.
|--- | -------------------------------



|(2) | The amount is equal to the aggregate grant-date fair value with respect
to the awards, computed in accordance with FASB ASC Topic 718, determined without regard to estimated forfeitures. See Note 2 to our consolidated
financial statements in this Annual Report on Form 10-K for a discussion of the assumptions used in determining the FASB ASC 718 grant
date fair value of these awards.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





72









|(3) | Mr. Bunka was appointed Interim Chief Executive Officer by the Board
effective October 14, 2022.
|--- | ------------------------------------------------------------------------------------------------



|(4) | Mr. Barry is currently our Interim Chief Financial Officer. Previously,
Mr. Barry was a full-time employee following our initial public offering on July 31, 2020. Mr. Barry’s title was changed to Chief
Accounting Officer in July 2021, and he was our Chief Accounting Officer until January 2022. Mr. Barry was appointed Interim Chief Financial
Officer by the Board effective October 14, 2022. Other compensation represents matching contributions under our 401(k) plan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|(5) | Mr. Rusnak has served as our Chief Merchandizing and Brand Innovation
Officer since November 2021.
|--- | --------------------------------------------------------------------------------------------------



|(6) | Ms. Johnson served as our Chief Financial Officer from July 2021 until her resignation in October 2022. Other compensation for 2022 represents a vacation payout. Other compensation for 2021 represents payments for parking her personal vehicle.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Mr. Fouerti served as our
    Chief Executive Officer from August 2021 until his resignation in October 2022.
|--- | -------------------------------------------------------------------------------------------------------------



Employment Agreements



On October 14, 2022, the Board appointed with
immediate effect J.E. “Rick” Bunka as Interim Chief Executive Officer and Robert D. Barry as Interim Chief Financial Officer
of the Company, following the resignations of Albert Fouerti as Chief Executive Officer and President, Elie Fouerti as Chief Operating
Officer and Maria Johnson as Chief Financial Officer and Secretary.



In connection with his appointment as Interim
Chief Executive Officer, Mr. Bunka entered into an engagement agreement with the Company, pursuant to which, the Company shall pay Mr.
Bunka a fee of $16,826.92 per week for his services. Mr. Bunka’s term commenced on October 14, 2022, and will be for a period of
six-months, unless extended by Mr. Bunka and the Company. In addition to payment for his services, Mr. Bunka shall be eligible for a success
fee equal to $2,187,500 and a leadership transition fee of $437,500. The success fee shall be earned if, during his term, the Company
consummates a Change in Control (as defined in the Company’s 2020 Equity Incentive Plan) and Mr. Bunka is performing services (and
has not given notice) through the date of closing of such Change in Control. The leadership transition fee shall be paid if, in the Board’s
sole determination, Mr. Bunka has materially assisted in the successful transition to permanent executive leadership during his term.





In connection with his appointment as Interim
Chief Financial Officer, Mr. Barry entered into an employment agreement with the Company, pursuant to which, the Company shall pay Mr.
Barry an annual base salary of $325,000, paid bi-weekly with standard payroll deductions and less applicable taxes, and an annual bonus
target for 2023 of up to 50% of his applicable base salary, subject to adoption by the Company’s board of directors. In addition
to payment for his services, Mr. Barry shall be eligible for a Change in Control bonus equal to $325,000, if, subsequent to January 1,
2023, the Company consummates a Change in Control and Mr. Barry remains employed through the date of closing of such Change in Control.



Outstanding Equity Awards at Fiscal Year-End



The following table includes certain information
with respect to the value of all unexercised options and unvested shares of restricted stock previously awarded to the executive officers
named above at the fiscal year ended December 31, 2022.



|                  |  | Option Awards                                                       |  |  |                                                                      
|----------------- |  | ------------------------------------------------------------------- |  |  | ---------------------------------------------------------------------
|Name              |  | Number of Securities Underlying Unexercised Options (#) Exercisable |  |  | Number of Securities Underlying Unexercised Options (#) Unexercisable
|J.E. “Rick” Bunka |  | ‒                                                                   |  |  | ‒                                                                    
|Robert D. Barry   |  | ‒                                                                   |  |  | ‒                                                                    
|Jody Rusnak       |  | ‒                                                                   |  |  | ‒                                                                    
|Maria Johnson     |  | ‒                                                                   |  |  | ‒                                                                    
|Albert Fouerti    |  | ‒                                                                   |  |  | ‒                                                                    





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Additional Narrative Disclosures



Retirement Benefits



We have not maintained, and do not currently maintain,
a defined benefit pension plan or nonqualified deferred compensation plan. We currently make available a retirement plan intended to provide
benefits under Section 401(k) of the Code, pursuant to which employees, including the executive officers named above, can make voluntary
pre-tax contributions. We currently match 100% of elective deferrals up to 3% of compensation and 50% of elective deferrals for next 2%
of compensation. All contributions under the plan are subject to certain annual dollar limitations, which are periodically adjusted for
changes in the cost of living. See “— Summary Compensation Table - Years Ended December 31, 2020 and 2019” for matches
made for the executive officers named above.



Director Compensation



In mid-2021, we revised the fees paid to our directors
such that our independent directors receive an annual fee of $40,000, payable monthly. The Chair of the Board receives an additional annual
fee of $50,000. Each independent director who serves on the Audit Committee also receives an annual fee of $6,000, those who serve on
the Compensation Committee receive an annual fee of $4,500, and those who serve on the Nominating and Governance Committee also receive
an annual fee of $3,000. The Chairman of the Audit Committee receives an additional $10,000, the Chairman of the Compensation Committee
receives an additional $7,500 and the Chairman of the Nominating and Governance Committee receives an additional $5,000.





|Audit Committee                               |  |   |        | 
|--------------------------------------------- |  | - | ------ | 
|Committee Chair Fee                           |  | $ | 10,000 | 
|Committee Member Fee                          |  | $ | 6,000  | 
|Compensation Committee                        |  |   |        | 
|Committee Chair Fee                           |  | $ | 7,500  | 
|Committee Member Fee                          |  | $ | 4,500  | 
|Nominating and Corporate Governance Committee |  |   |        | 
|Committee Chair Fee                           |  | $ | 5,000  | 
|Committee Member Fee                          |  | $ | 3,000  | 



In addition, on March 29, 2022, each of Messrs.
Shaw and Schneider received a grant of 34,883 shares of fully vested common stock. On February 8, 2023, Mr. Akhavan received a grant of
83,011 shares of fully vested common stock.





The table below sets forth the compensation to
our non-employee directors during the fiscal year ended December 31, 2022.





|Name                |  | Fees Earned
    or Paid in
    Cash ($) |        |  | Stock 
Awards($) |  |        | Total ($) | 
|------------------- |  | --------------------------------------- | ------ |  | ---------------- |  | ------ | --------- | 
|Ellette A. Anderson |  |                                         | 47,500 |  |                  |  | -      |           | 
|Clark R. Crosnoe    |  |                                         | 54,500 |  |                  |  | -      |           | 
|Glyn C. Milburn     |  |                                         | 51,000 |  |                  |  | -      |           | 
|Ellery Roberts      |  |                                         | 90,000 |  |                  |  | -      |           | 
|G. Alan Shaw        |  |                                         | 49,000 |  |                  |  | 60,000 |           | 
|Alan P. Shor        |  |                                         | 47,500 |  |                  |  | -      |           | 
|Edward Tobin        |  |                                         | 40,000 |  |                  |  | -      |           | 
|James M. Schneider  |  |                                         | 42,167 |  |                  |  | 60,000 |           | 
|Houman Akhavan      |  |                                         | -      |  |                  |  | -      |           | 



2020 Equity Incentive Plan



On July 30, 2020, we established the 1847 Goedeker
Inc. 2020 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to grant restricted stock, stock options and other
forms of incentive compensation to our officers, employees, directors and consultants.



The following summary briefly describes the principal
features of the Plan and is qualified in its entirety by reference to the full text of the Plan.







74







Awards that may be granted include: (a) incentive
stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, and
(f) performance compensation awards. These awards offer our officers, employees, consultants and directors the possibility of future value,
depending on the long-term price appreciation of our common stock and the award holder’s continuing service with our company.



Stock options give the option holder the right
to acquire from us a designated number of shares of common stock at a purchase price that is fixed upon the grant of the option. The exercise
price will not be less than the market price of the common stock on the date of grant. Stock options granted may be either tax-qualified
stock options (so-called “incentive stock options”) or non-qualified stock options.



Stock appreciation rights, or SARs, which may
be granted alone or in tandem with options, have an economic value similar to that of options. When a SAR for a particular number of shares
is exercised, the holder receives a payment equal to the difference between the market price of the shares on the date of exercise and
the exercise price of the shares under the SAR. Again, the exercise price for SARs normally is the market price of the shares on the date
the SAR is granted. Under the Plan, holders of SARs may receive this payment – the appreciation value – either in cash or
shares of common stock valued at the fair market value on the date of exercise. The form of payment will be determined by us.



Restricted shares are shares of common stock awarded
to participants at No cost. Restricted shares can take the form of awards of restricted stock, which represent issued and outstanding
shares of our common stock subject to vesting criteria, or restricted stock units, which represent the right to receive shares of our
common stock subject to satisfaction of the vesting criteria. Restricted shares are forfeitable and non-transferable until the shares
vest. The vesting date or dates and other conditions for vesting are established when the shares are awarded.



The Plan also provides for performance compensation
awards, representing the right to receive a payment, which may be in the form of cash, shares of common stock, or a combination, based
on the attainment of pre-established goals.



All of the permissible types of awards under the
Plan are described in more detail as follows:



Purposes of Plan: The purposes of
the Plan are to attract and retain officers, employees and directors for our company and its subsidiaries; motivate them by means of appropriate
incentives to achieve long-range goals; provide incentive compensation opportunities; and further align their interests with those of
our stockholders through compensation that is based on our common stock.



Administration of the Plan: The
Plan is administered by our compensation committee (which we refer to as the administrator). Among other things, the administrator has
the authority to select persons who will receive awards, determine the types of awards and the number of shares to be covered by awards,
and to establish the terms, conditions, performance criteria, restrictions and other provisions of awards. The administrator has authority
to establish, amend and rescind rules and regulations relating to the Plan.



Eligible Recipients: Persons eligible
to receive awards under the Plan will be those officers, employees, consultants, and directors of our company and its subsidiaries who
are selected by the administrator.



Shares Available Under the Plan:
The maximum number of shares of our common stock that may be delivered to participants under the Plan is 1,000,000 (subject to stockholder
approval of such increase), subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject
to an award under the Plan for which the award is canceled, forfeited or expires again become available for grants under the Plan. Shares
subject to an award that is settled in cash will not again be made available for grants under the Plan.



Stock Options:



General. Subject to the provisions of the
Plan, the administrator has the authority to determine all grants of stock options. That determination will include: (i) the number of
shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date
of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and
conditions as the administrator may determine.



Option Price. The exercise price for stock
options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date
of grant. As a matter of tax law, the exercise price for any incentive stock option awarded may not be less than the fair market value
of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting stock must
have an exercise price of not less than 110% of the fair market value on the grant date.





75







Exercise of Options. An option may be exercised
only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant.
The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option
of the administrator, by actual or constructive delivery of shares of common stock to the holder of the option based upon the fair market
value of the shares on the date of exercise.



Expiration or Termination. Options, if
not previously exercised, will expire on the expiration date established by the administrator at the time of grant. In the case of incentive
stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting stock, such term
cannot exceed five years. Options will terminate before their expiration date if the holder’s service with our company or a subsidiary
terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of employment,
including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised
to be established by the administrator and reflected in the grant evidencing the award.



Incentive and Non-Qualified Options. As
described elsewhere in this summary, an incentive stock option is an option that is intended to qualify under certain provisions of the
Code, for more favorable tax treatment than applies to non-qualified stock options. Any option that does not qualify as an incentive stock
option will be a non-qualified stock option. Under the Code, certain restrictions apply to incentive stock options. For example, the exercise
price for incentive stock options may not be less than the fair market value of the shares on the grant date and the term of the option
may not exceed ten years. In addition, an incentive stock option may not be transferred, other than by will or the laws of descent and
distribution, and is exercisable during the holder’s lifetime only by the holder. In addition, No incentive stock options may be
granted to a holder that is first exercisable in a single year if that option, together with all incentive stock options previously granted
to the holder that also first become exercisable in that year, relate to shares having an aggregate fair market value in excess of $100,000,
measured at the grant date.



Stock Appreciation Rights: Awards
of SARs may be granted alone or in tandem with stock options. SARs provide the holder with the right, upon exercise, to receive a payment,
in cash or shares of stock, having a value equal to the excess of the fair market value on the exercise date of the shares covered by
the award over the exercise price of those shares. Essentially, a holder of a SAR benefits when the market price of the common stock increases,
to the same extent that the holder of an option does, but, unlike an option holder, the SAR holder need not pay an exercise price upon
exercise of the award.



Stock Awards: Stock awards can also
be granted under the Plan. A stock award is a grant of shares of common stock or of a right to receive shares in the future. These awards
will be subject to such conditions, restrictions and contingencies as the administrator shall determine at the date of grant. Those may
include requirements for continuous service and/or the achievement of specified performance goals.



Cash Awards: A cash award is an
award that may be in the form of cash or shares of common stock or a combination, based on the attainment of pre-established performance
goals and other conditions, restrictions and contingencies identified by the administrator.



Performance Criteria: Under the
Plan, one or more performance criteria will be used by the administrator in establishing performance goals. Any one or more of the performance
criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate,
or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate.
In determining the actual size of an individual performance compensation award, the administrator may reduce or eliminate the amount of
the award through the use of negative discretion if, in its sole judgment, such reduction or elimination is appropriate. The administrator
shall not have the discretion to (i) grant or provide payment in respect of performance compensation awards if the performance goals have
not been attained or (ii) increase a performance compensation award above the maximum amount payable under the Plan.



Other Material Provisions: Awards
will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to the
capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be
made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator
is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change
of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant,
awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted
to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. Our board also has the authority, at any
time, to discontinue the granting of awards. The board also has the authority to alter or amend the Plan or any outstanding award or may
terminate the Plan as to further grants, provided that No amendment will, without the approval of our stockholders, to the extent that
such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the Plan, change
the persons eligible for awards under the Plan, extend the time within which awards may be made, or amend the provisions of the Plan related
to amendments. No amendment that would adversely affect any outstanding award made under the Plan can be made without the consent of the
holder of such award.





76







ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.



Security Ownership of Certain Beneficial Owners
and Management



The following table sets forth certain information
with respect to the beneficial ownership of our common stock as of July 28, 2023 by (i) each of our named executive officers and directors;
(ii) all of our current executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more
than 5% of our common stock. Unless otherwise specified, the address of each of the persons set forth below is c/o our company, 1870 Bath
Ave, Brooklyn, NY 11214.



|Name and Address of Beneficial Owner                               |  | Title of Class |  | Amount and Nature of Beneficial Ownership(1) |           | Percent of Class(2) |     
|------------------------------------------------------------------ |  | -------------- |  | -------------------------------------------- | --------- | ------------------- | ----
|J.E. “Rick” Bunka, Interim Chief Executive Officer                 |  | Common Stock   |  |                                              | -         |                     | *   
|Robert D. Barry, Interim Chief Financial Officer and Secretary(3)  |  | Common Stock   |  |                                              | 75,199    |                     | *   
|Jody Rusnak, Chief Merchandising and Brand Innovation Officer      |  | Common Stock   |  |                                              | 98,684    |                     | *   
|Ellery W. Roberts, Executive Chairman of the Board of Directors(4) |  | Common Stock   |  |                                              | 397,597   |                     | *   
|Ellette A. Anderson, Director                                      |  | Common Stock   |  |                                              | 25,438    |                     | *   
|Clark R. Crosnoe, Director(5)                                      |  | Common Stock   |  |                                              | 647,238   |                     | *   
|Glyn C. Milburn, Director                                          |  | Common Stock   |  |                                              | 27,738    |                     | *   
|James M. Schneider, Director                                       |  | Common Stock   |  |                                              | 170,723   |                     | *   
|G. Alan Shaw, Director                                             |  | Common Stock   |  |                                              | 34,883    |                     | *   
|Alan P. Shor, Director                                             |  | Common Stock   |  |                                              | 23,438    |                     | *   
|Edward J. Tobin, Director                                          |  | Common Stock   |  |                                              | 984,118   |                     | *   
|Houman Akhavan, Director(6)                                        |  | Common Stock   |  |                                              | 209,757   |                     | *   
|All current executive officers and directors(12 persons)           |  | Common Stock   |  |                                              | 2,694,813 |                     | 2.6 
|                                                                   |  |                |  |                                              |           |                     |     
|5% Stockholders                                                    |  |                |  |                                              |           |                     |     
|Cannell Capital LLC(7)                                             |  | Common Stock   |  |                                              | 5,258,805 |                     | 4.99
|Empery Asset Management, LP(8)                                     |  | Common Stock   |  |                                              | 5,258,805 |                     | 4.99
|Altium Growth Fund, LP(9)                                          |  | Common Stock   |  |                                              | 5,258,805 |                     | 4.99
|The Vanguard Group (10)                                            |  | Common Stock   |  |                                              | 5,369,942 |                     | 5.1 
|Morgan Dempsey Capital Management LLC (11)                         |  | Common Stock   |  |                                              | 6,036,954 |                     | 5.7 












|* | Less than 1%
|- | ------------



|(1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to our common stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | A total of 105,386,867 shares of common stock are considered to be
outstanding pursuant to SEC Rule 13d-3(d)(1) as of July 28, 2023. For each beneficial owner above, any options exercisable within 60 days
have been included in the denominator.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes 13,000 shares of common stock held by Mr. Barry’s spouse
and 40,000 shares of common stock issuable upon the exercise of warrants.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes 22,200 shares held by Cardinal 33 LLC. Mr. Roberts
is the Manager of Cardinal 33 LLC and has voting and investment power over the securities held by it. Mr. Roberts disclaims beneficial
ownership of the shares held by Cardinal 33 LLC except to the extent of his pecuniary interest, if any, in such shares.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





77







|(5) | Includes 558,438 shares held by CRC Investment Fund LP and 88,800 shares held by NM 2018 Trust. Mr. Crosnoe is the managing member and owns 100% of CRC Investment Fund GP, LLC, the general partner of CRC Investment Fund LP, and of CRC Capital LLC, the manager of CRC Investment Fund LP, and has sole voting and investment power over the shares held by CRC Investment Fund LP. Mr. Crosnoe is the investment adviser to NM 2018 Trust and also has a power of attorney to direct purchases and sales of the shares held by it. Mr. Crosnoe disclaims beneficial ownership of the shares held by CRC Investment Fund LP and NM 2018 Trust except to the extent of his pecuniary interest, if any, in such shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes approximately 147,638 shares of common stock and approximately 62,119 shares of common stock issuable upon the exercise of warrants.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Includes 4,992,381 shares of common stock and 266,424 shares of common stock issuable upon the exercise of warrants, but excludes an additional 4,888,030 shares of common stock issuable on the exercise of warrants that cannot be exercised due to a beneficial ownership blocker provision pursuant to a securities purchase agreement. The beneficial owner cannot exercise warrants to the extent it would beneficially own, after any such exercise, more than 4.99% of the outstanding shares of common stock. Based solely on the information set forth in the Schedule 13G/A filed by Cannell Capital LLC with the SEC on February 14, 2022. J. Carlo Cannell may be deemed to be the beneficial owner of the shares held by Cannell Capital LLC. The address of the business office of each of Cannell Capital LLC and J. Carlo Cannell Is 245 Meriwether Circle, Alta, WY 83414
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Includes 5,258,805 shares of common stock issuable upon the
exercise of warrants, but excludes an additional 3,190,450 shares of common stock issuable upon the exercise of warrants that cannot
be exercised due to a beneficial ownership blocker provision in a securities purchase agreement. The beneficial owner cannot exercise
warrants to the extent it would beneficially own, after any such exercise, more than 4.99% of the outstanding shares of common stock.
Based solely on the information set forth in the Schedule 13G/A filed by Empery Asset Management, LP (“Empery”) with the
SEC on January 24, 2022. Empery serves as the investment manager to certain funds holding an aggregate of 8,449,255 shares of common
stock. Empery AM GP, LLC, the general partner of Empery, has the power to exercise investment discretion. Each of Empery and Ryan M.
Lane and Martin D. Hoe, the managing members of Empery AM GP, LLC, may be deemed to be the beneficial owner of all shares of common stock
held by such funds. Each of the foregoing disclaims any beneficial ownership of any such shares of common stock. The address of each
of the foregoing beneficial owners is 1 Rockefeller Plaza, Suite 1205, New York, New York 10020.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Includes 5,258,805 shares of common stock issuable upon the exercise
of warrants, but excludes an additional 845,019 shares of common stock issuable upon the exercise of warrants that cannot be exercised
due to a beneficial ownership blocker provision in a securities purchase agreement. The beneficial owner cannot exercise warrants to the
extent it would beneficially own, after any such exercise, more than 4.99% of the outstanding shares of common stock. Based solely on
the information set forth in the Schedule 13G/A filed by Altium Growth Fund, LP (the “Altium”), with the SEC on February 14,
2022. Altium is the record and direct beneficial owner of the shares. Altium Capital Management, LP is the investment adviser of, and
may be deemed to beneficially own the common shares held by, Altium. Altium Growth GP, LLC is the general partner of, and may be deemed
to beneficially own the common shares held by, Altium. The address of the principal business office of each of the foregoing beneficial
owners is 152 West 57th Street, FL 20, New York, NY 10019.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | Based solely on the information set forth in the Schedule 13G filed by The Vanguard Group (“Vanguard”) with the SEC on February 9, 2023. The business address of Vanguard is 100 Vanguard Blvd.
Malvern, PA 19355.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | Based solely on the information set forth in the Schedule 13D/A filed
by Morgan Dempsey Capital Management LLC, a Wisconsin limited liability company (“Morgan Dempsey”) with the SEC on February
3, 2023. The principal business of Morgan Dempsey is the performance of investment management and advisory services. Mr. Marc Dion and
Mr. David Durham are the managing members of Morgan Dempsey. The present principal occupation of Mr. Dion, Mr. Durham, and Mr. Peters
is the performance of investment management and advisory services. Mr. Dion and Mr. Durham are both citizens of the United States. The
business address of Morgan Dempsey is 111 Heritage Reserve, Suite 200, Menomonee Falls, WI 53051.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





78







Changes in Control



We do not currently have any arrangements which
if consummated may result in a change of control of our company.



Securities Authorized for Issuance Under Equity
Compensation Plans



The following table sets forth certain information
about the securities authorized for issuance under our incentive plans as of December 31, 2022.



|Plan Category                                              |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |         |  | Weighted average exercise price of outstanding options, warrants and rights (b) |   |      | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | 
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------------- | - | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------- | 
|Equity compensation plans approved by security holders     |  |                                                                                                 | 150,000 |  |                                                                                 | $ | 3.10 |                                                                                                                                                 | 
|Equity compensation plans not approved by security holders |  |                                                                                                 | ‒       |  |                                                                                 |   | ‒    |                                                                                                                                                 | 
|Total                                                      |  |                                                                                                 | 150,000 |  |                                                                                 | $ | 3.10 |                                                                                                                                                 | 





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.



Transactions with Related Persons



The following includes a summary of transactions
since the beginning of our 2022 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the
amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last
two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation
described under Item 11 “Executive Compensation”). We believe the terms obtained or consideration that we paid or received,
as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid
or received, as applicable, in arm’s-length transactions.





79







Management Services Agreement



On April 5, 2019, the Company entered into a management
services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts, the Company’s
chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to the offsetting management services
agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500;
provided, however, that under certain circumstances specified in the management services agreement, the quarterly fee may be reduced if
similar fees payable to the Manager by subsidiaries of the Company’s former parent company, 1847 Holdings LLC, exceed a threshold
amount.



The Company shall also reimburse the Manager for
all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket
costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing
services under the management services agreement. The Company did not pay any expenses for the years ended December 31, 2022 and 2021.



The Company expensed management fees of $0.25
million for each of the years ended December 31, 2022 and 2021, respectively.





Advances



We repaid $33,738 of related party advances to
our Manager in August 2020. These advances were unsecured, bore No interest, and did not have formal repayment terms or arrangements.



Related Party Note



A portion of the purchase price for the acquisition
of Goedeker Television Co. (“Goedeker Television”).was paid by our issuance to Steve Goedeker, as representative of Goedeker
Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. Michael Goedeker, our director, President and
Chief Operating Officer until March 2020 and a significant stockholder, was also a director, officer and principal stockholder of Goedeker
Television. On June 2, 2020, the parties entered into an amendment and restatement of the note that became effective as of the closing
of our initial public offering on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000,
(ii) upon the closing of the initial public offering, we agreed to make all payments of principal and interest due under the note through
the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance
with the terms of the amended and restated note, we used a portion of the proceeds from the initial public offering to pay $1,083,842
of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.
We repaid this note in August 2020.



Leonite Securities Purchase Agreement



On April 5, 2019, our Company, 1847 Goedeker Holdco
Inc. (“Holdco”) (our direct parent company at such time) and 1847 Holdings (Holdco’s parent company at such time) entered
into a securities purchase agreement with Leonite Capital LLC (“Leonite”) (the “Leonite Securities Purchase Agreement”),
pursuant to which our Company, Holdco and 1847 Holdings issued to Leonite a secured convertible promissory note (the “Secured Note”)
in the aggregate principal amount of $714,286. As additional consideration for the purchase of the Secured Note, (i) 1847 Holdings issued
to Leonite 50,000 common shares (valued at $137,500), (ii) 1847 Holdings issued to Leonite a five-year warrant to purchase 200,000 common
shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued
to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco. As of December 31, 2019, the balance of the note was
$584,943. As a result of this transaction, Leonite became a related party.



On May 11, 2020, the Company, Holdco, 1847 Holdings
and Leonite entered into a first amendment to Secured Note, pursuant to which the parties agreed (i) to extend the maturity date of the
Secured Note to October 5, 2020, (ii) that our failure to repay the Secured Note on the original maturity date of April 5, 2020 shall
not constitute and event of default under the note and (iii) to increase the principal amount of the Secured Note by $207,145, as a forbearance
fee.



In connection with the amendment, (i) 1847 Holdings
issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment),
which may be exercised on a cashless basis and (ii) upon closing of 1847 Holdings’ acquisition of Asien’s Appliance, Inc.,
1847 Holdings’ wholly owned subsidiary 1847 Asien Inc. issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien
Inc.



