LBRA 10-K & 10-Q changes, risk factors and insider trading
1847 Holdings LLC · OTC · Services-Management Consulting Services · CIK 1599407 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our common shares are quoted on the OTCID Market, which may have an unfavorable impact on our share price and liquidity.”
Removed heading “We may not be able to maintain a listing of our common shares on NYSE American.”
Largest changes
“Our common shares are listed on NYSE American, and we must meet certain financial and liquidity criteria to maintain the listing of our common shares on NYSE American. If we fail to meet any listing standards or if we violate any listing requirements, our common shares may be delisted. …”see in full comparison
“Our common shares are quoted on the OTCID Market, which may have an unfavorable impact on our share price and liquidity.”see in full comparison
“Although we do not believe that we will require additional cash to continue our operations over the next twelve months, there are no assurances that we will be able to raise our revenues to a level which supports profitable operations and provides sufficient funds to pay obligations in the future. Our prior losses have had, and will continue to have, an adverse effect on our financial condition. …”see in full comparison
see in full comparisonAlthoughTheour audited financial statements for the year ended December 31, 2024 were prepared under the assumption that we would continue our operations as a going concern, thereport of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31,20242025 contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time.We have generated losses since inception and have relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related party debt to support cashflow from operations.As of December 31,2024,2025, we had cash and cash equivalents of$2,502,450,$1,987,301,restrictedancashaccumulated deficit of$1,358,968$109,599,852, and atotalworking capital deficit of$111,927,759.$43,065,927. For the yearendedthenDecember 31, 2024,ended, weincurred angenerated operatinglossincome of$11,998,244$3,981,712 andusednet cashflowsprovidedinby operating activities of$14,635,636.$3,359,054.
“Our consolidated financial statements have been prepared assuming our company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our 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 might result should we be unable to continue as a going concern. If we are unable to obtain adequate capital, we could be forced to cease or curtail our operations. …”see in full comparison
“Notwithstanding current-year operating income and positive operating cash flows, we do not expect to have sufficient cash and other liquid resources to meet our obligations as they become due over the next twelve months, primarily due to the magnitude of our current liabilities and significant near-term debt maturities. These conditions, considered in the aggregate, raise substantial doubt about our company’s ability to continue as a going concern within one year after the date our consolidated financial statements are issued.”see in full comparison
Full comparison: every changed paragraph (15)
AlthoughThe our audited financial statements for
the year ended December 31, 2024 were prepared under the assumption that we would continue our operations as a going concern, the
report of our independent registered public accounting firm that
accompanies our financial statements for the year ended December 31,
2024 2025 contains a going concern qualification in which such firm
expressed substantial doubt about our ability to continue as a going concern,
based on the financial statements at that time. We have generated losses since inception and have relied on cash on hand, sales of securities,
external bank lines of credit, and issuance of third-party and related party debt to support cashflow from operations. As of December
31, 2024,2025, we had cash and cash equivalents of $2,502,450,$1,987,301, restrictedan cashaccumulated deficit of $1,358,968$109,599,852, and a total working capital deficit of $111,927,759.$43,065,927.
For the year endedthen December 31, 2024,ended, we incurred angenerated operating lossincome of $11,998,244$3,981,712 and usednet cash flowsprovided inby operating activities of $14,635,636.$3,359,054.
Notwithstanding current-year operating income and positive operating cash flows, we do not expect to have sufficient cash and other liquid resources to meet our obligations as they become due over the next twelve months, primarily due to the magnitude of our current liabilities and significant near-term debt maturities. These conditions, considered in the aggregate, raise substantial doubt about our company’s ability to continue as a going concern within one year after the date our consolidated financial statements are issued.
Management plans to address these conditions by securing additional capital through debt and equity financing, including potential public and private offerings of our securities, evaluating opportunities to refinance or extend the maturity of existing debt obligations, implementing reductions in discretionary operating expenditures to the extent practicable, and exploring strategic alternatives with respect to its operating subsidiaries to reduce debt obligations. Management has evaluated whether it is probable that these plans would be effectively implemented and, if so, whether they would mitigate the relevant conditions or events that raise substantial doubt within the next twelve months. Because these plans are subject to market conditions and reliance on third parties, and because there is no assurance that we will be able to raise capital on acceptable terms or at all, management has concluded that substantial doubt about our company’s ability to continue as a going concern has not been alleviated as of the date our consolidated financial statements are issued.
Our consolidated financial statements have been prepared assuming our company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our 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 might result should we be unable to continue as a going concern. If we are unable to obtain adequate capital, we could be forced to cease or curtail our operations. If we cannot continue as a going concern, our shareholders would likely lose most or all of their investment in us.
Notwithstanding the foregoing, management believes,
based on our operating plan, that current working capital and current and expected additional financing is sufficient to fund operations
and satisfy our obligations as they come due for at least one year from the financial statement issuance date. However,
we do 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.
Although we do not believe that we will require
additional cash to continue our operations over the next twelve months, there are no assurances that we will be able to raise our revenues
to a level which supports profitable operations and provides sufficient funds to pay obligations in the future. Our prior losses have
had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to acquire
additional businesses may be dependent on our ability to obtain additional financing in the future, and there are no assurances that such
financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do
not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the
future through our operations, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue
operations. If we cannot continue as a going concern, our shareholders would likely lose most or all of their investment in us.
While CMD and Kyle’s
purchase most of their materials from domestic suppliers, much of the wood used in such materials originates from Canada. InnovativeICD Cabinetspurchases
purchases products from South Vietnam. If the U.S. continues to impose new tariffs, this may cause supply chain disruptions and could
further escalate
our costs. We may determine to increase our sales prices in order to pass these increased costs to our customers. Kyle’s
has a
short lead-time (30 days) and bids projects based on material costs, lowering the risk to profitability. CMD has a longer lead-time
(6
to 24 months) and has allowances in its contracts for change-orders if costs increase, allowing for CMD to recover most of the cost increases
increases created by economic factors. However, in the event we determine to pass increased costs to our customers, our customers may
reduce their
orders from us, which could negatively affect our business, profitability and operating results. We are closely monitoring
these developments
and evaluating strategies to mitigate potential impacts.
Our common shares are quoted on the OTCID Market, which may have an unfavorable impact on our share price and liquidity.
Our common shares are quoted on the OTCID Market operated by OTC Markets Group Inc. The OTCID Market is a significantly more limited market than the New York Stock Exchange or The Nasdaq Stock Market. The quotation of our shares on the OTCID Market may result in a less liquid market available for existing and potential shareholders to trade our common shares, could depress the trading price of our common shares and could have a long-term adverse impact on our ability to raise capital in the future.
We may not be able to maintain a listing
of our common shares on NYSE American.
Our common shares are listed on NYSE American,
and we must meet certain financial and liquidity criteria to maintain the listing
of our common shares on NYSE American.
