UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31 ~~2022~~, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: ~~000-56128~~001-41368

1847 HOLDINGS LLC

(Exact name of registrant as specified in its charter)

Delaware		38-3922937
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

590 Madison Avenue, 21st Floor, New York, NY		10022
(Address of principal executive offices)		(Zip Code)

(212) 417-9800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: ~~None~~

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares		EFSH		NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May ~~13, 2022,~~12, 2023, there were ~~4,995,232~~5,074,927 common shares of the registrant issued and outstanding.

1847 HOLDINGS LLC

Quarterly Report on Form 10-Q

Period Ended March 31, ~~2022~~2023

TABLE OF CONTENTS

~~PART I~~

~~FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements~~PART I	1
	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3331
Item 4.	Controls and Procedures	3331

	PART II
	OTHER INFORMATION
~~Item 1.~~	~~Legal Proceedings~~	35
Item ~~1A.~~1.	~~Risk Factors~~Legal Proceedings	3533
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3533
Item 3.	Defaults Upon Senior Securities	3533
Item 4.	Mine Safety Disclosures	3533
Item 5.	Other Information	3533
Item 6.	Exhibits	3634

PART I

FINANCIAL INFORMATION

~~PART I~~

~~FINANCIAL INFORMATION~~

ITEM 1. FINANCIAL STATEMENTS.

1847 HOLDINGS LLC

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page

Condensed Consolidated Balance Sheets as of March 31, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022		2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (Unaudited)		3
Condensed Consolidated Statements of ~~Mezzanine~~Shareholders’ Equity ~~and Shareholders’ Deficit~~(Deficit) for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (Unaudited)		5
Notes to Condensed Consolidated Financial Statements (Unaudited)		6

1847 HOLDINGS LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,
2022 December 31, 2021
(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents $ 1,638,924 $ 1,383,533
Investments 276,691 276,429
Receivables, net 3,918,814 3,378,996
Contract assets 69,735 88,466
Inventories, net 5,805,494 5,427,302
Prepaid expenses and other current assets 270,537 582,048
Total Current Assets 11,980,195 11,136,774

Property and equipment, net 1,920,967 1,695,311
Operating lease right-of-use assets 3,094,573 3,192,604
Goodwill 19,452,270 19,452,270
Intangible assets, net 11,079,205 11,443,897
Other long-term assets 85,691 85,691
TOTAL ASSETS $ 47,612,901 $ 47,006,547

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT

Current Liabilities
Accounts payable and accrued expenses $ 5,911,576 $ 4,818,672
Contract liabilities 1,696,449 2,547,903
Customer deposits 3,677,543 3,465,259
Due to related parties 193,762 193,762
Current portion of operating lease liabilities 595,039 613,696
Current portion of finance lease liabilities 143,865 100,652
Current portion of notes payable, net 686,285 692,522
Total Current Liabilities 12,904,519 12,432,466

Operating lease liabilities, net of current portion 2,542,790 2,607,862
Finance lease liabilities, net of current portion 698,409 455,905
Notes payable, net of current portion 222,399 251,401
Convertible notes payable, net of current portion 26,880,029 26,630,655
Contingent note payable, net of current portion 1,001,183 1,001,183
Deferred tax liability, net 1,981,000 2,070,000
TOTAL LIABILITIES 46,230,329 45,449,472

Mezzanine Equity
Series A senior convertible preferred shares, 4,450,460 shares designated; 1,684,849 and 1,818,182 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 1,415,100 1,655,404
Series B senior convertible preferred shares, 583,334 shares designated; 426,999 and 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 1,113,650 -
TOTAL MEZZANINE EQUITY 2,528,750 1,655,404

Shareholders’ Deficit
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021 1,000 1,000
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,995,232 and 4,842,851 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 4,995 4,843
Distribution receivable (2,000,000 ) (2,000,000 )
Additional paid-in capital 21,983,594 21,719,410
Accumulated deficit (22,012,401 ) (20,754,394 )
TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT (2,022,812 ) (1,029,141 )
NON-CONTROLLING INTERESTS 876,634 930,812
TOTAL SHAREHOLDERS’ DEFICIT (1,146,178 ) (98,329 )
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT $ 47,612,901 $ 47,006,547

	March 31, 2023			December 31, 2022
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	2,297,927		$	1,079,355
Investments		277,612			277,310
Receivables, net		7,481,706			5,215,568
Contract assets		60,952			89,574
Inventories, net		14,033,937			4,184,019
Prepaid expenses and other current assets		399,119			379,875
Total Current Assets		24,551,253			11,225,701

Property and equipment, net		2,285,402			1,885,206
Operating lease right-of-use assets		2,668,680			2,854,196
Long-term deposits		156,997			82,197
Intangible assets, net		9,928,437			9,985,129
Goodwill		19,452,270			19,452,270
TOTAL ASSETS	$	59,043,039		$	45,484,699