Under the Secured Note, Leonite had the right
at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of
the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of 1847 Holdings into which
such common shares may be changed or reclassified.





80







On May 4, 2020, Leonite converted $100,000 of
the outstanding balance of the Secured Note into 100,000 common shares of 1847 Holdings. On July 24, 2020, Leonite converted $50,000 of
the outstanding balance of the Secured Note into 50,000 common shares of 1847 Holdings.



On August 4, 2020, we used a portion of the proceeds
from our initial public offering to repay the note in full.



On September 2, 2020, 1847 Holdings and Leonite
entered into an amendment to the warrant issued on April 5, 2019, pursuant to which the warrant was amended to allow for the exercise
of the warrant for 180,000 common shares of 1847 Holdings in exchange for Leonite’s surrender of the remaining 20,000 common shares
underlying that warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September
18, 2020, Leonite exercised the warrant in accordance with the foregoing for 180,000 common shares of 1847 Holdings. As a result, both
warrants have terminated.



DMI Cooperative



The Company is a member of Dynamic Marketing,
Inc. (“DMI”), an appliance purchasing cooperative. DMI purchases consumer electronics and appliances at wholesale prices
from various vendors, and then makes such products available to its members, including the Company, who sell such products to end consumers.
DMI’s purchasing group arrangement provides its members, including the Company, with leverage and purchasing power with appliance
vendors, and increases our ability to compete with competitors, including big box appliance and electronics retailers. We own an approximate
5% interest in the cooperative. Additionally, Albert Fouerti, our former Chief Executive Officer, is on the board of DMI. As such, DMI
is deemed to be a related party.





During the years ended December 31, 2022 and 2021, total purchases
from DMI, net of holdbacks, were $255.9 million and $177.8 million, respectively. At December 31, 2022, deposits at DMI totaled $25.0
million and the vendor rebate due from DMI were $5.8 million. At December 31, 2021, vendor rebate deposits, net, due from DMI were $12.2
million and vendor rebates receivable were $5.8 million.



Related Party Leases



On May 31, 2019, our subsidiary YF Logistics LLC
entered into a sublease agreement with DMI for our warehouse space in Hamilton, New Jersey. The initial term of the sublease was for a
period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one year terms until the earlier
of (i) termination by either upon thirty (30) days’ prior written notice or (ii) April 30, 2024. The sublease provides for a base
rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses, additional
charges or any other amounts due by DMI, for a total of $56,250 per month.



On June 2, 2021, our subsidiary 1 Stop Electronics
Center, Inc. entered into a lease agreement with 1870 Bath Ave. LLC, an entity that is owned by Albert Fouerti, our former Chief Executive
Officer, and Elie Fouerti, our former Chief Operating Officer, for our premises located at 1870 Bath Avenue, Brooklyn, New York. The lease
is for a term of ten years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896.37
during the last year of the term. 1 Stop Electronics Center, Inc. is also responsible for all property taxes, insurance costs and the
utilities used on the premises. The lease contains customary events of default. The initial right-of-use (“ROU”) asset and
liability associated with this lease is $8.4 million.



On June 2, 2021, our subsidiary Joe’s Appliances
LLC entered into a lease agreement with 812 5th Ave Realty LLC, an entity that is owned by Albert Fouerti, our former Chief Executive
Officer, and Elie Fouerti, our former Chief Operating Officer, for our premises located at 7812 5th Avenue, Brooklyn, New York. The lease
is for a term of ten years and provides for a base rent of $6,365.40 per month during the first year with annual increases to $8,305.40
during the last year of the term. Joe’s Appliances LLC is also responsible for all property taxes, insurance costs and the utilities
used on the premises. The lease contains customary events of default. The initial ROU asset and liability associated with this lease is
$0.7 million.



On March 15, 2022, the Company entered into a
lease agreement by and between the Company and 8780 19 Ave LLC, a New York limited liability company owned by Albert Fouerti, our former
Chief Executive Officer, and Elie Fouerti, our former Chief Operating Officer, for the lease of a new office building located in Brooklyn,
New York. The lease commenced on March 1, 2022 and shall expire on December 31, 2026. The Company has the option to extend the term of
the lease for one additional term of five years. The premises of the lease contain approximately 5,835 rentable square feet. Under the
terms of the lease, the Company will lease the premises at the monthly rate of $22,000 for the first year, with scheduled annual increases.
The Company will receive a four-month rent concession so that its first rental payment shall become due on or before July 1, 2022.



Director Independence



Our board of directors has determined that Ellette
A. Anderson, Clark R. Crosnoe, Glyn C. Milburn, James M. Schneider, G. Alan Shaw, Alan P. Shor and Houman Akhavan are independent within
the meaning of the rules of NYSE American.





81







ITEM 14. PRINCIPAL ACCOUNTING
FEES AND SERVICES.



Independent Auditors’ Fees



The following is a summary of the fees billed
to us for professional services rendered for the fiscal years ended December 31, 2022 and 2021:



|Year Ended December 31, |  | 2022 |         |  | 2021 |  
|----------------------- |  | ---- | ------- |  | ---- | -
|Audit Fees              |  | $    | 564,535 |  |      | $
|Audit-Related Fees      |  | $    | ‒       |  |      | $
|Tax Fees                |  |      | ‒       |  |      |  
|All Other Fees          |  |      | ‒       |  |      |  
|TOTAL                   |  | $    | 564,535 |  |      | $



“Audit Fees” consisted of fees billed for professional
services rendered by the principal accountant for the audit of our annual consolidated financial statements and review of the consolidated
financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory
and regulatory filings or engagements. Total audit fees for the year ended December 31, 2022 were $514,660 for Sadler, Gibb & Associates
and $49,875 for Friedman LLP. Total audit fees for the year ended December 31, 2021 were $1,056,990. Audit fees in 2021 for Sadler Gibb
were $506,990 and 550,000 for Friedman LLP.





“Audit-Related Fees” consisted of fees billed for assurance
and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial
statements and are not reported under the paragraph captioned “Audit Fees” above. There were no audit-related fees for the
year ended December 31, 2022 were $131,560 of audit related fees for the year ended December 31, 2021. Audit related fees in 2021 were
$21,560 for Sadler Gibb and $110,000 for Friedman LLP.





“Tax Fees” consisted of fees billed
for professional services rendered by the principal accountant for tax returns preparation.



“All Other Fees” consisted of fees
billed for products and services provided by the principal accountant, other than the services reported above under other captions of
this Item 14.



Pre-Approval Policies and Procedures



Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services
performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’
independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed
by Sadler, Gibb & Associates for our consolidated financial statements as of and for the year ended December 31, 2022.









82







PART
IV



ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.



|(a) | List of Documents Filed as a Part of This Report:
|--- | -------------------------------------------------



|(1) | Index to Consolidated Financial Statements:
|--- | -------------------------------------------



|                                                                                                                                                                                     |  | Page
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|Report of Independent Registered Public Accounting Firm (PCAOB Firm ID #3627)                                                                                                        |  | F-2 
|Consolidated Balance Sheets as of December 31, 2022 and 2021 (As Restated)                                                                                                           |  | F-3 
|Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                                   |  | F-4 
|Consolidated Statements of Stockholders’ Equity  for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                        |  | F-5 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                                   |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                                                           |  | F-7 
|                                                                                                                                                                                     |  |     
|Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022                                                                                         |  | F-36
|Condensed Consolidated Balance Sheets as of March 31, 2022 (As Restated), June 30, 2022, September 30, 2022 (Unaudited), and December 31, 2021                                       |  | F-35
|Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and March 31, 2023 (Unaudited)           |  | F-37
|Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2022 and the Nine Months Ended September 30, 2022 (Unaudited)                                      |  | F-38
|Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and March 31, 2023 (Unaudited) |  | F-39
|Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and March 31, 2023 (Unaudited)           |  | F-40
|Notes to the Condensed Consolidated Financial Statements (Unaudited)                                                                                                                 |  | F-41



|(2) | Index to Consolidated Financial Statement Schedules:
|--- | ----------------------------------------------------



All schedules have been omitted because the required information
is included in the consolidated financial statements or the notes thereto, or because it is not required.



| | (3) | Index to Exhibits:
| | --- | ------------------



See exhibits listed under Part (b) below.





83







|(b) | Exhibits:
|--- | ---------



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Amended and Restated Certificate of Incorporation of 1847 Goedeker Inc. (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed on August 3, 2020)                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.2         |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation of 1847 Goedeker Inc. (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 filed on December 28, 2021)                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.3         |  | Bylaws of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.4         |  | Amendment No 1. To Bylaws of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 13, 2021)                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.5         |  | Certificate of Correction of Certificate of Amendment of 1847 Goedeker Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on July 7, 2022)                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.6         |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Polished.com Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on July 21, 2022)                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.7         |  | Amended and Restated Bylaws of Polished.com Inc. (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed on July 21, 2022)                                                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|4.1         |  | Description of Registrant’s Common Stock (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed on March 31, 2022)                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|4.2         |  | Common Stock Purchase Warrant issued to Evergreen Capital Management LLC on March 19, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|4.3         |  | Common Stock Purchase Warrant issued to SILAC Insurance Company on March 19, 2021 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|4.4         |  | Form of Representative’s Warrant for Initial Public Offering (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 5, 2020)                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                     
|10.1        |  | Securities Purchase Agreement, dated October 20, 2020, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and the other parties signatory thereto (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed on March 29, 2021)





84









|10.2  |  | Amendment No. 1 to Securities Purchase Agreement, dated December 8, 2020, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and the other parties signatory thereto (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed on March 29, 2021)                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.3  |  | Amendment No. 2 to Securities Purchase Agreement, dated April 6, 2021, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and the other parties signatory thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on April 6, 2021)                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.4  |  | Warrant Agent Agreement, dated May 27, 2021, between 1847 Goedeker Inc. and American Stock Transfer & Trust Company, LLC and Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.5  |  | Credit and Guaranty Agreement, dated June 2, 2021, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, certain other subsidiaries party thereto from time to time as guarantors, the financial institutions party thereto from time to time, and Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 3, 2021)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.6  |  | Loan and Security Agreement, dated June 3, 2021, between 1847 Goedeker Inc. and Northpoint Commercial Finance LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 9, 2021)                                                                                                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.7  |  | Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Manufacturers and Traders Trust Company on June 2, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.8  |  | Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to First Horizon Bank on June 2, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.9  |  | Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Sterling National Bank on June 2, 2021 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.10 |  | Term Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to BankUnited N.A. on June 2, 2021 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.11 |  | Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Manufacturers and Traders Trust Company on June 2, 2021 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.12 |  | Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to First Horizon Bank on June 2, 2021 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.13 |  | Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to Sterling National Bank on June 2, 2021 (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.14 |  | Revolving Loan Note issued by 1847 Goedeker Inc. and Appliances Connection Inc. to BankUnited N.A. on June 2, 2021 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.15 |  | Pledge and Security Agreement, dated June 2, 2021, among 1847 Goedeker Inc., Appliances Connection Inc., 1 Stop Electronics Center, Inc., Gold Coast Appliances, Inc., Superior Deals Inc., Joe’s Appliances LLC, YF Logistics LLC, and such other subsidiaries from time to time a party thereto, in favor of Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on June 3, 2021)                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.16 |  | Management Services Agreement, dated April 5, 2019, between 1847 Goedeker Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.17 |  | Amendment No. 1 to Management Services Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.18 |  | Lease Agreement, dated April 5, 2019, between S.H.J., L.L.C. and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.22 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.19 |  | Lease Agreement, dated January 13, 2021, by and between Westgate 200, LLC and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 20, 2021)                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.20 |  | First Amendment to Lease Agreement, dated March 30, 2021, by and between Westgate 200, LLC and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 5, 2021)                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.21 |  | Lease, dated June 2, 2021, between 1870 Bath Ave. LLC and 1 Stop Electronics Center, Inc. (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                                           





85







|10.22  |  | Lease, dated June 2, 2021, between 7812 5th Ave Realty LLC and Joe’s Appliances LLC (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                                                                                  
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.23  |  | Sublease Agreement, dated May 31, 2019, between YF Logistics LLC and Icon 400 Cabot Owner Pool 4 NJ, LLC (incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1 filed on May 3, 2021)                                                                                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.24  |  | Lease Agreement, dated March 15, 2022, between 8780 19 Ave LLC and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 21, 2022)                                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.25  |  | Warehouse Agreement, dated September 9, 2021, between Brook Warehousing Corporation and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed on November 15, 2021)                                                                                                                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.26  |  | Agreement, dated September 9, 2021, between Brook Warehousing Corporation and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed on November 15, 2021)                                                                                                                                                                                                                                                                                                              
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.27  |  | Securities Purchase Agreement, dated March 19, 2021, among 1847 Goedeker Inc., Evergreen Capital Management LLC and SILAC Insurance Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.28  |  | Security Agreement, dated March 19, 2021, between 1847 Goedeker Inc. and SILAC Insurance Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.29  |  | 10% OID Senior Secured Promissory Note issued to Evergreen Capital Management LLC on March 19, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.30  |  | 10% OID Senior Secured Promissory Note issued to SILAC Insurance Company on March 19, 2021 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on March 25, 2021)                                                                                                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.31  |  | Trademark Assignment Agreement, dated October 15, 2020, between Superior Deals, Inc. and Albert Fouerti (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed on May 3, 2021)                                                                                                                                                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.32  |  | Trademark Assignment Agreement, dated October 15, 2020, between 1 Stop Electronics, Inc. and Albert Fouerti (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed on May 3, 2021)                                                                                                                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.33# |  | Amendment to Employment Letter Agreement, dated June 3, 2021, between 1847 Goedeker Inc. and Douglas T. Moore (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on June 9, 2021)                                                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.34# |  | Separation and Release Agreement, dated August 30, 2021, between Douglas T. Moore and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 3, 2021)                                                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.35# |  | Amendment No. 1 to Separation Agreement and Release, dated September 17, 2021, between Douglas T. Moore and 1847 Goedeker Inc. (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on November 15, 2021)                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.36# |  | Employment
    Agreement between Appliances Connection Inc. and Albert Fouerti (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K filed on March 31, 2022)                                                                                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.37# |  | Employment
    Agreement between Appliances Connection Inc. and Elie Fouerti (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K filed on March 31, 2022)                                                                                                                                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.38# |  | Employment Letter Agreement, dated July 14, 2021, between 1847 Goedeker Inc. and Maria Johnson (incorporated by reference to Exhibit 10.1 to the Current Report filed on July 20, 2021)                                                                                                                                                                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.39# |  | Employment Letter Agreement, dated April 21, 2020, between 1847 Goedeker Inc. and Robert D. Barry (incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.40# |  | Transition and Separation Agreement, dated January 31, 2022, between 1847 Goedeker Inc. and Robert D. Barry (incorporated by reference to Exhibit 10.1 to the Current Report filed on Form 8-K filed on February 2, 2022)                                                                                                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.41# |  | Independent
    Director Agreement between 1847 Goedeker Inc. and director Glyn C. Milburn, dated April 21, 2020, together with a schedule
    identifying other substantially identical agreements between the Company and each of its independent directors identified on the
    schedule and identifying the material differences between each of those agreements and the filed Independent Director Agreement (incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K filed on March 31, 2022)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.42# |  | Independent Director Agreement between 1847 Goedeker Inc. and director G. Alan Shaw, dated October 17, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 21, 2021)                                                                                                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.43# |  | Independent Director Agreement between 1847 Goedeker Inc. and director James M. Schneider, dated January 14, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 21, 2022)                                                                                                                                                                                                                                                                                                 





86









|10.44#  |  | Independent Director Agreement between 1847 Goedeker Inc. and director Alan P. Shor, dated May 18, 2021, (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on June 3, 2021)                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.45#  |  | Indemnification
    Agreement between 1847 Goedeker Inc. and Ellery W. Roberts, dated May 7, 2020, together with a schedule identifying other
    substantially identical agreements between the Company and each of its directors identified on the schedule and identifying the
    material differences between each of those agreements and the filed Indemnification Agreement (incorporated by reference to Exhibit 10.45 to the Annual Report on Form 10-K filed on March 31, 2022)
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.46#  |  | Indemnification
    Agreement between 1847 Goedeker Inc. and G. Alan Shaw, dated October 17, 2021, (incorporated by reference to Exhibit 10.5 to the
    Current Report on Form 8-K filed on October 21, 2021)                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.47#  |  | Indemnification Agreement between 1847 Goedeker Inc. and James M. Schneider, dated January 14, 2022 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on January 21, 2022)                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.48#  |  | 1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed on August 3, 2020)                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.49#  |  | Amendment No. 1 to 1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.31 to the Registration Statement on Form S-1 filed on May 3, 2021)                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.50#  |  | Amendment No. 2 to 1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 99.3 to the Registration Statement on Form S-8 filed on December 28, 2021)                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.51#  |  | Form of Stock Option Agreement for 1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.30 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.52#  |  | Form of Restricted Stock Award Agreement for 1847 Goedeker Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.31 to the Registration Statement on Form S-1 filed on April 22, 2020)                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.53   |  | Cooperation Agreement, dated October 15, 2021, by and among 1847 Goedeker Inc., David L. Kanen, Philotimo Fund, LP, Philotimo Focused Growth and Income Fund and Kanen Wealth Management LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 21, 2021)                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.54   |  | Credit Agreement, dated as of May 9, 2022, among 1847 Goedeker Inc., Appliances Connection Inc., certain subsidiaries of the borrowers party thereto, Bank of America, N.A., certain lenders party thereto, BofA Securities, Inc., Manufacturers and Traders Trust Company and Webster Bank, National Association (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 11, 2022)                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.55   |  | Security and Pledge Agreement, dated as of May 9, 2022, among 1847 Goedeker Inc., Appliances Connection Inc., the Grantors thereto and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on May 11, 2022)                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.56*  |  | First Amendment to Credit Agreement, dated as of July 25, 2023, by and among Polished.com Inc., Appliances Connection Inc., certain guarantors party thereto, certain lenders party thereto and Bank of America, N.A.                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.57   |  | Settlement Agreement, dated December 21, 2022, between Albert Fouerti and Polished.com Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 27, 2022)                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.58*# |  | Employment Letter Agreement, dated October 14, 2022, between Polished.com Inc. and Robert D. Barry.                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.59*# |  | Engagement Agreement, dated October 14, 2022, between Polished.com Inc. and J.E. “Rick” Bunka.                                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|21.1    |  | List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K filed on March 31, 2022)                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|23.1*   |  | Consent of Sadler, Gibb & Associates, LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.1*   |  | Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.2*   |  | Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.1**  |  | Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.2**  |  | Certifications of Principal Financial and Accounting Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                           





87









|101.INS* |  | Inline XBRL Instance Document                                                           
|-------- |  | ----------------------------------------------------------------------------------------
|         |  |                                                                                         
|101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document                                          
|         |  |                                                                                         
|101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document                            
|         |  |                                                                                         
|101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document                             
|         |  |                                                                                         
|101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document                                  
|         |  |                                                                                         
|101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document                           
|         |  |                                                                                         
|104*     |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)












|*  | Filed herewith                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Furnished herewith                                                                                                                                                                                                                                
|†  | Certain confidential information contained in this exhibit has been
redacted in accordance with Regulation S-K Item 601(b) because the information (i) is not material and (ii) is the type that the registrant
treats as private or confidential.



| | # | Executive compensation plan or arrangement
| | - | ------------------------------------------



ITEM 16. FORM 10-K SUMMARY.



None.





88







CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                                                     |  | Page
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|Report
of Independent Registered Public Accounting Firm (PCAOB Firm ID #3627)                                                                                                        |  | F-2 
|Consolidated
Balance Sheets as of December 31, 2022 and 2021 (As Restated)                                                                                                           |  | F-3 
|Consolidated
Statements of Operations for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                                   |  | F-4 
|Consolidated
Statements of Stockholders’ Equity  for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                        |  | F-5 
|Consolidated
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 (As Restated)                                                                                   |  | F-6 
|Notes
to Consolidated Financial Statements                                                                                                                                           |  | F-7 
|                                                                                                                                                                                     |  |     
|Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022                                                                                         |  | F-36
|Condensed Consolidated Balance Sheets as of March 31, 2022 (As Restated), June 30, 2022, September 30, 2022 (Unaudited), and December 31, 2021                                       |  | F-35
|Condensed
Consolidated Statements of Operations for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and
March 31, 2023 (Unaudited)           |  | F-37
|Condensed
Consolidated Statements of Operations for the Six Months Ended June 30, 2022 and the Nine Months Ended September 30, 2022 (Unaudited)                                      |  | F-38
|Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and March 31, 2023 (Unaudited) |  | F-39
|Condensed
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and
March 31, 2023 (Unaudited)           |  | F-40





F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and Shareholders of Polished.com Inc:



Opinion on the Financial Statements



We have audited the accompanying consolidated
balance sheets of Polished.com Inc (“the Company”) as of December 31, 2022 and 2021 (As Restated), the related consolidated statements
of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022 and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and
2021 (As Restated), and the results of its operations and its cash flows for each of the years in the two-year period ended December 31,
2022, in conformity with accounting principles generally accepted in the United States of America.



Restatement of Previously Issued Financial
Statements



As discussed in Note 2 to the consolidated financial
statements, the Company has restated its 2021 consolidated financial statements to correct misstatements.



Basis for Opinion



These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ Sadler, Gibb & Associates, LLC



We have served as the Company’s auditor
since 2022.



Draper, UT

July 31, 2023





F-2







POLISHED.COM INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)





|                                                                                                                                                           |  | December 31, |          |   | December 31,  |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------- | -
|                                                                                                                                                           |  | 2022         |          |   | 2021          |  
|                                                                                                                                                           |  |              |          |   | (As Restated) |  
|ASSETS                                                                                                                                                     |  |              |          |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Current Assets                                                                                                                                             |  |              |          |   |               |  
|Cash and cash equivalents                                                                                                                                  |  | $            | 19,549   |   |               | $
|Restricted cash                                                                                                                                            |  |              | 950      |   |               |  
|Receivables, net                                                                                                                                           |  |              | 26,650   |   |               |  
|Vendor deposits                                                                                                                                            |  |              | 25,022   |   |               |  
|Merchandise inventory, net                                                                                                                                 |  |              | 41,766   |   |               |  
|Prepaid expenses and other current assets                                                                                                                  |  |              | 11,217   |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Total Current Assets                                                                                                                                       |  |              | 125,154  |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Property and equipment, net                                                                                                                                |  |              | 5,075    |   |               |  
|Operating lease right-of-use assets                                                                                                                        |  |              | 11,688   |   |               |  
|Derivative instruments                                                                                                                                     |  |              | 3,178    |   |               |  
|Goodwill                                                                                                                                                   |  |              | 106,173  |   |               |  
|Intangible assets, net                                                                                                                                     |  |              | 10,296   |   |               |  
|Deferred tax asset                                                                                                                                         |  |              | 1        |   |               |  
|Other long-term assets                                                                                                                                     |  |              | 349      |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|TOTAL ASSETS                                                                                                                                               |  | $            | 261,914  |   |               | $
|                                                                                                                                                           |  |              |          |   |               |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                       |  |              |          |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Current Liabilities                                                                                                                                        |  |              |          |   |               |  
|Accounts payable and accrued expenses                                                                                                                      |  | $            | 81,537   |   |               | $
|Customer deposits                                                                                                                                          |  |              | 7,292    |   |               |  
|Current portion of notes payable, net                                                                                                                      |  |              | 6,628    |   |               |  
|Current portion of finance lease liabilities                                                                                                               |  |              | 112      |   |               |  
|Current portion of operating lease liabilities                                                                                                             |  |              | 3,726    |   |               |  
|Contingent note payable                                                                                                                                    |  |              | -        |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Total Current Liabilities                                                                                                                                  |  |              | 99,295   |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Notes payable, net of current portion                                                                                                                      |  |              | 90,816   |   |               |  
|Finance lease liabilities, net of current portion                                                                                                          |  |              | 225      |   |               |  
|Operating lease liabilities, net of current portion                                                                                                        |  |              | 9,013    |   |               |  
|Deferred tax liability, net                                                                                                                                |  |              | -        |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|TOTAL LIABILITIES                                                                                                                                          |  |              | 199,349  |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|Stockholders’ Equity                                                                                                                                       |  |              |          |   |               |  
|Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of December 31, 2021 and 2020                             |  |              | -        |   |               |  
|Common stock, $0.0001 par value, 200,000,000 shares authorized; 105,227,876 and 106,387,332 shares issued and outstanding as of December 31, 2022 and 2021 |  |              | 11       |   |               |  
|Additional paid-in capital                                                                                                                                 |  |              | 222,827  |   |               |  
|Accumulated deficit                                                                                                                                        |  |              | (160,273 | ) |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                 |  |              | 62,565   |   |               |  
|                                                                                                                                                           |  |              |          |   |               |  
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                 |  | $            | 261,914  |   |               | $



The accompanying notes are an integral part
of these consolidated financial statements





F-3







POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)





|                                                       |  | For the Years Ended |            
|------------------------------------------------------ |  | ------------------- | -----------
|                                                       |  | December 31,        |            
|                                                       |  | 2022                |            
|                                                       |  |                     |            
|                                                       |  |                     |            
|Product sales, net                                     |  | $                   | 534,474    
|Cost of goods sold                                     |  |                     | 444,957    
|Gross profit                                           |  |                     | 89,517     
|                                                       |  |                     |            
|Operating Expenses                                     |  |                     |            
|Personnel                                              |  |                     | 28,800     
|Advertising                                            |  |                     | 25,461     
|Bank and credit card fees                              |  |                     | 18,776     
|Depreciation and amortization                          |  |                     | 11,456     
|Impairment of goodwill and intangible assets           |  |                     | 109,140    
|Loss on abandonment of right-of-use asset              |  |                     | -          
|General and administrative                             |  |                     | 24,226     
|                                                       |  |                     |            
|Total Operating Expenses                               |  |                     | 217,859    
|                                                       |  |                     |            
|LOSS FROM OPERATIONS                                   |  |                     | (128,342   
|                                                       |  |                     |            
|Other Income (Expenses)                                |  |                     |            
|Interest income                                        |  |                     | 518        
|Adjustment in value of contingency                     |  |                     | (2         
|Interest expense                                       |  |                     | (3,940     
|Gain on change in fair value of derivative instruments |  |                     | 3,178      
|Loss on settlement of debt                             |  |                     | (3,240     
|Other income                                           |  |                     | (2,546     
|                                                       |  |                     |            
|Total Other Expenses                                   |  |                     | (6,032     
|                                                       |  |                     |            
|NET LOSS BEFORE INCOME TAXES                           |  |                     | (134,374   
|                                                       |  |                     |            
|INCOME TAX (EXPENSE) BENEFIT                           |  |                     | 8,409      
|                                                       |  |                     |            
|NET LOSS                                               |  | $                   | (125,965   
|                                                       |  |                     |            
|NET LOSS PER COMMON SHARE – BASIC AND DILUTED          |  | $                   | (1.18      
|                                                       |  |                     |            
|WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   |  |                     |            
|BASIC AND DILUTED                                      |  |                     | 106,436,719



