Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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:

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our ability to effectively integrate and operate the businesses that we acquire;

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our ability to successfully identify and acquire additional businesses;

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our organizational structure, which may limit our ability to meet our dividend and distribution policy;

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our ability to service and comply with the terms of indebtedness;

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our cash flow available for distribution and our ability to make distributions to our common shareholders;

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our ability to pay the management fee, profit allocation and put price to our manager when due;

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labor disputes, strikes or other employee disputes or grievances;

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the regulatory environment in which our businesses operate under;

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trends in the industries in which our businesses operate;

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the competitive environment in which our businesses operate;

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changes in general economic or business conditions or economic or demographic trends in the United States including changes in interest rates and inflation;

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our and our manager's ability to retain or replace qualified employees of our businesses and our manager;

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casualties, condemnation or catastrophic failures with respect to any of our business' facilities;

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costs and effects of legal and administrative proceedings, settlements, investigations and claims; and

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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.

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 first quarter of 2025, we received approval from our board of directors to engage in an active program to sell Wolo, which makes up the automotive supplies segment. We determined that our decision to sell Wolo is considered a strategic shift that will have a major effect on our 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.

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.

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 and nine months ended September 30, 2025.

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 September 30, 2025 and 2024, of which $41,667 is included in discontinued operations for the three months ended September 30, 2024 due to the sale of High Mountain described under "-Discontinued Operations" below, and $375,000 for the nine months ended September 30, 2025 and 2024, of which $125,000 is included in discontinued operations for the nine months ended September 30, 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 September 30, 2025 and 2024, and $225,000 for the nine months ended September 30, 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 and $225,000 for the three and nine months ended September 30, 2024, respectively, 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 and $225,000 for the three and nine months ended September 30, 2025, respectively.

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 September 30, 2025, respectively, and $1,298,333 and $141,667 for the three months ended September 30, 2024, respectively, and $1,465,000 and $575,000 for the nine months ended September 30, 2025, respectively, and $600,000 and $225,000 for the nine months ended September 30, 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.

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 and nine months ended September 30, 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, or the Holdback Amount, 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 and nine months ended September 30, 2024. During the nine months ended September 30, 2025, we recorded a $858,039 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. As September 30, 2025, the balance of the Holdback Amount was $500,929.

As noted above, during the first quarter of 2025, we received approval from our board to engage in an active program to sell Wolo, which makes up the automotive supplies segment. Accordingly, the assets and liabilities of Wolo are presented as held for sale in the unaudited condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024, and the operating results are presented as discontinued operations in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table sets forth key components of our results of continuing operations during the three months ended September 30, 2025 and 2024, both in dollars and as a percentage of our revenues.

		Three Months Ended September 30,
		2025								2024
		Amount				% of Revenues				Amount				% of Revenues
Revenues		$	13,563,612				100.0	%		$	3,805,621				100.0	%
Operating expenses
Cost of revenues			6,897,848				50.9	%			1,425,247				37.5	%
Personnel			1,887,153				13.9	%			2,172,873				57.1	%
Depreciation and amortization			362,666				2.7	%			166,935				4.4	%
General and administrative			1,143,422				8.4	%			1,984,187				52.1	%
Professional fees			644,265				4.7	%			657,513				17.3	%
Impairment of goodwill and intangible assets			-				-				679,175				17.8	%
Total operating expenses			10,935,354				80.6	%			7,085,930				186.2	%
Income (loss) from operations			2,628,258				19.4	%			(3,280,309	)			(86.2	)%
Other income (expense)
Other expense			(89,879	)			(0.7	)%			(1,285,055	)			(33.8	)%
Gain on disposal of property and equipment			3,800				0.0	%			-				-
Interest expense			(1,087,416	)			(8.0	)%			(1,106,830	)			(29.1	)%
Amortization of debt discounts			(260,272	)			(1.9	)%			(2,095,970	)			(55.1	)%
Loss on extinguishment of debt			-				-				(1,642,701	)			(43.2	)%
Gain on change in fair value of derivative liabilities			-				-				3,592,435				94.4	%
Gain on change in fair value of warrant liabilities			32,003,657				236.0	%			81,400				2.1	%
Total other income (expense)			30,569,890				225.4	%			(2,456,721	)			(64.6	)%
Net income (loss) before income taxes			33,198,148				244.8	%			(5,737,030	)			(150.8	)%
Income tax benefit (provision)			(579,000	)			(4.3	)%			357,000				9.4	%
Net income (loss) from continuing operations		$	32,619,148				240.5	%		$	(5,380,030	)			(141.4	)%

