UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
For the transition period from ____________ to _____________
Commission File Number:
|
|
| (Exact name of registrant as specified in its charter) |
|
|
|
|
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
|
|
|
| (Address of principal executive offices) | (Zip Code) |
|
|
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
|
|
|
|
| (1) | On April 3, 2025, NYSE American notified the Company that it has determined to commence proceedings to delist the Company’s common shares and trading of the Company’s common shares on NYSE American was suspended on such date. The Company has requested review of NYSE American’s determination to delist the Company’s common shares and the hearing for such review is schedule for June 5, 2025. Accordingly, trading of the Company’s common shares will remain suspended pending the outcome of that review. If the delisting determination is upheld, NYSE American will file a Form 25 with the U.S. Securities and Exchange Commission to delist the common shares from NYSE American. The deregistration of the common shares under Section 12(b) of the Act will be effective 90 days, or such shorter period as the U.S. Securities and Exchange Commission may determine, after filing of the Form 25. |
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.
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 during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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 ☐ |
|
|
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 comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 14, 2025, there were
1847 HOLDINGS LLC
Quarterly Report on Form 10-Q
Period Ended March 31, 2025
TABLE OF CONTENTS
| PART I | ||
| FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 32 |
| Item 4. | Controls and Procedures | 32 |
| PART II | ||
| OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 34 |
| Item 1A. | Risk Factors | 34 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 34 |
| Item 3. | Defaults Upon Senior Securities | 34 |
| Item 4. | Mine Safety Disclosures | 34 |
| Item 5. | Other Information | 34 |
| Item 6. | Exhibits | 34 |
i
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
1847 HOLDINGS LLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
|
March 31,
2025 |
December 31,
2024 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
| Accounts receivable, net |
|
|
||||||
| Contract assets |
|
|
||||||
| Inventories, net |
|
|
||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Assets held for sale |
|
|
||||||
| Total Current Assets |
|
|
||||||
| Property and equipment, net |
|
|
||||||
| Operating lease right-of-use assets |
|
|
||||||
| Long-term deposits |
|
|
||||||
| Intangible assets, net |
|
|
||||||
| Goodwill |
|
|
||||||
| Non-current assets held for sale |
|
|||||||
| TOTAL ASSETS | $ |
|
$ |
|
||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ |
|
$ |
|
||||
| Contract liabilities |
|
|
||||||
| Current portion of operating lease liabilities |
|
|
||||||
| Current portion of finance lease liabilities |
|
|
||||||
| Current portion of notes payable, net |
|
|
||||||
| Current portion of convertible notes payable, net |
|
|
||||||
| Related party note payable |
|
|
||||||
| Derivative liabilities |
|
|
||||||
| Warrant liabilities |
|
|
||||||
| Liabilities held for sale |
|
|
||||||
| Total Current Liabilities |
|
|
||||||
| Operating lease liabilities, net of current portion |
|
|
||||||
| Finance lease liabilities, net of current portion |
|
|
||||||
| Notes payable, net of current portion |
|
|
||||||
| Deferred tax liabilities, net |
|
|
||||||
| TOTAL LIABILITIES |
|
|
||||||
| Shareholders’ Deficit | ||||||||
|
Series A senior convertible preferred shares,
par value,
|
|
|
||||||
|
Series C senior convertible preferred shares,
par value,
|
|
|
||||||
|
Series D senior convertible preferred shares,
par value,
|
|
|
||||||
|
Series F convertible preferred shares,
par value,
|
|
|||||||
|
Allocation shares,
|
|
|
||||||
|
Common shares, $
|
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT |
(
|
) |
(
|
) | ||||
| NON-CONTROLLING INTERESTS |
(
|
) |
(
|
) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT |
(
|
) |
(
|
) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
Three Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| Revenues | $ |
|
$ |
|
||||
| Operating Expenses | ||||||||
| Cost of revenues |
|
|
||||||
| Personnel |
|
|
||||||
| Depreciation and amortization |
|
|
||||||
| General and administrative |
|
|
||||||
| Professional fees |
|
|
||||||
| Total Operating Expenses |
|
|
||||||
| LOSS FROM OPERATIONS |
(
|
) |
(
|
) | ||||
| Other Income (Expense) | ||||||||
| Other income |
|
|
||||||
| Gain on disposal of property and equipment |
|
|||||||
| Interest expense |
(
|
) |
(
|
) | ||||
| Amortization of debt discounts |
(
|
) |
(
|
) | ||||
| Loss on extinguishment of debt |
(
|
) |
(
|
) | ||||
| Gain (loss) on change in fair value of warrant liabilities |
|
(
|
) | |||||
| Loss on change in fair value of derivative liabilities |
(
|
) |
(
|
) | ||||
| Total Other Income (Expense) |
(
|
) |
(
|
) | ||||
| NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
(
|
) |
(
|
) | ||||
| Income tax provision |
|
|
||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ |
(
|
) | $ |
(
|
) | ||
| Net loss from discontinued operations |
(
|
) |
(
|
) | ||||
| Gain on disposition of subsidiaries |
|
|||||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
(
|
) |
|
|||||
| NET LOSS | $ |
(
|
) | $ |
(
|
) | ||
| NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS FROM CONTINUING OPERATIONS |
(
|
) |
|
|||||
| NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS FROM DISCONTINUED OPERATIONS |
|
(
|
) | |||||
| NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS | $ |
(
|
) | $ |
(
|
) | ||
| NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS |
(
|
) |
(
|
) | ||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS |
(
|
) |
|
|||||
| NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS | $ |
(
|
) | $ |
(
|
) | ||
| PREFERRED SHARE DIVIDENDS |
(
|
) |
(
|
) | ||||
| DEEMED DIVIDENDS |
(
|
) | ||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ |
(
|
) | $ |
(
|
) | ||
| LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS – BASIC AND DILUTED | $ |
(
|
) | $ |
(
|
) | ||
| EARNINGS (LOSS) PER COMMON SHARE FROM DISCONTINUED OPERATIONS – BASIC AND DILUTED |
(
|
) |
|
|||||
| LOSS PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS – BASIC AND DILUTED | $ |
(
|
) | $ |
(
|
) | ||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING – BASIC AND DILUTED |
|
|
||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
|
Series
A
Preferred Shares |
Series C Senior Convertible Preferred Shares |
Series D Senior Convertible Preferred Shares |
Series F Convertible Preferred Shares |
Allocation | Common Shares | Additional Paid-In | Accumulated |
Non-
Controlling |
Total Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Shares | Amount | Capital | Deficit |
Interests |
Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
- | $ | $ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of convertible notes payable | - | - | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of series F preferred shares upon settlement of series A warrants | - | - | - |
|
|
- |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends – series A convertible preferred shares | - | - | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends – series C convertible preferred shares | - | - | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends – series D convertible preferred shares | - | - | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - |
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||||||||||||||||||||||||||||||
4
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
|
Series A Senior Convertible Preferred Shares |
Series B Senior Convertible Preferred Shares |
Allocation | Common Shares | Distribution | Additional Paid-In | Accumulated | Non- Controlling | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Shares | Amount | Receivable | Capital | Deficit |
Interests |
Deficit | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series A preferred share dividends | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series B preferred share dividends | - | - |
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares and warrants in public offering | - |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrant liabilities recognized upon issuance of warrants | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||||||||||
| Extinguishment of warrant liabilities upon exercise of warrants | - | - | - |
|
|
|||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon exercise of warrants | - |
|
|
(
|
) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of convertible notes payable | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series A preferred shares |
(
|
) |
(
|
) | - |
|
|
|
||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series B preferred shares |
(
|
) |
(
|
) |
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Dividends - series A senior convertible preferred shares | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends - series B senior convertible preferred shares | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend from down round provision in warrants | - | - | - |
|
(
|
) | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - |
(
|
) |
|
(
|
) | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Three
Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Net loss from discontinued operations |
|
|
||||||
| Gain on disposition of subsidiaries |
(
|
) | ||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Gain on disposal of property and equipment |