The accompanying notes are an integral part
of these consolidated financial statements





F-4







POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY(in thousands, except share and per share data)





|                                                                           |  | Common Stock |             |  | Additional Paid-in |   |    | Accumulated |  |   | Stockholders’ |  
|-------------------------------------------------------------------------- |  | ------------ | ----------- |  | ------------------ | - | -- | ----------- |  | - | ------------- | -
|                                                                           |  | Shares       |             |  | Amount             |   |    | Capital     |  |   | Deficit       |  
|                                                                           |  |              |             |  |                    |   |    |             |  |   |               |  
|Balance at January 1, 2021                                                 |  |              | 6,111,200   |  |                    | $ | 1  |             |  | $ | 13,409        |  
|                                                                           |  |              |             |  |                    |   |    |             |  |   |               |  
|Issuance of warrants with debt                                             |  |              | -           |  |                    |   | -  |             |  |   | 1,340         |  
|Issuance of common stock in the acquisition of Appliances Connection       |  |              | 5,895,973   |  |                    |   | 1  |             |  |   | 12,263        |  
|Issuance of common stock and warrants in connection with a public offering |  |              | 93,111,111  |  |                    |   | 9  |             |  |   | 194,389       |  
|Issuance of common stock through equity incentive awards                   |  |              | 216,800     |  |                    |   | -  |             |  |   | 555           |  
|Issuance of common stock in connection with exercise of warrants           |  |              | 1,052,248   |  |                    |   | -  |             |  |   | 2,368         |  
|Stock-based compensation                                                   |  |              | -           |  |                    |   | -  |             |  |   | 324           |  
|Net loss for the year ended December 31, 2021                              |  |              | -           |  |                    |   | -  |             |  |   | -             |  
|                                                                           |  |              |             |  |                    |   |    |             |  |   |               |  
|Balance at December 31, 2021 (As Restated)                                 |  |              | 106,387,332 |  |                    | $ | 11 |             |  | $ | 224,648       |  
|                                                                           |  |              |             |  |                    |   |    |             |  |   |               |  
|Issuance of common stock to directors                                      |  |              | 69,766      |  |                    |   | -  |             |  |   | -             |  
|Purchase of and subsequent retirement of treasury stock                    |  |              | (1,229,222  |  |                    |   | -  |             |  |   | (2,000        | )
|Stock compensation expense                                                 |  |              | -           |  |                    |   | -  |             |  |   | 179           |  
|Net loss for the year-ended December 31, 2022                              |  |              | -           |  |                    |   | -  |             |  |   | -             |  
|Balance at December 31, 2022                                               |  |              | 105,227,876 |  |                    |   | 11 |             |  |   | 222,827       |  





The accompanying notes are an integral part
of these consolidated financial statements





F-5







POLISHED.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)





|                                                                                   |  | For the Years Ended |         
|---------------------------------------------------------------------------------- |  | ------------------- | --------
|                                                                                   |  | December 31,        |         
|                                                                                   |  | 2022                |         
|                                                                                   |  |                     |         
|CASH FLOWS FROM OPERATING ACTIVITIES                                               |  |                     |         
|Net loss                                                                           |  | $                   | (125,965
|Adjustments to reconcile net loss to net cash used in operating activities:        |  |                     |         
|Impairment of goodwill and intangible assets                                       |  |                     | 109,140 
|Gain on change in fair value of derivative                                         |  |                     | (3,178  
|Depreciation and amortization                                                      |  |                     | 11,456  
|Amortization of debt discount                                                      |  |                     | 515     
|Stock-based compensation                                                           |  |                     | 179     
|Inventory reserve                                                                  |  |                     | 946     
|Bad debt expense                                                                   |  |                     | 415     
|Loss on settlement of debt                                                         |  |                     | 3,240   
|Loss on abandonment of right-of-use asset                                          |  |                     | -       
|Adjustment in value of contingency                                                 |  |                     | 2       
|Deferred tax benefit                                                               |  |                     | (8,409  
|Non-cash lease expense                                                             |  |                     | 3,249   
|Changes in operating assets and liabilities:                                       |  |                     |         
|Receivables                                                                        |  |                     | (3,533  
|Vendor deposits                                                                    |  |                     | (12,823 
|Merchandise inventory                                                              |  |                     | 9,681   
|Prepaid expenses and other assets                                                  |  |                     | (5,238  
|Accounts payable and accrued expenses                                              |  |                     | (1,208  
|Customer deposits                                                                  |  |                     | (21,523 
|Operating lease liabilities                                                        |  |                     | (3,627  
|Net cash used in operating activities                                              |  |                     | (46,681 
|                                                                                   |  |                     |         
|CASH FLOWS FROM INVESTING ACTIVITIES                                               |  |                     |         
|Purchases of property and equipment                                                |  |                     | (1,420  
|Cash paid to sellers in acquisition of Appliances Connection, net of cash acquired |  |                     | -       
|Cash paid to sellers in acquisition of Appliance Gallery                           |  |                     | -       
|Net cash used in investing activities                                              |  |                     | (1,420  
|                                                                                   |  |                     |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                               |  |                     |         
|Net proceeds from public equity offering                                           |  |                     | -       
|Proceeds from exercise of warrants                                                 |  |                     | -       
|Proceeds from notes payable                                                        |  |                     | 43,045  
|Repayments of notes payable                                                        |  |                     | (5,927  
|Repayments of convertible notes payable                                            |  |                     | (200    
|Repayments of finance lease liabilities                                            |  |                     | (109    
|Purchase of treasury stock                                                         |  |                     | (2,000  
|Net cash provided by financing activities                                          |  |                     | 34,809  
|                                                                                   |  |                     |         
|NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH                          |  |                     | (13,292 
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR                     |  |                     | 33,791  
|                                                                                   |  |                     |         
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF YEAR                           |  | $                   | 20,499  
|                                                                                   |  |                     |         
|Cash, cash equivalents, and restricted cash consist of the following:              |  |                     |         
|End of the year                                                                    |  |                     |         
|Cash and cash equivalents                                                          |  | $                   | 19,549  
|Restricted cash                                                                    |  |                     | 950     
|                                                                                   |  |                     |         
|                                                                                   |  | $                   | 20,499  
|                                                                                   |  |                     |         
|Cash, cash equivalents, and restricted cash consist of the following:              |  |                     |         
|Beginning of the year                                                              |  |                     |         
|Cash and cash equivalents                                                          |  | $                   | 25,724  
|Restricted cash                                                                    |  |                     | 8,067   
|                                                                                   |  |                     |         
|                                                                                   |  | $                   | 33,791  
|                                                                                   |  |                     |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                  |  |                     |         
|Cash paid for interest                                                             |  | $                   | 4,161   
|Cash paid for income taxes                                                         |  | $                   | 5,073   
|                                                                                   |  |                     |         
|NON-CASH INVESTING AND FINANCING ACTIVITIES                                        |  |                     |         
|Operating lease right-of-use assets and liabilities assumed                        |  |                     | -       
|Financed purchases of property and equipment                                       |  |                     | 308     
|Settlement of notes payable and interest in issuance of new note                   |  |                     | 55,851  
|Debt discount on notes payable from OID                                            |  |                     | 1,104   
|Debt discount on notes payable from warrants                                       |  |                     | -       
|Stock issued in the acquisition of Appliances Connection                           |  |                     | -       
|Due to seller (consideration) settled by vendor deposits                           |  |                     | -       
|Net assets acquired in the acquisition of Appliances Connection                    |  |                     | -       
|Net assets acquired in the acquisition of Appliance Gallery                        |  |                     | -       







The accompanying notes are an integral part
of these consolidated financial statements



F-6







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 1—ORGANIZATION AND NATURE OF BUSINESS



1847 Goedeker Inc. (“1847
Goedeker”) was formed under the laws of the State of Delaware on January 10, 2019 for the sole purpose of acquiring the
business of Goedeker Television Co., a Missouri corporation (“Goedeker Television”) Prior to the acquisition, the
Company did not have any operations other than operations relating to its incorporation and organization. On July 20, 2022, the 1847
Goedeker amended the Certificate of Incorporation changing its name to Polished.com Inc. (“Polished.com”).



On October 20, 2020, 1847 Goedeker formed Appliances
Connection Inc. (“ACI”) as a wholly owned subsidiary in the State of Delaware. On June 2, 2021, ACI acquired all of the
issued and outstanding capital stock or other equity securities of 1 Stop Electronics Center, Inc., a New York corporation (“1
Stop”), Gold Coast Appliances, Inc., a New York corporation (“Gold Coast”), Superior Deals Inc., a New York corporation
(“Superior Deals”), Joe’s Appliances LLC, a New York limited liability company (“Joe’s Appliances”)
and YF Logistics LLC, a New Jersey limited liability company (“YF Logistics,” and collectively with 1 Stop, Gold Coast, Superior
Deals, and Joe’s Appliances, “Appliances Connection”).



On July 6, 2021, 1847 Goedeker formed AC Gallery
Inc. (“AC Gallery”) as a wholly owned subsidiary in the State of Delaware.



On July 29, 2021, AC Gallery acquired substantially
all the assets and assumed substantially all the liabilities of Appliance Gallery, Inc., a retail appliance store in Largo, Florida (“Appliance
Gallery”). As a result of this transaction, AC Gallery acquired the former business of Appliance Gallery and continues to operate
this business.



Polished.com and its consolidated
subsidiaries (collectively, the “Company,” “we,” “us,” or “our”) operate a
content-driven and technology-enabled shopping destination for appliances, furniture and home goods. With warehouse fulfillment
centers in the Northeast and Midwest, as well as showrooms in Brooklyn, New York, and Largo, Florida, the Company offers one-stop
shopping for national and global brands. The Company carries many household name-brands, including Bosch, I, Frigidaire Pro,
Whirlpool, LG, and Samsung, and also carries many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve,
Jenn-Air and Viking, among others. The Company also sells furniture, fitness equipment, plumbing fixtures, televisions, outdoor
appliances, and patio furniture, as well as commercial appliances for builder and business clients.



NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation



The consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”)
and are presented in US dollars.



Principles of Consolidation



The consolidated financial statements include
our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Company does not have
a majority or minority interest in any other company, either consolidated or unconsolidated.



Use of Estimates



The preparation of these consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as the disclosure of contingent assets and liabilities, at the date of and during the reported period of the consolidated
financial statements. Actual results could differ from those estimates. We evaluate our estimates and assumptions on an ongoing basis.



Cash and Cash Equivalents



Cash and cash equivalents consist of cash on
hand and marketable securities with original maturities of three months or less. The Company maintains deposits in several financial
institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”).
The Company has not experienced any losses related to amounts in excess of FDIC limits.



Cash and cash equivalents include: (1) currency
on hand, (2) demand deposits with banks or financial institutions, (3) other kinds of accounts that have the general characteristics
of demand deposits, and (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near
their maturity that they present insignificant risk of changes in value because of changes in interest rates. The majority of payments
due from financial institutions for the settlement of credit card and debit card transactions process within two business days and are,
therefore, classified as cash and cash equivalents. Other payment methods that take more time to settle are classified as receivables.



At December 31, 2022, restricted cash includes
$0.2 million to secure a vendor letter of credit and $0.75 million withheld by credit card processors as security for the Company’s
customer refund claims and credit card chargebacks. The cash pledged to secure the letter of credit will be released when the vendor
offers the Company credit terms, and the cash held by credit card processors will be released at the discretion of the credit card companies.





F-7







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Revenue Recognition and Cost of Revenue



The Company records revenue in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue
from Contracts with Customers.” Revenue is recognized to depict the transfer of goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires
additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders,
including significant judgments.



Substantially all the Company’s sales are
to individual retail consumers (homeowners), builders and designers. The Company’s performance obligation is to deliver the customer’s
order. Each customer order generally contains only one performance obligation based on the merchandise sale to be delivered, at which
time revenue is recognized.



Control of the delivery transfers to customers
when the customer can direct the use of, and obtain substantially all the benefits from, the Company’s products, which generally
occurs when the customer assumes the risk of loss. The risk of loss shifts to the customer at different times depending on the method
of delivery. The Company delivers products to its customers in three possible ways. The first way is through a shipment of the products
through a third-party carrier from the Company’s warehouse to the customer (a “Company Shipment”). The second way is
through a shipment of the products through a third-party carrier from a warehouse other than the Company’s warehouse to the customer
(a “Drop Shipment”) and the third way is where the Company itself delivers the products to the customer and often also installs
the product (a “Local Delivery”). In the case of a Local Delivery, the Company loads the product on its own or contracted
trucks and delivers and installs the product at the customer’s location. When a product is delivered through a Local Delivery, risk
of loss passes to the customer at the time of installation and revenue is recognized upon installation at the customer’s location.
In the case of a Company Shipment and a Drop Shipment, the delivery to the customer is made free on board, or FOB, shipping point (whether
from the Company’s warehouse or a third party’s warehouse). Therefore, risk of loss and title transfers to the customer once
the products are shipped (i.e., leaves the Company’s warehouse or a third-party’s warehouse). After shipment and prior to
delivery, the customer is able to redirect the product to a different destination, which demonstrates the customer’s control over
the product once shipped. Once the risk of loss has shifted to the customer, the Company has satisfied its performance obligation and
the Company recognizes revenue.



The Company agrees with customers on the selling
price of each transaction. This transaction price is generally based on the agreed upon sales price. In the Company’s contracts
with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative
standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax the Company collects
concurrently with revenue-producing activities are excluded from revenue.



We offer promotional financing and credit cards
issued by third-party banks that manage and directly extend credit to our customers. The banks are the sole owners of the accounts receivable
generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in
the financing transactions with customers. We frequently offer sales incentives that entitle our customers to discounts at the time of
purchase (if 3rd party financing is obtained or a seasonal sale discounts). This is not a performance obligation but is recognized
as a reduction of the transaction price when the transaction occurs.



The Company also sells extended warranty contracts,
acting as an agent for the warranty company and earns a commission on the warranty contracts purchased by customers; therefore, the cost
of the warranty contracts is netted against warranty revenue in the accompanying consolidated statements of operations. The Company assumes
no liability for repairs to products on which it has sold a warranty contract or products for which no warranty is sold, as the warranty
obligations associated with the sale of our products are assurance-type warranties that are a guarantee of the product’s intended
functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.



Sales returns are estimated based on historical
return levels and our expectation of future returns. We also recognize a return asset, and corresponding adjustment to cost of sales,
for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery
cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets.



Customer deposits ‒ Includes amounts collected
from customers when an order is placed. The deposits are recognized as revenue when the order is shipped to
the customer, or they are refunded by the Company in the event of an order cancellation. As of December 31, 2022, and 2021, customer deposits
amounted to $7.3 million and $28.8 million, respectively.



Cost of revenue ‒ Includes the cost of
purchased merchandise plus the cost of shipping merchandise and where applicable installation, net of promotional rebates and other incentives
received from vendors. Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certain purchase
levels and advertising allowances for the promotion of vendors’ products that are typically based on guaranteed minimum amounts
with additional amounts being earned for attaining certain purchase levels. These vendor allowances are accrued as earned, with those
allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases.
Volume rebates and certain advertising allowances reduce the carrying cost of inventory and are recognized in cost of sales when earned.



Shipping and Handling ‒ The Company
invoices its customers for shipping and handling charges associated with luxury appliance sales and premium services like
“white glove” delivery. For standard delivery, also known as “curb” delivery, the cost of shipping and handling
is already included in the quoted price provided to the customer. Irrespective of the delivery option chosen by the customer, the
cost of shipping and handling is included in cost of sales.





F-8







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



Advertising ‒ Costs for advertising are expensed as incurred and include direct response
performance marketing costs, such as paid search advertising, social media advertising, and search engine optimization. For the years
ended December 31, 2022 and 2021, advertising expenses amounted to $25.5 million and $12.0 million, respectively.



Receivables



Receivables consists of customer’s balance
payments for which the Company extends credit to certain homebuilders and designers based on prior business relationships, and vendor
rebate receivables. Vendor rebate receivables represent amounts due from manufacturers from whom the Company purchases products. Rebate
receivables are stated at the amount that management expects to collect from manufacturers (vendors). Rebates are calculated on product
and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor
credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with
its manufacturers, it has concluded that there should be no allowance for uncollectible accounts for vendor rebates.



The Company maintains an allowance for
doubtful accounts, which is established based on estimated losses expected to be incurred in the collection of accounts receivable.
As of December 31, 2022 and 2021, the balance of the allowance was $1.5 million and $1.0 million, respectively. The Company had no
significant concentrations of receivables balances as of December 31, 2022, and 2021.



Merchandise Inventory



Inventory consists of finished products acquired for resale and is
stated at the lower of cost (on an average cost basis) or net realizable value. The Company conducts regular evaluations of the inventory
value and performs write-downs based on its estimates of market conditions. As of December 31, 2022 and 2021, the Company determined that
an obsolescence allowance of $1.8 million and $0.8 million, respectively, was necessary.



Property and Equipment



Property and equipment are stated at their
historical cost. Maintenance and repair expenses of property and equipment are expensed in operations as incurred. Leasehold
improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements.



Depreciation is computed using the straight-line
method over estimated useful lives as follows:



|                         |  | Useful Life (Years) |    
|------------------------ |  | ------------------- | ---
|                         |  |                     |    
|Equipment                |  |                     | 5  
|Warehouse equipment      |  |                     | 2-7
|Furniture and fixtures   |  |                     | 1-3
|Transportation equipment |  |                     | 1-5
|Leasehold improvements   |  |                     | 2-5
|Showroom inventory       |  |                     | 5  





Intangible Assets



The Company’s definite-lived intangible assets
primarily consisted of marketing-related and customer relationships which are being amortized over their estimated useful lives, or 5
years.





The Company periodically evaluates the reasonableness
of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. The Company has no intangibles
with indefinite lives.



Goodwill



Goodwill represents the excess of consideration
transferred over the fair value of tangible and identifiable intangible net assets acquired and the liabilities assumed in a business
combination. Substantially all of the Company’s goodwill was recognized in the purchase price allocations when the Company was acquired
in 2019 and when ACI was acquired in June 2021. Goodwill is not subject to amortization; instead, it is tested for impairment at the reporting unit level annually
or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting
unit is less than its carrying amount. In conducting the impairment test, the Company first reviews qualitative factors to determine whether
it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as a single
reporting unit.



When testing goodwill for impairment, the Company has the option of
first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is
less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely
than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill
impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that
difference.



The Company conducts its annual goodwill impairment
test on December 31 or whenever an indicator of impairment exists. As a result of the quantitative impairment assessment, the carrying
value of the single reporting unit exceeded its fair value, and the Company recorded $85.4 million of non-cash goodwill impairment charge
during the year ended December 31, 2022. At December 31, 2021, there was no impairment of goodwill.





F-9







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Impairment of Long-Lived Assets



The Company reviews the carrying value of long-lived
assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets for impairment whenever
events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. These events and circumstances
may include significant decreases in the market price of an asset or asset group, significant changes in the extent or manner in which
an asset or asset group is being used by the Company or in its physical condition, a significant change in legal factors or in the business
climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company’s
share price, a significant decline in revenue or adverse changes in the economic environment. If such facts indicate a potential impairment,
the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum
of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic
life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable,
the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an
estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its
estimated fair value.



During the fourth quarter of 2022, the Company recognized an
impairment charge of $23.7 million related to our marketing-related and customer relationships intangible assets, which is primarily
composed of intangible assets recognized in the acquisition of ACI. During 2021, we identified changes in events and circumstances
relating to a certain ROU operating lease asset, that was abandoned as a result of the Company closing its warehouse and retail
showroom in anticipation of relocating to a new facility that was acquired in the acquisition of ACI. Consequently, the lease
facility was abandoned and we recorded an impairment loss during the year ended December 31, 2021 of $1.4 million.



Leases



The Company accounts for leases in accordance
with ASC Topic 842, “Leases.” The Company determines whether a contract is a lease at contract inception or for a modified
contract at the modification date. At inception or modification, the Company recognizes ROU assets and related lease liabilities on the
balance sheet for all leases greater than one year in duration. Lease liabilities and their corresponding ROU assets are initially measured
at the present value of the unpaid lease payments as of the lease commencement date. If the lease contains a renewal and/or termination
option, the exercise of the option is included in the term of the lease if the Company is reasonably certain that a renewal or termination
option will be exercised. As the Company’s leases do not provide an implicit rate, the Company uses an estimated incremental borrowing
rate (“IBR”) based on the information available at the commencement date of the respective lease to determine the present
value of future payments. The IBR is determined by estimating what it would cost the Company to borrow a collateralized amount equal to
the total lease payments over the lease term based on the contractual terms of the lease and the location of the leased asset.



Operating lease payments are recognized as an
expense on a straight-line basis over the lease term in equal amounts of rent expense attributed to each period during the term of the
lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early
years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental
payments is typically represented as the spread between the ROU asset and lease liability.



When calculating the present value of minimum
lease payments, we account for leases as one single lease component if a lease has both lease and non-lease fixed cost components. Variable
lease and non-lease cost components are expensed as incurred.



We do not recognize ROU assets and lease liabilities
for short-term leases that have an initial lease term of 12 months or less. We recognize the lease payments associated with short-term
leases as an expense on a straight-line basis over the lease term.



Fair Value of Financial Instruments



The fair value of a financial instrument is the
amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair
value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of
the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement.  The fair value hierarchy is defined in the following three categories:



Level 1: Unadjusted quoted prices
that are available in active markets for identical assets or liabilities at the measurement date.



Level 2: Significant other observable
inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.



Level 3: Significant unobservable
inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.



Cash, restricted cash, receivables, inventory,
vendor deposits, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term
nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market
rates of interest.











F-10







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Assets and liabilities that are measured at
fair value on a nonrecurring basis relate primarily to long-lived assets and goodwill, which are remeasured when
the derived fair value is below carrying value in the consolidated balance sheets.



Derivative Instruments – Interest Rate Swaps



The Company uses interest rate swap agreements
to manage interest rate exposures. The Company recognizes interest rate swap agreements as either a derivative asset or liability on the
balance sheet at fair value.



The fair value of an interest rate swap agreement
is determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flows of each derivative.
These analyses reflect the contractual terms of the derivative, including the period to maturity, and use observable market-based inputs,
including interest rate curves and implied volatilities. The fair value of interest rate swap agreements is determined using the market
standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts.



Included in the following table are the Company’s
major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (in thousands):



|                       |  | Fair Value Measurement at December 31, 2022 |  
|---------------------- |  | ------------------------------------------- | -
|Description            |  | Level 1                                     |  
|Assets:                |  |                                             |  
|Derivative instruments |  |                                             |  
|Interest rate swap     |  | $                                           | -





Income Taxes



Income taxes are accounted for under the asset
and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases.



Deferred income tax assets and liabilities are
recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax
purposes. Where, based on the weight of available evidence, it is more likely than not that some amount of recorded deferred tax assets
will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce
the deferred tax asset to an amount that is more likely than not to be realized. A tax position must meet a minimum probability threshold
before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is
greater than fifty percent likely of being realized upon ultimate settlement.



Sales Tax Liability



On June 21, 2018, the U.S. Supreme Court
issued an opinion in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), whereby the longstanding Quill Corp v. North
Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances.
The Company accrued sales taxes in the states with sales tax. The Company accrued the liability from the effective date of a
state’s adoption of the Wayfair decision up to the date the Company began collecting and filing sales taxes in the various
states. As of December 31, 2022 and 2021, the accrued amount for this liability, along with related interest expense, was $19.3
million and $18.5 million, respectively.



Between August 2022 and November 2022, the Company
experienced delays in filing sales tax returns. The Company is in the process of paying these taxes to become current with all sales tax
filings. In connection with the late filings, the Company has accrued penalties and interest that may be due upon payment of past-due
taxes.



Earnings (Loss) Per Share



Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is calculated
by adjusting the weighted average number of shares of common stock outstanding for the dilutive effect, if any, of common stock equivalents.
Common stock equivalents whose effect would be antidilutive are not included in diluted earnings (loss) per share. The Company uses the
treasury stock method to determine the dilutive effect, which assumes that all common stock equivalents have been exercised at the beginning
of the period and that the funds obtained from those exercises were used to repurchase shares of common stock of the Company at the average
closing market price during the period (see Note 16).





F-11







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Stock-Based Compensation



We recognize the fair value compensation cost
relating to stock-based payment transactions in accordance with ASC Topic 718, “Share-Based Payments,”. Under the
provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized
on a straight-line basis over the employee’s requisite service period, which is generally the vesting period (see Note 15). The
fair value of our stock options is estimated using a Black-Scholes option valuation model. Restricted stock awards are valued based on
the closing stock price on the date of grant (intrinsic value method). The Company has elected to recognize forfeitures as they occur.



Impact of COVID-19



In 2022, we experienced only minor impact to our
operations, primarily due to staffing challenges brought on by COVID-19. We continue to monitor the current COVID-19 situation in each
market in which we operate and will react accordingly. In May 2023, the US Government declared an end to the pandemic.



Liquidity and Going Concern Assessment







Management assesses liquidity and going concern
uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working
capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial
statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As
part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios,
forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures
or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among
other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments
or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved
and management has the proper authority to execute them within the look-forward period.



As of December 31, 2022, we had cash and
cash equivalents of $19.5 million, restricted cash of $1.0 million, and vendor deposits of $25.0 million, and total working capital
of $25.9 million. For the year ended December 31, 2022, the Company incurred an operating loss of $134.4 million, and cash flows
used in operations of $46.7 million. The operating loss for 2022 included $11.5 million in non-cash charges for depreciation and
amortization, as well as an impairment charge of $109.1 million.



The Company performed an assessment to determine
whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability
to continue as a going concern within one year after the filing date of this report, when the accompanying financial statements are being
issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully
implemented.