If we fail to meet any listing standards or if we violate any listing requirements, our common shares may
be delisted. For instance, we have been advised by NYSE American that our common shares may be delisted if our share price falls below
$0.10, and due to new NYSE American rules limiting the number of reverse splits that companies may effectuate over a two-year period to
less than a cumulative ratio of 200 shares to 1, we will be unable to effectuate an additional reverse share split until at least July
2026, thereby increasing the likelihood that our share price may fall below $0.10. Furthermore, we have a shareholders’ deficit
of approximately $96 million as of December 31, 2024, which NYSE American could also use as a basis to delist our common shares.
Accordingly, we cannot guarantee that we will continue to meet all listing standards
or that we will not violate any listing requirements in the future. In addition,
our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits
of such listing.
A
delisting of our common shares from NYSE American may
materially impair our shareholders’ ability to buy and sell our common shares and
could have an adverse effect on the market price of, and the efficiency of the trading market for, our common shares.
The delisting of our common shares could significantly impair our ability
to raise capital and the value of your investment.
We cannot predict what effect, if any, future
future sales of our common shares, or the availability of common shares for future sale, will have on the market price of our common shares.
shares. Notably, we are obligated to issue 453,4552,267,273 common shares upon the conversion of our outstanding series A senior convertible preferred
preferred shares, 5,574 common shares upon the conversion of our outstanding series C senior convertible preferred shares, 32,274
common shares
upon the conversion of our outstanding series D senior convertible preferred sharesshares, and 174,186,2066,630,086 common shares upon the conversion of our
outstanding series F convertible preferred shares, and 1,266,178,648 common shares issuable upon the exercise of outstanding warrants
at a weighted averageweighted-average exercise price of $0.53$0.07 per share (excludingsubject any decrease
to the exercise price and increase in the number of shares as a result of antidilution adjustments contained in certain outstanding
warrantsadjustment). We are also obligedobligated to issue 561,139,204 common shares
upon the conversion of secured convertible promissory notes in the aggregate
principal amount of $22,819,184,$22,751,184 and accrued interest, which
are convertible into our common shares at a conversion price of equal to the lowest daily
volume weighted price of our common shares during the five trading days prior to conversion$0.054 (subject to adjustment). We have also
reserved 5,000,0008,095,933 common shares
for issuance under our 2023 Equity Incentive Plan. The issuance of any of the foregoing shares would result in significant dilution to
our existing shareholders and could adversely affect the market price of our common shares.
Our series A senior convertible preferred
shares, series C senior convertible preferred shares and series D senior convertible preferred shares are senior to our common shares
as to distributions and in liquidation, which could limit our ability to make distributions
to our common shareholders.
Holders
of our series A senior convertible preferred
shares are entitled to quarterly dividends, payable in cash or in common shares, at a rate
per annum of 24.0% of the stated value ($2.42
per share), holders of our series C senior convertible preferred shares are entitled to
accruing dividends, payable upon conversion or
liquidation, at a rate per annum of 6.0% of the stated value ($10.00 per share), and holders
of our series D senior convertible preferred
shares are entitled to accruing dividends, payable upon conversion or liquidation, at a
rate per annum of 10.0% of the stated value ($0.339
per share). In addition, upon any liquidation of our company or its subsidiaries,
each holder of outstanding series A senior convertible
preferred shares will be entitled to receive an amount of cash equal to 115% of the stated value, plus an amount of cash equal to all
accumulated accrued and unpaid dividends thereon (whether or not declared), and each holder of outstanding series C senior convertible
preferred shares and series D senior convertible preferred shares will be entitled to receive an amount of cash equal to 100%115% of
the stated
value, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared), each
holder of outstanding series D senior convertible preferred shares, series D senior convertible preferred shares and series F convertible
preferred shares will be entitled to receive an amount of cash equal to 100% of the stated value ($1,000 per share in the case of our
series F convertible preferred shares), plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether
or not declared), all before any
payment shall be made to or set apart for the holders of our common shares. This could limit our ability
to make regular distributions
to our common shareholders or distributions upon liquidation.
Management's Discussion & Analysis (MD&A)
New heading “Cost of Revenues and Gross Profit”
New heading “Personnel Costs”
New heading “Corporate Services”
New heading “Depreciation and Amortization”
New heading “General and Administrative Expenses”
New heading “Corporate Services”
New heading “Professional Fees”
New heading “Corporate Services”
New heading “Impairment of Goodwill”
New heading “Loss on Abandonment of Right-of-Use Asset”
New heading “Total Other Income (Expense)”
New heading “Income Tax Benefit (Provision)”
New heading “Net Income (Loss) from Continuing Operations”
New heading “EBITDA and Adjusted EBITDA”
New heading “Reconciliation of EBITDA and Adjusted EBITDA”
Removed heading “Recent Developments”
Removed heading “Amendment to Operating Agreement”
Removed heading “Warrant Exchange”
Removed heading “Public Offering of Common Shares and Pre-Funded Warrants”
Removed heading “Public Offering of Units”
Removed heading “Private Placement of Units”
Largest changes
“We define EBITDA as earnings before interest, taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA before other income (expense), gain on disposal of property and equipment, amortization of debt discounts, loss on settlement of debt, loss on extinguishment of debt, gain (loss) on change in fair value of warrant liabilities, gain on change in fair value of derivative liabilities, impairment of goodwill and intangible assets, loss on abandonment of right-of-use asset, non-recurring professional and acquisition-related fees, and management fees. …”see in full comparison
Goodwill. In accordance with ASCsee in full comparisonTopic350, “Intangibles — Goodwill and Other,” we test goodwill for impairment annually on October 1, or more frequently when events or circumstances indicate an impairment may have occurred. When assessingthegoodwillrecoverabilityforof goodwill,impairment, we may firstassessperform a qualitativefactorsassessmentintodeterminingdetermine whether it is more likely than not(that is, a likelihood of more than 50%)that the fair value of a reporting unit is less than its carrying amount. The qualitative assessmentis based on severalconsiders factors, including the current operating environment, industry and market conditions, and overall financial performance. If we bypass the qualitative assessment, orif weconclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a quantitative assessment by comparing the estimated fair value ofathe reporting unitwithto its carrying amount. We estimate the fair value ofourits reporting unitsbased onusing the present value of estimated future cashflows.flows,Considerablewhich requires considerable management judgmentisregardingnecessary to evaluatethe impact of operating and macroeconomic changes.changes,Significantandassumptionsto estimate the future cash flows used to measure fair value. Our estimates of future cash flows considerinclude past performance, current and anticipated market conditions,and internal projections and operating plans, includingforecasted growthratesrates, and estimated discount rates. If the fair value of a reporting unit is less than its carrying amount,a reporting unit is considered impaired, andan impairment charge is recognized for the difference.