(
|
) | ||||||
| Loss on extinguishment of debt |
|
|
||||||
| (Gain) loss on change in fair value of warrant liabilities |
(
|
) |
|
|||||
| Loss on change in fair value of derivative liabilities |
|
|
||||||
| Deferred taxes |
(
|
) |
(
|
) | ||||
| Depreciation and amortization |
|
|
||||||
| Amortization of debt discounts |
|
|
||||||
| Amortization of right-of-use assets |
|
|
||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
|
(
|
) | |||||
| Contract assets |
(
|
) |
|
|||||
| Inventories |
|
(
|
) | |||||
| Prepaid expenses and other current assets |
|
(
|
) | |||||
| Other assets |
(
|
) | ||||||
| Accounts payable and accrued expenses |
|
|
||||||
| Contract liabilities |
(
|
) |
(
|
) | ||||
| Operating lease liabilities |
(
|
) |
(
|
) | ||||
| Net cash provided by (used in) operating activities from continuing operations |
|
(
|
) | |||||
| Net cash provided by (used in) operating activities from discontinued operations |
(
|
) |
|
|||||
| Net cash provided by (used in) operating activities |
|
(
|
) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment |
(
|
) | ||||||
| Proceeds from the disposal of property and equipment |
|
|||||||
| Net cash provided by investing activities from continuing operations |
|
|||||||
| Net cash provided by investing activities from discontinued operations | ||||||||
| Net cash provided by investing activities |
|
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net proceeds from notes payable |
|
|||||||
| Net proceeds from issuance of common shares and warrants in connection with a public offering |
|
|||||||
| Repayments of notes payable and finance lease liabilities |
(
|
) |
(
|
) | ||||
| Net cash provided by (used in) financing activities from continuing operations |
(
|
) |
|
|||||
| Net cash used in financing activities from discontinued operations |
(
|
) | ||||||
| Net cash provided by (used in) financing activities |
(
|
) |
|
|||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS |
(
|
) |
(
|
) | ||||
| CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS | ||||||||
| Cash from continuing operations at the beginning of the period | $ |
|
$ |
|
||||
| Cash from continuing operations at the end of the period | $ |
|
|
|||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ |
|
$ |
|
||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Net assets from the disposition of subsidiaries | $ | $ |
|
|||||
| Operating lease right-of-use asset and liability measurement | $ |
|
||||||
| Deemed dividend from down round provision in warrants | $ | $ |
|
|||||
| Accrued dividends on series A preferred shares | $ |
|
$ |
|
||||
| Accrued dividends on series B preferred shares | $ | $ |
|
|||||
| Accrued dividends on series C preferred shares | $ |
|
$ | |||||
| Accrued dividends on series D preferred shares | $ |
|
$ | |||||
| Issuance of common shares upon settlement of accrued series A dividends | $ | $ |
|
|||||
| Issuance of common shares upon settlement of accrued series B dividends | $ | $ |
|
|||||
| Issuance of common shares upon conversion of series A shares | $ | $ |
|
|||||
| Issuance of common shares upon conversion of series B shares | $ | $ |
|
|||||
| Issuance of common shares upon cashless exercise of warrants | $ | $ |
|
|||||
| Debt discount on notes payable | $ | $ |
|
|||||
| Fair value of warrant liabilities recognized upon issuance of warrants | $ | $ |
|
|||||
| Extinguishment of warrant liabilities upon exercise of warrants | $ | $ |
|
|||||
| Issuance of common shares upon conversion of convertible notes payable | $ |
|
$ |
|
||||
| Reclassification of accrued interest to convertible notes payable | $ | $ |
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 1 —BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited condensed consolidated financial statements of 1847 Holdings LLC (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes required by GAAP for complete financial statements. The December 31, 2024 consolidated balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2025. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
Assets Held for Sale and Discontinued Operations
During the three months ended March 31, 2025, the Company committed to a plan to sell Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (collectively referred to as “Wolo”), which makes up the Automotive Supplies Segment. The Company is currently engaged in an active program to sell Wolo, which is expected to occur in 2025.
The Company evaluated whether its intent to sell Wolo qualifies for reporting as discontinued operations in accordance with Accounting Standards Codification (“ASC”) Topic 205-20, “ Discontinued Operations .” A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results when the following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2) the component or group of components is disposed of by sale; or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off). For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for current and all prior periods presented. The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheet for prior periods.
The Company determined that its decision to sell Wolo is considered a strategic shift that will have a major effect on the Company’s operations and financial results and met the criteria for classification as discontinued operations. As a result, the assets and liabilities of Wolo are presented as held for sale in the unaudited condensed consolidated balance sheets and the operating results are presented as discontinued operations in the unaudited condensed consolidated statements of operations for all periods presented. Unless otherwise noted, amounts and disclosures throughout these notes to the condensed consolidated financial statements relate solely to continuing operations and exclude all discontinued operations. See Note 3 for additional information.
Reclassifications
Certain prior period amounts related to discontinued operations have been reclassified and separately presented in the condensed consolidated financial statements and accompanying notes to conform to the current period financial statement presentation.
Recently Adopted Accounting Pronouncements
In August 2023, the FASB issued ASU 2023-05, “ Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement ,” which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. The adoption of ASU 2023-05 did not have a material impact on the Company’s condensed consolidated financial statements.
7
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ,” which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “ Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ,” which requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization included in each relevant expense caption presented on the statement of operations. The standard also requires disclosure of qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, as well as the total amount of selling expenses and an entity’s definition of selling expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to its condensed consolidated financial statements.
NOTE 2 —LIQUIDITY AND GOING CONCERN ASSESSMENT
Management assesses liquidity and going concern uncertainty in the Company’s condensed 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 financial statements are 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 considered various scenarios, forecasts, projections, estimates and made 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, management made 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, 2025, the Company had cash and
cash equivalents of $
The Company has generated operating losses since its inception and has relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related party debt to support cashflows from operations. The Company expects that within the next twelve months it will not have sufficient cash and other resources on hand to sustain its current operations or meet its obligations as they become due unless it obtains additional financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
An assessment was performed 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 condensed consolidated financial statements are issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully implemented. Based on this assessment, substantial doubt exists regarding the Company’s ability to continue as a going concern.
8
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Management plans to address these concerns by securing additional financing through debt and equity offerings. Management assessed the mitigating effect of its plans to determine if it is probable that the plans would be effectively implemented within one year after the consolidated financial statements are issued and when implemented, would mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. These plans are subject to market conditions and reliance on third parties, and there is no assurance that effective implementation of the Company’s plans will result in the necessary funding to continue current operations and satisfy current debt obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date the condensed consolidated financial statements are issued.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
NOTE 3 —DISCONTINUED OPERATIONS
Wolo Assets Held for Sale
As described above, during the three months ended March 31, 2025, the Company committed to a plan to sell Wolo. The Company received approval from the Board and is currently engaged in an active program to sell Wolo, which is expected to occur in 2025. The Company determined that its decision to sell Wolo is considered a strategic shift that will have a major effect on the Company’s operations and financial results and met the criteria for classification as discontinued operations.
