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DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Jun. 30, 2023
Accounting Policies [Abstract] |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Description of Business Unless the context requires otherwise, references in these financial statements to “RumbleOn,” the “Company,” “we,” “us,” and “our” refer to RumbleOn, Inc. and its consolidated subsidiaries. RumbleOn is the nation's first and largest publicly traded, technology-enhanced dealership group platform in the powersports industry. Headquartered in the Dallas Metroplex, RumbleOn is revolutionizing the customer experience for outdoor enthusiasts across the country and providing more choices in making powersports vehicles accessible to more people in more places than ever before. We strive to build long-term value for our customers, employees, and shareholders with the nation’s largest network of powersports dealerships, service departments, and fulfillment centers operated by our highly-trained and knowledgeable team. We are transforming the powersports customer experience by giving consumers what they want - a wide selection, great value and quality, and an easy transaction. Every element of our business, from inventory procurement, to fulfillment, to overall ease of transactions, has been built for a singular purpose – to create an unparalleled customer experience in the powersports industry regardless of whether they are shopping our inventory online or in-store. Although our primary focus is on the customer experience and building market share in the powersports industry, during 2022 and 2023 we participated in the automotive industry through our wholly-owned wholesale distributor of used automotive inventory, Wholesale, Inc. ("Wholesale Inc."), and our exotics retailer AutoSport USA, Inc., which does business under the name Got Speed. In the third quarter of 2022, we announced we would be winding down our wholesale automotive business. The process of winding down this business was completed as of June 30, 2023, and we have reported the operations of this segment of our business as discontinued operations within the Condensed Consolidated Financial Statements. Our logistics services company, Wholesale Express, LLC ("Wholesale Express"), provides freight brokerage services facilitating transportation for dealers and consumers. On August 31, 2021 (the “RideNow Closing Date”), RumbleOn, Inc. completed its business combination with RideNow Powersports ("RideNow"), the nation's largest powersports retailer group. On February 18, 2022 (the “Freedom Closing Date”), the Company completed its acquisition of Freedom Powersports, LLC (“Freedom Powersports”) and Freedom Powersports Real Estate, LLC (“Freedom Powersports - RE,” and together with Freedom Powersports, the “Freedom Entities”), a retailer group with 13 locations in Texas, Georgia, and Alabama. Since the acquisitions of RideNow and Freedom Powersports, we have made a handful of smaller acquisitions. We plan to continue the growth of our powersports footprint through strategic acquisitions. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information and with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Condensed Consolidated Financial Statements include the accounts of RumbleOn, Inc. and its subsidiaries, which are all wholly owned, including RideNow and the Freedom Entities from the respective dates these businesses were acquired. In accordance with those rules and regulations, the Company has omitted certain information and notes required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented. The year-end condensed balance sheet data was derived from audited financial statements. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results expected for the entire fiscal year. All intercompany accounts and material intercompany transactions have been eliminated. Use of Estimates The preparation of these Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions, and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions, and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates. In particular, current or future macro economic conditions, as well as the effect of economic conditions on the Company’s operations, may impact future estimates including, but not limited to inventory valuations, fair value measurements, asset impairment charges, and discount rate assumptions. These conditions may include, but are not limited to, recession, inflation, interest rates, unemployment levels, the state of the housing market, gasoline prices, consumer credit availability, consumer credit delinquency and loss rates, personal discretionary spending levels, and consumer sentiment about the economy in general. These conditions and the economy in general could be affected by significant national or international events such as a global health crisis, acts of terrorism, or acts of war. If economic conditions worsen or stagnate, it can have a material adverse effect on consumer demand as well as the availability of credit to finance powersports and vehicle purchases, which could adversely impact our business and results of operations. Liquidity and Management’s Plans As described more completely in Note 5, the Company was not in compliance with certain financial covenants contained in various debt agreements at June 30, 2023, providing the lenders the ability to accelerate the outstanding loan balances to the Company if a compliance waiver or loan amendment is not obtained. On August 9, 2023, the Company and Oaktree Fund Administration, LLC executed Amendment No. 5 (as defined in Note 5) to the Term Loan Credit Agreement, which provides the Company a covenant waiver as of June 30, 2023 and as of September 30, 2023, and more favorable financial covenants for each quarter through the second quarter of 2024. Amendment No. 5 also requires the Company to undertake certain actions in the coming months to generate additional liquidity that will be used to repay a portion of the outstanding balance of the Term Loan Credit Agreement. These actions include divesting of certain assets and completing a $100,000 rights offering, for which the Company has received binding commitments for up to $100,000 if the rights offering is not fully subscribed. Management has initiated plans that will allow the Company to remain in compliance with all revised covenants under Amendment No. 5. The Company has classified certain assets as held for sale at June 30, 2023 and also executed a Standby Purchase Agreement on August 8, 2023 that provides binding commitments for up to $100,000 from certain existing shareholders if the rights offering is not fully subscribed. Management has considered these plans, including if they are within the control of the Company, in evaluating ASC 205-40, Presentation of Financial Statements. Management believes the above actions are sufficient to allow the Company to meet its obligations as they become due for a period of at least 12 months from the issuance of these financial statements and to comply with the amended financial covenants of Amendment No. 5. Management believes that it has alleviated any substantial doubt regarding the Company’s ability to continue as a going concern. Correction of an Immaterial Misstatement Related to Prior Periods During the quarter ended December 31, 2022, the Company identified a misstatement in its accounting for internal powersports revenue and internal powersports cost of sales, which were included in the consolidated statements of operations rather than being eliminated, which resulted in an overstatement of both revenue and cost of sales, with no impact to gross profit, operating income (loss), or net income (loss). The misstatement impacted the unaudited Condensed Consolidated Financial Statements for the three month periods ended March 31, 2022, June 30, 2022, and September 30, 2022. The Company evaluated the misstatement and concluded that the impact was not material, either individually or in the aggregate, to its current or previously issued consolidated financial statements. The Company has corrected the Condensed Consolidated Financial Statements by decreasing powersports revenue and cost of sales for the three months ended June 30, 2022 by $18,094 and $18,094, respectively, and for the six months ended June 30, 2022 by $32,813 and $32,813, respectively. Recent Pronouncements Adoption of New Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for financial assets held. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 on January 1, 2023. The standard did not have a material impact on the Company's Condensed Consolidated Financial Statements for the six months ended June 30, 2023. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope.” This ASU refines the scope of ASC 848 and clarifies some of its guidance as part of the Board's monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities. In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." This ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. These new standards were effective upon issuance and generally can be applied to applicable contract modifications. Our senior secured debt and most of our floorplan arrangements have transitioned from LIBOR to the use of SOFR or an alternative benchmark rate as of June 30, 2023. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606 instead of being recorded at fair value. The Company early adopted these requirements prospectively in the first quarter of 2022. Accounting for Business Combinations Total consideration transferred for acquisitions is allocated to the tangible and intangible assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and other fair value adjustments with respect to certain assets acquired and liabilities assumed. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our Condensed Consolidated Statements of Operations. We use the income approach to determine the fair value of certain identifiable intangible assets including franchise rights. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth rates, etc. We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors. We believe the estimated purchased franchise rights and non-compete intangible asset amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets. Assets Held for Sale We consider properties to be assets held for sale when (1) management commits to a plan to sell the property; (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we expect the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying amount or its estimated fair value, less estimated costs to sell, and we cease depreciation.

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