“Management plans to address these conditions by securing additional capital through debt and equity financing, including potential public and private offerings of our securities, evaluating opportunities to refinance or extend the maturity of existing debt obligations, implementing reductions in discretionary operating expenditures to the extent practicable, and exploring strategic alternatives with respect to its operating subsidiaries to reduce debt obligations. …”see in full comparison
“Notwithstanding current-year operating income and positive operating cash flows, we do not expect to have sufficient cash and other liquid resources to meet our obligations as they become due over the next twelve months, primarily due to the magnitude of our current liabilities and significant near-term debt maturities. These conditions, considered in the aggregate, raise substantial doubt about our company’s ability to continue as a going concern within one year after the date our consolidated financial statements are issued.”see in full comparison
see in full comparisonImpairment of goodwill and intangible assets.ForFortheyearyears ended December 31, 2025 and 2024, we recorded impairments of goodwill of $0 andintangible assets of$679,175,as compared to $10,456,087 for the year ended December 31, 2023.respectively.
Full comparison: every changed paragraph (126)
Recent Developments
Amendment to Operating Agreement
On March 11, 2025, our manager entered into an
amendment to our operating agreement to increase the number of common shares that we are authorized to issue from 500 million shares to
2 billion shares.
Warrant Exchange
As described below, on October 30, 2024, we issued
series A warrants to certain investors, most of which were exercised shortly after issuance. On March 11, 2025, the exercise price of
the remaining series A warrants was reduced to $0.81 per share, with a corresponding increase in the number of series A warrants. Following
this adjustment, the number of series A warrants outstanding was increased to 632,990, with each series A warrant exercisable for two
common shares, or an aggregate of 1,265,980 common shares. Following the adjustment, a holder exercised 193,348 series A warrants for
386,696 common shares, or the Exercised Shares. Accordingly, an aggregate of 439,642 series A warrants remained outstanding, or the Remaining
Warrants.
On March 25, 2025, we entered into cancellation
and exchange agreements with the holders of the Remaining Warrants and the Exercised Shares, pursuant to which such holders agreed to
exchange the Remaining Warrants and the Exercised Shares for an aggregate of 1,027 series F convertible preferred shares.
In connection with the cancellation and exchange
agreements, on March 25, 2025 we executed a share designation to establish the terms of the series F convertible preferred shares, or
the Share Designation. Pursuant to the Share Designation, we designated 1,027 of our preferred shares as series F convertible preferred
shares with a stated value of $1,000 per share. Following is a summary of the material terms of the series F convertible preferred shares:
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 us 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.
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 our company, before any payment or distribution of the assets of our 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 100% of the stated value ($1,000 per share). If, upon any liquidation,
the assets, or proceeds thereof, distributable among the holders of the series F convertible preferred shares shall be insufficient to
pay in full the preferential amount payable to the holders of the series F convertible preferred shares and liquidating payments on any
other shares of any class or series of parity securities as to the distribution of assets on any liquidation, then such assets, or the
proceeds thereof, shall be distributed among the holders of series F convertible preferred shares and any such other parity securities
ratably in accordance with the respective amounts that would be payable on such series F convertible preferred shares and any such other
parity securities if all amounts payable thereon were paid in full.
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, we
shall not, and shall not permit any of our 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 our certificate of formation or 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 ($1,000 per share) by the conversion price of $0.1549 per
share. The conversion price is subject to standard adjustments in the event of any share splits, share combinations, share reclassifications,
dividends paid in common shares, sales of substantially all of our assets, mergers, consolidations or similar transactions, as well as
for subsequent issuances of common shares, or securities convertible into or exercisable or exchangeable for common shares, at a price
below the then conversion price; provided that a holder shall not be entitled to utilize a conversion price of less than $0.01 (subject
to standard adjustments for share splits, share combinations, recapitalizations and similar transactions). Notwithstanding the foregoing,
the aggregate number of common shares that we may issue upon conversion of the series F convertible preferred shares is limited to 5,385,291
shares (equal to 19.99% of our outstanding common shares prior to entry into the cancellation and exchange agreements) prior to obtaining
shareholder approval of the issuance of all common shares that may be issued upon conversion of the series F convertible preferred shares,
in accordance with NYSE American rules. Furthermore, we shall not effect any conversion of the series F convertible preferred shares,
and a holder shall not have the right to convert any portion of the series F convertible preferred shares, to the extent that, after giving
effect to the conversion, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the
number of common shares outstanding immediately after giving effect to the issuance of common shares issuable upon conversion. This limitation
may be waived (up to a maximum of 9.99%) by the holder in its sole discretion upon not less than sixty-one (61) days’ prior notice
to us.
Other Rights. Holders of series F convertible
preferred shares have no redemption, preemptive or subscription rights for additional securities of our company.
Following
the assignment of all of the assets
of Asien’s on February 26, 2024 as described under “—Discontinued Operations”
below, our manager ceased
to provide services to 1847 Asien for quarterly management fees. 1847 Asien expensed management fees of $50,000 and $300,000
for the years
year ended December 31, 2024 and 2023, respectively,2024, which is included in discontinued operations.
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 $375,000$500,000 and $500,000$375,000 for the years ended December 31, 20242025 and 2023,2024, respectively,
of which $125,000 is included in
discontinued operations for the yearsyear ended December 31, 2024 and 2023 due to the sale of High Mountain described
under “—Discontinued
Operations” below.
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 $175,000 and $225,000
for the yearsyear ended December
31, 2024 and 2023, respectively,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 $300,000 for the year ended December 31, 2025.
In addition, under our operating agreement, in the event of an acquisition of a target business or disposition of a subsidiary, our manager will receive a transaction fee of 2% of the aggregate purchase price, which percentage decreases if the purchase exceeds $50 million.
On
a consolidated basis, for the year ended December 31, 2025, we expensed total management fees of $1,100,000, and for the year ended December
31, 2024, we expensed total management fees from continued operations and discontinued operations of $2,267,000 and $350,000, respectively.
For the year ended December 31, 2023, we expensed total management fees from continued operations and discontinued operations of $633,333
and $691,667, respectively.
Following
the divestures described under “—Discontinued
Operations” below, we now haveoperate twothrough four reportable segments:
within two primary industries. Our four reportable segments are Kyle’s, ICD, CMD and Wolo. The following describes the primary
revenue-generating activities of each segment.
We
report all other business activities that are
not reportable in the foregoing segments in corporate services segment.services. We provide general corporate
services to our 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.
On
February 26, 2024, Asien’s entered into
a general assignment for the benefit of its creditors with SG Service Co., LLC. Pursuant
to the assignment, 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. Following the assignment, we retained no financial interest in Asien’s.
Accordingly, the results of operations
of Asien’s are reported as discontinued operations for the yearsyear ended December 31, 2024 and 2023.2024.
Our
company was a limited guarantor of the Loan
Agreement that was entered into on September 11, 2023 between the ICU Lender, 1847 ICU and
ICU Eyewear. 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 yearsyear ended December 31, 2024 and
2023.2024.
On
September 30, 2024, we entered into an asset
purchase agreement with 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 $1,358,968,$1,700,000, netwhich ofmay be used for certain post-closing adjustments.payments, Followingwhich we refer to as the sale,Holdback weAmount. retained no financial interest in High Mountain. Accordingly,During the results of
operations of High Mountain are reported as discontinued operations for the yearsyear ended December
31, 20242025, andwe 2023.recorded a $921,772 reduction to the Holdback Amount related to the resolution of post-closing working capital adjustments,
with the offsetting impact of this adjustment recognized in discontinued operations.