The following table summarizes the carrying amounts of the major classes of assets and liabilities of Wolo, which have been classified as assets and liabilities held for sale in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Assets | ||||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Accounts receivable, net |
|
|
||||||
| Inventories, net |
|
|
||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Property and equipment, net |
|
|
||||||
| Operating lease right-of-use assets |
|
|
||||||
| Security deposits |
|
|
||||||
| Total assets held for sale | $ |
|
$ |
|
||||
| Liabilities | ||||||||
| Accounts payable and accrued expenses | $ |
|
$ |
|
||||
| Operating lease liabilities |
|
|
||||||
| Total liabilities held for sale |
|
|
||||||
| Total net assets held for sale | $ |
|
$ |
|
||||
9
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following table presents the results of operations of Wolo, which have been included in discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024:
|
Three Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| Revenues | $ |
|
$ |
|
||||
| Operating Expenses | ||||||||
| Cost of revenues |
|
|
||||||
| Personnel |
|
|
||||||
| Depreciation and amortization |
|
|
||||||
| General and administrative |
|
|
||||||
| Professional fees |
|
|
||||||
| Total Operating Expenses |
|
|
||||||
| Loss from operations |
(
|
) |
(
|
) | ||||
| Interest expense |
(
|
) |
(
|
) | ||||
| Net loss from discontinued operations before income taxes |
(
|
) |
(
|
) | ||||
| Income tax provision |
(
|
) | ||||||
| Net loss from discontinued operations | $ |
(
|
) | $ |
(
|
) | ||
| Net loss attributable to non-controlling interests from discontinued operations |
|
|
||||||
| Net loss from discontinued operations attributable to 1847 Holdings | $ |
(
|
) | $ |
(
|
) | ||
The following table presents cash flow information from the discontinued operations of Wolo for the three months ended March 31, 2025 and 2024:
|
Three Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization |
|
|
||||||
| Amortization of right-of-use assets |
|
|
||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
(
|
) |
|
|||||
| Inventories |
|
|
||||||
| Prepaid expenses and other current assets |
|
(
|
) | |||||
| Accounts payable and accrued expenses |
|
(
|
) | |||||
| Operating lease liabilities |
(
|
) |
(
|
) | ||||
| Net cash provided by (used in) operating activities from discontinued operations |
(
|
) |
|
|||||
| Cash flows from investing activities | ||||||||
| Net cash from investing activities from discontinued operations | ||||||||
| Cash flows from financing activities | ||||||||
| Net cash from financing activities from discontinued operations | ||||||||
| Net change in cash and cash equivalents from discontinued operations | $ |
(
|
) | $ |
|
|||
10
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Asien’s Assignment for the Benefit of Creditors
On February 26, 2024, the Company’s subsidiary Asien’s Appliance, Inc. (“Asien’s”) entered into a general assignment for the benefit of its creditors (the “Assignment Agreement”), pursuant to which Asien’s transferred ownership of all or substantially all of its right, title, and interest in, as well as custody and control of, its assets to SG Service Co., LLC in trust. The Company received no cash consideration related to the assignment. Following the assignment, the Company retained no financial interest in Asien’s. The assignment of Asien’s represents a strategic shift and its results are reported as discontinued operations for the three months ended March 31, 2024.
The following table presents the results of operations of Asien’s, which have been included in discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2024:
|
Three Months Ended
March 31, 2024 |
||||
| Revenues | $ |
|
||
| Operating Expenses | ||||
| Cost of revenues |
|
|||
| Personnel |
|
|||
| Depreciation and amortization |
|
|||
| General and administrative |
|
|||
| Professional fees |
|
|||
| Total Operating Expenses |
|
|||
| Loss from operations |
(
|
) | ||
| Interest expense |
(
|
) | ||
| Net loss from discontinued operations before income taxes |
(
|
) | ||
| Income tax provision | ||||
| Net loss from discontinued operations | $ |
(
|
) | |
| Net loss attributable to non-controlling interests from discontinued operations |
|
|||
| Net loss from discontinued operations attributable to 1847 Holdings | $ |
(
|
) | |
11
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following table presents cash flow information from the discontinued operations of Asien’s for the three months ended March 31, 2024:
|
Three Months
Ended |
||||
| March 31, 2024 | ||||
| Cash flows from operating activities | ||||
| Net loss | $ |
(
|
) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Depreciation and amortization |
|
|||
| Changes in operating assets and liabilities: | ||||
| Receivables |
|
|||
| Inventories |
|
|||
| Prepaid expenses and other current assets |
|
|||
| Accounts payable and accrued expenses |
|
|||
| Customer deposits |
(
|
) | ||
| Net cash used in operating activities from discontinued operations |
(
|
) | ||
| Cash flows from investing activities | ||||
| Net cash from investing activities from discontinued operations | ||||
| Cash flows from financing activities | ||||
| Repayments of notes payable |
(
|
) | ||
| Net cash used in financing activities from discontinued operations |
(
|
) | ||
| Net change in cash and cash equivalents from discontinued operations | $ |
(
|
) | |
ICU Eyewear Foreclosure Sale
The Company’s subsidiary ICU Eyewear, Inc.
(“ICU Eyewear”) was in default under an Amended and Restated Credit and Security Agreement (the “ICU Loan Agreement”)
that was entered into on September 11, 2023 between AB Lending SPV I LLC d/b/a Mountain Ridge Capital (the “ICU Lender”),
ICU Eyewear and the Company’s subsidiaries ICU Eyewear Holdings, Inc., and 1847 ICU Holdings Inc. (together with ICU Eyewear, the
“ICU Parties”) and, with the approval of the other ICU Parties, consented to a foreclosure by the ICU Lender and private
sale of substantially all of its assets in an Article 9 sale process, pursuant to Section 9-610 of the Uniform Commercial Code as in
effect in the State of New York and Section 9-610 of the Uniform Commercial Code as in effect in the State of California. On August 5,
2024, ICU Eyecare Solutions Inc., an entity that is not affiliated with the Company, was the successful bidder with a cash bid of $
12
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following table presents the results of operations of ICU Eyewear, which have been included in discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2024:
|
Three Months Ended
March 31, 2024 |
||||
| Revenues | $ |
|
||
| Operating Expenses | ||||
| Cost of revenues |
|
|||
| Personnel |
|
|||
| Depreciation and amortization |
|
|||
| General and administrative |
|
|||
| Professional fees |
|
|||
| Total Operating Expenses |
|
|||
| Loss from operations |
(
|
) | ||
| Other Expense | ||||
| Other expense |
(
|
) | ||
| Interest expense |
(
|
) | ||
| Amortization of debt discount |
(
|
) | ||
| Total Other Expense |
(
|
) | ||
| Net loss from discontinued operations before income taxes |
(
|
) | ||
| Income tax provision |
(
|
) | ||
| Net loss from discontinued operations | $ |
(
|
) | |
13
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following table presents cash flow information from the discontinued operations of ICU Eyewear for the three months ended March 31, 2024:
|
Three Months Ended
March
31,
|
||||
| Cash flows from operating activities | ||||
| Net loss | $ |
(
|
) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
| Depreciation and amortization |
|
|||
| Amortization of debt discount |
|
|||
| Inventory reserve |
|
|||
| Amortization of right-of-use assets |
|
|||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable |
(
|
) | ||
| Inventories |
(
|
) | ||
| Prepaid expenses and other current assets |
|
|||
| Accounts payable and accrued expenses |
|
|||
| Customer deposits |
(
|
) | ||
| Net cash provided by operating activities from discontinued operations |
|
|||
| Cash flows from investing activities | ||||
| Net cash from investing activities from discontinued operations | ||||
| Cash flows from financing activities | ||||
| Net repayments of revolving line of credit |
(
|
) | ||
| Net cash used in financing activities from discontinued operations |
(
|
) | ||
| Net change in cash and cash equivalents from discontinued operations | $ |
|
||
14
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Sale of High Mountain
On September 30, 2024, the Company entered into
an asset purchase agreement (the “Purchase Agreement”) with BFS Group LLC (“BFS”), and the Company’s majority
owned subsidiary High Mountain Door & Trim Inc. (“High Mountain”), pursuant to which the Company sold substantially all
of the assets of High Mountain to BFS for an aggregate cash only purchase price of $
The following table presents the results of operations of High Mountain, which have been included in discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2024:
|
Three Months Ended
March 31, 2024 |
||||
| Revenues | $ |
|
||
| Operating Expenses | ||||
| Cost of revenues |
|
|||
| Personnel |
|
|||
| Depreciation and amortization |
|
|||
| General and administrative |
|
|||
| Professional fees |
|
|||
| Total Operating Expenses |
|
|||
| Income from operations |
|
|||
| Other Expense | ||||
| Interest Expense |
(
|
) | ||
| Amortization of debt discount |
(
|
) | ||
| Total Other Expense |
(
|
) | ||
| Net income from discontinued operations before income taxes |
|
|||
| Income tax provision |
(
|
) | ||
| Net income from discontinued operations | $ |
|
||
| Net income attributable to non-controlling interests from discontinued operations |
(
|
) | ||
| Net income from discontinued operations attributable to 1847 Holdings | $ |
|
||
15
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following table presents cash flow information from the discontinued operations of High Mountain for the three months ended March 31, 2024:
|
Three Months Ended
March 31, 2024 |
||||
| Cash flows from operating activities | ||||
| Net income | $ |
|
||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization |
|
|||
| Amortization of debt discount |
|
|||
| Deferred taxes |
(
|
) | ||
| Amortization of right-of-use assets |
|
|||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable |
|
|||
| Inventories |
(
|
) | ||
| Prepaid expenses and other current assets |
|
|||
| Accounts payable and accrued expenses |
(
|
) | ||
| Contract liabilities |
(
|
) | ||
| Operating lease liabilities |
(
|
) | ||
| Net cash provided by operating activities from discontinued operations |
|
|||
| Cash flows from investing activities | ||||
| Net cash from investing activities from discontinued operations | ||||
| Cash flows from financing activities | ||||
| Repayments of notes payable and finance lease liabilities |
(
|
) | ||
| Net cash used in financing activities from discontinued operations |
(
|
) | ||
| Net change in cash and cash equivalents from discontinued operations | $ |
|
||
16
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 4 —DISAGGREGATION OF REVENUES AND SEGMENT REPORTING
Following the divestiture of the Automotive Supplies
Segment, the Company operates
Construction Segment – Provides finish carpentry and related products and services, including doors, frames, trim, hardware, millwork, cabinetry, and specialty construction accessories.
