10-Q: 1847 Holdings Reports Q2 Profit Amid Delisting Threat

1847 Holdings LLC reported a significant shift to net income and positive operating cash flow for the first half of 2025, driven by a key acquisition, despite facing a NYSE American delisting and substantial doubt about its ability to continue as a going concern.

Summary

• Revenues from continuing operations surged by 381.9% to $22,889,929 for the six months ended June 30, 2025, up from $4,750,259 in the prior year, primarily due to the acquisition of CMD Inc.
• The company achieved a net income from continuing operations of $23,452,817 for the six months ended June 30, 2025, a substantial improvement from a net loss of $13,552,940 in the same period last year.
• Net cash provided by operating activities from continuing operations was $973,606 for the six months ended June 30, 2025, a significant turnaround from net cash used of $4,696,037 in the prior year.
• Basic earnings per common share from continuing operations improved to $0.80 for the six months ended June 30, 2025, compared to a loss of $85.66 in the prior year.
• Diluted earnings per common share from continuing operations improved to $0.17 for the six months ended June 30, 2025, compared to a loss of $85.66 in the prior year.
• As of June 30, 2025, the company had a working capital deficit of $87,343,162.
• Total liabilities decreased to $107,948,744 as of June 30, 2025, from $130,113,775 as of December 31, 2024.
• The total shareholders deficit improved to $(73,102,448) as of June 30, 2025, from $(96,466,037) as of December 31, 2024.
• The company is in the process of selling its Automotive Supplies Segment (Wolo Mfg. Corp.), which is expected to occur in 2025 and is classified as discontinued operations.
• NYSE American LLC filed a Form 25 on July 9, 2025, to delist the common shares, with deregistration expected within 90 days or less.
• Management has identified material weaknesses in internal control over financial reporting and is implementing remedial procedures.

Sentiment

Score: 3

Explanation: While the company reported a significant increase in revenue and a shift to net income and positive operating cash flow, these positives are heavily overshadowed by the explicit 'substantial doubt about going concern' warning and the imminent delisting from NYSE American. The large net income is also significantly influenced by non-cash gains on warrant liabilities, which are not indicative of sustainable operational profitability. The substantial working capital deficit and high debt levels further contribute to a highly precarious financial position, making the overall sentiment negative despite the improved top-line and bottom-line figures.

Positives

• Revenues from continuing operations increased by 381.9% to $22,889,929 for the six months ended June 30, 2025, primarily due to the acquisition of CMD Inc.
• The company transitioned from a net loss to a net income of $23,452,817 from continuing operations for the six months ended June 30, 2025.
• Operating activities generated positive cash flow of $973,606 from continuing operations for the six months ended June 30, 2025, a significant improvement from a negative cash flow in the prior year.
• The shareholders deficit improved by over $23 million, from $(96,466,037) at December 31, 2024, to $(73,102,448) at June 30, 2025.
• A substantial gain on change in fair value of warrant liabilities of $27,723,683 contributed to the net income for the six months ended June 30, 2025.
• Cost of revenues as a percentage of revenue decreased to 48.1% for the six months ended June 30, 2025, from 56.0% in the prior year, indicating improved gross margins.
• Personnel costs as a percentage of revenue decreased to 16.4% for the six months ended June 30, 2025, from 42.1% in the prior year.
• General and administrative expenses as a percentage of revenue decreased to 9.5% for the six months ended June 30, 2025, from 19.9% in the prior year.
• Professional fees as a percentage of revenue decreased to 12.1% for the six months ended June 30, 2025, from 76.6% in the prior year.