Total revenues. Our
total revenues
were $48,272,312 for the year ended December 31, 2025, as compared to $15,710,330 for the year ended December 31, 2024,2024.
The asfollowings comparedtables topresent $14,190,135our revenues by segment for the yearyears ended December 31, 2023.2025 and 2024:
Revenue from our construction operations is derived from contracts with customers for finish carpentry and related products and services, including doors, frames, trim, hardware, millwork, cabinetry, and specialty construction accessories.
The construction segment generates revenue through
the sale of finished carpentry and related products and services. Revenues from the construction segment increased by $2,321,335, or
24.1%, to $11,960,884 for the year ended December 31, 2024 from $9,639,549 for the year ended December 31, 2023. The increase
in revenues was primarily attributed to an increase in new multi-family projects and an increase in the average customer contract value.
The automotive supplies segment generates revenue through the design
and sale of horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), including vehicle emergency
and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. Revenues from the automotive supplies segment
decreased by $801,140, or 17.6%, to $3,749,446 for the year ended December 31, 2024 from $4,550,586 for the year ended December 31, 2023.
The decrease in revenues was primarily attributed to working capital constraints on inventory.
Cost of revenues. Our total cost
of revenues was $7,937,588 for the year ended December 31, 2024, as compared to $7,637,496 for the year ended December 31, 2023.
Cost of revenues for the construction segment
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 for the construction segment increased by $956,944, or 21.3%, to $5,439,723 for the year ended December 31,
2024 from $4,482,779 for the year ended December 31, 2023. Such increase was primarily attributed to the corresponding increase in revenues.
As a percentage of construction revenues, cost of revenues for the construction segment was 45.5% and 46.5% for the years ended December
31, 2024 and 2023, respectively.
Cost of revenues for the automotive supplies segment
consists of the costs of purchased finished goods plus freight and tariff costs. Cost of revenues for the automotive supplies segment
decreased by $656,852, or 20.8%, to $2,497,865 for the year ended December 31, 2024 from $3,154,717 for the year ended December 31, 2023.
Such decrease was primarily attributed to the corresponding decrease in revenues. As a percentage of automotive supplies revenues, cost
of revenues for the automotive supplies segment was 66.6% and 69.3% for the years ended December 31, 2024 and 2023, 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 were $6,538,872 for the year ended December 31, 2024, as compared to $4,990,561 for the year
ended December 31, 2023.
Personnel costs for the construction segment
increased by $752,966, or 24.7%, to $3,805,928 for the year ended December 31, 2024 from $3,052,962 for the year ended December 31, 2023.
Such increase was primarily attributed to increased employee headcount as a result of increased revenues and corporate wage allocations.
As a percentage of construction revenue, personnel costs for the construction segment were 31.8% and 31.7% for the years ended December
31, 2024 and 2023, respectively.
Personnel costs for the automotive supplies segment
increased by $17,507, or 1.9%, to $934,895 for the year ended December 31, 2023 from $917,388 for the year ended December 31, 2023. Such
increase was primarily attributed to increased benefit costs. As a percentage of automotive supplies revenues, personnel costs for the
automotive supplies segment were 24.9% and 20.2% for the years ended December 31, 2024 and 2023, respectively.
PersonnelRevenues
from costsKyle’s for the corporate services segment
increased by $777,838,$1,274,610, or 76.2%,24.0%, to $1,798,049$6,593,218 for the year ended December 31, 20242025 from $1,020,211$5,318,608 for the year
ended December 31, 2023.
2024. Such increase was primarily attributeddue to continued organic growth driven by increased benefitdemand costsin andthe accruedresidential management bonuses and wages.construction
market.
Revenues from ICD decreased by $5,702,441, or 99.4%, to $33,971 for the year ended December 31, 2025 from $5,736,412 for the year ended December 31, 2024. Such decrease was primarily due to the strategic repositioning of ICD’s operations during 2025, including the abandonment of its warehouse facility in Reno, Nevada and the relocation of operations, as we evaluate high-growth construction market opportunities.
Depreciation and amortization.
Our total depreciation and amortization expense decreased by $506,637, or 43.6%, to $655,658 for the year ended December 31, 2024 from
$1,162,295 for the year ended December 31, 2023. Such decrease was primarily as a result of impairments of intangible assets.
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
were $5,000,843 for the year ended December 31, 2024, as compared to $3,272,333 for the year ended December 31, 2023.
General and administrative expenses for the construction
segment increased by $272,590, or 18.5%, to $1,745,773 for the year ended December 31, 2024 from $1,473,183 for the year ended December
31, 2023. Such increase was primarily attributed to increased revenues, along with increases in rent and office expenditures.
As a percentage of construction revenue, general and administrative expenses for the construction segment were 14.6% and 15.3% for the
years ended December 31, 2024 and 2023, respectively.
General and administrative expenses for the automotive
supplies segment decreased by $82,879, or 8.7%, to $865,115 for the year ended December 31, 2024 from $947,994 for the year ended December
31, 2023. Such decrease was primarily attributed to decreased office expenditures. As a percentage of automotive supplies revenue, general
and administrative expenses for the automotive supplies segment were 23.1% and 20.8% for the years ended December 31, 2024 and 2023,
respectively.
General and administrative expenses for the corporate
services segment increased by $1,538,799, or 180.8%, to $2,389,955 for the year ended December 31, 2024 from $851,156 for the year ended
December 31, 2023. Such increase was primarily attributed to management fees from the sale of High Mountain that entitles our manager
to receive a 20% profit allocation and a transaction fee of 2.0% from the sale of High Mountain and purchase of CMD, offset by decreased
software and office expenditures.
ProfessionalRevenues
from fees. Our total professional
feesCMD were $6,896,438$40,467,946 for the year ended December 31, 2024,2025 asand compared to $2,378,190$905,864 for the yearperiod endedfrom December 16, 2024 (date of acquisition)
to December 31, 2023.2024.
Revenue from our automotive supplies operations is derived from the sale of horn and safety warning lights for cars, trucks, industrial equipment, and emergency vehicles.
Revenues from Wolo decreased by $2,572,269, or 68.6%, to $1,177,177 for the year ended December 31, 2025 from $3,749,446 for the year ended December 31, 2024. The decrease in revenues was primarily attributable to working capital constraints on inventory and the strategic repositioning of Wolo’s operations undertaken during 2025. Following a strategic review, we elected to retain and rebuild Wolo rather than divest and implemented a series of operational changes including the transition to a third-party logistics model, and a refocusing of commercial efforts on e-commerce growth channels. These actions, while necessary to establish a leaner and more sustainable operating model, resulted in reduced product availability and revenue during 2025. We believe these changes may position Wolo for improved profitability going forward.
Cost of Revenues and Gross Profit
Our total cost of revenues was $24,354,373 for the year ended December 31, 2025, as compared to $7,937,588 for the year ended December 31, 2024. Accordingly, our total gross profit was $23,917,939 for the year ended December 31, 2025, as compared to $7,772,742 for the year ended December 31, 2024.