The Company considered several conditions and events including (1)
financial results and operations, (2) the investigation of certain allegations made by certain former employees related to the Company’s
business operations, (3) technical non-compliance with certain loan covenants of our term loan with Bank of America, based in part due
to our failure to timely deliver financial statements, and (4) the Company not being in compliance with the continued listing standards
of NYSE American LLC (the “Exchange”) since the Company failed to timely file certain required filings, which if not successfully
remediated could lead to the potential delisting of the Company from the Exchange



Based on the circumstances discussed above in
the initial assessment, substantial doubt exists regarding our ability to continue as a going concern. Management then assessed the mitigating
effect of its plans to determine if it is probable that the plans (1) would be effectively implemented within one year after the filing
date of this report, when the accompanying financial statements are being issued and (2) when implemented, would mitigate the relevant
conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.











F-12









POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



As discussed below, the Company has implemented
plans which encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations
for at least the 12-month period following the date its fiscal year 2022 financial statements are issued, in addition to creating sustained
cash flow generation thereafter. The Company has either taken or intends to take, the following actions, among others, to improve its
liquidity position and to address uncertainty about its ability to continue as a going concern:





| | ● | As described in Note 19,
                                                                                                                                                                        the Company entered into a loan amendment of their term loan and revolver loan agreement with Bank of America, in which Bank of
                                                                                                                                                                        America waived specific technical defaults and re-established a revolver loan commitment balance of $10 million.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We
are taking concrete steps to improve efficiency and profitability through headcount reductions and consolidation of operations including
the imminent consolidation of two existing New Jersey warehouses into one new warehouse.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We
hired an internationally recognized firm of digital advertising consultants to help us improve our return on advertising spend, which
we believe when completed will result in more sales per dollar of advertising expense.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We
are implementing new financing initiatives for our customers, including a new store-branded credit card and a leasing alternative for
customers who do not qualify for conventional credit, and we have added a new payment processor which will provide additional liquidity
compared to our incumbent processor.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | We
have changed our sales focus to emphasizing the sale of high-margin luxury products, as opposed to mass-market appliances, began becoming
dealers for higher-margin small appliances and promoting them on our website, and have begun actively negotiating improved terms with
several of our largest appliance vendors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Management has prepared estimates of operations
for fiscal years 2023 and 2024 and believes that sufficient funds will be generated from operations to fund its operations, and to service
its debt obligations for one year from the date of the filing of these consolidated financial statements in the Company’s 10-K.
The accompanying consolidated financial statements have been prepared on a going concern basis under which the Company is expected to
be able to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant
conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of these consolidated
financial statements, indicate improved operations and the Company’s ability to continue operations as a going concern.





Recent Accounting Pronouncements



Recently Adopted



In August 2020, the FASB issued ASU 2020-06,
Accounting for Convertible Instruments and Contracts In An Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain
convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments
with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument
with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation
for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. For SEC
filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning
after December 15, 2020, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2022. The
Company’s adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.





F-13









POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



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 which requires the measurement and recognition
of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model
with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual
reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU
2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this
extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The
Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated
financial statements.



In October 2021, the FASB issued ASU 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends
ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business
combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years. The Company has not completed its assessment of the standard but does not expect the adoption to have a material
impact on our consolidated financial statements.



In March 2022, the FASB issued ASU 2022-02, Troubled
Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses. This amended
guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for
TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables
made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year
of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required
to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis.
The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated
financial statements.



The Company currently believes that all other
issued and not yet effective accounting standards are not relevant to the Company’s consolidated financial statements.





Restatement



The Company restated its previously issued financial
statements as of and for the year ended December 31, 2021, to reflect the following adjustments:



Consolidated Statement of Operations



| | 1. | Reduction in revenue of $16.6 million, which comprised the
                                                     following: (1) an increase in the allowance for sales returns of $7.4 million, (2) revenue of $8.1 million that should be recognized
                                                     in 2022, and (3) sales tax collections of $1.1 million improperly recognized as revenue.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Net reduction in cost of goods of $6.7 million, which comprised of
the following: (1) reduction in product cost of sales due to an increase in the allowance for sales returns of $4.0 million, (2) reduction
in product cost of sales of $6.0 million relating to revenue cutoff that should be recognized in 2022, and (3) an offsetting increase
in cost of goods sold from an over accrual of vendor rebates ($0.4 million), under accrual of vendor purchases ($1.5 million), and an
error in inventory cutoff ($1.4 million).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Increase in general and administrative expenses of $0.9 million, resulting
from an increase in bad debt expense of $0.6 million in accordance with the Company’s policy for allowance for doubtful accounts,
and an over accrual of sales tax receivable of $0.3 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | As a result of the changes above, income tax changed from a tax benefit
of $4.4 million to a tax expense of $0.1 million.
| | -- | -------------------------------------------------------------------------------------------------------------------------





F-14









POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Consolidated Balance Sheet



| | 5. | Net increase in current assets of $6.6 million, which comprised the
following: (1) increase in inventory of $7.7 million, resulting from the reduction in cost of goods sold attributable to the allowance
for sales returns, revenue cutoff, and inventory cutoff, offset by a reduction in showroom inventory of $1.0 million that was reclassified
as property and equipment, (2) reduction in receivables of $1.1 million, resulting from an increase to the allowance for doubtful accounts
of $0.6 million, and an over accrual of vendor rebates (as detailed in Nos. 1-4 above).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | 6. | Net increase in current liabilities of $18.3 million, which comprised
the following: (1) increase in accounts payable of $10.3 million, as a result of the increase in the allowance for sales returns, and
an under accrual of sales tax refund receivable (netted with the sales tax liability), and (2) increase in customer deposits related to
revenue cutoff (as detailed in Nos. 1-4 above).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                    

| | 7. | Increase in long-term liabilities of $4.5 million, relating to an increase
to the deferred tax liability as a result of the changes described above.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------





POLISHED.COM INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2021

(in thousands)



|                                           |  | As Originally |         |   |     |             |   |         |             | 
|------------------------------------------ |  | ------------- | ------- | - | --- | ----------- | - | ------- | ----------- | 
|                                           |  | Reported      |         |   |     | Adjustments |   |         | As Restated | 
|Current assets                             |  | $             | 121,318 |   | (5) |             | $ | 6,577   |             | 
|Property and equipment                     |  |               | 3,554   |   | (5) |             |   | 1,031   |             | 
|Total assets                               |  | $             | 375,984 |   |     |             | $ | 7,608   |             | 
|                                           |  |               |         |   |     |             |   |         |             | 
|Current liabilities                        |  | $             | 105,341 |   | (6) |             |   | 18,320  |             | 
|Deferred tax liability                     |  |               | 3,867   |   | (7) |             |   | 4,540   |             | 
|Total liabilities                          |  |               | 170,381 |   |     |             |   | 22,860  |             | 
|Accumulated deficit                        |  |               | (19,056 | ) |     |             |   | (15,252 | )           | 
|Total liabilities and stockholders’ equity |  | $             | 375,984 |   |     |             | $ | 7,608   |             | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER
31, 2021

(in thousands)





|                                           |  | As Originally |            |  |     |             |   |         |             | 
|------------------------------------------ |  | ------------- | ---------- |  | --- | ----------- | - | ------- | ----------- | 
|                                           |  | Reported      |            |  |     | Adjustments |   |         | As Restated | 
|Product sales, net                         |  | $             | 362,314    |  | (1) |             | $ | (16,589 | )           | 
|Cost of goods sold                         |  |               | 282,655    |  | (2) |             |   | (6,733  | )           | 
|Operating expense                          |  |               | 71,339     |  | (3) |             |   | 918     |             | 
|Income taxes                               |  |               | 4,376      |  | (4) |             |   | (4,478  | )           | 
|Net income (loss)                          |  | $             | 7,670      |  |     |             | $ | (15,252 | )           | 
|                                           |  |               |            |  |     |             |   |         |             | 
|Net income (loss) per common share         |  |               |            |  |     |             |   |         |             | 
|BASIC                                      |  | $             | 0.12       |  |     |             |   |         |             | 
|DILUTED                                    |  | $             | 0.10       |  |     |             |   |         |             | 
|                                           |  |               |            |  |     |             |   |         |             | 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |  |               |            |  |     |             |   |         |             | 
|BASIC                                      |  |               | 64,528,299 |  |     |             |   |         |             | 
|DILUTED                                    |  |               | 76,460,460 |  |     |             |   |         |             | 





F-15







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021





POLISHED.COM INC.

CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands)







|                                                                           |  |              |             |  | Additional |   |    |             |  |   |               | 
|-------------------------------------------------------------------------- |  | ------------ | ----------- |  | ---------- | - | -- | ----------- |  | - | ------------- | 
|                                                                           |  | Common Stock |             |  | Paid-Inc   |   |    | Accumulated |  |   | Stockholders’ | 
|                                                                           |  | Shares       |             |  | Amount     |   |    | Capital     |  |   | Deficit       | 
|Balance at December 31, 2021 as originally filed                           |  |              | 106,387,322 |  |            | $ | 11 |             |  | $ | 224,648       | 
|Adjustments to results of  operations for the year ended
December 31, 2021 |  |              | -           |  |            |   | -  |             |  |   | -             | 
|Balance at December 31, 2021 as restated                                   |  |              | 106,387,322 |  |            | $ | 11 |             |  | $ | 224,648       | 





POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2021

(in
thousands)



|                                                  |  | As
    Originally |          |   |       |             |   |         | As       | 
|------------------------------------------------- |  | ----------------- | -------- | - | ----- | ----------- | - | ------- | -------- | 
|                                                  |  | Reported          |          |   |       | Adjustments |   |         | Restated | 
|Cash Flows from Operating Activities              |  |                   |          |   |       |             |   |         |          | 
|Net income
    (loss)                             |  | $                 | 7,670    |   |       |             | $ | (15,252 | )        | 
|Receivables                                       |  |                   | (5,603   | ) | (1-4) |             |   | 444     |          | 
|Inventory                                         |  |                   | (18,459  | ) | (5)   |             |   | (8,121  | )        | 
|Accounts payable and accrued
    expenses         |  |                   | 14,178   |   | (5)   |             |   | 10,207  |          | 
|Customer deposits                                 |  |                   | (18,968  | ) | (6)   |             |   | 8,113   |          | 
|Deferred tax expense (benefit)                    |  |                   | (4,908   | ) | (6)   |             |   | 4,540   |          | 
|Miscellaneous other accounts                      |  |                   | 1,116    |   | (7)   |             |   | 69      |          | 
|                                                  |  |                   |          |   |       |             |   |         |          | 
|Net
    cash used in operating activities         |  |                   | (18,328  | ) |       |             |   | -       |          | 
|                                                  |  |                   |          |   |       |             |   |         |          | 
|Net
    cash used in investing activities         |  |                   | (204,834 | ) |       |             |   | -       |          | 
|                                                  |  |                   |          |   |       |             |   |         |          | 
|Net
    cash provided by financing activities     |  |                   | 247,041  |   |       |             |   | -       |          | 
|                                                  |  |                   |          |   |       |             |   |         |          | 
|Net
    change in cash and restricted cash        |  |                   | 23,879   |   |       |             |   | -       |          | 
|Cash and restricted cash
    at beginning of year |  |                   | 9,912    |   |       |             |   | -       |          | 
|                                                  |  |                   |          |   |       |             |   |         |          | 
|Cash
    and restricted cash at end of year       |  | $                 | 33,791   |   |       |             | $ | -       |          | 





F-16







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 3—REVENUES



Disaggregated Revenue ‒ The Company disaggregates
revenue from contracts with customers by product type, as it believes it best depicts how the nature, amount, timing and uncertainty
of revenue and cash flows are affected by economic factors.



The Company’s disaggregated revenue by
product type is as follows (in thousands):



|                          |  | For the Years Ended |        
|------------------------- |  | ------------------- | -------
|                          |  | December 31,        |        
|                          |  | 2022                |        
|                          |  |                     |        
|Appliance sales           |  | $                   | 500,506
|Furniture and other sales |  |                     | 33,878 
|                          |  |                     |        
|Total                     |  | $                   | 534,474





NOTE 4—RECEIVABLES



Receivables at December 31, 2022 and 2021, consisted
of the following (in thousands):



|                                     |  | December 31, |        |   | December 31, |  
|------------------------------------ |  | ------------ | ------ | - | ------------ | -
|                                     |  | 2022         |        |   | 2021         |  
|                                     |  |              |        |   |              |  
|Trade accounts receivable            |  | $            | 13,691 |   |              | $
|Vendor rebates receivable            |  |              | 8,514  |   |              |  
|Other receivables                    |  |              | 5,951  |   |              |  
|                                     |  |              |        |   |              |  
|Total receivables                    |  |              | 28,156 |   |              |  
|Less allowance for doubtful accounts |  |              | (1,506 | ) |              |  
|                                     |  |              |        |   |              |  
|Total receivables, net               |  | $            | 26,650 |   |              | $





NOTE 5—VENDOR DEPOSITS



Deposits with vendors represent cash on deposit
with one vendor arising from accumulated rebates paid by the vendor. The deposits are used by the vendor to seek to secure the Company’s
purchases. The deposit can be withdrawn at any time up to the amount of the Company’s credit line with the vendor. Alternatively,
the Company could secure their credit line with a floor plan line from a lender and withdraw all its deposits. The Company has elected
to leave the deposits with the vendor on which it earns interest income and serves as collateral for the Company’s accounts payable
with the vendor (see Note 14).



Vendor deposits as of December 31, 2022 and 2021,
were $25.0 million and $12.2 million, respectively.





F-17







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 6—MERCHANDISE INVENTORY



Merchandise inventory at December 31, 2022 and
2021, consisted of the following (in thousands):



|                                 |  | December 31, |        |   | December 31, |  
|-------------------------------- |  | ------------ | ------ | - | ------------ | -
|                                 |  | 2022         |        |   | 2021         |  
|                                 |  |              |        |   |              |  
|Appliances                       |  | $            | 39,702 |   |              | $
|Furniture and other              |  |              | 3,853  |   |              |  
|                                 |  |              |        |   |              |  
|Total merchandise inventory      |  |              | 43,555 |   |              |  
|Less reserve for obsolescence    |  |              | (1,789 | ) |              |  
|                                 |  |              |        |   |              |  
|Total merchandise inventory, net |  | $            | 41,766 |   |              | $





NOTE 7—PROPERTY AND EQUIPMENT



Property and equipment at December 31, 2021 and
2020, consisted of the following (in thousands):



|                               |  | December 31, |        |   | December 31, |  
|------------------------------ |  | ------------ | ------ | - | ------------ | -
|                               |  | 2022         |        |   | 2021         |  
|                               |  |              |        |   |              |  
|Warehouse equipment            |  | $            | 291    |   |              |  
|Financed warehouse equipment   |  |              | 515    |   |              |  
|Office furniture and equipment |  |              | 324    |   |              |  
|Transportation equipment       |  |              | 1,466  |   |              |  
|Leasehold improvements         |  |              | 3,131  |   |              |  
|Showroom inventory             |  |              | 1,037  |   |              |  
|Total property and equipment   |  |              | 6,764  |   |              |  
|Less: accumulated depreciation |  |              | (1,689 | ) |              |  
|                               |  |              |        |   |              |  
|Property and equipment, net    |  | $            | 5,075  |   |              | $



Depreciation expense for the years ended December
31, 2022 and 2021 was $1.2 million and $0.4 million, respectively.





F-18







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 8—INTANGIBLE ASSETS AND GOODWILL



Intangible assets at December 31, 2022 and 2021, consisted of the following
(in thousands):



|                               |  | December 31, |        |  | December 31, |  
|------------------------------ |  | ------------ | ------ |  | ------------ | -
|                               |  | 2022         |        |  | 2021         |  
|                               |  |              |        |  |              |  
|Customer relationships         |  | $            | 3,461  |  |              | $
|Marketing-related              |  |              | 6,835  |  |              |  
|                               |  |              |        |  |              |  
|Total intangible assets        |  |              | 10,296 |  |              |  
|Less: accumulated amortization |  |              | -      |  |              |  
|                               |  |              |        |  |              |  
|Intangible assets, net         |  | $            | 10,296 |  |              | $



In connection with the acquisition of Goedeker Television, the Company
identified intangible assets of $2.1 million, representing marketing-related and customer relationships. For the Appliances Connection
acquisition, the Company identified intangible assets of $49.0 million, representing marketing-related and customer relationships. During
the year-ended December 31, 2022, the Company recognized an impairment charge of $23.7 million related to our marketing-related and customer
relationships intangible assets.



These assets are being amortized on a straight-line basis over their
average estimated remaining useful life of 41 months. Amortization expense for the years ended December 31, 2022 and 2021 was $10.2 million
and $6.1 million, respectively.



Following is the estimated amortization expense
for the customer relationship and marketing-related intangible assets for the next five years as of December 31, 2021 (in thousands):



|Year Ending December 31, |  | Amount |       
|------------------------ |  | ------ | ------
|                         |  |        |       
|2023                     |  | $      | 3,013 
|2024                     |  |        | 3,013 
|2025                     |  |        | 3,013 
|2026                     |  |        | 1,257 
|                         |  |        |       
|Total                    |  | $      | 10,296





F-19







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



The changes in the carrying amount of goodwill
for the years ended December 31, 2022 and 2021, are as follows (in thousands):



|Balance  January 1, 2021                               |  | $ | 4,726   |  
|------------------------------------------------------ |  | - | ------- | -
|                                                       |  |   |         |  
|Goodwill from acquisition of Appliances Connection     |  |   | 185,720 |  
|Goodwill from acquisition of Appliances Gallery        |  |   | 1,168   |  
|                                                       |  |   |         |  
|Balance at December 31, 2021                           |  | $ | 191,614 |  
|Impairment charge for the year-ended December 31, 2022 |  |   | (85,441 | )
|Balance December 31, 2022                              |  | $ | 106,173 |  



At December 31, 2022, the Company recognized an impairment charge of
$85.4 million to goodwill. At December 31, 2021, there was no impairment of goodwill.



NOTE 9—ACCOUNTS PAYABLE AND ACCRUED EXPENSES



Accounts payable and accrued expenses at December 31, 2022 and 2021,
consisted of the following (in thousands):



|                                            |  | December 31, |        |  | December 31, |  
|------------------------------------------- |  | ------------ | ------ |  | ------------ | -
|                                            |  | 2022         |        |  | 2021         |  
|                                            |  |              |        |  |              |  
|Trade accounts payable                      |  | $            | 34,345 |  |              | $
|Accrued sales tax                           |  |              | 36,196 |  |              |  
|Accrued payroll liabilities                 |  |              | 680    |  |              |  
|Accrued interest                            |  |              | 37     |  |              |  
|Accrued liability for sales returns         |  |              | 3,916  |  |              |  
|Accrued income taxes                        |  |              | -      |  |              |  
|Credit cards payable                        |  |              | 32     |  |              |  
|Accrued insurance                           |  |              | 1,180  |  |              |  
|Accrued severance                           |  |              | -      |  |              |  
|Other accrued liabilities                   |  |              | 5,151  |  |              |  
|                                            |  |              |        |  |              |  
|Total accounts payable and accrued expenses |  | $            | 81,537 |  |              | $







F-20







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 10—BUSINESS
COMBINATIONS



Appliances Connection



On October 20, 2020, the Company entered into
a securities purchase agreement, which was amended on December 8, 2020 and April 6, 2021 (as amended, the “AC Purchase Agreement”),
with ACI, Appliances Connection and the sellers (the “Sellers”), pursuant to which ACI agreed to acquire all of the issued
and outstanding capital stock or other equity securities of Appliances Connection from the Sellers (the “AC Acquisition”).
The AC Acquisition was completed on June 2, 2021.



AC is one of the leading e-commerce retailers
of household appliances and carries many household name brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and
also carries many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve, Wolf, Jenn-Air, Viking among others.
The completion of the AC acquisition accelerates the Company’s long-term vision that changes the way Americans shop for appliances.



The aggregate purchase price was $224.7 million, consisting of (i)
$180.0 million in cash, (ii) 5,895,973 shares of the Company’s common stock valued at $12.3 million, and (iii) $32.4 million as
a result of the post-closing net working capital adjustment provision. The Company recorded $0.9 million in acquisition-related expenses.



The Company accounted for the AC Acquisition
using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance
with ASC 805, the Company assigned fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition
date.



The purchase price was allocated as follows (in
thousands):



|Purchase consideration at fair value:                  |  |   |        
|------------------------------------------------------ |  | - | -------
|                                                       |  |   |        
|Cash consideration                                     |  | $ | 180,000
|Common stock                                           |  |   | 12,264 
|Working capital adjustment                             |  |   | 32,411 
|                                                       |  |   |        
|Total consideration                                    |  | $ | 224,675
|                                                       |  |   |        
|Assets acquired and liabilities assumed at fair value: |  |   |        
|                                                       |  |   |        
|Cash                                                   |  | $ | 5,897  
|Receivables                                            |  |   | 17,141 
|Vendor deposits                                        |  |   | 15,000 
|Merchandise inventory                                  |  |   | 21,634 
|Prepaid expenses and other current assets              |  |   | 2,194  
|Property and equipment                                 |  |   | 1,891  
|Right-of-use operating lease assets                    |  |   | 1,834  
|Customer relationships                                 |  |   | 23,399 
|Tradenames                                             |  |   | 25,567 
|Goodwill                                               |  |   | 185,720
|Accounts payable and accrued expenses                  |  |   | (45,715
|Customer deposits                                      |  |   | (17,536
|Notes payable                                          |  |   | (1,527 
|Finance lease liabilities                              |  |   | (215   
|Right-of-use operating lease liabilities               |  |   | (1,834 
|Net deferred tax liabilities                           |  |   | (8,775 
|                                                       |  |   |        
|Net assets acquired                                    |  | $ | 224,675





F-21







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



The adjustments to the initial allocation are
based on more detailed information obtained about the specific assets acquired and liabilities assumed. The adjustments made to the initial
allocation did not result in material changes to the amortization expense recorded in the previous quarters.



We are amortizing the customer relationship and
tradename intangible assets acquired over 5 years. The goodwill consists largely of the synergies expected from combining operations and
is not deductible for tax purposes.



From the date of acquisition until December 31,
2021, Appliances Connection contributed net sales of $297.9 million and net income from continuing operations of $14.9 million, which
are included in our consolidated statements of operations.



Appliance Gallery



On July 6, 2021, AC Gallery entered into an asset
purchase agreement, which was amended on July 21, 2021 and July 29, 2021 (as amended, the “AG Purchase Agreement”), with
Appliance Gallery, pursuant to which AC Gallery agreed to acquire substantially all the assets and assumed substantially all the liabilities
of Appliance Gallery (the “AG Acquisition”). The AG Acquisition was completed on July 29, 2021.



Pursuant to the AG Purchase Agreement, the purchase
price paid at closing was $1.4 million.



The Company accounted for the Gallery Acquisition
using the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance
with ASC 805, the Company assigned fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition
date.



The purchase price was allocated as follows (in
thousands):



|Purchase consideration at fair value:                  |  |   |      
|------------------------------------------------------ |  | - | -----
|                                                       |  |   |      
|Cash consideration                                     |  | $ | 1,420
|                                                       |  |   |      
|Total consideration                                    |  | $ | 1,420
|                                                       |  |   |      
|Assets acquired and liabilities assumed at fair value: |  |   |      
|                                                       |  |   |      
|Merchandise inventory                                  |  | $ | 483  
|Prepaid expenses and other current assets              |  |   | 6    
|Property and equipment                                 |  |   | 19   
|Goodwill                                               |  |   | 1,168
|Customer deposits                                      |  |   | (256 
|                                                       |  |   |      
|Net assets acquired                                    |  | $ | 1,420



Goodwill recognized for
this transaction is deductible for tax purposes.



From the date of acquisition until December 31,
2021, Appliance Gallery contributed net sales of $0.2 million and net income from continuing operations of $0.2 million, which are included
in our consolidated statements of operations.





F-22







POLISHED.COM INC.
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



Pro Forma Information



The following unaudited pro forma results presented
below (in thousands) include the effects of the AC and AG Acquisitions as if they had been consummated as of January 1, 2021, with adjustments
to give effect to pro forma events that are directly attributable to the acquisitions.



|                    |  | December 31, |        
|------------------- |  | ------------ | -------
|                    |  | 2021         |        
|                    |  |              |        
|Net sales           |  | $            | 525,152
|Net income          |  | $            | 12,658 
|Earnings per share: |  |              |        
|Basic and diluted   |  | $            | 0.20   



These unaudited pro
forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations
would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results
of operations.



NOTE 11—NOTES PAYABLE



Arvest Loan



On August 25, 2020, the Company entered into a promissory note and
security agreement with Arvest Bank for a loan in the principal amount of $3.5 million. On May 10, 2021, the Company repaid this loan.



Credit Facilities



M&T Credit Agreement



On June 2, 2021, the
Company entered into a credit and guaranty agreement (the “M&T Credit Agreement”) with the financial institutions party
thereto from time to time (“M&T Lenders”), and Manufacturers and Traders Trust Company, as sole lead arranger, sole book
runner, administrative agent and collateral agent (“M&T”), pursuant to which the M&T Lenders agreed to make available
to the Company and ACI senior secured credit facilities in the aggregate initial amount of $70.0 million, including (i) a $60.0 million
term loan (the “M&T Term Loan”) and (ii) a $10.0 million revolving credit facility (the “M&T Revolving Loan”).
The M&T Loans bear interest on the unpaid principal amount at a rate determined by the Base Rate (as defined in the Credit Agreement),
then at the Base Rate plus the Applicable Margin. Each of the M&T Loans were set to mature on June 2, 2026.



On June 2, 2021, the
Company borrowed the entire amount of the Term Loan and issued term loan notes to the M&T Lenders in the aggregate principal amount
of $60.0 million. As of December 31, 2021, the carrying value of the M&T Term Loan was $55.2 million, comprised of principal of $58.5
million, net of unamortized loan costs of $3.3 million. Loan costs before amortization included $3.5 million of lender and placement agent
fees and $0.3 million of legal other fees. The Company did not borrow any amounts under the M&T Revolving Loan.



On May 9, 2022, the Company repaid the M&T Term Loan, through
the proceeds of a new loan issuance. As a result, the obligations under the M&T Credit Agreement were terminated.



Bank of America Credit Agreement



On May 9, 2022,
the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”)
and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant to
which the Lenders agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140.0
million, including (i) a $100.0 million term loan (the “Term Loan”) and (ii) a $40.0 million revolving credit facility (the
“Revolving Loan”), which revolving credit facility included a $2.00 million swingline sublimit (the “Swing Line Loan”
and together with the Term Loan and the Revolving Loan, the “Loans”) and, separately, a $10.0 million letter of credit commitment,
in each case, on the terms and conditions contained in the Credit Agreement.