The Company reports all other business activities that are not reportable in the Corporate Services Segment. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. The Corporate Services Segment includes costs associated with executive management, financing activities and other public company-related costs.
The Company’s revenues for the three months ended March 31, 2025 and 2024 are disaggregated as follows:
|
Three Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| Revenues | ||||||||
| Cabinetry and millwork | $ |
|
$ |
|
||||
| Doors, frames, hardware, and trim |
|
|||||||
| Specialty construction accessories |
|
|||||||
| Total revenues | $ |
|
$ |
|
||||
Segment information for the three months ended March 31, 2025 and 2024 are as follows:
|
Three Months Ended
March 31, 2025 |
||||||||||||
| Construction | Corporate Services | Total | ||||||||||
| Revenues | $ |
|
$ | - | $ |
|
||||||
| Operating expenses | ||||||||||||
| Cost of revenues |
|
|
||||||||||
| Personnel |
|
(
|
) |
|
||||||||
| Personnel – corporate allocation |
|
(
|
) | |||||||||
| Depreciation and amortization |
|
|
||||||||||
| General and administrative |
|
(
|
) |
|
||||||||
| General and administrative – management fees |
|
|
||||||||||
| General and administrative – corporate allocation |
|
(
|
) | |||||||||
| Professional fees |
|
|
|
|||||||||
| Total operating expenses |
|
|
|
|||||||||
| Income (loss) from operations | $ |
|
$ |
(
|
) | $ |
(
|
) | ||||
17
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
|
Three Months Ended
March 31, 2024 |
||||||||||||
| Construction |
Corporate
Services |
Total | ||||||||||
| Revenues | $ |
|
$ | $ |
|
|||||||
| Operating expenses | ||||||||||||
| Cost of revenues |
|
|
||||||||||
| Personnel |
|
|
|
|||||||||
| Personnel – corporate allocation |
|
(
|
) | |||||||||
| Depreciation and amortization |
|
|
||||||||||
| General and administrative |
|
(
|
) |
|
||||||||
| General and administrative – management fees |
|
|
||||||||||
| General and administrative – corporate allocation |
|
(
|
) | |||||||||
| Professional fees |
|
|
|
|||||||||
| Total operating expenses |
|
|
|
|||||||||
| Loss from operations | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||
Total assets by operating segment as of March 31, 2025 are as follows:
| March 31, 2025 | ||||||||||||
| Construction |
Corporate
Services |
Total | ||||||||||
| Assets | ||||||||||||
| Current assets | $ |
|
$ |
|
$ |
|
||||||
| Long-lived assets |
|
|
||||||||||
| Goodwill |
|
|
||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
||||||
NOTE 5 —PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2025 and December 31, 2024 consisted of the following:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Machinery and equipment | $ |
|
$ |
|
||||
| Office furniture and equipment |
|
|
||||||
| Transportation equipment |
|
|
||||||
| Leasehold improvements |
|
|
||||||
| Total property and equipment |
|
|
||||||
| Less: accumulated depreciation |
(
|
) |
(
|
) | ||||
| Total property and equipment, net | $ |
|
$ |
|
||||
Depreciation expense for the three months ended
March 31, 2025 and 2024 was $
18
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 6 —INTANGIBLE ASSETS
Intangible assets as of March 31, 2025 and December 31, 2024 consisted of the following:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Customer-related | $ |
|
$ |
|
||||
| Marketing-related |
|
|
||||||
| Total intangible assets |
|
|
||||||
| Less: accumulated amortization |
(
|
) |
(
|
) | ||||
| Total intangible assets, net | $ |
|
$ |
|
||||
Amortization expense for the three months ended
March 31, 2025 and 2024 was $
Estimated amortization expense for intangible assets for the next five years consists of the following as of March 31, 2025:
| Year Ending December 31, | Amount | |||
| 2025 (remaining) | $ |
|
||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| 2029 |
|
|||
| Thereafter |
|
|||
| Total estimated amortization expense | $ |
|
||
NOTE 7 —ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of March 31, 2025 and December 31, 2024 consisted of the following:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Trade accounts payable | $ |
|
$ |
|
||||
| Credit cards payable |
|
|
||||||
| Accrued payroll liabilities |
|
|
||||||
| Accrued interest |
|
|
||||||
| Accrued dividends |
|
|
||||||
| Accrued taxes |
|
|
||||||
| Other accrued liabilities |
|
|
||||||
| Total accounts payable and accrued expenses | $ |
|
$ |
|
||||
NOTE 8 —LEASES
Operating Leases
In February 2025, the Company’s subsidiary
CMD Inc. entered into a lease agreement for office space located in Lake Havasu City, Arizona. The lease commenced on February 15, 2025,
and is for a term of three years. Under the terms of the lease, CMD Inc. will lease the premises at the monthly rate of $
19
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
The following was included in the condensed consolidated balance sheets at March 31, 2025 and December 31, 2024:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Operating lease right-of-use assets | $ |
|
$ |
|
||||
| Operating lease liabilities, current portion |
|
|
||||||
| Operating lease liabilities, long-term |
|
|
||||||
| Total operating lease liabilities | $ |
|
$ |
|
||||
| Weighted-average remaining lease term (months) |
|
|
||||||
| Weighted-average discount rate |
|
% |
|
% | ||||
Rent expense for the three months ended March
31, 2025 and 2024 was $
As of March 31, 2025, maturities of operating lease liabilities were as follows:
| Year Ending December 31, | Amount | |||
| 2025 (remaining) | $ |
|
||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| 2029 |
|
|||
| Total |
|
|||
| Less: imputed interest |
(
|
) | ||
| Total operating lease liabilities | $ |
|
||
Finance Leases
As of March 31, 2025, maturities of financing lease liabilities were as follows:
| Year Ending December 31, | Amount | |||
| 2025 (remaining) | $ |
|
||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| Total |
|
|||
| Less: amount representing interest |
(
|
) | ||
| Total finance lease liabilities | $ |
|
||
As of March 31, 2025, the weighted-average remaining
lease term for all finance leases is
20
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 9 —FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The fair value of financial instruments measured on a recurring basis as of March 31, 2025 consisted of the following:
|
Fair Value Measurements as of
March 31, 2025 |
||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Derivative liabilities | $ | $ | $ |
|
$ |
|
||||||||||
| Warrant liabilities |
|
|
||||||||||||||
| Total recurring fair value measurements | $ |
|
$ |
|
||||||||||||
The following table provides a roll-forward of changes for financial instruments measured at fair value on a recurring basis for the three months ended March 31, 2025:
| Derivative Liabilities | Amount | |||
| Balance as of December 31, 2024 | $ |
|
||
| Loss on change in fair value of derivative liabilities |
|
|||
| Balance as of March 31, 2025 | $ |
|
||
| Warrant Liabilities | Amount | |||
| Balance as of December 31, 2024 | $ |
|
||
| Gain on change in fair value of warrant liabilities |
(
|
) | ||
| Extinguishment of warrant liabilities upon settlement |
(
|
) | ||
| Balance as of March 31, 2025 | $ |
|
||
NOTE 10 —NOTES PAYABLE
Notes payable as of March 31, 2025 and December 31, 2024 consisted of the following:
|
March 31,
2025 |
December 31,
2024 |
|||||||
| Vehicle loans | $ |
|
$ |
|
||||
|
|
|
|
||||||
| Purchase and sale of future revenues loan |
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
| CMD seller promissory note |
|
|||||||
| Total notes payable |
|
|
||||||
| Less: debt discounts |
(
|
) |
(
|
) | ||||
| Total notes payable, net | $ |
|
$ |
|
||||
| Current portion of notes payable, net | $ |
|
$ |
|
||||
| Notes payable, net of current portion | $ |
|
$ |
|
||||
20% OID Promissory Notes – March 2024
On March 31, 2025, the
As of March 31, 2025, the total outstanding principal
balance is $
21
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
NOTE 11 —SHAREHOLDERS’ DEFICIT
Series A Senior Convertible Preferred Shares