Cost of revenues from our construction operations primarily consists of direct materials, including doors, frames, trim, hardware, millwork, and cabinetry, direct labor and subcontractor costs, and other costs directly attributable to contract performance.
Cost of revenues for Kyle’s increased by $640,728, or 20.9%, to $3,704,185 for the year ended December 31, 2025 from $3,063,457 for the year ended December 31, 2024, consistent with the increase in revenues. Accordingly, gross profit for Kyle’s increased by $633,882, or 28.1%, to $2,889,033 for the year ended December 31, 2025 from $2,255,151 for the year ended December 31, 2024. Gross margin for Kyle’s improved to 43.8% for the year ended December 31, 2025 from 42.4% for the year ended December 31, 2024, reflecting operating leverage as revenue growth outpaced the increase in direct material and labor costs.
Cost of revenues for ICD decreased by $1,985,083, or 99.9%, to $1,723 for the year ended December 31, 2025 from $1,986,806 for the year ended December 31, 2024, consistent with the decrease in revenues. Accordingly, gross profit for ICD decreased by $3,717,358, or 99.1%, to $32,248 for the year ended December 31, 2025 from $3,749,606 for the year ended December 31, 2024. Gross margin for ICD is not meaningful for comparative purposes given the minimal revenue generated during the operational repositioning period.
Cost of revenues for CMD was $19,541,606 for the year ended December 31, 2025 and $389,460 for the period from December 16, 2024 (date of acquisition) to December 31, 2024. Accordingly, gross profit for CMD was $20,926,340 for the year ended December 31, 2025 and $516,404 for the period from December 16, 2024 (date of acquisition) to December 31, 2024. Gross margin for CMD was 51.7% for the year ended December 31, 2025. The reported gross margin of 57.0% for the period from December 16, 2024 (date of acquisition) to December 31, 2024 is not representative of CMD’s normalized cost structure given it reflects only approximately 16 days of operations following acquisition. On a full-year proforma basis, CMD’s gross margin improved to 51.7% in 2025 from 44.3% in 2024, reflecting operating leverage as revenue grew 31.5% from 2024, with direct costs growing at a lower rate.
Cost of revenue from our automotive supplies operations primarily consists of the costs of purchased finished goods, inbound freight and tariff costs.
Cost of revenues for Wolo decreased by $1,391,006, or 55.7%, to $1,106,859 for the year ended December 31, 2025 from $2,497,865 for the year ended December 31, 2024, consistent with the decrease in revenues. Accordingly, gross profit for Wolo decreased by $1,181,263, or 94.4%, to $70,318 for the year ended December 31, 2025 from $1,251,581 for the year ended December 31, 2024. Gross margin for Wolo decreased to 6.0% for the year ended December 31, 2025 from 33.4% for the year ended December 31, 2024, primarily due to working capital constraints on inventory and reduced product availability during the operational repositioning period, which resulted in fixed product costs being absorbed over a significantly lower revenue base.
Personnel Costs
Personnel costs include employee salaries and bonuses, and related payroll taxes, as well as health insurance premiums, 401(k) contributions, and training costs. Our total personnel costs were $8,174,368 for the year ended December 31, 2025, as compared to $6,538,872 for the year ended December 31, 2024.
Professional feesPersonnel
costs for theKyle’s construction segment
decreasedincreased by $39,282,$49,421, or 25.5%,4.2%, to $114,731$1,237,937 for the year ended December 31, 20242025 from $154,013$1,188,516 for the year
ended December 31, 2023.
2024. Such decreaseincrease was primarily attributeddue to decreasedincreased consultingheadcount fees.to support revenue growth. As a percentage of constructionrevenues,
personnel revenue, professional feescosts for the
construction segmentKyle’s were 1.0%18.8% and 1.6%22.3% for the years ended December 31, 20242025 and 2023,2024, respectively.
Professional feesPersonnel
costs for theICD automotive supplies
segment increaseddecreased by $25,790,$2,639,299, or 13.1%,99.2%, to $222,360$21,760 for the year ended December 31, 20242025 from $196,570$2,661,059 for the year ended December
31, 31,
2023.2024. Such increasedecrease was primarily attributeddue to increasedthe consultingreduction fees.in workforce resulting from the operational repositioning described above.
As a percentage of automotiverevenues, suppliespersonnel revenue, professional
feescosts for the automotive supplies segmentICD were 5.9%64.1% and 4.3%46.4% for the years ended December 31, 20242025 and 2023,2024, respectively.
Personnel costs for CMD were $6,582,923 for the year ended December 31, 2025 and $310,953 for the period from December 16, 2024 (date of acquisition) to December 31, 2024. As a percentage of revenues, personnel costs for CMD were 16.3% and 34.3% for the year ended December 31, 2025 and for the period from December 16, 2024 (date of acquisition) to December 31, 2024, respectively.
Personnel costs for Wolo decreased by $761,610, or 68.7%, to $347,069 for the year ended December 31, 2025 from $1,108,679 for the year ended December 31, 2024. Such decrease was primarily due to the reduction in workforce in transition to a third-party logistics model. As a percentage of revenues, personnel costs for Wolo were 29.5% and 29.6% for the years ended December 31, 2025 and 2024, respectively.
Corporate Services
Personnel costs for the corporate services segment were $(15,321) for the year ended December 31, 2025 compared to $1,269,665 for the year ended December 31, 2024. Corporate personnel costs reflect intercompany allocations of corporate compensation costs to the operating subsidiaries, which eliminate in consolidation, resulting in a net credit balance for the year ended December 31, 2025.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
New heading “Sale Process for CMD”
New heading “Income Tax Benefit (Provision)”
New heading “Net Income (Loss) from Continuing Operations”
New heading “Comparison of the Six Months Ended June 30, 2026 and 2025”
New heading “Cost of Revenues and Gross Profit”
New heading “Personnel Costs”
New heading “Depreciation and Amortization”
New heading “General and Administrative Expenses”
New heading “Professional Fees”
New heading “Total Other Income (Expense)”
Removed heading “Corporate Services”
Removed heading “Corporate Services”
Removed heading “Corporate Services”
Largest changes
“As previously disclosed, during the first quarter of 2026, our Board of Directors approved a plan to actively market CMD for sale, and CMD has been classified as held for sale and as discontinued operations. We are currently evaluating multiple non-binding offers from prospective buyers, none of which is subject to exclusivity. There can be no assurance that a definitive agreement will be reached or that any transaction will be completed on terms acceptable to us or at all. See Note 2—Liquidity and Going Concern Assessment for additional information.”see in full comparison
Full comparison: every changed paragraph (89)
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
Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities
and Exchange Commission (“SEC”) on March 31, 2026, 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.
Recent Developments
Sale Process for CMD
As previously disclosed, during the first quarter of 2026, our Board of Directors approved a plan to actively market CMD for sale, and CMD has been classified as held for sale and as discontinued operations. We are currently evaluating multiple non-binding offers from prospective buyers, none of which is subject to exclusivity. There can be no assurance that a definitive agreement will be reached or that any transaction will be completed on terms acceptable to us or at all. See Note 2—Liquidity and Going Concern Assessment for additional information.