Revenues. Our construction business generates revenue through the sale of finished carpentry and related products and services. Our revenues increased by $9,757,991, or 256.4%, to $13,563,612 for the three months ended September 30, 2025 from $3,805,621 for the three months ended September 30, 2024. The increase in revenues was primarily attributed to the acquisition of CMD, which contributed $11,803,543 to revenues for the three months ended September 30, 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 $5,472,601, or 384.0%, to $6,897,848 for the three months ended September 30, 2025 from $1,425,247 for the three months ended September 30, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $5,929,736 to cost of revenues for the three months ended September 30, 2025. As a percentage of revenues, cost of revenues was 50.9% and 37.5% for the three months ended September 30, 2025 and 2024, respectively.

Personnel costs. Our personnel costs include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and training costs. Our personnel costs decreased by $285,720, or 13.1%, to $1,887,153 for the three months ended September 30, 2025 from $2,172,873 for the three months ended September 30, 2024. Such decrease was primarily attributed to decreased wages for Innovative Cabinets and the corporate segment, offset by the acquisition of CMD, which contributed $1,627,393 to personnel costs for the three months ended September 30, 2025. As a percentage of revenue, personnel costs were 13.9% and 57.1% for the three months ended September 30, 2025 and 2024, respectively.

Depreciation and amortization. Our depreciation and amortization expense increased by $195,731, or 117.2%, to $362,666 for the three months ended September 30, 2025 from $166,935 for the three months ended September 30, 2024. Such increase was primarily 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 general and administrative expenses decreased by $840,765, or 42.4%, to $1,143,422 for the three months ended September 30, 2025 from $1,984,187 for the three months ended September 30, 2024. Such decrease was primarily attributed to decreased general and administrative expenses for Innovative Cabinets and the corporate segment, offset by the acquisition of CMD, which contributed $985,025 to general and administrative expenses for the three months ended September 30, 2025. As a percentage of revenue, general and administrative expenses were 8.4% and 52.1% for the three months ended September 30, 2025 and 2024, respectively.

Professional fees. Our professional fees decreased by $13,248, or 2.0%, to $644,265 for the three months ended September 30, 2025 from $657,513 for the three months ended September 30, 2024. Such decrease was primarily attributed to decreased consulting fees, investor relations, acquisition related costs, and other public company related fees during the period, offset by the acquisition of CMD, which contributed $193,721 to professional fees for the three months ended September 30, 2025. As a percentage of revenue, professional fees were 4.7% and 17.3% for the three months ended September 30, 2025 and 2024, respectively.

Impairment of goodwill and intangible assets. For the three months ended September 30, 2025 and 2024, we recorded impairments of goodwill and intangible assets of $0 and $679,175, respectively.

Total other income (expense). We had $30,569,890 in total other income, net, for the three months ended September 30, 2025, as compared to $2,456,721 in total other expense, net, for the three months ended September 30, 2024. Other income, net, for the three months ended September 30, 2025 consisted of gain on change in fair value of warrant liabilities of $32,003,657 and a gain on disposal of property and equipment of $3,800, offset by interest expense of $1,087,416, amortization of debt discounts of $260,272, and other expense of $89,879. Other expense, net, for the three months ended September 30, 2024 consisted of interest expense of $1,106,830, amortization of debt discounts of $2,095,970, a loss on extinguishment of debt of $1,642,701, and other expense of $1,285,055, offset by a gain on change in fair value of derivative liabilities of $3,592,435 and a gain on change in fair value of warrant liabilities of $81,400.

Income tax benefit (provision). We had an income tax expense of $579,000 for the three months ended September 30, 2025, as compared to an income tax benefit of $357,000 for the three months ended September 30, 2024.

Net income (loss) from continuing operations. As a result of the cumulative effect of the factors described above, we had a net income from continuing operations of $32,619,148 for the three months ended September 30, 2025, as compared to a net loss of $5,380,030 for the three months ended September 30, 2024.

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table sets forth key components of our results of continuing operations during the nine months ended September 30, 2025 and 2024, both in dollars and as a percentage of our revenues.