As of March 31, 2025 and December 31, 2024, the
Company had
During the three months ended March 31, 2025,
the Company accrued dividends of $
Series C Senior Convertible Preferred Shares
As of March 31, 2025 and December 31, 2024, the
Company had
During the three months ended March 31, 2025,
the Company accrued dividends of $
Series D Senior Convertible Preferred Shares
As of March 31, 2025 and December 31, 2024, the
Company had
During the three months ended March 31, 2025,
the Company accrued dividends of $
Series F Convertible Preferred Shares
On March 25, 2025, the Company executed a Share
Designation to establish the terms of its series F convertible preferred shares (the “Share Designation”). Pursuant to the
Share Designation, the Company designated
Ranking . The series F convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common shares, allocation shares, series C preferred shares, series D preferred shares and each other class or series that is not expressly made senior to or on parity with the series F convertible preferred shares; (ii) on parity with each other class or series that is not expressly subordinated or made senior to the series F convertible preferred shares; and (iii) junior to the series A senior convertible preferred shares, all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series F convertible preferred shares.
Dividend Rights . Holders of series F convertible preferred shares are entitled to receive dividends, when, as and if declared on the common shares, pari passu with the holders of common shares, on an as-converted basis.
22
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Liquidation Rights
. Subject to the rights
of creditors and the holders of any senior securities or parity securities (in each case, as defined in the Share Designation), upon
any liquidation of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be
made to or set apart for the holders of junior securities (as defined in the Share Designation), each holder of outstanding series F
convertible preferred shares shall be entitled to receive an amount of cash equal to
Voting Rights . The series F convertible preferred shares do not have any voting rights; provided that, so long as any series F convertible preferred shares are outstanding, the Company shall not, and shall not permit any of its subsidiaries to, directly or indirectly, without the affirmative vote of the holders of a majority of the then outstanding series F convertible preferred shares, (a) amend the Company’s certificate of formation or its operating agreement in any manner that adversely affects any rights of the holders of the series F convertible preferred shares or alter or amend the Share Designation, (b) authorize or create any class of shares ranking as to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the series F convertible preferred shares, or (c) enter into any agreement with respect to any of the foregoing.
Conversion Rights
. Each series F convertible
preferred share shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully
paid and nonassessable common shares determined by dividing the stated value ($
Other Rights . Holders of series F convertible preferred shares have no redemption, preemptive or subscription rights for additional securities of the Company.
On March 25, 2025, the Company entered into cancellation
and exchange agreements with the remaining holders of the series A warrants issued on October 30, 2024, pursuant to which such holders
agreed to exchange such warrants for an aggregate of
As of March 31, 2025 and December 31, 2024, the
Company had
23
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
(UNAUDITED)
Common Shares
During the three months ended March 31, 2025,
the Company issued
Potential Common Stock Equivalents
For the three months ended March 31, 2025, there
were
Warrants
The Company did not issue any new warrants during
the three months ended March 31, 2025. However, on March 11, 2025, the exercise price of the remaining series A warrants and series B
warrants that were issued on October 31, 2024, which included
Below is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2025:
| Warrants |
Weighted-
Average Exercise Price |
|||||||
| Outstanding at December 31, 2024 |
|
$ |
|
|||||
| Warrant adjustment (1) |
|
|
||||||
| Settlement |
(
|
) |
(
|
) | ||||
| Outstanding at March 31, 2025 |
|
$ |
|
|||||
| Exercisable at March 31, 2025 |
|
$ |
|
|||||
| (1) |
|
As of March 31, 2025, the outstanding warrants
have a weighted average remaining contractual life of
NOTE 12 —SUBSEQUENT EVENTS
On April 2, 2025, 1847 CMD and The CD Trust, dated October 18, 2021 entered into Amendment No. 3 to the CMD Purchase Agreement, pursuant to which the parties agreed to waive the working capital adjustment provision. The parties also agreed that no purchase price adjustment was due at the closing as a result of comparing the Net Working Capital Target (as defined in the CMD Purchase Agreement) to the net working capital reflected in the Preliminary Balance Sheet (as defined in the CMD Purchase Agreement). In addition, the parties agreed that The CD Trust, dated October 18, 2021 will not be in breach of Section 4.5 of the CMD Purchase Agreement (Financial Statements) with respect to line items that are included in the net working capital calculation.
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition . The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and “our company” refer to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated subsidiaries. References to “our manager” refer to 1847 Partners LLC, a Delaware limited liability company.
Special Note 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:
| ● | our ability to effectively integrate and operate the businesses that we acquire; |
| ● | our ability to successfully identify and acquire additional businesses; |
| ● | our organizational structure, which may limit our ability to meet our dividend and distribution policy; |
| ● | our ability to service and comply with the terms of indebtedness; |
| ● | our cash flow available for distribution and our ability to make distributions to our common shareholders; |
| ● | our ability to pay the management fee, profit allocation and put price to our manager when due; |
| ● | labor disputes, strikes or other employee disputes or grievances; |
| ● | the regulatory environment in which our businesses operate under; |
| ● | trends in the industries in which our businesses operate; |
| ● | the competitive environment in which our businesses operate; |
| ● | changes in general economic or business conditions or economic or demographic trends in the United States including changes in interest rates and inflation; |
| ● | our and our manager’s ability to retain or replace qualified employees of our businesses and our manager; |
| ● | casualties, condemnation or catastrophic failures with respect to any of our business’ facilities; |
| ● | costs and effects of legal and administrative proceedings, settlements, investigations and claims; and |
| ● | extraordinary or force majeure events affecting the business or operations of our businesses. |
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” included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on March 31, 2025, or the Annual Report, 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.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
25
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.
Overview
We are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America.
On September 30, 2020, our subsidiary 1847 Cabinet Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders.
On March 30, 2021, our subsidiary 1847 Wolo Inc., or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation, which we collectively refer to as Wolo. Headquartered in Deer Park, New York and founded in 1965, Wolo designs and sells horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. During the three months ended March 31, 2025, we committed to a plan to sell Wolo, which makes up the automotive supplies segment. We are currently engaged in an active program to sell Wolo, which is expected to occur in 2025.