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
and six months ended MarchJune 31,30, 2026.
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 for three months ended MarchJune 31,30, 2026 and 2025 and $250,000 for the six months ended June 30, 2026 and 2025.
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 MarchJune 31,30, 2026 and
2025 and $150,000 for the six months ended June 30, 2026 and 2025.
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 MarchJune 31,30, 2026 and
2025 and $150,000 for the six months ended June 30, 2026 and 2025, which is included in discontinued operations.
On a consolidated basis, our company expensed
total management fees from continuing operations and discontinued operations of $200,000 and $75,000, respectivelyrespectively, for the three months
ended MarchJune 31,30, 2026 and 2025.2025 and $400,000 and $150,000 for the six months ended June 30, 2026 and 2025, respectively.
Comparison of the Three Months Ended
June March
31,30, 2026 and 2025
The following tabletables sets forthpresent key components of
of our results of continuing operations during the three months ended MarchJune 31,30, 2026 and 2025, both in dollars and as a percentage of our
our revenues.
Our total revenues were $1,168,408$1,567,130 for the three
months ended MarchJune 31,30, 2026, as compared to $2,770,791$1,791,544 for the three months ended MarchJune 31,30, 2025. The followingsfollowing tables present our revenues
by segment for the three months ended MarchJune 31,30, 2026 and 2025:
Revenues from Kyle’s decreased by $760,822,$89,615,
or 40.9%,5.8%, to $1,101,530$1,459,511 for the three months ended MarchJune 31,30, 2026 from $1,862,352$1,549,126 for the three months ended MarchJune 31,30, 2025. Such a decrease
was primarily attributable to the timing of new contract awards and the commencement of related performance obligations. Revenue from
Kyle’s construction contracts is recognized over time as costs are incurred, and the volume of active contracts in the firstsecond quarter
of 2026 reflects a temporary reduction in new project starts compared to the prior year period. Management expects revenue to recover
as newly awarded contracts advance toward completion and additional contract awards are obtained.
ICD generated no revenues duringfor the three months
ended MarchJune 31,30, 20262026, oras compared to $33,971 for the three months ended June 30, 2025, as we continued the operational repositioning of
ICD’s business following the closure of its warehouse
facility in 2025. Management is evaluating strategic alternatives for ICD’s
operations going forward.
Revenues from Wolo decreased by $841,561,$100,828, or
92.6%,48.4%, to $66,878$107,619 for the three months ended MarchJune 31,30, 2026 from $908,439$208,447 for the three months ended MarchJune 31,30, 2025. The decrease in revenues
revenues reflects the continued transition of Wolo’s business model following the strategic repositioning undertaken during 2025, which
which included the transition to a third-party logistics model and a refocusing of commercial efforts on e-commerce growth channels. Revenue
Revenue during the firstsecond quarter of 2026 reflects the early stages of this transition, as we continued to rebuild Wolo’s product availability
availability and establish its presence across e-commerce platforms. While revenues remain significantly below prior year levels during
this rebuilding
period, management believes the operational changes implemented position Wolo for improved performance as its e-commerce
channels mature
and product availability increases.
Our total cost of revenues was $855,314 for the three months ended June 30, 2026, as compared to $1,085,942 for the three months ended June 30, 2025. Total gross profit increased to $711,816 for the three months ended June 30, 2026 from $705,602 for the three months ended June 30, 2025, as the decrease in cost of revenues outpaced the decrease in revenues. This was primarily due to the shift in Wolo’s revenue mix toward higher-margin direct-to-consumer e-commerce sales and the elimination of fixed fulfillment and warehousing costs from cost of revenues following the transition to a third-party logistics model, as well as a lower proportion of direct material and subcontractor costs relative to revenues at Kyle’s, each as discussed further below.
Our total cost of revenues was $753,437 for the
three months ended March 31, 2026, as compared to $1,540,346 for the three months ended March 31, 2025. Accordingly, our total gross
profit was $414,971 for the three months ended March 31, 2026, as compared to $1,230,445 for the three months ended March 31, 2025.
Cost of revenues for Kyle’s decreased by $70,576, or 7.8%, to $839,154 for the three months ended June 30, 2026 from $909,730 for the three months ended June 30, 2025, a decline that outpaced the 5.8% decrease in revenues. Accordingly, gross profit for Kyle’s decreased by $19,039, or 3.0%, to $620,357 for the three months ended June 30, 2026 from $639,396 for the three months ended June 30, 2025, while gross margin improved to 42.5% from 41.3%, primarily due to a lower proportion of direct material and subcontractor costs relative to contract revenues for the period. The improved gross margin percentage should be considered in the context of the lower revenue base for the period and may not be indicative of future results.
Cost of revenues for Kyle’s decreased by
$252,835, or 25.9%, to $723,320 for the three months ended March 31, 2026 from $976,155 for the three months ended March 31, 2025, consistent
with the decrease in revenues. Accordingly, gross profit for Kyle’s decreased by $507,987, or 57.3%, to $378,210 for the three
months ended March 31, 2026 from $886,197 for the three months ended March 31, 2025. Gross margin for Kyle’s declined to 34.3%
for the three months ended March 31, 2026 from 47.6% for the three months ended March 31, 2025, reflecting the impact of fixed and semi-fixed
direct costs being absorbed over a significantly lower revenue base during the period. As active contract volume declined due to the
timing of new contract awards, certain direct labor and overhead costs could not be proportionally reduced, resulting in margin compression.
Management expects gross margins to recover as new contract awards are obtained and revenue volumes return to normalized levels.
ICD generated no revenues during the three months
ended MarchJune 31,30, 2026 or 2025, and accordingly no cost ofminimal revenues wasduring recordedthe forthree eithermonths period.ended June 30, 2025.
Cost of revenues for Wolo decreased by $534,074,$158,329,
or 94.7%,90.7%, to $30,117$16,160 for the three months ended MarchJune 31,30, 2026 from $564,191$174,489 for the three months ended MarchJune 31,30, 2025,2025. consistentDespite with
the decrease
in revenues. Accordingly,revenues, gross profit for Wolo decreasedincreased by $307,487,$57,501, or 89.3%,169.3%, to $36,761$91,459 for the three months ended March
31,June 30, 2026 from $344,248 $33,958
for the three months ended MarchJune 31,30, 2025. Gross margin for Wolo improved to 55.0% for the three months ended
March 31, 2026 from 37.9%85.0% for the three months ended MarchJune 31,30, 2026 from 16.3%
for the three months ended June 30, 2025, primarily due to a favorable shift in product and channel mix as
Wolo transitions toward direct-to-consumer
e-commerce sales, which carry higher margins relative to the wholesale and distributor channels
that comprised a greater portion of revenues
in the prior year period. Additionally, the transition to a third-party logistics model
reduced certain fixed fulfillment and warehousing
costs that were previously absorbed into cost of revenues. The improved gross margin
percentage should be considered in the context of
the significantly reduced revenue base and may not be indicative of future results
as Wolo continues to rebuild its revenue base.