		Nine Months Ended September 30,
		2025								2024
		Amount				% of Revenues				Amount				% of Revenues
Revenues		$	36,453,541				100.0	%		$	8,555,880				100.0	%
Operating expenses
Cost of revenues			17,898,193				49.1	%			4,084,493				47.7	%
Personnel			5,630,713				15.4	%			4,172,503				48.8	%
Depreciation and amortization			1,066,111				2.9	%			507,117				5.9	%
General and administrative			3,325,054				9.1	%			2,928,268				34.2	%
Professional fees			3,417,821				9.4	%			4,296,702				50.2	%
Impairment of goodwill and intangible assets			-				-				679,175				7.9	%
Loss on abandonment of right-of-use asset			112,705				0.3	%			-				-
Total operating expenses			31,450,597				86.3	%			16,668,258				194.8	%
Income (loss) from operations			5,002,944				13.7	%			(8,112,378	)			(94.8	)%
Other income (expense)
Other expense			(79,557	)			(0.2	)%			(1,277,446	)			(14.9	)%
Gain on disposal of property and equipment			54,496				0.1	%			-				-
Interest expense			(3,263,840	)			(9.0	)%			(3,007,347	)			(35.1	)%
Amortization of debt discounts			(1,198,002	)			(3.3	)%			(7,976,758	)			(93.2	)%
Loss on extinguishment of debt			(3,009,416	)			(8.3	)%			(2,843,451	)			(33.2	)%
Gain on change in fair value of derivative liabilities			185,000				0.5	%			1,689,410				19.7	%
Gain on change in fair value of warrant liabilities			59,727,340				163.8	%			1,841,000				21.5	%
Total other income (expense)			52,416,021				143.8	%			(11,574,592	)			(135.3	)%
Net income (loss) before income taxes			57,418,965				157.5	%			(19,686,970	)			(230.1	)%
Income tax benefit (provision)			(1,347,000	)			(3.7	)%			754,000				8.8	%
Net income (loss) from continuing operations		$	56,071,965				153.8	%		$	(18,932,970	)			(221.3	)%

Revenues. Our revenues increased by $27,897,661, or 326.1%, to $36,453,541 for the nine months ended September 30, 2025 from $8,555,880 for the nine months ended September 30, 2024. The increase in revenues was primarily attributed to the acquisition of CMD, which contributed $31,248,023 to revenues for the nine months ended September 30, 2025.

Cost of revenues. Cost of revenues increased by $13,813,700, or 338.2%, to $17,898,193 for the nine months ended September 30, 2025 from $4,084,493 for the nine months ended September 30, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $15,042,473 to cost of revenues for the nine months ended September 30, 2025. As a percentage of revenues, cost of revenues was 49.1% and 47.7% for the nine months ended September 30, 2025 and 2024, respectively.

Personnel costs. Our personnel costs increased by $1,458,210, or 34.9%, to $5,630,713 for the nine months ended September 30, 2025 from $4,172,503 for the nine months ended September 30, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $4,807,131 to personnel costs for the nine months ended September 30, 2025, offset by decreased personnel costs for Innovative Cabinets and the corporate segment for the nine months ended September 30, 2025. As a percentage of revenue, personnel costs were 15.4% and 48.8% for the nine months ended September 30, 2025 and 2024, respectively.

Depreciation and amortization. Our depreciation and amortization expense increased by $558,994, or 110.2%, to $1,066,111 for the nine months ended September 30, 2025 from $507,117 for the nine months ended September 30, 2024. Such increase was primarily a result of acquired intangibles in the acquisition of CMD on December 16, 2024.

General and administrative expenses. Our general and administrative expenses increased by $396,786, or 13.6%, to $3,325,054 for the nine months ended September 30, 2025 from $2,928,268 for the nine months ended September 30, 2024. Such increase was primarily attributed to the acquisition of CMD, which contributed $2,357,810 to general and administrative expenses for the nine months ended September 30, 2025, offset by decreased general and administrative expenses for Innovative Cabinets and the corporate segment for the nine months ended September 30, 2025. As a percentage of revenue, general and administrative expenses were 9.1% and 34.2% for the nine months ended September 30, 2025 and 2024, respectively.

Professional fees. Our professional fees decreased by $878,881, or 20.5%, to $3,417,821 for the nine months ended September 30, 2025 from $4,296,702 for the nine months ended September 30, 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 $1,044,541 to professional fees for the nine months ended September 30, 2025. As a percentage of revenue, professional fees were 9.4% and 50.2% for the nine months ended September 30, 2025 and 2024, respectively.

Impairment of goodwill and intangible assets. For the nine months ended September 30, 2025 and 2024, we recorded impairments of goodwill and intangible assets of $0 and $679,175, respectively.