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	12,466,451		$	6,741,769
Contract liabilities		1,957,411			2,353,295
Customer deposits		2,977,474			3,059,658
Due to related parties		193,762			193,762
Current portion of operating lease liabilities		718,868			713,100
Current portion of finance lease liabilities		187,429			185,718
Current portion of notes payable, net		4,859,816			551,210
Revolving line of credit		2,063,182			-
Related party note payable		362,779			362,779
Total Current Liabilities		25,787,172			14,161,291

Operating lease liabilities, net of current portion		2,052,170			2,237,797
Finance lease liabilities, net of current portion		736,993			784,148
Notes payable, net of current portion		127,853			144,830
Convertible notes payable, net		24,864,371			24,667,799
Deferred tax liability, net		187,000			599,000
TOTAL LIABILITIES		53,755,559			42,594,865

Shareholders’ Equity
Series A senior convertible preferred shares, no par value, 4,450,460 shares designated; 1,593,940 shares issued and outstanding as of March 31, 2023 and December 31, 2022		1,338,746			1,338,746
Series B senior convertible preferred shares, no par value, 583,334 shares designated; 464,899 shares issued and outstanding as of March 31, 2023 and December 31, 2022		1,214,181			1,214,181
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022		1,000			1,000
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,655,636 and 4,079,137 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		4,656			4,079
Distribution receivable		(2,000,000	)		(2,000,000	)
Additional paid-in capital		47,310,059			43,962,606
Accumulated deficit		(42,804,608	)		(41,919,277	)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ EQUITY		5,064,034			2,601,335
NON-CONTROLLING INTERESTS		223,446			288,499
TOTAL SHAREHOLDERS’ EQUITY		5,287,480			2,889,834
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	59,043,039		$	45,484,699

The accompanying notes are an integral part of these condensed consolidated financial statements.

1847 HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended
March 31,
2022 2021
Revenues $ 12,073,878 $ 4,780,275

Operating Expenses
Cost of sales 7,749,130 3,260,682
Personnel 1,577,700 484,672
Depreciation and amortization 511,371 122,106
General and administrative 2,166,207 1,324,196
Total Operating Expenses 12,004,408 5,191,656

INCOME (LOSS) FROM OPERATIONS 69,470 (411,381 )

Other Income (Expenses)
Other income 318 -
Interest expense (906,743 ) (45,121 )
Gain on forgiveness of debt - 360,302
Gain on disposal of property and equipment 32,747 -
Loss on adjustment shares - (757,792 )
Total Other Income (Expenses) (873,678 ) (442,611 )

NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (804,208 ) (853,992 )
INCOME TAX EXPENSE ON CONTINUING OPERATIONS (123,000 ) -
NET LOSS FROM CONTINUING OPERATIONS $ (927,208 ) $ (853,992 )

NET INCOME FROM DISCONTINUED OPERATIONS - 178,510
NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS - 80,329
NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS - 98,181

NET LOSS $ (927,208 ) (755,811 )
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (54,178 ) (25,370 )
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS $ (873,030 ) $ (730,441 )

PREFERRED SHARE DIVIDENDS (135,215 ) (188,709 )
DEEMED DIVIDEND RELATED TO ISSUANCE OF PREFERRED SHARES - (1,527,086 )
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS $ (1,008,245 ) $ (2,446,236 )

EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS
LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS – BASIC AND DILUTED $ (0.21 ) $ (0.19 )
EARNINGS PER COMMON SHARE FROM DISCONTINUED OPERATIONS – BASIC AND DILUTED - 0.02
LOSS PER COMMON SHARE – BASIC AND DILUTED $ (0.21 ) $ (0.55 )

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED 4,915,655 4,466,171

	Three Months Ended March 31,
	2023			2022
Revenues	$	15,403,538		$	12,073,878

Operating Expenses
Cost of revenues		9,566,508			7,749,130
Personnel		3,026,193			1,577,700
Depreciation and amortization		573,609			511,371
General and administrative		2,315,061			2,166,207
Total Operating Expenses		15,481,371			12,004,408

INCOME (LOSS) FROM OPERATIONS		(77,833	)		69,470

Other Income (Expense)
Other income (expense)		33,168			318
Interest expense		(1,817,715	)		(906,743	)
Gain on disposal of property and equipment		-			32,747
Gain on bargain purchase		2,639,861			-
Total Other Income (Expense)		855,314			(873,678	)

NET INCOME (LOSS) BEFORE INCOME TAXES		777,481			(804,208	)
INCOME TAX BENEFIT (EXPENSE)		270,000			(123,000	)
NET INCOME (LOSS)	$	1,047,481		$	(927,208	)

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		(65,053	)		(54,178	)
NET INCOME (LOSS) ATTRIBUTABLE TO 1847 HOLDINGS	$	1,112,534		$	(873,030	)

PREFERRED SHARE DIVIDENDS		(162,865	)		(135,215	)
DEEMED DIVIDENDS		(1,835,000	)		-
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS’	$	(885,331	)	$	(1,008,245	)

LOSS PER COMMON SHARE ATTRIBUTABLE TO 1847 HOLDINGS COMMON SHAREHOLDERS’
BASIC AND DILUTED	$	(0.20	)	$	(0.21	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		4,419,917			4,915,655

The accompanying notes are an integral part of these condensed consolidated financial statements.