On May 9, 2022, the Company
borrowed the entire amount of the Term Loan in the aggregate principal amount of $100.0 million. A portion of the proceeds of the Term
Loan were to repay and terminate the M&T Credit Agreement. Commencing on September 30, 2022, through and including June 30, 2023,
the Borrowers repaid the principal amount of the Term Loan in quarterly installments of $1,250,000 each, payable on the last business
day of each March, June, September and December.



As of December 31, 2022,
the carrying value of the Term Loan was $96.5 million, comprised of principal of $97.5 million, net of unamortized loan costs of $1.0
million. Loan costs before amortization included $1.1 million of lender and other fees.



As a result of our
technical non-compliance with specified loan covenants for both the Bank of America Term Loan and Revolving loan, based in part due
to our failure to timely deliver financial statements, Bank of America froze the $40.0 million Revolving Loan before any
borrowings had been made against the facility.





F-23







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



Subsequent to year-end,
on July 25, 2023, the Company and Bank of America amended the Credit Agreement (the “Amendment”), in part, to waive events
of defaults on its existing credit agreement. The Amendment requires the Company to pay the existing Term Facility and Revolving Facility
by August 31, 2024 (the “Maturity Date”). The Revolving Loan decreased to $10,000,000 from and after July 25, 2023. The Letter
of Credit commitments decreased to $2,000,000 and the Swing Line Loan was eliminated. The amendment also establishes a new EBITDA covenant
and requires the Company to maintain minimum liquidity of $8 million including restricted cash and $5 million excluding restricted cash.
Liquidity as defined in the Amendment includes Cash and certain qualifying customer and credit card accounts receivable.



The Term Loan and
Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate
determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest
at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or
convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate
benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also
select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with
the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively,
for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment.
Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing,
following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than
the interest rate then in effect for the applicable loan.



Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed
at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving
Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from
time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited
circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset
sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon
receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically
set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.



As a result of the reduced term, the Company has begun discussions
with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.



Northpoint Loan



On June 3, 2021, the Company entered into a loan
and security agreement with Northpoint Commercial Finance LLC (“Northpoint”), pursuant to which Northpoint may from time-to-time
advance funds for the acquisition, financing and/or refinancing by the Company of inventory purchased from Samsung Electronics America,
Inc. and/or affiliates and for such other purposes as are acceptable Northpoint. The loan and security agreement provides that Northpoint
may establish a credit limit and may adjust such credit limit from time to time; provided that such credit limit does not constitute
a commitment or committed line of credit to Northpoint. As of December 31, 2021, such credit limit is $2.0 million, of which $0.2 million
was owed and included in accounts payable.



The applicable per annum interest rates for a
loan, including any default rates, will be determined at the time of the loan. The loan and security agreement contains customary events
of default and is secured by a security interest in all of the Company’s inventory (i) that is manufactured, distributed, or sold
by Samsung Electronics America, Inc. and/or its affiliates and/or (ii) that bears any trade names, trademarks, or logos of Samsung Electronics
America, Inc. and/or its affiliates; all returns, repossessions, exchanges, substitutions, replacements, attachments, parts, accessories
and accessions of any of the foregoing; all price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments
related to any of the foregoing; supporting obligations to any of the foregoing; and products and proceeds in whatever form of any of
the foregoing.





F-24







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



10% OID Senior Promissory Notes



On March 19, 2021, the Company entered into a
securities purchase agreement with two institutional investors, pursuant to which the Company issued to each investor (i) a 10% OID senior
secured promissory note in the principal amount of $2.8 million and (ii) a four-year warrant to purchase 200,000 shares of the Company’s
common stock at an exercise price of $12.00 (subject to adjustments), which may be exercised on a cashless basis, for a purchase price
of $2.5 million each, or $5.0 million in the aggregate, the relative fair value of which is $1.3 million and was recorded as debt discount.
After deducting a placement fee and other expenses, the Company received net proceeds of $4.6 million. The original issue discount and
warrant expense were amortized as interest expense. On June 2, 2021, the Company repaid these notes from the proceeds of the Term Loan.
At the time of repayment, the Company wrote off the balance of the debt discount of $1.7 million, as a loss on early settlement of debt.



Vehicle Loans



The Company has financed purchases of transportation
vehicles with notes payable, which are secured by the vehicles purchased. These notes have five-year terms and interest rates ranging
from 3.8% to 5.7%. As of December 31, 2022, the outstanding balance of these vehicle loans is $0.9 million.



Future minimum principal payments on our total
notes payable as of December 31, 2022, are as follows (in thousands):



|Year Ending December 31,                    |  | Amount |       
|------------------------------------------- |  | ------ | ------
|                                            |  |        |       
|2023                                        |  | $      | 6,628 
|2024                                        |  |        | 91,576
|2025                                        |  |        | 182   
|2026                                        |  |        | 9     
|2027                                        |  |        | 8     
|                                            |  |        |       
|Total future minimum payments               |  |        | 98,403
|Less: debt discount                         |  |        | (959  
|Total                                       |  |        | 97,444
|                                            |  |        |       
|Total current portion of notes payable, net |  | $      | 6,628 
|Total notes payable, net of current portion |  | $      | 90,816



NOTE 12— LEASES



Operating Leases



On April 5, 2019, the Company entered into a
lease agreement with S.H.J., L.L.C for its prior principal office in Ballwin, Missouri. The lease is for a term of five years and provides
for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term.
The lease agreement contains customary events of default, representations, warranties, and covenants. In June 2021, the Company abandoned
the building leased from S.H.J., L.L.C. In connection with the abandonment of this Right of Use asset, the Company recognized an abandonment
loss of $1.4 million. The Company remains obligated on the lease until April 4, 2024.



On May 31, 2019, YF Logistics entered into a sublease
agreement with Dynamic Marketing, Inc. (“DMI”) for its warehouse space in Hamilton, NJ. The initial term of the sublease was
for a period commencing on June 1, 2019 and terminating on April 30, 2020, with automatic renewals for successive one year terms until
the earlier of (i) termination by either upon thirty days’ prior written notice or (ii) April 30, 2024. The sublease provides for
a base rent equal to 71.43% of the base rent paid by DMI under its lease for the premises, plus 71.43% of any taxes, operating expenses,
additional charges or any other amounts due by DMI, for a total of $56,250 per month. The initial ROU asset and liability associated with
this lease is $3.0 million.



On January 13, 2021, the Company entered into
a lease agreement with Westgate 200, LLC, which was amended on March 31, 2021, for its new principal office and showroom in St. Charles,
Missouri. The lease terminates on April 30, 2027, with two options to renew for additional five year periods. The base rent is $20,977
per month until September 30, 2021, and increases to $31,465 per month until April 30, 2022, after which time the base rent increases
at approximately 2.5% per year thereafter. The Company must also pay its 43.4% pro rata portion of the property taxes, operating expenses
and insurance costs and is also responsible to pay for the utilities used on the premises. The lease contains customary events of default.
The initial ROU asset and liability associated with this lease is $2.0 million.





F-25







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



On June 2, 2021, 1 Stop entered into a new lease
agreement with 1870 Bath Ave. LLC, a related party, for the premises located at 1870 Bath Avenue, Brooklyn, NY. The lease is for a term
of ten years and provides for a base rent of $74,263 per month during the first year with annual increases to $96,896 during the last
year of the term. 1 Stop is also responsible for all property taxes, insurance costs and the utilities used on the premises. The lease
contains customary events of default. This lease replaces the prior lease entered into between the parties on September 1, 2018. The
initial ROU asset and liability associated with this lease is $8.4 million.



On June 2, 2021, Joe’s Appliances entered
into a new lease agreement with 7812 5th Ave Realty LLC, a related party, for the premises located at 7812 5th Avenue, Brooklyn, NY. The
lease is for a term of ten years and provides for a base rent of $6,365 per month during the first year with annual increases to $8,305
during the last year of the term. Joe’s Appliances is also responsible for all property taxes, insurance costs and the utilities
used on the premises. The lease contains customary events of default. This lease replaces the prior lease entered into between the parties
on September 1, 2018. The initial ROU asset and liability associated with this lease is $0.7 million.



On July 29, 2021, AC Gallery entered into a lease
agreement with Tom’s Flooring, LLC for the showroom and warehouse located in Largo, Florida. The lease is for a term of four months
commencing on September 1, 2021 and ending on December 31, 2021 and provides for a case rent of $6,500 per month. AC Gallery must also
pay its one-third pro rata portion of the common area maintenance charges, utilities and sales taxes. The lease contains customary events
of default. The lease is short term and therefore not recorded as a right of use asset and liability.



On September 9, 2021, the Company entered into
a warehouse agreement for a new warehouse in Somerset, NJ. The warehouse agreement is for a term of 26 months commencing on October 1,
2021 and ending November 29, 2023, unless the master lease for the premises is terminated earlier. The monthly storage fee is $136,274
for the first year, $140,362 for the second year, and $144,573 for the last two months. The Company also paid a security deposit of $272,549.
The lease agreement contains customary events of default, representations, warranties, and covenants. The initial ROU and liability associated
with this operating lease is $3.4 million.



The following was included in our consolidated
balance sheet as of December 31, 2022 and 2021 (in thousands):



|                                               |  | December 31, |        |   | December 31, |  
|---------------------------------------------- |  | ------------ | ------ | - | ------------ | -
|                                               |  | 2022         |        |   | 2021         |  
|                                               |  |              |        |   |              |  
|Operating lease right-of-use assets            |  | $            | 11,688 |   |              | $
|                                               |  |              |        |   |              |  
|Lease liabilities, current portion             |  |              | 3,726  |   |              |  
|Lease liabilities, long-term                   |  |              | 9,013  |   |              |  
|                                               |  |              |        |   |              |  
|Total operating lease liabilities              |  | $            | 12,739 |   |              | $
|                                               |  |              |        |   |              |  
|Weighted-average remaining lease term (months) |  |              | 73     |   |              |  
|                                               |  |              |        |   |              |  
|Weighted average discount rate                 |  |              | 3.9    | % |              |  



Operating lease expense was $3.8 million and $1.8
million for the years ended December 31, 2022 and 2021, respectively.





F-26







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



As of December 31, 2022, maturities of operating
lease liabilities were as follows, in thousands:



|Year Ending December 31,          |  | Amount |       
|--------------------------------- |  | ------ | ------
|                                  |  |        |       
|2023                              |  | $      | 4,175 
|2024                              |  |        | 1,808 
|2025                              |  |        | 1,489 
|2026                              |  |        | 1,531 
|2027                              |  |        | 1,284 
|Thereafter                        |  |        | 4,159 
|Total                             |  |        | 14,446
|Less: imputed interest            |  |        | (1,707
|                                  |  |        |       
|Total operating lease liabilities |  | $      | 12,739



Finance Leases



The Company has three finance leases, acquired
in the acquisition of Appliances Connection. At December 31, 2022, the total amount due on these leases was $0.34 million.



Future minimum principal payments on our finance
leases payable as of December 31, 2022, are as follows (in thousands):



|Year Ending December 31,                     |  | Amount |    
|-------------------------------------------- |  | ------ | ---
|                                             |  |        |    
|2023                                         |  | $      | 125
|2024                                         |  |        | 109
|2025                                         |  |        | 107
|2026                                         |  |        | 21 
|Total future minimum payments                |  |        | 362
|Less: debt discount                          |  |        | (25
|Total                                        |  |        | 337
|                                             |  |        |    
|Total current portion of finance leases, net |  | $      | 112
|Total finance leases, net of current portion |  | $      | 225



NOTE 13—SUPPLIER CONCENTRATION



For the years ended December 31, 2022 and 2021,
the Company purchased a substantial portion of finished goods from one vendor (DMI – see Note 14), representing 69% and 72%, respectively.



The Company believes there are numerous other
suppliers that could be substituted should the supplier become unavailable or non-competitive.



NOTE 14—RELATED PARTIES



Management Services Agreement



On April 5, 2019, the Company entered into a
management services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts,
the Company’s executive chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to
the offsetting management services agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly
management fee equal to $62,500; provided, however, that under certain circumstances specified in the management services agreement,
the quarterly fee may be reduced if similar fees payable to the Manager by subsidiaries of the Company’s former parent company,
1847 Holdings LLC, exceed a threshold amount.





F-27







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021





The Company shall also reimburse the Manager
for all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket
costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing
services under the management services agreement. The Company did not pay any expenses for the years ended December 31, 2021 and 2020.



The Company expensed management fees of $0.3
million for each of the years ended December 31, 2022 and 2021 respectively.



DMI



The Company is a member of DMI, an appliance purchasing
cooperative. DMI purchases consumer electronics and appliances at wholesale prices from various vendors, and then makes such products
available to its members, including the Company, who sell such products to end consumers. DMI’s purchasing group arrangement provides
its members, including the Company, with leverage and purchasing power with appliance vendors, and increases the Company’s ability
to compete with competitors, including big box appliance and electronics retailers. The Company owns an approximate 1.6% interest in DMI.
Additionally, Albert Fouerti, the Company’s former Chief Executive Officer, director, and a former significant stockholder of Appliances
Connection prior to the AC Acquisition, was on the board of DMI until November 2022. As such, DMI is deemed to be a related party for
2022 and 2021.



During the years ended December 31, 2022 and 2021, total purchases
from DMI, net of holdbacks, were $255.9 million and $177.8 million, respectively. At December 31, 2022, deposits at DMI totaled $25.0
million and the vendor rebate due from DMI were $5.8 million. At December 31, 2021, vendor rebate deposits, net, due from DMI were $12.2
million and vendor rebates receivable were $5.8 million.





Lease Agreements



As described above, 1 Stop and Joe’s Appliances
entered into lease agreements with 1870 Bath Ave. LLC and 7812 5th Ave Realty LLC. These entities are owned by Albert Fouerti
and Elie Fouerti (the Company’s former Chief Executive and Chief Operating Officers and significant stockholders of the Company).
The total rent paid to these two entities in 2022 was $1.0 million and $0.6 million for the period from June 2, 2021 to December 31, 2021.
In addition, YF Logistics has entered into a sublease agreement with DMI. The total rent expense under this related party lease was $0.7
million for the year-ended December 31, 2022 and $0.4 million for the period June 2, 2021 to December 31, 2021.



On March 15, 2022, the Company entered into a
lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie Fouerti. 
The Company contends that the lease required the Landlord do certain work at Landlord’s expense to improve the building at a cost
of approximately $1.2 million.  Landlord has refused to pay for this work, contending that this expense was the Company’s responsibility. 
In addition, the total remaining amount due on the lease at December 31, 2022 is also approximately $1.2 million.  Landlord contends
that the Company is in default of the lease for failing to pay rent.  The Company disagrees that its rent obligations have been triggered
and further contends that Landlord has violated the lease by failing to pay for the work.  The Company and the Landlord remain in
dispute over these issues.



NOTE 15—STOCKHOLDERS’ EQUITY



As of December 31, 2022 and 2021, the Company
was authorized to issue 200,000,000 shares of common stock, $0.0001 par value per share, and 20,000,000 shares of “blank check”
preferred stock, 0.0001 par value per share. To date, the Company has not designated or issued any shares of preferred stock.





On December 17, 2021, the Company approved a
new share repurchase program under which the Company may repurchase up to $25.0 million of its outstanding shares of common stock in
the open market, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange
Act of 1934, as amended. The Company’s decision to repurchase its shares, as well as the timing of such repurchases, will depend
on a variety of factors that include ongoing assessments of the Company’s capital needs, obtaining requisite senior lender consent,
market conditions and the price of the Company’s common stock, and other corporate considerations, as determined by management.
During 2022, the Company purchased 1,229,222 shares of common stock for a total purchase price of $2,000,000. Effective December 31,
2022, the board authorized that the shares purchased be retired.



Common Stock



As of December 31, 2022 and 2021, the Company
had 105,227,876 and 106,387,332 shares of common stock issued and outstanding, respectively. Each share entitles the holder thereof to
one vote per share on all matters coming before the stockholders of the Company for a vote.





On June 2, 2021, the Company sold 91,111,111
units, consisting of one share of common stock and a warrant to purchase one share of common stock, at a public offering price of $2.25
per unit to ThinkEquity, a division of Fordham Financial Management, Inc. (the “Underwriter”), pursuant to an underwriting
agreement dated May 27, 2021, for total gross proceeds of $205.0 million. Under the underwriting agreement, the Company granted the Underwriter
a 30-day option to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $2.0832 per share, and/or warrants
to purchase up to 2,000,000 additional shares of common stock, at a purchase price of $0.0093 per warrant, in any combination thereof,
solely to cover over-allotments, if any. The Underwriter exercised its option to purchase 2,000,000 additional warrants and 2,000,000
additional shares for total gross proceeds of $4.5 million.







F-28







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



After deducting the underwriting commission and
expenses, the Company received net proceeds of approximately $194.4 million. The Company used the proceeds of the offering to fund a
portion of the purchase price for the AC Acquisition.



On June 2, 2021, the Company issued 5,895,973
shares of common stock to the Sellers in connection with the Acquisition (See Note 10).



From June 25 through July 16, 2021, 1,052,248
shares of common stock were issued as a result of the exercise of 1,052,248 warrants for proceeds of $2.4 million.



On June 3, 2021, the Company granted restricted
stock awards under the 1847 Goedeker Inc. 2020 Equity Incentive Plan described below to certain directors, officers, and management of
the Company for an aggregate of 216,800 shares of common stock valued at $0.6 million. All restricted stock awards vested immediately.



On March 29, 2022, the Company granted 69,766
shares to two new directors valued at $0.07 million. All restricted stock awards vest immediately.



In July 2022, the Company purchased 1,229,222
shares of its common stock in accordance with a board approved stock repurchase program. The total cost of the acquired shares was $2,000,000
or an average cost of $1.63 per share. Effective December 31, 2022 the board retired all the purchased shares.



Equity Incentive Plan



Effective as of July 30, 2020, the Company established
the 1847 Goedeker Inc. 2020 Equity Incentive Plan (the “Plan”) and reserved 555,000 shares of common stock for issuance under
the Plan. The Plan was approved by the Company’s board of directors and stockholders on April 21, 2020. On April 9, 2021, the board
of directors approved an amendment to the Plan to increase the number of shares of common Stock reserved for issuance under the Plan
from 555,000 to 1,000,000 shares. On December 17, 2021, the board of directors approved an amendment to the Plan to increase the number
of shares of common Stock reserved for issuance under the Plan from 1,000,000 to 11,000,000 shares. Such increase was approved by the
Company’s stockholders effective as of December 21, 2021.



The Plan is administered by the compensation
committee of the board of directors. The Plan permits the grant of restricted stock, stock options and other forms of incentive compensation
to the Company’s officers, employees, directors, and consultants.



As of December 31, 2022, 11,000,000 shares remain
issuable under the 2020 EIP.





Stock Options



On July 28, 2021, the Company issued to a Company
officer nonqualified stock options to purchase 150,000 shares of common stock pursuant to the Plan. The stock options have an exercise
price of $3.10 per share and vest 25% annually over a 4-year period. The Company has calculated these options’ estimated fair market
value at $0.3 million using the Black-Scholes pricing model, with the following assumptions: expected term 6.25 years, stock price $3.10,
exercise price $3.10, volatility 77.65%, risk-free rate 1.00%, and no forfeiture rate.



Below is a table summarizing the changes in stock
options outstanding during the years ended December 31, 2022 and 2021:



|                                 |  |         |          |   | Weighted-Average |  
|-------------------------------- |  | ------- | -------- | - | ---------------- | -
|                                 |  | Options |          |   | Exercise Price   |  
|                                 |  |         |          |   |                  |  
|Outstanding at December 31, 2020 |  |         | 555,000  |   |                  | $
|                                 |  |         |          |   |                  |  
|Granted                          |  |         | 150,000  |   |                  |  
|Exercised                        |  |         | -        |   |                  |  
|Forfeited                        |  |         | (482,039 | ) |                  |  
|                                 |  |         |          |   |                  |  
|Outstanding at December 31, 2021 |  |         | 222,961  |   |                  | $
|                                 |  |         |          |   |                  |  
|Granted                          |  |         | -        |   |                  |  
|Exercised                        |  |         | -        |   |                  |  
|Forfeited                        |  |         | (185,461 | ) |                  |  
|                                 |  |         |          |   |                  |  
|Outstanding at December 31, 2022 |  |         | 37,500   |   |                  | $
|                                 |  |         |          |   |                  |  
|Exercisable at December 31, 2022 |  |         | 37,500   |   |                  | $







F-29







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



During the year end December 31, 2022, 72,960 stock options forfeited
as a result of employee terminations.



Stock-based compensation expense related to stock
options of $0.2 and $0.3 million was recorded during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022,
the remaining unrecognized compensation cost related to non-vested stock options is $0.2 million and is expected to be recognized over
2.6 years. The outstanding stock options have a weighted average remaining contractual life of 8.6 years and a total intrinsic value of
nil.



Warrants



On August 4, 2020, the Company issued warrants
for the purchase of 55,560 shares of common stock to affiliates of the representative in its initial public offering. These warrants
are exercisable at any time and from time to time, in whole or in part, beginning on January 26, 2021 until July 30, 2025, an exercise
price of $11.25 per share (subject to customary adjustments), and may also be exercised on a cashless basis if, at any time during the
term of the warrants, the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement.



On March 19, 2021, the Company issued four-year
warrants to purchase an aggregate of 400,000 shares of common stock to two investors. These warrants are exercisable at any time and
from time to time, in whole or in part, at an exercise price of $12.00 per share (subject to customary adjustments) and may also be exercised
on a cashless basis if, at any time during the term of the warrants, the issuance of common stock upon exercise of the warrants is not
covered by an effective registration statement.



On June 2, 2021, the Company issued warrants
to purchase 93,111,111 shares of common stock in the public offering. These warrants are exercisable immediately and expire five years
from the date of issuance. The warrants have an exercise price of $2.25 per share, subject to appropriate adjustment in the event of
certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s
common stock or upon any distributions of assets, including cash, stock or other property to stockholders, and may also be exercised
on a cashless basis if, at any time during the term of the warrants, the issuance of common stock upon exercise of the warrants is not
covered by an effective registration statement.



Below is a table summarizing the changes in warrants
outstanding during the years ended December 31, 2022 and 2021:



|                                 |  |          |            |   | Weighted-
Average |  
|-------------------------------- |  | -------- | ---------- | - | ----------------- | -
|                                 |  | Warrants |            |   | Exercise
 Price   |  
|                                 |  |          |            |   |                   |  
|Outstanding at December 31, 2020 |  |          | 55,560     |   |                   | $
|                                 |  |          |            |   |                   |  
|Granted                          |  |          | 93,511,111 |   |                   |  
|Exercised                        |  |          | (1,052,248 | ) |                   |  
|Forfeited                        |  |          | -          |   |                   |  
|                                 |  |          |            |   |                   |  
|Outstanding at December 31, 2021 |  |          | 92,514,423 |   |                   | $
|                                 |  |          |            |   |                   |  
|Granted                          |  |          | -          |   |                   |  
|Exercised                        |  |          | -          |   |                   |  
|Forfeited                        |  |          | -          |   |                   |  
|                                 |  |          |            |   |                   |  
|Outstanding at December 31, 2022 |  |          | 92,514,423 |   |                   | $
|                                 |  |          |            |   |                   |  
|Exercisable at December 31, 2022 |  |          | 92,514,423 |   |                   | $



As of December 31, 2022, the outstanding warrants
have a weighted average remaining contractual life of 3.4 years and a total intrinsic value of nil.





F-30







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



NOTE 16—EARNINGS (LOSS) PER SHARE



The computation of weighted average shares outstanding
and the basic loss per common share for the following periods consisted of the following (in thousands, except per share amounts):



|                                              |  | December 31, |             |   | December 31, |  
|--------------------------------------------- |  | ------------ | ----------- | - | ------------ | -
|                                              |  | 2022         |             |   | 2021         |  
|Basic Loss Per Share                          |  |              |             |   |              |  
|                                              |  |              |             |   |              |  
|Net loss                                      |  | $            | (125,965    | ) |              | $
|Weighted average common shares outstanding    |  |              | 106,436,719 |   |              |  
|                                              |  |              |             |   |              |  
|Basic loss per share                          |  | $            | (1.18       | ) |              | $
|                                              |  |              |             |   |              |  
|Diluted Loss Per Share                        |  |              |             |   |              |  
|                                              |  |              |             |   |              |  
|Weighted average common shares outstanding    |  |              | 106,436,719 |   |              |  
|Effect of dilutive stock options and warrants |  |              | -           |   |              |  
|                                              |  |              |             |   |              |  
|Total potential shares outstanding            |  |              | 106,436,719 |   |              |  
|                                              |  |              |             |   |              |  
|Diluted loss per share                        |  | $            | (1.18       | ) |              | $



For the year ended December 31, 2022 and
2021, there were 92,737,384 potential common share equivalents from warrants and options excluded from the diluted earnings per
share calculations as their effect is anti-dilutive.



NOTE 17—INCOME TAXES



As of December 31, 2022 and 2021, the Company had net operating loss
carry forwards of approximately $6.3 million and $21.0 million, respectively, that may be available to reduce future years’ taxable
income indefinitely. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial
statements, as their realization is determined not likely to occur. Accordingly, the Company has recorded a valuation allowance for the
deferred tax asset relating to these tax loss carry-forwards. For the year ending December 2021, the company reflects a deferred tax liability
in the amount of 8.4M due to the future tax liability from an asset with an indefinite life known as a “naked credit.” The
future tax liability from this indefinite lived asset can be offset by up to 80% of net operating loss carryforwards created after 2017.
The remaining portion of the future tax liability from indefinite lived assets cannot be used to offset definite lived deferred tax assets.
The impairment of the value indefinite lived assets in the year ending December 31, 2022 reduced the future expected tax liability sufficiently
that no naked credit exists because the future tax liability is determined to be less than 80% of future net operating losses.