On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain Door & Trim Inc., a Nevada corporation, or High Mountain, which we subsequently sold on September 30, 2024 (see “ —Discontinued Operations ” below), and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited liability company, or Innovative Cabinets. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well as commercial clients.
On December 16, 2024, our subsidiary 1847 CMD Inc., or 1847 CMD, acquired CMD Inc., a Nevada corporation, and CMD Finish Carpentry, LLC, a Nevada limited liability company, which we collectively refer to as CMD. Headquartered in Las Vegas, Nevada and founded in 2012, CMD specializes in finish carpentry and related products and services, including doors, frames, trim, hardware, millwork, cabinetry, and specialty construction accessories for general contractors, commercial developers, residential builders and homeowners, and government entities.
Through our structure, we offer investors an opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increase common shareholder value over time.
We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.
Recent Developments
On April 2, 2025, 1847 CMD and The CD Trust, dated October 18, 2021 entered into Amendment No. 3 to the stock and membership interest purchase agreement, dated November 4, 2024 and previously amended on December 5, 2024 and December 16, 2024, or the CMD Purchase Agreement, pursuant to which the parties agreed to waive the working capital adjustment provision contained in the CMD Purchase Agreement. The parties also agreed that no purchase price adjustment was due at the closing as a result of comparing the Net Working Capital Target (as defined in the CMD Purchase Agreement) to the net working capital reflected in the Preliminary Balance Sheet (as defined in the CMD Purchase Agreement). In addition, the parties agreed that The CD Trust, dated October 18, 2021 will not be in breach of Section 4.5 of the CMD Purchase Agreement (Financial Statements) with respect to line items that are included in the net working capital calculation.
26
Management Fees
On April 15, 2013, we and our manager entered into a management services agreement, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% of our adjusted net assets for services performed (which we refer to as the parent management fee). The amount of the parent management fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by our manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) parent management fees received by (or owed to) our manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid parent management fees. We did not expense any parent management fees for the three months ended March 31, 2025 and 2024.
On August 21, 2020, 1847 Cabinet entered into an offsetting management services agreement with our manager, which was amended on October 8, 2021. Pursuant to the amended management services agreement, our manager will provide certain services to 1847 Cabinet in exchange for a quarterly management fee equal to the greater of $125,000 or 2% of adjusted net assets (as defined within the amended management services agreement). 1847 Cabinet expensed management fees of $125,000 and $125,000 for three months ended March 31, 2025 and 2024, respectively, of which $41,667 is included in discontinued operations for the three months ended March 31, 2024 due to the sale of High Mountain described under “ —Discontinued Operations ” below.
On March 30, 2021, 1847 Wolo entered into an offsetting management services agreement with our manager. Pursuant to the management services agreement, our manager will provide certain services to 1847 Wolo in exchange for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined within the management services agreement). 1847 Wolo expensed management fees of $75,000 for the three months ended March 31, 2025 and 2024, which is included in discontinued operations.
Following the foreclosure sale of all of the assets of ICU Eyewear on August 5, 2024 as described under “ —Discontinued Operations ” below, our manager ceased to provide services to 1847 ICU for quarterly management fees. 1847 ICU expensed management fees of $75,000 for the three months ended March 31, 2024, which is included in discontinued operations.
On December 16, 2024, 1847 CMD entered into an offsetting management services agreement with our manager. Pursuant to the management services agreement, our manager will provide certain services to 1847 CMD in exchange for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined within the management services agreement). 1847 CMD expensed management fees of $75,000 for the three months ended March 31, 2025.
In addition, if the aggregate amount of management fees paid or to be paid to our manager under the offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our gross income in any fiscal year or the parent management fee in any fiscal quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to our manager under other offsetting management services agreements.
On a consolidated basis, our company expensed total management fees from continued operations and discontinued operations of $200,000 and $75,000 for the three months ended March 31, 2025, respectively, and $83,333 and $241,667 for the three months ended March 31, 2024, respectively.
Segments
Following the divestures described under “ —Discontinued Operations ” below, we now have one reportable segment, the construction segment, which provides finish carpentry and related products and services, including doors, frames, trim, hardware, millwork, cabinetry, and specialty construction accessories.
We report all other business activities that are not reportable in the corporate services segment. We provide general corporate services to our construction segment; however, these services are not considered when making operating decisions and assessing segment performance. The corporate services segment includes costs associated with executive management, financing activities and other public company-related costs.
27
Discontinued Operations
On February 9, 2023, our subsidiary 1847 ICU Holdings Inc. acquired ICU Eyewear Holdings, Inc., a California corporation, and its subsidiary ICU Eyewear, Inc., a California corporation, or ICU Eyewear, which specialized in the sale and distribution of reading eyewear and sunglasses, blue light blocking eyewear, sun readers, and other outdoor specialty sunglasses, as well as select health and personal care items, including face masks. Our company was a limited guarantor of an amended and restated credit and security agreement, or Loan Agreement, that was entered into on September 11, 2023 between AB Lending SPV I LLC d/b/a Mountain Ridge Capital, or the ICU Lender, and ICU Eyewear, ICU Eyewear Holdings, Inc. and 1847 ICU Holdings Inc. Pursuant to the Loan Agreement, the ICU Lender had a security interest in all the assets of ICU Eyewear. ICU Eyewear was in default under the Loan Agreement and consented to a foreclosure by the ICU Lender and private sale of substantially all of its assets in an Article 9 sale process, pursuant to Section 9-610 of the Uniform Commercial Code as in effect in the State of New York and Section 9-610 of the Uniform Commercial Code as in effect in the State of California. On August 5, 2024, ICU Eyecare Solutions Inc., an entity that is not affiliated with our company, was the successful bidder with a cash bid of $4,250,000. Pursuant to an agreement, dated August 5, 2024, and in consideration for such purchase price, the ICU Lender having foreclosed on its security interest in all of the assets of ICU Eyewear then conveyed all of its rights, title, and interest in all of such assets to ICU Eyecare Solutions Inc. Following the sale, we retained no financial interest in ICU Eyewear. Accordingly, the results of operations of ICU Eyewear are reported as discontinued operations for the three months ended March 31, 2024.
On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain, which specialized in all aspects of finished carpentry products and services. On September 30, 2024, we entered into an asset purchase agreement with BFS Group LLC, or BFS, and High Mountain, pursuant to which we sold substantially all of the assets of Hight Mountain to BFS for an aggregate cash only purchase price of $17,000,000, subject to certain pre-closing and post-closing adjustments. At closing, the purchase price was subject to a working capital adjustment and was also reduced by the amount of outstanding indebtedness repaid at closing or assumed by BFS, as well as certain transaction expenses. Additionally, the purchase price was reduced by $1,700,000, which may be used for certain post-closing payments. Following the sale, we retained no financial interest in High Mountain. Accordingly, the results of operations of High Mountain are reported as discontinued operations for the three months ended March 31, 2024.
As noted above, during the three months ended March 31, 2025, we committed to a plan to sell Wolo, which makes up the automotive supplies segment. We are currently engaged in an active program to sell Wolo, which is expected to occur in 2025. Accordingly, the results of operations of Wolo are reported as discontinued operations for the three months ended March 31, 2025 and 2024.