Personnel costs include employee salaries and
bonuses, and related payroll taxes, as well as health insurance premiums, 401(k) contributions, and training costs. Our total personnel
costs were $279,139$373,940 for the three months ended MarchJune 31,30, 2026, as compared to $394,360$443,568 for the three months ended MarchJune 31,30, 2025.
Personnel costs for Kyle’s increasedremained byrelatively
$35,943,consistent orat 12.7%, to $318,550$311,119 for the three months ended MarchJune 31,30, 2026 fromcompared $282,607to $308,289 for the three months ended MarchJune 31,30, 2025. Such
increase was primarily due to additional headcount added during 2025 in anticipation of new contract awards and the associated revenue
ramp up expected in subsequent periods. As a percentage
of revenues, personnel costs for Kyle’s were 28.9%21.3% and 15.2%19.9% for the three
months ended MarchJune 31,30, 2026 and 2025, respectively.
ICD did not have any personnel costs for the
three months ended MarchJune 31,30, 2026, as compared to $60,906$2,500 for the three months ended MarchJune 31,30, 2025. Such decrease was primarily due to
to the reduction in workforce resulting from the operational repositioning described above.
Personnel costs for Wolo decreased by $136,405,$81,546,
or 82.0%,75.6%, to $29,864$26,291 for the three months ended MarchJune 31,30, 2026 from $166,269$107,837 for the three months ended MarchJune 31,30, 2025. Such decrease was
was primarily due to the significant reduction in workforce in connection with the transition to a third-party logistics model. As a percentage
percentage of revenues, personnel costs for Wolo were 44.7%24.4% and 18.3%51.7% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
Corporate Services
Personnel costs for the corporate services segment
were $(69,275)$36,530 for the three months ended MarchJune 31,30, 2026 compared to $(115,422)$24,942 for the three months ended MarchJune 31,30, 2025. Corporate personnel
personnel costs reflect intercompany allocations of corporate compensation costscosts, net of intercompany allocations to the operating subsidiaries, which eliminate in consolidation,consolidation.
resultingBoth inperiods reflect a net creditexpense, balancesas forcorporate compensation costs retained at the threecorporate monthslevel endedexceeded Marchamounts 31,allocated 2026to andthe
operating 2025.subsidiaries during the respective periods.
Our total depreciation and amortization expense
decreased by $14,633,$16,776, or 11.3%,13.2%, to $114,697$110,757 for the three months ended MarchJune 31,30, 2026 from $129,330$127,533 for the three months ended MarchJune 30,
31, 2025. Such a decrease was primarily a result of disposals of property and equipment during 2025 resulting in a lower depreciable asset
asset base in the current period.
Our total general and administrative expenses
increased by $12,399, or 2.2%, to $584,238 for the three months ended June 30, 2026, as compared to $571,839 for the three months ended
June 30, 2025.Our general and administrative expenses consist
primarily of insurance expense, rent expense, management fees, advertising,
bank fees, bad debt expense, and other general expenses incurred
in connection with general operations. Our total general and administrative expenses were $458,246 for the three months ended March 31,
2026, as compared to $677,955 for the three months ended March 31, 2025.
General and administrative expenses for Kyle’s
decreased by $124,$23,244, or 0.0%,8.3%, to $275,035$256,240 for the three months ended MarchJune 31,30, 2026 from $275,159$279,484 for the three months ended MarchJune 31,30,
2025, remaininga essentiallydecrease flatbroadly periodproportional overto period.the decline in revenues. As a percentage of revenues, general and administrative expenses for
Kyle’s Kyle’s
were 25.0%17.6% and 14.8%18.0% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
General and administrative expenses for ICD decreased
by $180,567,$29,873, or 74.3%,32.3%, to $62,559$62,500 for the three months ended MarchJune 31,30, 2026 from $243,126$92,373 for the three months ended MarchJune 31,30, 2025. Such
Such a decrease was primarily due to reduced operating costs resulting from the abandonment of the warehouse facility and workforce reductions,
partially offset by costs incurred in connection with the operational repositioning.
General and administrative expenses for Wolo
decreasedincreased by $123,485,$86,561, or 52.5%,44.1%, to $111,801$282,722 for the three months ended MarchJune 31,30, 2026 from $235,286$196,161 for the three months ended MarchJune 30,
31, 2025. Such aan decreaseincrease was primarily due to reducedbad operatingdebt expense recognized during the three months ended June 30, 2026 related to receivables
from Wolo’s legacy wholesale and distributor customers, as well as increased software and information technology costs in connection associated
with the operationalbuild-out repositioning,of includingWolo’s e-commerce platform, partially offset by decreases in advertising, rent, and utilities costs following
the
termination exit of the warehouse leasefacility and thelower transitioncorporate toshared aservices third-party logistics model.allocations. As a percentage of revenues, general and administrative
expenses for Wolo were 167.2%262.7% and 25.9%94.1% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
Corporate Services
General and administrative expenses for the corporate
services segment were $8,851 for the three months ended March 31, 2026 compared to $(75,61617,224) for the three months ended MarchJune 31,30, 2026 compared to $3,821 for the three months ended June 30, 2025.
Corporate general and administrative expenses reflect intercompany allocations of corporate overhead costs to the operating subsidiaries,
which eliminate in consolidation. The priorcurrent period reflects a net credit balance resulting from allocations of corporate costs to operating
subsidiaries exceeding total
corporate overhead incurred during that period. The currentprior period reflects a net expense as the level of
corporate overhead retained at
the corporate level exceeded amounts allocated to operating subsidiaries during the three months ended
March 31,June 2026.30, 2025.
Our total professional fees were $362,092$101,407 for
the three months ended MarchJune 31,30, 2026, as compared to $1,443,700$507,926 for the three months ended MarchJune 31,30, 2025.
Kyle’s did not incurhave any professional fees
for the three months ended MarchJune 31,30, 20262026, andas compared to $6,400 for the three months ended June 30, 2025.
ICD did not incur any professional fees for the three months ended June 30, 2026 and 2025.
ICD did not incur any professional fees for the
three months ended March 31, 2026, as compared to $3,518 for the three months ended March 31, 2025. Such a decrease was primarily due
a reduction in legal and consulting fees in connection with the operational repositioning and workforce reductions undertaken during
2025.
Professional fees for Wolo decreased by $18,030,$7,895,
or 71.8%,59.5%, to $7,087$5,378 for the three months ended MarchJune 31,30, 2026 from $25,117$13,273 for the three months ended MarchJune 31,30, 2025. Such decrease was
primarily due to reduced legal and consulting fees in connection with the operational repositioning undertaken during 2025, including
costs associated with the warehouse lease termination and logistics transition that were incurred in the prior year period and did not
recur. As a percentage of revenues, professional fees for Wolo were 10.6%5.0% and 2.8%6.4% for the three months ended MarchJune 31,30, 2026 and 2025,
respectively.