The components of the provision for income taxes
for the years ended December 31, 2022 and 2021, consisted of the following (in thousands):



|                                           |  | December 31, |         |   | December 31, |  
|------------------------------------------ |  | ------------ | ------- | - | ------------ | -
|                                           |  | 2022         |         |   | 2021         |  
|                                           |  |              |         |   |              |  
|Current federal and state                  |  | $            | -       |   |              | $
|Valuation allowance                        |  |              | 3,960   |   |              |  
|Deferred federal and state                 |  |              | (12,369 | ) |              |  
|                                           |  |              |         |   |              |  
|Total provision (benefit) for income taxes |  | $            | (8,409  | ) |              | $





F-31







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



The difference between the income tax expense
(benefit) reported and amounts computed by applying the statutory federal rate of 21.0% to pretax income (loss) for the years ended December
31, 2022 and 2021, consisted of the following (in thousands):





|                                     |  | December 31, |         |    | December 31, |  
|------------------------------------ |  | ------------ | ------- | -- | ------------ | -
|                                     |  | 2022         |         |    | 2021         |  
|                                     |  |              |         |    |              |  
|Federal tax                          |  | $            | (28,219 | )  |              | $
|State tax, net of federal benefit    |  |              | (3,185  | )  |              |  
|Other state tax adjustments          |  |              | -       |    |              |  
|Permanent items                      |  |              | 504     |    |              |  
|Goodwill impairment                  |  |              | 18,531  |    |              |  
|Acquisition costs                    |  |              |         |    |              |  
|Change in state tax rates            |  |              |         |    |              |  
|                                     |  |              |         |    |              |  
|Valuation allowance                  |  |              | 3,960   |    |              |  
|                                     |  |              |         |    |              |  
|Total income tax provision (benefit) |  | $            | (8,409  | )  |              | $
|                                     |  |              |         |    |              |  
|Effective tax rate                   |  |              | (6.3    | )% |              |  



Deferred income tax assets and liabilities at
December 31, 2022 and 2021, consisted of the following temporary differences and carry-forward items (in thousands):





|                                  |  | December 31, |         |   | December 31, |  
|--------------------------------- |  | ------------ | ------- | - | ------------ | -
|                                  |  | 2022         |         |   | 2021         |  
|                                  |  |              |         |   |              |  
|Inventory                         |  |              | 418     |   |              | $
|Receivables                       |  |              | 352     |   |              |  
|Accrued expenses                  |  |              | 79      |   |              |  
|Interest limitations              |  |              | 1,170   |   |              |  
|Reserves                          |  |              | 5,443   |   |              |  
|Other                             |  |              | 169     |   |              |  
|Derivative                        |  |              | (743    | ) |              |  
|Lease liabilities                 |  |              | 2,977   |   |              |  
|Loss carryforward                 |  |              | 4,853   |   |              |  
|Valuation allowance               |  |              | (10,957 | ) |              |  
|                                  |  |              |         |   |              |  
|Total deferred tax asset          |  |              | 3,761   |   |              | $
|                                  |  |              |         |   |              |  
|Fixed assets                      |  |              | (123    | ) |              |  
|Right-of-use assets               |  |              | (2,732  | ) |              |  
|Intangibles                       |  |              | (906    | ) |              |  
|                                  |  |              |         |   |              |  
|Total deferred tax liability      |  | $            | (3,761  | ) |              | $
|                                  |  |              |         |   |              |  
|Total deferred tax liability, net |  | $            | -       |   |              | $



F-32







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021



The Company accrues interest and penalties related to unrecognized
tax benefits. The Company does not believe it has any unrecognized tax benefits for December 31, 2022 and 2021 that would have a material
impact on the financial statements. The Company’s income tax returns are open to examination by the Internal Revenue Service and
various State jurisdictions.



|                           |  | December 31, |   |  | December 31, |  
|-------------------------- |  | ------------ | - |  | ------------ | -
|                           |  | 2022         |   |  | 2021         |  
|                           |  |              |   |  |              |  
|Net deferred tax liability |  | $            | 1 |  |              | $
|Valuation allowance        |  | $            | - |  |              | $





NOTE 18—DERIVATIVE INSTRUMENTS (INTEREST
RATE SWAP):



On May 9, 2022, the Company entered into a Term
Loan agreement with Bank of America, N.A. (See Note 11). On the same day, the Company entered into an interest rate swap agreement to
reduce its exposure to fluctuations in the floating interest rate tied to SOFR under the Term Loan with a notional amount of $100 million.
The interest rate swap became effective on May 9, 2022, and will terminate on May 31, 2029. The Company receives variable interest payments
monthly based on a one-month SOFR and pays a fixed rate of 2.93% to the counterparty.



As of December 31, 2022, the fair value of the
interest rate swap agreement was $3.2 million and was classified as a derivative asset in our consolidated balance sheet. Additionally,
during the year ended December 31, 2022, the Company recognized a $3.2 million gain on the change in fair value of the interest rate swap.



The Company classified the interest rate swap
in Level 2 of the fair value hierarchy.



NOTE 19—COMMITMENTS AND CONTINGENCIES



On January 18, 2019, the Company entered into
an asset purchase agreement with Goedeker Television, Steve Goedeker and Mike Goedeker, pursuant to which on April 5, 2019 the Company
acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (the “Goedeker
Business”).



Pursuant to the asset purchase agreement, Goedeker
Television entitled to receive an earn out payment of $0.2 million if the EBITDA (as defined in the asset purchase agreement) of the
Goedeker Business for the trailing twelve (12) month period from April 5, 2022 is $2.5 million or greater, and may be entitled to receive
a partial earn out payment if the EBITDA of the Goedeker Business is less than $2.5 million but greater than $1.5 million. The Company
expects to meet this target and adjusted the contingent note payable in the consolidated balance sheet to the present value of the amount
due of $0.2 million as of December 31, 2021. The final payment of $0.2 was paid October 2022.



Legal Proceedings



At the Company’s annual meeting on December
21, 2021, the stockholders were asked to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation,
dated July 30, 2020 (the “Certificate of Incorporation”), increasing the number of authorized shares of the Company’s
common stock, par value $0.0001 per share (“Common Stock” and such proposal, the “Share Increase Proposal”) by
50,000,000 shares of Common Stock. As reported in a Form 8-K filing on December 28, 2021, the Share Increase Proposal was adopted and
a Certificate of Amendment to the Certificate of Incorporation setting forth the amendment adopted pursuant to the Share Increase Proposal
(the “Certificate of Amendment”) was filed with the Secretary of State of the State of Delaware (the “Delaware Secretary
of State”). To date, none of these newly authorized shares has actually been issued.



Three purported beneficial owners of Common Stock
subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically
questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held
by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the
situation performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated
and that the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure
against any future question as to the validity of these newly authorized shares, the Company has elected to seek validation of its Certificate
of Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section
205 of the Delaware General Corporation Law (the “205 Petition”). The action, styled In re 1847 Goedeker Inc., C.A.
2022-0219-SG, seeks entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating
the additional shares of Common Stock authorized under the Share Increase Proposal.





F-33







POLISHED.COM INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2022 AND 2021



One of the purported stockholders who had submitted
a demand related to adoption of the Share Increase Proposal has filed a Class Action Complaint in the Court of Chancery against the Company
and its Board of Directors. The lawsuit, captioned Scot T. Boden v. 1847 Goedeker Inc., et al., C.A. No. 2022-0196-SG (the “BodenAction”), asserts two claims for relief. The first is against the Company for alleged violation of the Delaware General Corporation
Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal. The second asserts that the Company’s
directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment
to our Certificate of Incorporation to be filed with the Delaware Secretary of State.







Subsequent to December 31, 2022, the Company
settled this claim for $475,000.



On October 31, 2022, a putative shareholder class action was filed
against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as well as certain
underwriters of the Company’s 2020 initial public offering (the “IPO”).  The action was commenced in the United
States District Court for the Eastern District of New York court and is captioned Ryan Maschhoff v. Polished.com Inc., et al.,
No. 1:22-cv-06606.  The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as Sections
10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements and
omissions made in certain of the Company’s SEC filings made in connection with the IPO.  On or about December 20, 2022, plaintiffs
filed a motion for the appointment of lead plaintiff and lead counsel.  Although that motion is fully briefed, to date, oral argument
has yet to be scheduled.



NOTE 20—SUBSEQUENT EVENTS



Subsequent to December 31, 2022, the Company signed a letter
of intent for a sublease from DMI, a related party for a new warehouse in a building being leased by DMI. The new lease will allow the
Company to close its two existing New Jersey warehouses and consolidate operations into one new warehouse. The lease, which is expected
to be finalized in the third quarter of 2023 is for 228,000 square feet for seven years at a cost of approximately $15 per square foot,
including common area charges with annual increases of 3.75%.



Bank of America Loan Amendment



On July 25, 2023, the
Company and Bank of America amended the Credit Agreement (the “Amendment”), in part, to waive events of defaults on its existing
credit agreement. The Amendment requires the Company to pay the existing Term Facility and Revolving Facility by August 31, 2024 (the
“Maturity Date”). The Revolving Loan decreased to $10,000,000 from and after July 25, 2023. The Letter of Credit commitments
decreased to $2,000,000 and the Swing Line Loan was eliminated. The amendment also establishes a new EBITDA covenant and requires the
Company to maintain minimum liquidity of $8 million including restricted cash and $5 million excluding restricted cash. Liquidity as defined
in the Amendment includes Cash and certain qualifying customer and credit card accounts receivable.



The Term Loan and Revolving Loan will bear interest on the unpaid principal
amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at the Base Rate plus the
Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then at Term SOFR plus the
Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from
Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR or Base Rate (and, with
respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by notifying the Agent and
the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from
a high of 1.95% and 0.95%, respectively, for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate
as a result of the Amendment. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding
the foregoing, following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum
higher than the interest rate then in effect for the applicable loan.



Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed
at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving
Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from
time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited
circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset
sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon
receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically
set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.



As a result of the reduced term, the Company has
begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.



F-34









|POLISHED.COM INC.                              
|-----------------------------------------------
|CONSOLIDATED BALANCE SHEETS                    
|(in thousands, except share and per share data)





|                                                                                                                                                                                                                                                                                  |  | September 30, |         |   | June 30,    |   |         | March 31,               |  |   | December 31,            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------- | - | ------- | ----------------------- |  | - | ----------------------- | -
|                                                                                                                                                                                                                                                                                  |  | 2022          |         |   | 2022        |   |         | 2022                    |  |   | 2021                    |  
|                                                                                                                                                                                                                                                                                  |  | (Unaudited)   |         |   | (Unaudited) |   |         | As Restated (Unaudited) |  |   | As Restated (Unaudited) |  
|ASSETS                                                                                                                                                                                                                                                                            |  |               |         |   |             |   |         |                         |  |   |                         |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Current Assets                                                                                                                                                                                                                                                                    |  |               |         |   |             |   |         |                         |  |   |                         |  
|Cash and cash equivalents                                                                                                                                                                                                                                                         |  | $             | 28,433  |   |             | $ | 47,386  |                         |  | $ | 25,983                  |  
|Restricted cash                                                                                                                                                                                                                                                                   |  |               | 1,733   |   |             |   | 1,733   |                         |  |   | 2,583                   |  
|Receivables, net                                                                                                                                                                                                                                                                  |  |               | 24,892  |   |             |   | 25,657  |                         |  |   | 22,411                  |  
|Vendor deposits                                                                                                                                                                                                                                                                   |  |               | 24,785  |   |             |   | 18,130  |                         |  |   | 18,067                  |  
|Merchandise inventory, net                                                                                                                                                                                                                                                        |  |               | 44,488  |   |             |   | 56,750  |                         |  |   | 46,203                  |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                                         |  |               | 9,825   |   |             |   | 6,335   |                         |  |   | 5,540                   |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Total Current Assets                                                                                                                                                                                                                                                              |  |               | 134,156 |   |             |   | 155,991 |                         |  |   | 120,787                 |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Property and equipment, net                                                                                                                                                                                                                                                       |  |               | 5,287   |   |             |   | 4,551   |                         |  |   | 4,666                   |  
|Operating lease right-of-use assets                                                                                                                                                                                                                                               |  |               | 12,512  |   |             |   | 13,327  |                         |  |   | 14,135                  |  
|Derivative instruments                                                                                                                                                                                                                                                            |  |               | 3,540   |   |             |   | -       |                         |  |   | -                       |  
|Goodwill                                                                                                                                                                                                                                                                          |  |               | 191,614 |   |             |   | 191,614 |                         |  |   | 191,614                 |  
|Intangible assets, net                                                                                                                                                                                                                                                            |  |               | 36,549  |   |             |   | 39,103  |                         |  |   | 41,658                  |  
|Other long-term assets                                                                                                                                                                                                                                                            |  |               | 349     |   |             |   | 349     |                         |  |   | 349                     |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|TOTAL ASSETS                                                                                                                                                                                                                                                                      |  | $             | 384,007 |   |             | $ | 404,935 |                         |  | $ | 373,209                 |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                              |  |               |         |   |             |   |         |                         |  |   |                         |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Current Liabilities                                                                                                                                                                                                                                                               |  |               |         |   |             |   |         |                         |  |   |                         |  
|Accounts payable and accrued expenses                                                                                                                                                                                                                                             |  | $             | 70,602  |   |             | $ | 72,093  |                         |  | $ | 84,717                  |  
|Due to related party                                                                                                                                                                                                                                                              |  |               | 2,413   |   |             |   | 2,413   |                         |  |   | -                       |  
|Customer deposits                                                                                                                                                                                                                                                                 |  |               | 7,955   |   |             |   | 16,750  |                         |  |   | 12,590                  |  
|Current portion of notes payable, net                                                                                                                                                                                                                                             |  |               | 6,009   |   |             |   | 5,395   |                         |  |   | 7,907                   |  
|Current portion of finance lease liabilities                                                                                                                                                                                                                                      |  |               | 115     |   |             |   | 118     |                         |  |   | 121                     |  
|Current portion of operating lease liabilities                                                                                                                                                                                                                                    |  |               | 3,808   |   |             |   | 3,747   |                         |  |   | 3,688                   |  
|Contingent note payable                                                                                                                                                                                                                                                           |  |               | 200     |   |             |   | 200     |                         |  |   | 200                     |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Total Current Liabilities                                                                                                                                                                                                                                                         |  |               | 91,102  |   |             |   | 100,716 |                         |  |   | 109,222                 |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Notes payable, net of current portion                                                                                                                                                                                                                                             |  |               | 92,727  |   |             |   | 94,645  |                         |  |   | 47,180                  |  
|Finance lease liabilities, net of current portion                                                                                                                                                                                                                                 |  |               | 252     |   |             |   | 279     |                         |  |   | 306                     |  
|Operating lease liabilities, net of current portion                                                                                                                                                                                                                               |  |               | 9,865   |   |             |   | 10,838  |                         |  |   | 11,796                  |  
|Derivative instruments                                                                                                                                                                                                                                                            |  |               | -       |   |             |   | 936     |                         |  |   | -                       |  
|Deferred tax liability, net                                                                                                                                                                                                                                                       |  |               | 5,174   |   |             |   | 7,470   |                         |  |   | 8,382                   |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|TOTAL LIABILITIES                                                                                                                                                                                                                                                                 |  |               | 199,120 |   |             |   | 214,884 |                         |  |   | 176,886                 |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|Stockholders’ Equity                                                                                                                                                                                                                                                              |  |               |         |   |             |   |         |                         |  |   |                         |  
|Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of March 31, June 30, September 30, or December 31, 2022                                                                                                                         |  |               | -       |   |             |   | -       |                         |  |   | -                       |  
|Common stock $0.0001 par value, 200,000,000 shares authorized; 106,387,332 shares issued and outstanding at December 31, 2021, 106,457,098 shares issued and outstanding at March 31, 2022, and 105,227,876 shares issued and outstanding at June 30, 2022 and September 30, 2022 |  |               | 11      |   |             |   | 11      |                         |  |   | 11                      |  
|Treasury stock, at cost                                                                                                                                                                                                                                                           |  |               | (2,000  | ) |             |   | (2,000  | )                       |  |   | -                       |  
|Additional paid-in capital                                                                                                                                                                                                                                                        |  |               | 224,841 |   |             |   | 224,821 |                         |  |   | 224,801                 |  
|Accumulated deficit                                                                                                                                                                                                                                                               |  |               | (37,965 | ) |             |   | (32,781 | )                       |  |   | (28,489                 | )
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                        |  |               | 184,887 |   |             |   | 190,051 |                         |  |   | 196,323                 |  
|                                                                                                                                                                                                                                                                                  |  |               |         |   |             |   |         |                         |  |   |                         |  
|                                                                                                                                                                                                                                                                                  |  | $             | 384,007 |   |             | $ | 404,935 |                         |  | $ | 373,209                 |  





F-35







POLISHED.COM INC.

CONSOLIDATED BALANCE SHEETS

(in
thousands, except share and per share data)



|                                                                                                                                                                               |  | March 31,   |          |   | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | -------- | - | ------------ | -
|                                                                                                                                                                               |  | 2023        |          |   | 2022         |  
|                                                                                                                                                                               |  | (Unaudited) |          |   |              |  
|ASSETS                                                                                                                                                                         |  |             |          |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Current Assets                                                                                                                                                                 |  |             |          |   |              |  
|Cash and cash equivalents                                                                                                                                                      |  |             | 25,615   |   |              |  
|Restricted cash                                                                                                                                                                |  |             | 950      |   |              |  
|Receivables, net                                                                                                                                                               |  |             | 16,693   |   |              |  
|Vendor deposits                                                                                                                                                                |  |             | 30,078   |   |              |  
|Merchandise inventory, net                                                                                                                                                     |  |             | 36,350   |   |              |  
|Prepaid expenses and other current assets                                                                                                                                      |  |             | 10,920   |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Total Current Assets                                                                                                                                                           |  |             | 120,606  |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Property and equipment, net                                                                                                                                                    |  |             | 4,975    |   |              |  
|Operating lease right-of-use assets                                                                                                                                            |  |             | 10,857   |   |              |  
|Derivative instruments                                                                                                                                                         |  |             | 1,853    |   |              |  
|Goodwill                                                                                                                                                                       |  |             | 106,173  |   |              |  
|Intangible assets, net                                                                                                                                                         |  |             | 9,542    |   |              |  
|Deferred tax asset, net                                                                                                                                                        |  |             | 3        |   |              |  
|Other long-term assets                                                                                                                                                         |  |             | 349      |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|TOTAL ASSETS                                                                                                                                                                   |  |             | 254,358  |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                           |  |             |          |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Current Liabilities                                                                                                                                                            |  |             |          |   |              |  
|Accounts payable and accrued expenses                                                                                                                                          |  |             | 80,938   |   |              |  
|Customer deposits                                                                                                                                                              |  |             | 5,090    |   |              |  
|Current portion of notes payable, net                                                                                                                                          |  |             | 7,264    |   |              |  
|Current portion of finance lease liabilities                                                                                                                                   |  |             | 107      |   |              |  
|Current portion of operating lease liabilities                                                                                                                                 |  |             | 3,353    |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Total Current Liabilities                                                                                                                                                      |  |             | 96,752   |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Notes payable, net of current portion                                                                                                                                          |  |             | 88,972   |   |              |  
|Finance lease liabilities, net of current portion                                                                                                                              |  |             | 199      |   |              |  
|Operating lease liabilities, net of current portion                                                                                                                            |  |             | 8,443    |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|TOTAL LIABILITIES                                                                                                                                                              |  |             | 194,366  |   |              |  
|                                                                                                                                                                               |  |             |          |   |              |  
|Stockholders’ Equity                                                                                                                                                           |  |             |          |   |              |  
|Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of March 31, 2023 or December 31, 2022                                        |  |             | -        |   |              |  
|Common stock $0.0001 par value, 200,000,000 shares authorized; 105,469,878 and 105,227,876 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |  |             | 11       |   |              |  
|Additional paid-in capital                                                                                                                                                     |  | $           | 223,015  |   |              | $
|Accumulated deficit                                                                                                                                                            |  | $           | (163,034 | ) |              | $
|                                                                                                                                                                               |  |             |          |   |              |  
|TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                                     |  | $           | 59,992   |   |              | $
|                                                                                                                                                                               |  |             |          |   |              |  
|                                                                                                                                                                               |  | $           | 254,358  |   |              | $





F-36









POLISHED.COM
INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS

(in
thousands, except share and per share data)

(Unaudited)



|                                                              |  | Three Months Ended |             |   | Three Months Ended |   |            | Three Months Ended | 
|------------------------------------------------------------- |  | ------------------ | ----------- | - | ------------------ | - | ---------- | ------------------ | 
|                                                              |  | June 30,           |             |   | June 30,           |   |            | September 30,      | 
|                                                              |  | 2022               |             |   | 2021               |   |            | 2022               | 
|Product sales, net                                            |  | $                  | 138,463     |   |                    | $ | 64,072     |                    | 
|Cost of goods sold                                            |  |                    | 115,438     |   |                    |   | 51,017     |                    | 
|Gross profit                                                  |  |                    | 23,025      |   |                    |   | 13,055     |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Operating Expenses                                            |  |                    |             |   |                    |   |            |                    | 
|Personnel                                                     |  |                    | 7,402       |   |                    |   | 4,821      |                    | 
|Advertising                                                   |  |                    | 5,363       |   |                    |   | 2,932      |                    | 
|Bank and credit card fees                                     |  |                    | 4,600       |   |                    |   | 2,095      |                    | 
|Depreciation and amortization                                 |  |                    | 2,887       |   |                    |   | 175        |                    | 
|Loss on abandonment of right-of-use asset                     |  |                    | -           |   |                    |   | 1,437      |                    | 
|General and administrative                                    |  |                    | 3,563       |   |                    |   | 2,858      |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Total Operating Expenses                                      |  |                    | 23,815      |   |                    |   | 14,318     |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|INCOME (LOSS) FROM OPERATIONS                                 |  |                    | (790        | ) |                    |   | (1,263     | )                  | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Other Income (Expenses)                                       |  |                    |             |   |                    |   |            |                    | 
|Interest income                                               |  |                    | 64          |   |                    |   | 12         |                    | 
|Financing costs                                               |  |                    | -           |   |                    |   | -          |                    | 
|Adjustment in value of contingency                            |  |                    | -           |   |                    |   | -          |                    | 
|Interest expense                                              |  |                    | (302        | ) |                    |   | (1,017     | )                  | 
|Gain (loss) on change in fair value of derivative instruments |  |                    | (936        | ) |                    |   | -          |                    | 
|Loss on settlement of debt                                    |  |                    | (3,241      | ) |                    |   | (1,748     | )                  | 
|Other income (expense)                                        |  |                    | (41         | ) |                    |   | -          |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Total Other Income (Expenses)                                 |  |                    | (4,456      | ) |                    |   | (2,753     | )                  | 
|                                                              |  |                    | -           |   |                    |   |            |                    | 
|NET INCOME (LOSS) BEFORE INCOME TAXES                         |  |                    | (5,246      | ) |                    |   | (4,016     | )                  | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|INCOME TAX (EXPENSE) BENEFIT                                  |  |                    | 954         |   |                    |   | 8,049      |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|NET INCOME (LOSS)                                             |  | $                  | (4,292      | ) |                    | $ | 4,033      |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Income per common share                                       |  |                    |             |   |                    |   |            |                    | 
|Basic                                                         |  | $                  | (0.04       | ) |                    | $ | 0.11       |                    | 
|Diluted                                                       |  | $                  | (0.04       | ) |                    | $ | 0.09       |                    | 
|                                                              |  |                    |             |   |                    |   |            |                    | 
|Weighted average common shares outstanding                    |  |                    |             |   |                    |   |            |                    | 
|Basic                                                         |  |                    | 105,774,197 |   |                    |   | 36,540,827 |                    | 
|Diluted                                                       |  |                    | 105,774,197 |   |                    |   | 46,448,892 |                    | 





F-37







POLISHED.COM
INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS

(in
thousands, except share and per share data)

(Unaudited)





|                                                              |  | Six Months Ended |             |   | Nine Months Ended |  
|------------------------------------------------------------- |  | ---------------- | ----------- | - | ----------------- | -
|                                                              |  | June 30,         |             |   | June 30,          |  
|                                                              |  | 2022             |             |   | 2021              |  
|Product sales, net                                            |  | $                | 287,144     |   |                   | $
|Cost of goods sold                                            |  |                  | 233,357     |   |                   |  
|Gross profit                                                  |  |                  | 53,787      |   |                   |  
|                                                              |  |                  |             |   |                   |  
|Operating Expenses                                            |  |                  |             |   |                   |  
|Personnel                                                     |  |                  | 14,048      |   |                   |  
|Advertising                                                   |  |                  | 10,941      |   |                   |  
|Bank and credit card fees                                     |  |                  | 9,189       |   |                   |  
|Depreciation and amortization                                 |  |                  | 5,706       |   |                   |  
|Loss on abandonment of right of use asset                     |  |                  | -           |   |                   |  
|General and administrative                                    |  |                  | 7,818       |   |                   |  
|                                                              |  |                  |             |   |                   |  
|Total Operating Expenses                                      |  |                  | 47,702      |   |                   |  
|                                                              |  |                  |             |   |                   |  
|INCOME (LOSS) FROM OPERATIONS                                 |  |                  | 6,085       |   |                   |  
|                                                              |  |                  |             |   |                   |  
|Other Income (Expenses)                                       |  |                  |             |   |                   |  
|Interest income                                               |  |                  | 108         |   |                   |  
|Adjustment in value of contingency                            |  |                  | (2          | ) |                   |  
|Interest expense                                              |  |                  | (1,243      | ) |                   |  
|Gain (loss) on change in fair value of derivative instruments |  |                  | (936        | ) |                   |  
|Loss on settlement of debt                                    |  |                  | (3,241      | ) |                   |  
|Other income (expense)                                        |  |                  | (90         | ) |                   |  
|                                                              |  |                  |             |   |                   |  
|Total Other Income (Expenses)                                 |  |                  | (5,404      | ) |                   |  
|                                                              |  |                  |             |   |                   |  
|NET INCOME (LOSS) BEFORE INCOME TAXES                         |  |                  | 681         |   |                   |  
|                                                              |  |                  |             |   |                   |  
|INCOME TAX (EXPENSE) BENEFIT                                  |  |                  | 846         |   |                   |  
|                                                              |  |                  |             |   |                   |  
|NET INCOME (LOSS)                                             |  |                  | 1,527       |   |                   |  
|                                                              |  |                  |             |   |                   |  
|Income per common share                                       |  |                  |             |   |                   |  
|Basic                                                         |  | $                | 0.01        |   |                   | $
|Diluted                                                       |  | $                | 0.01        |   |                   | $
|                                                              |  |                  |             |   |                   |  
|Weighted average common shares outstanding                    |  |                  |             |   |                   |  
|Basic                                                         |  |                  | 106,080,764 |   |                   |  
|Diluted                                                       |  |                  | 106,080,764 |   |                   |  