Negatives

• Management has identified substantial doubt about the company's ability to continue as a going concern within the next twelve months without obtaining additional financing.
• The company faces a significant working capital deficit of $87,343,162 as of June 30, 2025.
• Cash and cash equivalents decreased to $1,033,578 as of June 30, 2025, from $2,457,086 as of December 31, 2024.
• NYSE American LLC filed a Form 25 to delist the common shares, which will result in deregistration from the exchange.
• Material weaknesses in internal control over financial reporting persist, impacting the effectiveness of disclosure controls and procedures.
• The company recognized a loss on extinguishment of debt totaling $3,009,416 for the six months ended June 30, 2025.
• An impairment loss of $112,705 was recognized due to the abandonment of a right-of-use asset (warehouse facility closure and relocation).
• Interest expense remains high at $2,176,424 for the six months ended June 30, 2025.
• Amortization of debt discounts amounted to $937,730 for the six months ended June 30, 2025.
• Total debt, net, stands at $31,973,411 as of June 30, 2025, with a significant portion ($30,694,383) classified as short-term.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to insufficient cash and resources to sustain current operations or meet obligations without additional financing.
• Plans to secure additional financing through debt and equity offerings are subject to market conditions and reliance on third parties, with no assurance of effective implementation or necessary funding.
• The delisting of common shares from NYSE American LLC will likely reduce liquidity and may negatively impact share price.
• Material weaknesses in internal control over financial reporting could adversely affect the company's ability to accurately record, process, summarize, and report financial information.
• The company's organizational structure and management fee arrangements, profit allocation, and potential put price obligations to its manager may limit cash flow available for distributions to common shareholders.
• The company's ability to service and comply with the terms of its indebtedness is critical, especially given the high short-term debt and working capital deficit.
• Future acquisitions, which are part of the company's growth strategy, are dependent on available funds from cash flow, borrowings, or additional capital raises, which are not assured.

Future Outlook

Management plans to secure additional financing through debt and equity offerings to address liquidity concerns and support ongoing operations. The company expects to improve its businesses over the long term through organic growth opportunities, add-on acquisitions, and operational improvements. The sale of the Automotive Supplies Segment (Wolo) is actively being pursued and is expected to be completed in 2025.

Management Comments

• Management plans to address these concerns by securing additional financing through debt and equity offerings.
• Management has implemented tight cost controls to conserve cash.
• We believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses.
• We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.
• Notwithstanding the identified material weaknesses, management 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.

Industry Context

1847 Holdings LLC operates as an acquisition holding company, primarily focused on acquiring and managing small businesses with enterprise values under $50 million across various industries in North America. Following recent divestitures, the company's core operations are now concentrated in the Construction Segment, providing finish carpentry and related products and services. This strategic shift indicates a move away from previously held segments like automotive supplies, appliances, and eyewear, aiming for a more focused portfolio within the construction sector.

Corporate Governance

Legal Proceedings

• The company is currently not aware of any legal proceedings or claims that are believed to have a material adverse effect on its business, financial condition, or operating results.

Related Party Transactions

• On June 27, 2025, the company's subsidiary, 1847 Cabinet Inc., issued an 8% promissory note in the principal amount of $1,567,621 to Stephen Mallatt, Jr. and Rita Mallatt (related parties). This transaction resulted in the cancellation of a consulting agreement and a conversion agreement with Stephen Mallatt, Jr. and Rita Mallatt, respectively.

Stakeholder Impact

• Shareholders face significant dilution risk due to the increase in authorized common shares and potential future equity offerings, as well as the immediate impact of delisting from NYSE American, which will reduce liquidity and likely depress share price. The 'going concern' warning poses an existential threat to their investment.
• Creditors are impacted by the company's substantial debt, particularly the high short-term portion, and the explicit 'going concern' doubt, although the new related party note is subordinated to 'Senior Indebtedness'.
• Employees may be affected by operational changes, such as the relocation of a warehouse facility within the Construction Segment, and the overall financial instability of the company.

Next Steps

• Complete the sale of Wolo Mfg. Corp. (Automotive Supplies Segment) in 2025.
• Secure additional financing through debt and equity offerings to address liquidity and going concern issues.
• Continue implementing remedial procedures to address material weaknesses in internal control over financial reporting, including increasing personnel resources, engaging consultants, and preparing written documentation of policies.
• Relocate warehouse operations within the Construction Segment following the abandonment of a right-of-use asset.

Key Dates

Recommendation

Despite a significant increase in revenue and a shift to net income and positive operating cash flow, the company faces critical existential threats. The explicit 'substantial doubt about going concern' indicates a high risk of insolvency or inability to meet future obligations. The imminent delisting from NYSE American will severely impair liquidity and likely lead to a significant decline in share price, making it difficult for investors to exit positions. While the reported net income is positive, it is heavily influenced by non-cash gains from warrant liabilities, which are not sustainable operational profits. The large working capital deficit and high debt levels further compound the financial instability. Given these severe fundamental risks, a seasoned investor or institution would likely recommend a strong sell to minimize potential losses.

Keywords

Holding company, Acquisition strategy, Construction segment, Cabinetry, Millwork, Doors, Trim, Hardware, Discontinued operations, Going concern, SEC filing, 10-Q, Financial results, Corporate governance, Risk management, NYSE American delisting, Warrants, Convertible notes, Debt extinguishment, Internal controls, Financial reporting