Corporate Services
Professional fees for the corporate services
segment decreased by $1,060,060,$392,224, or 74.9%,80.3%, to $355,005$96,029 for the three months ended MarchJune 31,30, 2026 from $1,415,065$488,253 for the three months ended
endedJune March 31,30, 2025. Such a decrease was primarily due to a reduction in legal fees associated with outstanding litigation matters and lower
loweraudit, auditaccounting, and accountingother public company related fees in the current period. The prior period reflected elevated professional fees following the acquisition
of CMD in December 2024, which did not recur at the same level in the current period.
We had $3,110,746$5,482,891 in total other expense, net,
for the three months ended MarchJune 31,30, 2026, as compared to $307,402total other income, net of $22,031,532 for the three months ended MarchJune 31,30, 2025.
Other expense, net, for
the three months ended MarchJune 31,30, 2026 consisted of interest expense of $1,669,832,$1,616,654, a loss on change in fair value
of warrant liabilities
of $1,270,300,$3,136,100, amortization of debt discounts of $159,295 and other expense of $11,319, while other expense, net, for the three months
ended March 31, 2025 consisted of a$120,885, loss on extinguishment of debt of $2,301,198,$589,723, interestand other
expense of $1,229,506,$19,529, amortizationwhile other income, net, for the three months ended June 30, 2025 consisted of debta gain on change in fair value of
discountswarrant liabilities of $465,050$24,053,885 and a lossgain on change in fair value of derivative liabilities of $35,000,$220,000, offset by a gainloss on change in fair valueextinguishment
of warrant liabilitiesdebt of $3,669,798$708,218, interest expense of $1,058,597, amortization of debt discounts of $472,680, and a gainloss on disposal of property and
equipment of $53,554.$2,858.
Income Tax Benefit (Provision)
We had an income tax provision of $4,000 for the three months ended June 30, 2026, as compared to an income tax benefit of $81,000 for the three months ended June 30, 2025.
Net Income (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 $5,945,417 for the three months ended June 30, 2026, as compared to net income from continuing operations of $21,054,563 for the three months ended June 30, 2025.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following tables present key components of our results of continuing operations during the six months ended June 30, 2026 and 2025, both in dollars and as a percentage of our revenues.
Our total revenues were $2,735,538 for the six months ended June 30, 2026, as compared to $4,562,335 for the six months ended June 30, 2025. The following tables present our revenues by segment for the six months ended June 30, 2026 and 2025:
Revenues from Kyle’s decreased by $850,437, or 24.9%, to $2,561,041 for the six months ended June 30, 2026 from $3,411,478 for the six months ended June 30, 2025. Such a decrease was primarily attributable to the timing of new contract awards and the commencement of related performance obligations. Revenue from Kyle’s construction contracts is recognized over time as costs are incurred, and the volume of active contracts in the first half of 2026 reflects a temporary reduction in new project starts compared to the prior year period. Management expects revenue to recover as newly awarded contracts advance toward completion and additional contract awards are obtained.
ICD generated no revenues for the six months ended June 30, 2026, as compared to $33,971 for the six months ended June 30, 2025, as we continued the operational repositioning of ICD’s business following the closure of its warehouse facility in 2025. Management is evaluating strategic alternatives for ICD’s operations going forward.
Revenues from Wolo decreased by $942,389, or 84.4%, to $174,497 for the six months ended June 30, 2026 from $1,116,886 for the six months ended June 30, 2025. The decrease in revenues reflects the continued transition of Wolo’s business model following the strategic repositioning undertaken during 2025, which included the transition to a third-party logistics model and a refocusing of commercial efforts on e-commerce growth channels. Revenue during the first half of 2026 reflects the early stages of this transition, as we continued to rebuild Wolo’s product availability and establish its presence across e-commerce platforms. While revenues remain significantly below prior year levels during this rebuilding period, management believes the operational changes implemented position Wolo for improved performance as its e-commerce channels mature and product availability increases.
Cost of Revenues and Gross Profit
Our total cost of revenues was $1,608,751 for the six months ended June 30, 2026, as compared to $2,626,288 for the six months ended June 30, 2025. Accordingly, our total gross profit was $1,126,787 for the six months ended June 30, 2026, as compared to $1,936,047 for the six months ended June 30, 2025.
Cost of revenues for Kyle’s decreased by $323,411, or 17.1%, to $1,562,474 for the six months ended June 30, 2026 from $1,885,885 for the six months ended June 30, 2025. Accordingly, gross profit for Kyle’s decreased by $527,026, or 34.5%, to $998,567 for the six months ended June 30, 2026 from $1,525,593 for the six months ended June 30, 2025. Gross margin for Kyle’s declined to 39.0% for the six months ended June 30, 2026 from 44.7% for the six months ended June 30, 2025, reflecting the impact of fixed and semi-fixed direct costs being absorbed over a significantly lower revenue base during the period. As active contract volume declined due to the timing of new contract awards, certain direct labor and overhead costs could not be proportionally reduced, resulting in margin compression. Management expects gross margins to recover as new contract awards are obtained and revenue volumes return to normalized levels.
ICD generated no revenues during the six months ended June 30, 2026 and minimal revenues during the six months ended June 30, 2025.
Cost of revenues for Wolo decreased by $692,403, or 93.7%, to $46,277 for the six months ended June 30, 2026 from $738,680 for the six months ended June 30, 2025. Accordingly, gross profit for Wolo decreased by $249,986, or 66.1%, to $128,220 for the six months ended June 30, 2026 from $378,206 for the six months ended June 30, 2025. Gross margin for Wolo improved to 73.5% for the six months ended June 30, 2026 from 33.9% for the six months ended June 30, 2025, primarily due to a favorable shift in product and channel mix as Wolo transitions toward direct-to-consumer e-commerce sales, which carry higher margins relative to the wholesale and distributor channels that comprised a greater portion of revenues in the prior year period. Additionally, the transition to a third-party logistics model reduced certain fixed fulfillment and warehousing costs that were previously absorbed into cost of revenues. The improved gross margin percentage should be considered in the context of the significantly reduced revenue base and may not be indicative of future results as Wolo continues to rebuild its revenue base.
Personnel Costs
Our total personnel costs were $653,079 for the six months ended June 30, 2026, as compared to $837,928 for the six months ended June 30, 2025.
Personnel costs for Kyle’s increased by $38,773, or 6.6%, to $629,669 for the six months ended June 30, 2026 from $590,896 for the six months ended June 30, 2025. Such increase was primarily due to additional headcount added during 2025 in anticipation of new contract awards and the associated revenue ramp up expected in subsequent periods. As a percentage of revenues, personnel costs for Kyle’s were 24.6% and 17.3% for the six months ended June 30, 2026 and 2025, respectively.
LBRA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 2 trade dates, 200,000 shares, about $2.0K) and open-market sales in 0 filings. Net open-market shares: 200,000 (purchases minus sales); net value about $2.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-05-20 | Roberts Ellery |
Open-market purchase | 100,000 | $0.01 | $1.0K |
| 2026-05-19 | Roberts Ellery |
Open-market purchase | 100,000 | $0.01 | $1.0K |
Well-known investors holding LBRA (13F)
None of the 59 investors we track reported a position in their latest 13F.