F-38







POLISHED.COM
INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in
thousands, except share and per share data)



|                                                                  |  |              |             |   |         |   |    | Additional  |  |   |         |   |  | Treasury      |          |   | Total  |  
|----------------------------------------------------------------- |  | ------------ | ----------- | - | ------- | - | -- | ----------- |  | - | ------- | - |  | ------------- | -------- | - | ------ | -
|                                                                  |  | Common Stock |             |   | Paid-In |   |    | Accumulated |  |   | Stock   |   |  | Stockholders’ |         
|                                                                  |  | Shares       |             |   | Amount  |   |    | Capital     |  |   | Deficit |   |  | At Cost       |          |   | Equity |  
|Balance January 1, 2022                                           |  |              | 106,387,332 |   |         | $ | 11 |             |  | $ | 224,648 |   |  | $             | (34,308  | ) |        |  
|Issuance of common stock through equity incentive awards          |  |              | 69,766      |   |         |   | -  |             |  |   | 120     |   |  |               | -        |   |        |  
|Stock compensation expense                                        |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | -        |   |        |  
|March 31, 2022                                                    |  |              | -           |   |         |   | -  |             |  |   | 33      |   |  |               | -        |   |        |  
|Net income for the three months ended March 31, 2022              |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | 5,819    |   |        |  
|Balance March 31, 2022 (Unaudited)                                |  |              | 106,457,098 |   |         |   | 11 |             |  |   | 224,801 |   |  |               | (28,489  | ) |        |  
|Purchase of treasury stock                                        |  |              | (1,229,222  | ) |         |   | -  |             |  |   | -       |   |  |               | -        |   |        |  
|Stock compensation expense                                        |  |              | -           |   |         |   | -  |             |  |   | 20      |   |  |               | -        |   |        |  
|Net loss for the three months ended June 30, 2022                 |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | (4,292   | ) |        |  
|Balance June 30, 2022 (Unaudited)                                 |  |              | 105,227,876 |   |         |   | 11 |             |  |   | 224,821 |   |  |               | (32,781  | ) |        |  
|Stock compensation expense                                        |  |              | -           |   |         |   | -  |             |  |   | 20      |   |  |               | -        |   |        |  
|September 30, 2022                                                |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | -        |   |        |  
|Net loss for the three months ended September 30, 2022            |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | (5,184   | ) |        |  
|Balance September 30, 2022 (Unaudited)                            |  |              | 105,227,876 |   |         |   | 11 |             |  |   | 224,841 |   |  |               | (37,965  | ) |        |  
|Retire treasury stock                                             |  |              | -           |   |         |   | -  |             |  |   | (2,000  | ) |  |               | -        |   |        |  
|Stock compensation expense                                        |  |              | -           |   |         |   | -  |             |  |   |         |   |  |               | -        |   |        |  
|December 31, 2022                                                 |  |              | -           |   |         |   | -  |             |  |   | (14     | ) |  |               | -        |   |        |  
|Net loss for the three months ended December 31, 2022             |  |              | -           |   |         |   | -  |             |  |   |         |   |  |               | (122,308 | ) |        |  
|Balance December 31, 2022                                         |  |              | 105,227,876 |   |         |   | 11 |             |  |   | 222,827 |   |  |               | (160,273 | ) |        |  
|Issuance of common stock through equity incentive awards          |  |              | 83,011      |   |         |   | -  |             |  |   | 60      |   |  |               | -        |   |        |  
|Issuance of common stock in connection with employment agreements |  |              | 158,991     |   |         |   | -  |             |  |   | 120     |   |  |               | -        |   |        |  
|Stock compensation expense                                        |  |              | -           |   |         |   | -  |             |  |   | 8       |   |  |               | -        |   |        |  
|Net loss for the three months ended March 31, 2023                |  |              | -           |   |         |   | -  |             |  |   | -       |   |  |               | (2,761   | ) |        |  
|Balance March 31, 2023 (Unaudited)                                |  |              | 105,469,878 |   |         | $ | 11 |             |  | $ | 223,015 |   |  | $             | (163,034 | ) |        | $





F-39









POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share and per share data)

(Unaudited)



|                                                                                                   |  | Three Months Ended |        |   | Six Months Ended |   |         | Nine Months Ended | 
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------- | ----------------- | 
|                                                                                                   |  | March 31,          |        |   | March 31,        |   |         | June 31,          | 
|                                                                                                   |  | 2023               |        |   | 2022             |   |         | 2022              | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                               |  |                    |        |   |                  |   |         |                   | 
|Net income (loss)                                                                                  |  | $                  | (2,761 | ) |                  | $ | 5,819   |                   | 
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |                    |        |   |                  |   |         |                   | 
|Depreciation and amortization                                                                      |  |                    | 1,070  |   |                  |   | 2,819   |                   | 
|Amortization of debt discount                                                                      |  |                    | 54     |   |                  |   | 185     |                   | 
|Loss on settlement of debt                                                                         |  |                    | -      |   |                  |   | -       |                   | 
|Stock-based compensation                                                                           |  |                    | 68     |   |                  |   | 153     |                   | 
|Adjustment to contingent liability                                                                 |  |                    | -      |   |                  |   | 2       |                   | 
|Inventory reserve                                                                                  |  |                    | -      |   |                  |   | 57      |                   | 
|Loss (Gain) on change in fair value of derivative instruments                                      |  |                    | 1,325  |   |                  |   | -       |                   | 
|Bad debt expense                                                                                   |  |                    |        |   |                  |   | 121     |                   | 
|Deferred tax benefit                                                                               |  |                    | (1     | ) |                  |   | (25     | )                 | 
|Non-cash lease expense                                                                             |  |                    | 831    |   |                  |   | 801     |                   | 
|Changes in operating assets and liabilities:                                                       |  |                    |        |   |                  |   |         |                   | 
|Accounts receivable                                                                                |  |                    | 9,957  |   |                  |   | 999     |                   | 
|Deposits with vendors                                                                              |  |                    | (5,055 | ) |                  |   | (5,867  | )                 | 
|Inventory                                                                                          |  |                    | 5,416  |   |                  |   | 6,134   |                   | 
|Prepaid expenses and other current assets                                                          |  |                    | 297    |   |                  |   | 439     |                   | 
|Accounts payable and accrued liabilities                                                           |  |                    | (478   | ) |                  |   | 1,918   |                   | 
|Due to related party                                                                               |  |                    | -      |   |                  |   | -       |                   | 
|Customer deposits                                                                                  |  |                    | (2,202 | ) |                  |   | (16,225 | )                 | 
|Operating lease liabilities                                                                        |  |                    | (944   | ) |                  |   | (884    | )                 | 
|Net cash (used in) provided operating activities                                                   |  |                    | 7,577  |   |                  |   | (3,554  | )                 | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                                               |  |                    |        |   |                  |   |         |                   | 
|Purchases of property and equipment                                                                |  |                    | (124   | ) |                  |   | (37     | )                 | 
|Net cash used in investing activities                                                              |  |                    | (124   | ) |                  |   | (37     | )                 | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                               |  |                    |        |   |                  |   |         |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|Cash received from notes payable                                                                   |  |                    | -      |   |                  |   | -       |                   | 
|Repayment of notes payable                                                                         |  |                    | (1,356 | ) |                  |   | (1,615  | )                 | 
|Repayments of financing lease liabilities                                                          |  |                    | (31    | ) |                  |   | (19     | )                 | 
|Purchase of treasury stock at cost                                                                 |  |                    | -      |   |                  |   | -       |                   | 
|Net cash (used in) provided by in financing activities                                             |  |                    | (1,387 | ) |                  |   | (1,634  | )                 | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH                                          |  |                    | 6,066  |   |                  |   | (5,225  | )                 | 
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD                                   |  |                    | 20,499 |   |                  |   | 33,791  |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD                                         |  |                    | 25,565 |   |                  | $ | 28,566  |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|Cash, cash equivalents, and restricted cash consist of the following:                              |  |                    |        |   |                  |   |         |                   | 
|End of the period                                                                                  |  |                    |        |   |                  |   |         |                   | 
|Cash and cash equivalents                                                                          |  | $                  | 25,615 |   |                  | $ | 25,983  |                   | 
|Restricted cash                                                                                    |  |                    | 950    |   |                  |   | 2,583   |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|                                                                                                   |  | $                  | 25,565 |   |                  | $ | 28,566  |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|Cash, cash equivalents, and restricted cash consist of the following:                              |  |                    |        |   |                  |   |         |                   | 
|Beginning of the period                                                                            |  |                    |        |   |                  |   |         |                   | 
|Cash and cash equivalents                                                                          |  | $                  | 19,549 |   |                  | $ | 25,724  |                   | 
|Restricted cash                                                                                    |  |                    | 950    |   |                  |   | 8,067   |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|                                                                                                   |  | $                  | 20,499 |   |                  | $ | 33,791  |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                  |  |                    |        |   |                  |   |         |                   | 
|Cash paid for interest                                                                             |  | $                  | 1,634  |   |                  | $ | 639     |                   | 
|Cash paid for income taxes                                                                         |  | $                  | -      |   |                  | $ | -       |                   | 
|                                                                                                   |  |                    |        |   |                  |   |         |                   | 
|NON-CASH INVESTING AND FINANCING ACTIVITIES                                                        |  |                    |        |   |                  |   |         |                   | 
|Common stock issued in vesting of RSUs                                                             |  | $                  | -      |   |                  | $ | -       |                   | 
|Financed purchases of property and equipment                                                       |  | $                  | 94     |   |                  |   | 308     |                   | 
|Common stock issued in connection with employment agreements                                       |  | $                  | 121    |   |                  |   | -       |                   | 
|Debt discount on notes payable                                                                     |  | $                  | -      |   |                  | $ | -       |                   | 
|Settlement of notes payable and interest through the issuance of a new note                        |  | $                  | -      |   |                  | $ | -       |                   | 





F-40







POLISHED.COM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 1—BASIS OF PRESENTATION



In the opinion of management, the accompanying
unaudited condensed consolidated financial statements of Polished.com, Inc. (the “Company,” “Polished.com,” “1847
Goedeker,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and
Exchange Commission (“SEC”) regarding interim financial reporting and reflect all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally
included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and
regulations. The information included in the Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated
financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. Furthermore,
interim results for the three months ended March 31, 2022 (As Restated), June 30, 2022, September 30, 2022, and March 31, 2023 are not
necessarily indicative of the results that may be expected for the full year ending December 31, 2022 or future periods. Furthermore,
interim results for the six months ended June 30, 2022 and the nine months ended September 30, 2022 are not necessarily indicative of
the results that may be expected for the full year ending December 31, 2022 or future periods.



NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Derivative Instruments – Interest Rate Swaps



The Company uses interest rate swap agreements
to manage interest rate exposures. The Company recognizes interest rate swap agreements as either a derivative asset or liability on the
balance sheet at fair value.



The fair value of an interest rate swap agreement
is determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flows of each derivative.
These analyses reflect the contractual terms of the derivative, including the period to maturity, and use observable market-based inputs,
including interest rate curves and implied volatilities. The fair value of interest rate swap agreements is determined using the market
standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts.



Recent Accounting Pronouncements



Recently Adopted



In August 2020, the FASB issued ASU 2020-06, Accounting
for Convertible Instruments and Contracts In An Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain convertible
instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with
a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with
no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for
convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. For SEC filers,
excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December
15, 2020, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2022. The Company’s
adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.





F-41







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



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 which requires the measurement and recognition
of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model
with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual
reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU
2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this
extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The
Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated
financial statements.



In October 2021, the FASB issued ASU 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends
ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations.
The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our
consolidated financial statements.



In March 2022, the FASB issued ASU 2022-02, Troubled
Debt Restructurings (“TDRs”) and Vintage Disclosures (Topic 326): Financial Instruments – Credit Losses. This amended
guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for
TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables
made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year
of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required
to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis.
The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated
financial statements.



The Company currently believes that all other
issued and not yet effective accounting standards are not relevant to the Company’s consolidated financial statements.





F-42









POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Restatement



The Company restated its previously issued financial
statements as of and for the three months ended March 31, 2022, to reflect the following adjustments:



Consolidated Statements of Operations



| | 1. | Revenue declined by $4.1 million because of an understatement of a returns allowance and revenue cutoff issues.                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Cost of goods sold increased $1.0 million, net by reclassification of expenses from operating expenses to cost of goods sold offset by the reduction in product cost associated with the reduction in revenue.
| | 3. | Operating expense declined by $1.9 million primarily by reclassification of operating expense to cost of goods sold                                                                                           
| | 4. | Other income (expense)
    various miscellaneous adjustments totaling $0.2 million.                                                                                                                           
| | 5. | Income tax expense declined by $3.3 million.                                                                                                                                                                  
| | 6. | As a result of the above adjustments, net income declined by $0.1 million.                                                                                                                                    



Consolidated Balance Sheet



| | 7.  | Current assets declined by $13.2 million from a $3.8 million reduction in vendor rebate accrual, inventory declined by $6.7 million, net from changes to sales returns allowance and revenue cutoff adjustments, and prepaid expenses declined by $2.7 million by to adjust for charging some items to expense, rather than prepaid expense.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 8.  | Reclassification of showroom inventory to property and equipment.                                                                                                                                                                                                                                                                           
| | 9.  | Eliminate a right-of-use asset on a property that was not occupied.                                                                                                                                                                                                                                                                         
| | 10. | Reflect the issuance of shares granted to two directors.                                                                                                                                                                                                                                                                                    
| | 11. | Reflect adjustments made to 2021 accumulated deficit and adjustment to net income for the three months ended March 31, 2022.                                                                                                                                                                                                                



F-43







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



POLISHED.COM INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2022

(in thousands)



|                                            |  | As
    originally
    Reported |         |   | Adjustments |   |         | As Restated | 
|------------------------------------------- |  | ------------------------------ | ------- | - | ----------- | - | ------- | ----------- | 
|Current assets                              |  | $                              | 134,010 |   | (7)         | $ | (13,223 | )           | 
|Property and equipment                      |  |                                | 3,688   |   | (8)         |   | 978     |             | 
|Operating lease right-of-use assets         |  |                                | 15,262  |   | (9)         |   | (1,127  | )           | 
|Total assets                                |  | $                              | 386,581 |   |             | $ | (13,372 | )           | 
|                                            |  |                                |         |   |             |   |         |             | 
|Total liabilities                           |  | $                              | 175,037 |   |             |   | 1,849   |             | 
|Common stock and additional paid in capital |  |                                | 224,678 |   | (10)        |   | 134     |             | 
|Accumulated deficit                         |  |                                | (13,134 | ) | (11)        |   | (15,354 | )           | 
|Total liabilities and stockholders’ equity  |  | $                              | 386,581 |   |             | $ | (13,371 | )           | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(in thousands)



|                                           |  | As
originally |             |   |             |   |        |             | 
|------------------------------------------ |  | ------------- | ----------- | - | ----------- | - | ------ | ----------- | 
|                                           |  | Reported      |             |   | Adjustments |   |        | As Restated | 
|Product sales, net                         |  | $             | 152,752     |   | (1)         | $ | (4,071 | )           | 
|Cost of goods sold                         |  |               | 116,883     |   | (2)         |   | 1,036  |             | 
|Operating expense                          |  |               | 25,802      |   | (3)         |   | (1,915 | )           | 
|Other income (expense)                     |  |               | (762        | ) | (4)         |   | (186   | )           | 
|Income taxes                               |  |               | (3,383      | ) | (5)         |   | 3,275  |             | 
|Net income (loss)                          |  | $             | 5,922       |   | (6)         | $ | (103   | )           | 
|                                           |  |               |             |   |             |   |        |             | 
|Net income (loss) per common share         |  |               |             |   |             |   |        |             | 
|BASIC                                      |  | $             | 0.06        |   |             |   |        |             | 
|DILUTED                                    |  | $             | 0.06        |   |             |   |        |             | 
|                                           |  |               |             |   |             |   |        |             | 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |  |               |             |   |             |   |        |             | 
|BASIC                                      |  |               | 106,387,332 |   |             |   |        |             | 
|DILUTED                                    |  |               | 106,387,332 |   |             |   |        |             | 





F-44







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(in thousands)



|                                                                               |  |              |             |  | Additional |   |    |             |  |   | Total         | 
|------------------------------------------------------------------------------ |  | ------------ | ----------- |  | ---------- | - | -- | ----------- |  | - | ------------- | 
|                                                                               |  | Common Stock |             |  | Paid-Inc   |   |    | Accumulated |  |   | Stockholders’ | 
|                                                                               |  | Shares       |             |  | Amount     |   |    | Capital     |  |   | Deficit       | 
|Balance March 31, 2022 as originally filed                                     |  |              | 106,386,332 |  |            | $ | 11 |             |  | $ | 224,667       | 
|Adjustment to reflect issuance of vested stock                                 |  |              | 69,766      |  |            |   | -  |             |  |   | 134           | 
|Adjustments to results of operations for the year ended December 31, 2022      |  |              |             |  |            |   |    |             |  |   |               | 
|Adjustments to results of operations for the three months ended March 31, 2022 |  |              | -           |  |            |   | -  |             |  |   | -             | 
|Balance March 31, 2022, as restated                                            |  |              | 106,456,098 |  |            | $ | 11 |             |  | $ | 224,801       | 



POLISHED.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2022

(UNAUDITED)

(in thousands)



|                                                                                                          |  | As originally |        |   |             |   |        |             | 
|--------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ----------- | - | ------ | ----------- | 
|                                                                                                          |  | Filed         |        |   | Adjustments |   |        | As Restated | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                      |  |               |        |   |             |   |        |             | 
|Net income (loss) Adjustments to reconcile net income (loss) to net cash used in by operating activities: |  | $             | 5,922  |   |             | $ | (103   | )           | 
|Deferred tax (liability) asset                                                                            |  |               | 1,785  |   |             |   | (1,810 | )           | 
|Changes in operating assets and liabilities:                                                              |  |               |        |   |             |   |        |             | 
|Receivables                                                                                               |  |               | (1,694 | ) |             |   | 2,693  |             | 
|Merchandise inventory                                                                                     |  |               | (8,209 | ) |             |   | 14,343 |             | 
|Prepaid expenses and other assets                                                                         |  |               | (2,312 | ) |             |   | 2,751  |             | 
|Accounts payable and accrued expenses                                                                     |  |               | 11,368 |   |             |   | (9,450 | )           | 
|Customer deposits                                                                                         |  |               | (7,622 | ) |             |   | (8,603 | )           | 
|Various other changes                                                                                     |  |               | (2,985 | ) |             |   | 372    |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|Net cash used in operating activities                                                                     |  |               | (3,747 | ) |             |   | 193    |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                      |  |               |        |   |             |   |        |             | 
|Net cash used in investing activities                                                                     |  |               | (6     | ) |             |   | (31    | )           | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                      |  |               |        |   |             |   |        |             | 
|Net cash used in financing activities                                                                     |  |               | (1,634 | ) |             |   | -      |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH                                                 |  |               | (5,387 | ) |             |   | 162    |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD                                          |  |               | 33,791 |   |             |   | -      |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD                                                |  | $             | 28,404 |   |             | $ | 162    |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|Cash, cash equivalents, and restricted cash consist of the following:                                     |  |               |        |   |             |   |        |             | 
|End of the period                                                                                         |  |               |        |   |             |   |        |             | 
|Cash and cash equivalents                                                                                 |  | $             | 25,821 |   |             |   | 162    |             | 
|Restricted cash                                                                                           |  |               | 2,583  |   |             |   | -      |             | 
|                                                                                                          |  |               |        |   |             |   |        |             | 
|                                                                                                          |  | $             | 28,404 |   |             | $ | 28,404 |             | 





F-45







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 3—REVENUES



Disaggregated Revenue ‒ The Company disaggregates
revenue from contracts with customers by product type, as it believes it best depicts how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors.



The Company’s disaggregated revenue by product
type is as follows (in thousands):



|                                |  | For the Three Months Ended |       
|------------------------------- |  | -------------------------- | ------
|                                |  | March 31,                  |       
|                                |  | 2023                       |       
|                                |  |                            |       
|Appliance sales                 |  | $                          | 90,464
|Furniture sales and other sales |  |                            | 4,975 
|                                |  |                            |       
|Total                           |  | $                          | 95,439



NOTE 4—RECEIVABLES



Receivables consisted of the following (in thousands):



|                                     |  | March 31, |        |   | March 31, |   |        | June 30, |  |   | September 30, |  
|------------------------------------ |  | --------- | ------ | - | --------- | - | ------ | -------- |  | - | ------------- | -
|                                     |  | 2023      |        |   | 2022      |   |        | 2022     |  |   | 2022          |  
|                                     |  |           |        |   |           |   |        |          |  |   |               |  
|Trade accounts receivable            |  | $         | 11,576 |   |           | $ | 15,831 |          |  | $ | 15,367        |  
|Vendor rebates receivable            |  |           | 4,393  |   |           |   | 5,462  |          |  |   | 6,902         |  
|Other receivables                    |  |           | 2,230  |   |           |   | 2,251  |          |  |   | 2,251         |  
|                                     |  |           |        |   |           |   |        |          |  |   |               |  
|Total receivables                    |  |           | 18,199 |   |           |   | 23,544 |          |  |   | 26,844        |  
|Less allowance for doubtful accounts |  |           | (1,507 | ) |           |   | (1,133 | )        |  |   | (1,507        | )
|                                     |  |           |        |   |           |   |        |          |  |   |               |  
|Total receivables, net               |  | $         | 16,693 |   |           | $ | 22,411 |          |  | $ | 25,657        |  



NOTE 5—MERCHANDISE INVENTORY



Merchandise inventory at March 31, 2023, March
31, 2022, June 30, 2022 and September 30, 2022 consisted of the following (in thousands):



|                                 |  | March 31, |        |   | March 31, |   |        | June 30, |  |   | September 30, |  
|-------------------------------- |  | --------- | ------ | - | --------- | - | ------ | -------- |  | - | ------------- | -
|                                 |  | 2023      |        |   | 2022      |   |        | 2022     |  |   | 2022          |  
|                                 |  |           |        |   |           |   |        |          |  |   |               |  
|Appliances                       |  | $         | 35,109 |   |           | $ | 44,626 |          |  | $ | 54,216        |  
|Furniture                        |  |           | 721    |   |           |   | 714    |          |  |   | 925           |  
|Other                            |  |           | 2,309  |   |           |   | 1,763  |          |  |   | 2,609         |  
|                                 |  |           |        |   |           |   |        |          |  |   |               |  
|Total merchandise inventory      |  |           | 38,139 |   |           |   | 47,103 |          |  |   | 57,750        |  
|Less reserve for obsolescence    |  |           | (1,789 | ) |           |   | (900   | )        |  |   | (1,000        | )
|                                 |  |           |        |   |           |   |        |          |  |   |               |  
|Total merchandise inventory, net |  | $         | 36,350 |   |           | $ | 46,203 |          |  | $ | 56,750        |  





F-46









POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 6—INTANGIBLE ASSETS



Intangible assets consisted of the following (in thousands):



|                               |  | March 31, |        |   | March 31, |   |        | June 30, |  |   | September 30, |  
|------------------------------ |  | --------- | ------ | - | --------- | - | ------ | -------- |  | - | ------------- | -
|                               |  | 2023      |        |   | 2022      |   |        | 2022     |  |   | 2022          |  
|                               |  |           |        |   |           |   |        |          |  |   |               |  
|Customer relationships         |  | $         | 3,461  |   |           | $ | 24,148 |          |  | $ | 24,148        |  
|Marketing-related              |  |           | 6,835  |   |           |   | 26,935 |          |  |   | 26,935        |  
|                               |  |           |        |   |           |   |        |          |  |   |               |  
|Total intangible assets        |  |           | 20,296 |   |           |   | 51,083 |          |  |   | 51,083        |  
|Less: accumulated amortization |  |           | (753   | ) |           |   | (9,425 | )        |  |   | (11,979       | )
|                               |  |           |        |   |           |   |        |          |  |   |               |  
|Intangible assets, net         |  | $         | 9,543  |   |           | $ | 41,658 |          |  | $ | 39,104        |  



In connection with the acquisition of Goedeker
Television, the Company identified intangible assets of $2.1 million, representing marketing-related and customer relationships. For the
Appliances Connection acquisition, the Company identified intangible assets of $49.0 million, representing marketing-related and customer
relationships. During the fourth quarter of 2022, the Company recognized an impairment charge of $23.7 million related to our marketing-related
and customer relationships intangible assets.



These assets are being amortized on a straight-line
basis over their average estimated remaining useful life of 41 months. Amortization expense for the three months ended March 31, 2023
was $0.8 million and $2.55 million for each of the three month periods ended March 31, June 30, and September 30, 2022.



Following is the estimated amortization expense
for the customer relationship and marketing-related intangible assets for the next five years as of March 31, 2023 (in thousands):



|Year Ending December 31, |  | Amount |      
|------------------------ |  | ------ | -----
|                         |  |        |      
|2023, remainder of year  |  | $      | 2,260
|2024                     |  |        | 3,013
|2025                     |  |        | 3,013
|2026                     |  |        | 1,256
|2027                     |  |        | -    
|                         |  |        |      
|Total                    |  | $      | 9,543





F-47









POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7—BUSINESS
COMBINATIONS



Appliances Connection



On October 20, 2020, the Company entered into
a securities purchase agreement, which was amended on December 8, 2020 and April 6, 2021 (as amended, the “AC Purchase Agreement”),
with ACI, Appliances Connection and the sellers (the “Sellers”), pursuant to which ACI agreed to acquire all of the issued
and outstanding capital stock or other equity securities of Appliances Connection from the Sellers (the “AC Acquisition”).
The AC Acquisition was completed on June 2, 2021.



AC is one of the leading e-commerce retailers
of household appliances and carries many household name brands, including Bosch, Cafe, Frigidaire Pro, Whirlpool, LG, and Samsung, and
also carries many major luxury appliance brands such as Miele, Thermador, La Cornue, Dacor, Ilve, Wolf, Jenn-Air, Viking among others.
The completion of the AC acquisition accelerates the Company’s long-term vision that changes the way Americans shop for appliances.



The aggregate purchase price was $224.7 million,
consisting of (i) $180.0 million in cash, (ii) 5,895,973 shares of the Company’s common stock valued at $12.3 million, and (iii)
$32.4 million as a result of the post-closing net working capital adjustment provision. The Company recorded $0.9 million in acquisition-related
expenses.