Results of Operations
Comparison of the Three Months Ended March 31, 2025 and 2024
The following table sets forth key components of our results of continuing operations during the three months ended March 31, 2025 and 2024, both in dollars and as a percentage of our revenues.
| Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount |
% of Revenues |
Amount |
% of Revenues |
|||||||||||||
| Revenues | $ | 10,083,472 | 100.0 | % | $ | 2,084,454 | 100.0 | % | ||||||||
| Operating expenses | ||||||||||||||||
| Cost of revenues | 4,874,990 | 48.3 | % | 1,182,699 | 56.7 | % | ||||||||||
| Personnel | 1,748,240 | 17.3 | % | 910,591 | 43.7 | % | ||||||||||
| Depreciation and amortization | 351,390 | 3.5 | % | 172,110 | 8.3 | % | ||||||||||
| General and administrative | 1,108,912 | 11.0 | % | 441,898 | 21.2 | % | ||||||||||
| Professional fees | 2,098,562 | 20.8 | % | 2,545,189 | 122.1 | % | ||||||||||
| Total operating expenses | 10,182,094 | 101.0 | % | 5,252,487 | 252.0 | % | ||||||||||
| Loss from operations | (98,622 | ) | (1.0 | )% | (3,168,033 | ) | (152.0 | )% | ||||||||
| Other income (expenses) | ||||||||||||||||
| Other income | 727 | 0.0 | % | 3,338 | 0.2 | % | ||||||||||
| Gain on disposal of property and equipment | 53,554 | 0.5 | % | - | - | |||||||||||
| Interest expense | (1,123,576 | ) | (11.1 | )% | (1,001,770 | ) | (48.1 | )% | ||||||||
| Amortization of debt discounts | (465,050 | ) | (4.6 | )% | (3,592,107 | ) | (172.3 | )% | ||||||||
| Loss on extinguishment of debt | (2,301,198 | ) | (22.8 | )% | (421,875 | ) | (20.2 | )% | ||||||||
| Gain (loss) on change in fair value of warrant liabilities | 3,669,798 | 36.4 | % | (1,902,200 | ) | (91.3 | )% | |||||||||
| Loss on change in fair value of derivative liabilities | (35,000 | ) | (0.3 | )% | (612,462 | ) | (29.4 | )% | ||||||||
| Total other expense | (200,745 | ) | (2.0 | )% | (7,527,076 | ) | (361.1 | )% | ||||||||
| Net loss before income taxes | (299,367 | ) | (3.0 | )% | (10,695,109 | ) | (513.1 | )% | ||||||||
| Income tax provision | 72,000 | 0.7 | % | 89,000 | 4.3 | % | ||||||||||
| Net loss from continuing operations | $ | (227,367 | ) | (2.3 | )% | $ | (10,606,109 | ) | (508.8 | )% | ||||||
28
Revenues . Our construction business generates revenue through the sale of finished carpentry and related products and services. Our revenues increased by $7,999,018, or 383.7%, to $10,083,472 for the three months ended March 31, 2025 from $2,084,454 for the three months ended March 31, 2024. The increase in revenues was primarily attributed to the acquisition of CMD, which contributed $8,221,120 to revenues for the three months ended March 31, 2025.
Cost of revenues . Our cost of revenues consists of finished goods, lumber, hardware and materials and plus direct labor and related costs, net of any material discounts from vendors. Cost of revenues increased by $3,692,291, or 312.2%, to $4,874,990 for the three months ended March 31, 2025 from $1,182,699 for the three months ended March 31, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $3,898,835 to cost of revenues for the three months ended March 31, 2025. As a percentage of revenues, cost of revenues was 48.3% and 56.7% for the three months ended March 31, 2025 and 2024, respectively.
Personnel costs . Personnel costs include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and training costs. Our total personnel costs increased by $837,649, or 92.0%, to $1,748,240 for the three months ended March 31, 2025 from $910,591 for the three months ended March 31, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $1,520,149 to personnel costs for the three months ended March 31, 2025. As a percentage of revenue, personnel costs were 17.3% and 43.7% for the three months ended March 31, 2025 and 2024, respectively.
Depreciation and amortization . Our total depreciation and amortization expense increased by $179,280, or 104.2%, to $351,390 for the three months ended March 31, 2025 from $172,110 for the three months ended March 31, 2024. Such increase was primarily as a result of acquired intangibles in the acquisition of CMD on December 16, 2024.
General and administrative expenses . Our general and administrative expenses consist primarily of insurance expense, rent expense, management fees, advertising, bank fees, bad debt allowances, and other general expenses incurred in connection with general operations. Our total general and administrative expenses increased by $667,014, or 150.9%, to $1,108,912 for the three months ended March 31, 2025 from $441,898 for the three months ended March 31, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $633,243 to general and administrative expenses for the three months ended March 31, 2025. As a percentage of revenue, general and administrative expenses were 11.0% and 21.2% for the three months ended March 31, 2025 and 2024, respectively.
Professional fees . Our total professional fees decreased by $446,627, or 17.5%, to $2,098,562 for the three months ended March 31, 2025 from $2,545,189 for the three months ended March 31, 2024. Such decrease was primarily attributed to higher consulting fees, investor relations, and other public company related fees during the prior period, offset by the acquisition of CMD, which contributed $712,979 to professional fees for the three months ended March 31, 2025. As a percentage of revenue, professional fees were 20.8% and 122.1% for the three months ended March 31, 2025 and 2024, respectively.
Total other income (expense) . We had $200,745 in total other expense, net, for the three months ended March 31, 2025, as compared to other expense, net, of $7,527,076 for the three months ended March 31, 2024. Total other expense, net, for the three months ended March 31, 2025 consisted of interest expense of $1,123,576, amortization of debt discounts of $465,050, a loss on extinguishment of debt of $2,301,198, and a loss on change in fair value of derivative liabilities of $35,000, offset by a gain on change in fair value of warrant liabilities of $3,669,798, a gain on disposal of property and equipment of $53,554, and other income of $727. Total other expense, net, for the three months ended March 31, 2024 consisted of interest expense of $1,001,770, amortization of debt discounts of $3,592,107, a loss on extinguishment of debt of $421,875, a loss on change in fair value of derivative liabilities of $612,462, and a loss on change in fair value of warrant liabilities of $1,902,200, offset by other income of $3,338.
Income tax provision . We had an income tax benefit of $72,000 and $89,000 for the three months ended March 31, 2025 and 2024, respectively.
Net loss from continuing operations . As a result of the cumulative effect of the factors described above, we had a net loss from continuing operations of $227,367 for the three months ended March 31, 2025, as compared to $10,606,109 for the three months ended March 31, 2024.
29
Liquidity and Capital Resources
As of March 31, 2025, we had cash and cash equivalents of $1,108,477 and restricted cash of $1,358,968. To date, we have financed our operations primarily through revenue generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders.
Management plans to address the above as needed by, securing additional bank lines of credit, and obtaining additional financing through debt or equity transactions. Management has implemented tight cost controls to conserve cash.
The ability of our company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and to eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if our company is unable to continue as a going concern. If our company is unable to obtain adequate capital, it could be forced to cease operations.
We believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. We will seek growth as funds become available from cash flow, borrowings, additional capital raised privately or publicly, or seller retained financing.
Our primary use of funds will be for future acquisitions, public company expenses including regular distributions to our shareholders, investments in future acquisitions, payments to our manager pursuant to the management services agreement, potential payment of profit allocation to our manager and potential put price to our manager in respect of the allocation shares it owns. The management fee, expenses, potential profit allocation and potential put price are paid before distributions to shareholders and may be significant and exceed the funds we hold, which may require us to dispose of assets or incur debt to fund such expenditures. See Item 1. “Business—Our Manager” included in the Annual Report for more information concerning the management fee, the profit allocation and put price.
The amount of management fee paid to our manager by us is reduced by the aggregate amount of any offsetting management fees, if any, received by our manager from any of our businesses. As a result, the management fee paid to our manager may fluctuate from quarter to quarter. The amount of management fee paid to our manager may represent a significant cash obligation. In this respect, the payment of the management fee will reduce the amount of cash available for distribution to shareholders.