Loss on abandonment of right-of-use asset. In May 2025, we determined that a right-of-use asset associated with a warehouse facility was impaired due to our decision to close the facility and relocate operations to another site. As a result, we recognized an impairment loss of $112,705 related to the abandoned lease during the nine months ended September 30, 2025.

Total other income (expense). We had $52,416,021 in total other income, net, for the nine months ended September 30, 2025, as compared to other expense, net, of $11,574,592 for the nine months ended September 30, 2024. Other income, net, for the nine months ended September 30, 2025 consisted of a gain on change in fair value of derivative liabilities of $185,000, a gain on change in fair value of warrant liabilities of $59,727,340, and a gain on disposal of property and equipment of $54,496, offset by interest expense of $3,263,840, amortization of debt discounts of $1,198,002, a loss on extinguishment of debt of $3,009,416, and other expense of $79,557. Other expense, net, for the nine months ended September 30, 2024 consisted of interest expense of $3,007,347, amortization of debt discounts of $7,976,758, a loss on extinguishment of debt of $2,843,451, and other expense of $1,277,446, offset by a gain on change in fair value of derivative liabilities of $1,689,410 and a gain on change in fair value of warrant liabilities of $1,841,000.

Income tax benefit (provision). We had an income tax expense of $1,347,000 for the nine months ended September 30, 2025, as compared to an income tax benefit of $754,000 for the nine months ended September 30, 2024.

Net income (loss) from continuing operations. As a result of the cumulative effect of the factors described above, we had a net income from continuing operations of $56,071,965 for the nine months ended September 30, 2025, as compared to a net loss from continuing operations of $18,932,970 for the nine months ended September 30, 2024.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of $2,189,759 and restricted cash of $500,929. 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 condensed 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.

Summary of Cash Flow

The following table provides detailed information about our net cash flows from continuing operations for the periods indicated:

		Nine Months Ended September 30,
		2025				2024
Net cash provided by (used in) operating activities from continuing operations		$	3,002,642			$	(11,657,794	)
Net cash provided by (used in) investing activities			(896,075	)			17,501,868
Net cash provided by (used in) financing activities from continuing operations			(3,231,933	)			3,730,366
Net change in cash and cash equivalents and restricted cash			(1,125,366	)			9,574,440
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		$	2,690,688			$	10,184,622

Net cash provided by operating activities from continuing operations was $3,002,642 for the nine months ended September 30, 2025, as compared to net cash used in operating activities from continuing operations of $11,657,794 for the nine months ended September 30, 2024. Significant factors affecting the increase in net cash used in operating activities were a result of a change from a net loss to net income and increased accounts payable and accrued expenses, offset by increased accounts receivable and contract assets.

Net cash used in investing activities was $896,075 for the nine months ended September 30, 2025, as compared to net cash provided by investing activities of $17,501,868 for the nine months ended September 30, 2024. The decrease in the net cash used in investing activities was primarily a result of a reduction in the Holdback Amount and purchases of property and equipment, offset by proceeds received in the disposal of property and equipment and proceeds received in the sale of High Mountain.

Net cash used in financing activities was $3,231,933 for the nine months ended September 30, 2025, as compared to net cash provided by financing activities from continuing operations of $3,730,366 for the nine months ended September 30, 2024. The decrease in the net cash provided by financing activities was primarily a result of decreased debt or equity offerings, as well as increased 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 September 30, 2025. For a complete description of the terms of our outstanding debt, please see Note 10 and 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		$	18,656			$	-			$	18,656
6% Subordinated promissory note			500,000				-				500,000
Purchase and sale of future revenues loan			756,000				-				756,000
20% OID subordinated promissory note			3,576,898				-				3,576,898
12% subordinated promissory note for services			750,000				-				750,000
25% OID subordinated promissory note			1,455,600				-				1,455,600
Total notes payable			7,057,154				-				7,057,154
Less: debt discounts			(148,618	)			-				(148,618	)
Total notes payable, net			6,908,536				-				6,908,536
Related Party Notes Payable
Related party promissory note			629,303				788,677				1,417,980
Convertible Notes Payable
Secured convertible promissory notes			22,814,184				-				22,814,184
Less: debt discounts			(238,982	)			-				(238,982	)
Total convertible notes payable, net			22,575,202				-				22,575,202
Finance Leases
Finance leases			189,835				279,832				469,667
Total combined total debt		$	30,690,476			$	1,068,509			$	31,758,985
Less: combined debt discounts			(387,600	)			-				(387,600	)
Total combined total debt, net		$	30,302,876			$	1,068,509			$	31,371,385

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.