The Company accounted for the AC Acquisition using
the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. In accordance with
ASC 805, the Company assigned fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.



The purchase price was allocated as follows (in
thousands):



|Purchase consideration at fair value:                  |  |   |        
|------------------------------------------------------ |  | - | -------
|                                                       |  |   |        
|Cash consideration                                     |  | $ | 180,000
|Common stock                                           |  |   | 12,264 
|Working capital adjustment                             |  |   | 32,411 
|                                                       |  |   |        
|Total consideration                                    |  | $ | 224,675
|                                                       |  |   |        
|Assets acquired and liabilities assumed at fair value: |  |   |        
|                                                       |  |   |        
|Cash                                                   |  | $ | 5,897  
|Receivables                                            |  |   | 17,141 
|Vendor deposits                                        |  |   | 15,000 
|Merchandise inventory                                  |  |   | 21,634 
|Prepaid expenses and other current assets              |  |   | 2,194  
|Property and equipment                                 |  |   | 1,891  
|Right-of-use operating lease assets                    |  |   | 1,834  
|Customer relationships                                 |  |   | 23,399 
|Tradenames                                             |  |   | 25,567 
|Goodwill                                               |  |   | 185,720
|Accounts payable and accrued expenses                  |  |   | (45,715
|Customer deposits                                      |  |   | (17,536
|Notes payable                                          |  |   | (1,527 
|Finance lease liabilities                              |  |   | (215   
|Right-of-use operating lease liabilities               |  |   | (1,834 
|Net deferred tax liabilities                           |  |   | (8,775 
|                                                       |  |   |        
|Net assets acquired                                    |  | $ | 224,675





F-48









POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The adjustments to the initial allocation are
based on more detailed information obtained about the specific assets acquired and liabilities assumed. The adjustments made to the initial
allocation did not result in material changes to the amortization expense recorded in the previous quarters.



We are amortizing the customer relationship and
tradename intangible assets acquired over 5 years. The goodwill consists largely of the synergies expected from combining operations and
is not deductible for tax purposes.



From the date of acquisition until December 31,
2021, Appliances Connection contributed net sales of $297.9 million and net income from continuing operations of $14.9 million, which
are included in our consolidated statements of operations.



NOTE 8—NOTES PAYABLE



Credit Facilities





M&T Credit Agreement



On June 2, 2021, the
Company entered into a credit and guaranty agreement (the “M&T Credit Agreement”) with the financial institutions party
thereto from time to time (“M&T Lenders”), and Manufacturers and Traders Trust Company, as sole lead arranger, sole book
runner, administrative agent and collateral agent (“M&T”), pursuant to which the M&T Lenders agreed to make available
to the Company and ACI senior secured credit facilities in the aggregate initial amount of $70.0 million, including (i) a $60.0 million
term loan (the “M&T Term Loan”) and (ii) a $10.0 million revolving credit facility (the “M&T Revolving Loan”).
The M&T Loans bear interest on the unpaid principal amount at a rate determined by the Base Rate (as defined in the Credit Agreement),
then at the Base Rate plus the Applicable Margin. Each of the M&T Loans were set to mature on June 2, 2026.



On June 2, 2021, the
Company borrowed the entire amount of the Term Loan and issued term loan notes to the M&T Lenders in the aggregate principal amount
of $60.0 million. As of December 31, 2021, the carrying value of the M&T Term Loan was $55.2 million, comprised of principal of $58.5
million, net of unamortized loan costs of $3.3 million. Loan costs before amortization included $3.5 million of lender and placement agent
fees and $0.3 million of legal other fees. The Company did not borrow any amounts under the M&T Revolving Loan.



On May 9, 2022, the Company repaid the M&T
Term Loan, through the proceeds of a new loan issuance. As a result, the obligations under the M&T Credit Agreement were terminated.



Bank of America Credit
Agreement



On May 9, 2022,
the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders identified therein (the “Lenders”)
and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the “Agent”), pursuant
to which the Lenders agreed to make available to the Borrowers senior secured credit facilities in the aggregate initial amount of $140.0
million, including (i) a $100.0 million term loan (the “Term Loan”) and (ii) a $40.0 million revolving credit facility (the
“Revolving Loan”), which revolving credit facility included a $2.00 million swingline sublimit (the “Swing Line Loan”
and together with the Term Loan and the Revolving Loan, the “Loans”) and, separately, a $10.0 million letter of credit commitment,
in each case, on the terms and conditions contained in the Credit Agreement.





F-49







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



On May 9, 2022, the Company
borrowed the entire amount of the Term Loan in the aggregate principal amount of $100.0 million. A portion of the proceeds of the Term
Loan were to repay and terminate the M&T Credit Agreement. Commencing on September 30, 2022, through and including June 30, 2023,
the Borrowers repaid the principal amount of the Bank of America Term Loan in quarterly installments of $1,250,000 each, payable on the
last business day of each March, June, September and December.



As of December 31, 2022,
the carrying value of the Term Loan was $96.5 million, comprised of principal of $97.5 million, net of unamortized loan costs of $1.0
million. Loan costs before amortization included $1.1 million of lender and other fees.



As a result of our technical
non-compliance with specified loan covenants for both the Bank of America Term Loan and Revolving loan, based in part due to our failure
to timely deliver financial statements, Bank of America froze the $40.0 million Revolving Loan before any borrowings had been made against
the facility.



The Term Loan and
Revolving Loan will bear interest on the unpaid principal amount thereof as follows: (i) if it is a loan bearing interest at a rate
determined by the Base Rate, then at the Base Rate plus the Applicable Rate for such loan and (ii) if it is a loan bearing interest
at a rate determined by Term SOFR, then at Term SOFR plus the Applicable Rate for such loan. The Company may elect to continue or
convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may elect the interest rate
benchmark for future revolving loans as either Term SOFR or Base Rate (and, with respect to any loan made using Term SOFR, may also
select the interest period applicable to any such loan), by notifying the Agent and the Lenders from time to time in accordance with
the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from a high of 1.95% and 0.95%, respectively,
for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate as a result of the Amendment.
Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding the foregoing,
following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum higher than
the interest rate then in effect for the applicable loan.



Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed
at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving
Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from
time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited
circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset
sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon
receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically
set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.



As a result of the reduced
term, the Company has begun discussions with investment bankers to place financing to replace the existing credit agreement by August
31, 2024.





F-50







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Future minimum principal payments on our total
notes payable as of March 31, 2023, are as follows (in thousands):



|Year Ending December 31,                    |  | Amount |       
|------------------------------------------- |  | ------ | ------
|                                            |  |        |       
|2023 Remainder of year                      |  | $      | 5,296 
|2024                                        |  |        | 91,594
|2025                                        |  |        | 201   
|2026                                        |  |        | 29    
|2027                                        |  |        | 21    
|                                            |  |        |       
|Total future minimum payments               |  |        | 97,141
|Less: debt discount                         |  |        | (905  
|Total                                       |  | $      | 96,236
|                                            |  |        |       
|Total current portion of notes payable, net |  | $      | 7,264 
|Total notes payable, net of current portion |  | $      | 88,972



NOTE 9— LEASES



Operating Leases



The following was included in our consolidated
balance sheet as of December 31, 2022 and 2021 (in thousands):



|                                               |  | March 31, |        |   | December 31, |  
|---------------------------------------------- |  | --------- | ------ | - | ------------ | -
|                                               |  | 2023      |        |   | 2022         |  
|                                               |  |           |        |   |              |  
|Operating lease right-of-use assets            |  | $         | 10,857 |   |              | $
|                                               |  |           |        |   |              |  
|Lease liabilities, current portion             |  |           | 3,353  |   |              |  
|Lease liabilities, long-term                   |  |           | 8,443  |   |              |  
|                                               |  |           |        |   |              |  
|Total operating lease liabilities              |  | $         | 11,796 |   |              | $
|                                               |  |           |        |   |              |  
|Weighted-average remaining lease term (months) |  |           | 70     |   |              |  
|                                               |  |           |        |   |              |  
|Weighted average discount rate                 |  |           | 3.9    | % |              |  



Operating lease expense was expense was $1.1 million
for the three months ended March 31, 2023 and $3.8 million and $1.8 million for the years ended December 31, 2022 and 2021, respectively.





F-51







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



As of March 31, 2023, maturities of operating
lease liabilities were as follows, in thousands:



|Year Ending December 31,          |  | Amount |       
|--------------------------------- |  | ------ | ------
|                                  |  |        |       
|2023 Remainder of year            |  | $      | 4,175 
|2024                              |  |        | 1,808 
|2025                              |  |        | 1,489 
|2026                              |  |        | 1,532 
|2027                              |  |        | 1,284 
|Thereafter                        |  |        | 4,159 
|Total                             |  |        | 14,447
|Less: imputed interest            |  |        | (1,707
|                                  |  |        |       
|Total operating lease liabilities |  | $      | 12,740



Finance Leases



The Company has three finance leases, acquired
in the acquisition of Appliances Connection. At March 31, 2023, the total amount due on these leases was $0.34 million.



Future minimum principal payments on our finance
leases payable as of March 31, 2023, are as follows (in thousands):



|Year Ending December 31,                     |  | Amount |    
|-------------------------------------------- |  | ------ | ---
|                                             |  |        |    
|2023 Remainder of year                       |  | $      | 90 
|2024                                         |  |        | 109
|2025                                         |  |        | 107
|2026                                         |  |        | 21 
|2027                                         |  |        | -  
|Total future minimum payments                |  |        | 362
|Less: debt discount                          |  |        | (21
|Total                                        |  |        | 306
|                                             |  |        |    
|Total current portion of finance leases, net |  | $      | 108
|Total finance leases, net of current portion |  | $      | 198





F-52







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 10—SUPPLIER CONCENTRATION



For the three months ended March 31, 2023 and
the years ended December 31, 2022 and 2021, the Company purchased a substantial portion of finished goods from one vendor (DMI –
see Note 14), representing 69%, 69% and 72.%, respectively.



The Company believes there are numerous other
suppliers that could be substituted should the supplier become unavailable or non-competitive.



NOTE 11—RELATED PARTIES



Management Services Agreement



On April 5, 2019, the Company entered into a management
services agreement with 1847 Partners LLC (the “Manager”), a company owned and controlled by Ellery W. Roberts, the Company’s
executive chairman and prior significant stockholder, which was amended effective on August 4, 2020. Pursuant to the offsetting management
services agreement, as amended, the Company appointed the Manager to provide certain services to it for a quarterly management fee equal
to $62,500; provided, however, that under certain circumstances specified in the management services agreement, the quarterly fee may
be reduced if similar fees payable to the Manager by subsidiaries of the Company’s former parent company, 1847 Holdings LLC, exceed
a threshold amount.



The Company shall also reimburse the Manager for
all costs and expenses of the Company which are specifically approved by the board of directors of the Company, including all out-of-pocket
costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of the Company in connection with performing
services under the management services agreement. The Company did not pay any expenses for the years ended December 31, 2021 and 2020.



The Company expensed management fees of $0.3 million
for each of the years ended December 31, 2022 and 2021 respectively.



DMI



The Company is a member of DMI, an appliance purchasing
cooperative. DMI purchases consumer electronics and appliances at wholesale prices from various vendors, and then makes such products
available to its members, including the Company, who sell such products to end consumers. DMI’s purchasing group arrangement provides
its members, including the Company, with leverage and purchasing power with appliance vendors, and increases the Company’s ability
to compete with competitors, including big box appliance and electronics retailers. The Company owns an approximate 1.6% interest in DMI.
As such, DMI is deemed to be a related party for 2022 and 2021.



During the three months ended March 31, 2023 and
2022 , total purchases from DMI, were $48.4 million and $73.4 million, respectively. At March 31, 2023, deposits at DMI totaled 30.0 million
and vendor rebates due from DMI were $4.4 million.



Lease Agreements



As described above, 1 Stop and Joe’s Appliances
entered into lease agreements with 1870 Bath Ave. LLC and 7812 5th Ave Realty LLC. These entities are owned by Albert Fouerti
and Elie Fouerti (the Company’s former Chief Executive and Chief Operating Officers and significant stockholders of the Company).
The total rent paid to these two entities in 2022 was $1.0 million and $0.6 million for the period from June 2, 2021 to December 31, 2021.
In addition, YF Logistics has entered into a sublease agreement with DMI. The total rent expense under this related party lease was $0.7
million for the year-ended December 31, 2022 and $0.4 million for the period June 2, 2021 to December 31, 2021.





F-53







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



On March 15, 2022, the Company entered into a
lease for additional office space with 8780 19th Ave LLC (“Landlord”), an entity owned by Albert and Elie Fouerti. 
The Company contends that the lease required the Landlord do certain work at Landlord’s expense to improve the building at t cost
of approximately $1.2 million.  Landlord has refused to pay for this work, contending that this expense was the Company’s responsibility. 
In addition, the total remaining amount due on the lease at December 31, 2022 is also approximately $1.2 million.  Landlord contends
that the Company is in default of the lease for failing to pay rent.  The Company disagrees that its rent obligations have been triggered
and further contends that Landlord has violated the lease by failing to pay for the work.  The Company and the Landlord remain in
dispute over these issues.



NOTE 12—STOCKHOLDERS’ EQUITY



As of March 31, 2023, the Company was authorized
to issue 200,000,000 shares of common stock, $0.0001 par value per share, and 20,000,000 shares of “blank check” preferred
stock, 0.0001 par value per share. To date, the Company has not designated or issued any shares of preferred stock.



During 2022, the Company purchased 1,229,222 shares
of common stock for a total purchase price of $2,000,000. Effective December 31, 2022, the board authorized that the shares purchased
be retired.



Common Stock



As of March 31, 2023 and December 31, 2022, the
Company had 105,469,878 and 105,227,876 shares of common stock issued and outstanding, respectively. Each share entitles the holder thereof
to one vote per share on all matters coming before the stockholders of the Company for a vote.



During the three months ended March 31, 2023 the
Company issued 242,002 shares to employees and a director and recognized $188 thousand of compensation expense in connection therewith.



Equity Incentive Plan



Effective as of July 30, 2020, the Company established
the 1847 Goedeker Inc. 2020 Equity Incentive Plan (the “Plan”) and reserved 555,000 shares of common stock for issuance under
the Plan. The Plan was approved by the Company’s board of directors and stockholders on April 21, 2020. On April 9, 2021, the board
of directors approved an amendment to the Plan to increase the number of shares of common Stock reserved for issuance under the Plan from
555,000 to 1,000,000 shares. On December 17, 2021, the board of directors approved an amendment to the Plan to increase the number of
shares of common Stock reserved for issuance under the Plan from 1,000,000 to 11,000,000 shares. Such increase was approved by the Company’s
stockholders effective as of December 21, 2021.



The Plan is administered by the compensation committee
of the board of directors. The Plan permits the grant of restricted stock, stock options and other forms of incentive compensation to
the Company’s officers, employees, directors, and consultants.



As of March 31, 2023, 11,000,000 shares remain
issuable under the 2020 EIP.





F-54







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Stock Options



On January 1, 2023, the Company granted an option
to purchase 86,550 shares of common stock pursuant to an employment agreement. The stock options have an exercise price of $0.58 per share
and vest 25% annually over a 4-year period. The Company has calculated the estimated fair market value of these options at $0.03 million
using the Black-Scholes pricing model, with the following assumptions: expected term 7.0 years, stock price $0.58, exercise price $0.58,
volatility 67%, risk-free rate 3.9%, and no forfeiture rate.



Below is a table summarizing the changes in stock
options outstanding during the three months ended March 31, 2023:



|                                 |  |         |          |   | Weighted-Average |  
|-------------------------------- |  | ------- | -------- | - | ---------------- | -
|                                 |  | Options |          |   | Exercise Price   |  
|                                 |  |         |          |   |                  |  
|Outstanding at December 31, 2022 |  |         | 150,000  |   |                  | $
|                                 |  |         |          |   |                  |  
|Granted                          |  |         | 86,550   |   |                  |  
|Exercised                        |  |         | -        |   |                  |  
|Forfeited                        |  |         | (150,000 | ) |                  | $
|                                 |  |         |          |   |                  |  
|Outstanding at March 31, 2023    |  |         | 86,550   |   |                  | $
|                                 |  |         |          |   |                  |  
|Exercisable at March 31, 2023    |  |         | -        |   |                  | $



During the three months ended March 31, 2023, 37,500 stock options
forfeited, as a result of employee terminations.



Warrants

Below is a table summarizing the changes in warrants
outstanding during the three months ended March 31,



|                                 |  |          |            |  | Weighted-Average |  
|-------------------------------- |  | -------- | ---------- |  | ---------------- | -
|                                 |  | Warrants |            |  | Exercise Price   |  
|                                 |  |          |            |  |                  |  
|Outstanding at December 31, 2022 |  |          | 92,514,423 |  |                  | $
|                                 |  |          |            |  |                  |  
|Granted                          |  |          | -          |  |                  |  
|Exercised                        |  |          |            |  |                  |  
|Forfeited                        |  |          | -          |  |                  |  
|                                 |  |          |            |  |                  |  
|Outstanding at March 31, 2023    |  | $        | 92,514,423 |  |                  | $
|                                 |  |          |            |  |                  |  
|Exercisable at March 31, 2023    |  | $        | 92,514,423 |  |                  | $



As of March 31, 2023, the outstanding warrants
have a weighted average remaining contractual life of 3.2 years and a total intrinsic value of nil.





F-55







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 13—EARNINGS (LOSS) PER SHARE



The computation of weighted average shares outstanding
and the basic loss per common share for the following periods consisted of the following (in thousands, except per share amounts):



|                                           |  | Three Months Ended |            
|------------------------------------------ |  | ------------------ | -----------
|                                           |  | March 31,          |            
|                                           |  | 2022               |            
|Basic Earnings (Loss) Per Share            |  |                    |            
|                                           |  |                    |            
|Net income (loss)                          |  | $                  | 5,819      
|Weighted average common shares outstanding |  |                    | 106,386,548
|                                           |  |                    |            
|Basic earnings (loss) per share            |  | $                  | 0.05       



|                                           |  | Six Months Ended |             |  | Nine Months Ended |  
|------------------------------------------ |  | ---------------- | ----------- |  | ----------------- | -
|                                           |  | June 30,         |             |  | June 30,          |  
|                                           |  | 2022             |             |  | 2021              |  
|Basic Earnings (Loss) Per Share            |  |                  |             |  |                   |  
|                                           |  |                  |             |  |                   |  
|Net income (loss)                          |  | $                | 1,527       |  |                   | $
|Weighted average common shares outstanding |  |                  | 106,080,764 |  |                   |  
|                                           |  |                  |             |  |                   |  
|Basic earnings (loss) per share            |  | $                | 0.01        |  |                   | $



For the three months ended March 31, 2023 and
March 31, 2022, there were 92,514,423 and 92,694,423, respectively potential common share equivalents from stock options and warrants
excluded from the diluted EPS calculations as their effect is anti-dilutive.





F-56







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 14—COMMITMENTS AND CONTINGENCIES



Legal Proceedings



Three purported beneficial owners of Common Stock
subsequently expressed concerns about a statement in the Company’s proxy statement related to the Share Increase Proposal, specifically
questioning, in light of the proxy statement, the ability of brokerage firms and other custodians to vote shares of Common Stock held
by them for the benefit of their customers in the absence of instructions from the beneficial owners. Based on an examination of the situation
performed following receipt of these demands, the Company believes that the vote at the annual meeting was properly tabulated and that
the proposed amendment was properly adopted in accordance with Delaware law. In light of the demands, however, and to ensure against any
future question as to the validity of these newly authorized shares, the Company has elected to seek validation of its Certificate of
Amendment through a Petition to the Court of Chancery of the State of Delaware (the “Court of Chancery”) pursuant to Section
205 of the Delaware General Corporation Law (the “205 Petition”). The action, styled In re 1847 Goedeker Inc., C.A.
2022-0219-SG, seeks entry by the Court of Chancery of an order validating and declaring effective the Certificate of Amendment, and validating
the additional shares of Common Stock authorized under the Share Increase Proposal.



One of the purported stockholders who had submitted
a demand related to adoption of the Share Increase Proposal has filed a Class Action Complaint in the Court of Chancery against the Company
and its Board of Directors. The lawsuit, captioned Scot T. Boden v. 1847 Goedeker Inc., et al., C.A. No. 2022-0196-SG (the “BodenAction”), asserts two claims for relief. The first is against the Company for alleged violation of the Delaware General Corporation
Law Section 225(b) for improper tabulation of the stockholder vote on the Share Increase Proposal. The second asserts that the Company’s
directors breached their fiduciary duties by incorrectly tabulating the stockholder vote, and by causing a purportedly invalid amendment
to our Certificate of Incorporation to be filed with the Delaware Secretary of State.



Subsequent to December 31, 2022, the Company settled
this claim for $475,000.



On October 31, 2022, a putative shareholder class
action was filed against Polished.com Inc. (the “Company”) and certain of its current and former officers and directors, as
well as certain underwriters of the Company’s 2020 initial public offering (the “IPO”).  The action was commenced
in the United States District Court for the Eastern District of New York court and is captioned Ryan Maschhoff v. Polished.com Inc.,
et al., No. 1:22-cv-06606.  The complaint asserts violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as
well as Sections 10(b) and Rule 10b-5 promulgated thereunder, and 20(a) of the Securities Exchange Act of 1934 arising from alleged misstatements
and omissions made in certain of the Company’s SEC filings made in connection with the IPO.  On or about December 20, 2022,
plaintiffs filed a motion for the appointment of lead plaintiff and lead counsel.  Although that motion is fully briefed, to date,
oral argument has yet to be scheduled.





F-57







POLISHED.COM INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 15—SUBSEQUENT EVENTS



Subsequent to December 31, 2022, the Company signed
a letter of intent for a sublease from DMI, a related party for a new warehouse in a building being leased by DMI. The new lease will
allow the Company to close its two existing New Jersey warehouses and consolidate operations into one new warehouse. The lease, which
is expected to be finalized in the fourth quarter of 2023 or the first quarter of 2024, will be for leased space of approximately 228,000
square feet for seven years at a cost of approximately $15 per square foot, including common area charges with annual increases of 3.75%.



Bank of America Loan Amendment



On July 25, 2023, the
Company and Bank of America amended the Credit Agreement (the “Amendment”), in part, to waive events of defaults on its existing
credit agreement. The Amendment requires the Company to pay the existing Term Facility and Revolving Facility by August 31, 2024 (the
“Maturity Date”). The Revolving Loan decreased to $10,000,000 from and after July 25, 2023. The Letter of Credit commitments
decreased to $2,000,000 and the Swing Line Loan was eliminated. The amendment also establishes a new EBITDA covenant and requires the
Company to maintain minimum liquidity of $8 million including restricted cash and $5 million excluding restricted cash. Liquidity as defined
in the Amendment includes Cash and certain qualifying customer and credit card accounts receivable.



The Term Loan and Revolving Loan will bear interest on the unpaid principal
amount thereof as follows: (i) if it is a loan bearing interest at a rate determined by the Base Rate, then at the Base Rate plus the
Applicable Rate for such loan and (ii) if it is a loan bearing interest at a rate determined by Term SOFR, then at Term SOFR plus the
Applicable Rate for such loan. The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from
Term SOFR to Base Rate, and may elect the interest rate benchmark for future revolving loans as either Term SOFR or Base Rate (and, with
respect to any loan made using Term SOFR, may also select the interest period applicable to any such loan), by notifying the Agent and
the Lenders from time to time in accordance with the provisions of the Amendment and Credit Agreement. The Applicable Rate increased from
a high of 1.95% and 0.95%, respectively, for Term SOFR and Base Rate in the Credit Agreement to 4.00% for each of Term SOFR and Base Rate
as a result of the Amendment. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement). Notwithstanding
the foregoing, following an event of default, the loans under the Credit Facilities will bear interest at a rate that is 2% per annum
higher than the interest rate then in effect for the applicable loan.



Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Revolving Loans may be repaid and reborrowed
at any time until the Maturity Date, subject to the terms and conditions set forth in the Credit Agreement. Mandatory prepayments of Revolving
Loans are required if the amount borrowed at any time exceeds the commitment amount. The Company may voluntarily prepay the Loans from
time to time in accordance with the provisions of the Credit Agreement, and will be required to prepay the Loans under certain limited
circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds in connection with certain specified asset
sales, receipt of loss or condemnation proceeds or other cash proceeds received other than in the ordinary course of business or upon
receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the Credit Agreement, all as more specifically
set forth in the Credit Agreement. The Loans may from time to time be further evidenced by separate promissory notes issued by the Borrowers.



As a result of the reduced term, the Company
has begun discussions with investment bankers to place financing to replace the existing credit agreement by August 31, 2024.





F-58







SIGNATURES



Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



Date: July 31, 2023



| | Polished.com Inc.    
| | ---------------------
| |                      
| | /s/ J.E. “Rick” Bunka
| | Name:                
| | Title:               
| |                      
| |                      
| | /s/ Robert D. Barry  
| | Name:                
| | Title:               



Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.



|SIGNATURE               |  | TITLE                                                               |  | Date         
|----------------------- |  | ------------------------------------------------------------------- |  | -------------
|                        |  |                                                                     |  |              
|/s/ J.E. “Rick” Bunka   |  | Chief Executive Officer
(principal executive officer)               |  | July 31, 2023
|J.E. “Rick” Bunka       |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Robert D. Barry     |  | Chief Financial Officer and Secretary
(principal financial officer) |  | July 31, 2023
|Robert D. Barry         |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Ellery W. Roberts   |  | Executive Chairman of the Board of Directors                        |  | July 31, 2023
|Ellery W. Roberts       |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Ellette A. Anderson |  | Director                                                            |  | July 31, 2023
|Ellette A. Anderson     |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Clark R. Crosnoe    |  | Director                                                            |  | July 31, 2023
|Clark R. Crosnoe        |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Glyn C. Milburn     |  | Director                                                            |  | July 31, 2023
|Glyn C. Milburn         |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ James M. Schneider  |  | Director                                                            |  | July 31, 2023
|James M. Schneider      |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ G. Alan Shaw        |  | Director                                                            |  | July 31, 2023
|G. Alan Shaw            |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Alan P. Shor        |  | Director                                                            |  | July 31, 2023
|Alan P. Shor            |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Edward J. Tobin     |  | Director                                                            |  | July 31, 2023
|Edward J. Tobin         |  |                                                                     |  |              
|                        |  |                                                                     |  |              
|/s/ Houman Akhavan      |  | Director                                                            |  | July 31, 2023
|Houman Akhavan          |  |                                                                     |  |              





89