Our manager, as holder of 100% of our allocation shares, is entitled to receive a twenty percent (20%) profit allocation as a form of preferred equity distribution, subject to an annual hurdle rate of eight percent (8%), as follows. Upon the sale of a subsidiary, our manager will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high-water mark plus (ii) the subsidiary’s net income since its acquisition by us exceeds the 8% hurdle rate. The 8% hurdle rate is the product of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by us, multiplied by (iii) the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according to U.S. generally accepted accounting principles, or GAAP, with certain adjustments). In certain circumstances, after a subsidiary has been held for at least 5 years, our manager may also trigger a profit allocation with respect to such subsidiary (determined based solely on the subsidiary’s net income since its acquisition). The amount of profit allocation may represent a significant cash payment and is senior in right to payments of distributions to our shareholders. Therefore, the amount of profit allocation paid, when paid, will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. See Item 1. “Business—Our Manager—Our Manager as an Equity Holder—Manager’s Profit Allocation” included in the Annual Report for more information on the calculation of the profit allocation.
Our operating agreement also contains a supplemental put provision, which gives our manager the right, subject to certain conditions, to cause us to purchase the allocation shares then owned by our manager upon termination of the management services agreement. The amount of put price under the supplemental put provision is determined by assuming all of our subsidiaries are sold at that time for their fair market value and then calculating the amount of profit allocation would be payable in such a case. If the management services agreement is terminated for any reason other than our manager’s resignation, the payment to our manager could be as much as twice the amount of such hypothetical profit allocation. As is the case with profit allocation, the calculation of the put price is complex and based on many factors that cannot be predicted with any certainty at this time. See Item 1. “Business—Our Manager—Our Manager as an Equity Holder—Supplemental Put Provision” included in the Annual Report for more information on the calculation of the put price. The put price obligation, if our manager exercises its put right, will represent a significant cash payment and is senior in right to payments of distributions to our shareholders. Therefore, the amount of put price will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions.
30
Summary of Cash Flow
The following table provides detailed information about our net cash flows from continuing operations for the periods indicated:
|
Three Months Ended
March 31, |
||||||||
| 2025 | 2024 | |||||||
| Net cash provided by (used in) operating activities from continuing operations | $ | 765,599 | $ | (3,920,506 | ) | |||
| Net cash provided by investing activities | 43,760 | - | ||||||
| Net cash provided by (used in) financing activities from continuing operations | (2,157,968 | ) | 3,464,188 | |||||
| Net change in cash and cash equivalents and restricted cash | (1,348,609 | ) | (456,318 | ) | ||||
| Cash and cash equivalents at the beginning of period | 3,816,054 | 610,182 | ||||||
| Cash and cash equivalents and restricted cash at the end of period | $ | 2,467,445 | $ | 153,864 | ||||
Net cash provided by operating activities from continuing operations was $765,599 for the three months ended March 31, 2025, as compared to net cash used in operating activities from continuing operations of $3,920,506 for the three months ended March 31, 2024. Significant factors affecting the increase in net cash used in operating activities were decreased net loss and increased accounts payable and accrued expenses, offset by decreased contract assets.
Net cash provided by investing activities was $43,760 for the three months ended March 31, 2025, as compared to $0 for the three months ended March 31, 2024. The increase in the net cash used in investing activities was primarily a result of the proceeds received in the disposal of property and equipment.
Net cash used in financing activities from continuing operations was $2,157,968 for the three months ended March 31, 2025, as compared to net cash provided by financing activities from continuing operations of $3,464,188 for the three months ended March 31, 2024. The decrease in the net cash provided by financing activities was primarily a result of no debt or equity offerings, as well as repayments of notes payable, during the current period.
Debt
The following table shows aggregate figures for our total debt that is coming due in the short and long term as of March 31, 2025. For a complete description of the terms of our outstanding debt, please see Note 11 to our condensed consolidated financial statements above and Notes 14, 15 and 16 to our consolidated financial statements for the years ended December 31, 2024 and 2023 included in the Annual Report.
| Short-Term | Long-Term | Total Debt | ||||||||||
| Notes Payable | ||||||||||||
| Vehicle loans | $ | 38,810 | $ | 1,408 | $ | 40,218 | ||||||
| 6% Subordinated promissory note | 500,000 | - | 500,000 | |||||||||
| Purchase and sale of future revenues loan | 687,750 | - | 687,750 | |||||||||
| 12% subordinated promissory note for services | 500,000 | - | 500,000 | |||||||||
| 20% OID subordinated promissory notes | 4,076,898 | - | 4,076,898 | |||||||||
| 25% OID subordinated promissory note | 1,455,600 | - | 1,455,600 | |||||||||
| Total notes payable | 7,259,058 | 1,408 | 7,260,466 | |||||||||
| Less: debt discounts | (73,792 | ) | - | (73,792 | ) | |||||||
| Total notes payable, net | 7,185,266 | 1,408 | 7,186,674 | |||||||||
| Related Party Notes Payable | ||||||||||||
| Related party promissory note | 578,290 | - | 578,290 | |||||||||
| Convertible Notes Payable | ||||||||||||
| Secured convertible promissory notes | 22,819,184 | - | 22,819,184 | |||||||||
| Less: debt discounts | (666,760 | ) | - | (666,760 | ) | |||||||
| Total convertible notes payable, net | 22,152,424 | - | 22,152,424 | |||||||||
| Finance Leases | ||||||||||||
| Finance leases | 184,605 | 376,074 | 560,679 | |||||||||
| Total combined debt | $ | 30,841,137 | $ | 377,482 | $ | 31,218,619 | ||||||
| Less: combined debt discounts | (740,552 | ) | - | (740,552 | ) | |||||||
| Total combined debt, net | $ | 30,100,585 | $ | 377,482 | $ | 30,478,067 | ||||||
31
Contractual Obligations
Our principal commitments consist mostly of obligations under the loans described above and other contractual commitments described below.
We have engaged our manager to manage our day-to-day operations and affairs. Our relationship with our manager will be governed principally by the following agreements:
| ● | the management services agreement and offsetting management services agreements relating to the management services our manager will perform for us and the businesses we own and the management fee to be paid to our manager in respect thereof; and |
| ● | our operating agreement setting forth our manager’s rights with respect to the allocation shares it owns, including the right to receive profit allocations from us, and the supplemental put provision relating to our manager’s right to cause us to purchase the allocation shares it owns. |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a result of this evaluation, our chief executive officer and chief financial officer have concluded that, because of the material weaknesses described in Item 9A “Controls and Procedures” of the Annual Report, which we are still in the process of remediating as of March 31, 2025, our disclosure controls and procedures were not effective as of March 31, 2025. Investors are directed to Item 9A of the Annual Report for the description of these weaknesses. Notwithstanding the identified material weaknesses, management, including our chief executive officer and chief financial officer, believes the consolidated financial statements included in this report fairly represent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with GAAP.
32
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure
Changes in Internal Control Over Financial Reporting
Other than the remedial changes described below, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
As disclosed in the Annual Report, our management has identified the steps necessary to address the material weaknesses, and in the first quarter of 2025, we continued to implement the following remedial procedures:
| ● | increasing personnel resources and technical accounting expertise within the accounting function (until we have sufficient technical accounting resources, we have engaged external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP); |
| ● | engaging internal control consultants to assist us in performing a financial reporting risk assessment as well as identifying and designing our system of internal controls necessary to mitigate the risks identified; and |
| ● | preparation of written documentation of our internal control policies and procedures. |
We continue to enhance corporate oversight over process-level controls and structures to ensure that there is an appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. While management believes that the steps that we have taken and plan to take will be sufficient to remediate the identified material weaknesses and improve the overall system of internal control over financial reporting, the material weaknesses cannot be considered remediated until the applicable relevant controls operate for a sufficient period of time. As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
33
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We have not sold any equity securities during the three months ended March 31, 2025 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.
We did not repurchase any of our common shares during the three months ended March 31, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS.
34
| * | Filed herewith |
| ** | Furnished herewith |
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: May 15, 2025 | 1847 HOLDINGS LLC | |
| /s/ Ellery W. Roberts | ||
| Name: | Ellery W. Roberts | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Vernice L. Howard | ||
| Name: | Vernice L. Howard | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
36