1847 HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

~~MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT~~(UNAUDITED)

~~(UNAUDITED)~~

Three Months Ended March 31, 2023

Series A Senior Convertible
Preferred Shares Series B Senior Convertible
Preferred Shares Allocation Common Shares Distribution Additional
Paid-In Accumulated Non- Controlling Total
Shareholders’
Shares Amount Shares Amount Shares Shares Amount Receivable Capital Deficit Interests Equity
Balance at December 31, 2022 1,593,940 $ 1,338,746 464,899 $ 1,214,181 $ 1,000 4,079,137 $ 4,079 $ (2,000,000 ) $ 43,962,606 $ (41,919,277 ) $ 288,499 $ 2,889,834
Issuance of common shares upon settlement of accrued series A preferred shares dividends - - - - - 99,505 100 - 152,568 - - 152,668
Issuance of common shares and warrants in connection with a private debt offering - - - - - 415,605 416 - 1,359,946 - - 1,360,362
Issuance of common shares upon cashless exercise of warrants - - - - - 61,389 61 - (61 ) - - -
Deemed dividend from issuance of warrants to common shareholders - - - - - - - - 618,000 (618,000 ) - -
Deemed dividend from down round provision in warrants - - - - - - - - 1,217,000 (1,217,000 ) - -
Dividends - series A senior convertible preferred shares - - - - - - - - - (110,045 ) - (110,045 )
Dividends - series B senior convertible preferred shares - - - - - - - - - (52,820 ) - (52,820 )
Net income - - - - - - - - - 1,112,534 (65,053 ) 1,047,481
Balance at March 31, 2023 1,593,940 $ 1,338,746 464,899 $ 1,214,181 $ 1,000 4,655,636 $ 4,656 $ (2,000,000 ) $ 47,310,059 $ (42,804,608 ) $ 223,446 $ 5,287,480

Three Months Ended March 31, 2022

	Series A Senior Convertible Preferred Shares						Series B Senior Convertible Preferred Shares				Allocation		Common Shares				Distribution			Additional Paid-In		Accumulated			Non- Controlling			Total Shareholders’			Series A Senior Convertible Preferred Shares						Series B Senior Convertible Preferred Shares				Allocation		Common Shares				Distribution			Additional Paid-In		Accumulated			Non- Controlling			Total Shareholders’ Equity
	Shares			Amount			Shares		Amount		Shares		Shares		Amount		Receivable			Capital		Deficit			Interests			(Deficit)			Shares			Amount			Shares		Amount		Shares		Shares		Amount		Receivable			Capital		Deficit			Interests			(Deficit)
Balance at December 31, 2021		1,818,182		$	1,655,404			-	$	-	$	1,000		4,842,851	$	4,843	$	(2,000,000	)	$	21,719,410	$	(20,754,394	)	$	930,812		$	(98,329	)		1,818,182		$	1,655,404			-	$	-	$	1,000		1,210,918	$	1,211	$	(2,000,000	)	$	21,723,042	$	(20,754,394	)	$	930,812		$	(98,329	)
Issuance of common shares upon conversion of series A preferred shares		(133,333	)		(111,986	)		-		-		-		152,381		152		-			111,834		-			-			111,986			(133,333	)		(111,986	)		-		-		-		38,096		38		-			111,948		-			-			111,986
Issuance of series B convertible preferred shares and warrants		-			-			426,999		1,113,650		-		-		-		-			152,350		-			-			152,350			-			-			426,999		1,113,650		-		-		-		-			152,350		-			-			152,350
Dividends - common shares		-			-			-		-		-		-		-		-			-		(249,762	)		-			(249,762	)		-			-			-		-		-		-		-		-			-		(249,762	)		-			(249,762	)
Dividends - series A senior convertible preferred shares		-			(128,318	)		-		-		-		-		-		-			-		(121,455	)		-			(121,455	)		-			(128,318	)		-		-		-		-		-		-			-		(121,455	)		-			(121,455	)
Dividends - series B senior convertible preferred shares		-			-			-		-		-		-		-		-			-		(13,760	)		-			(13,760	)		-			-			-		-		-		-		-		-			-		(13,760	)		-			(13,760	)
Net loss		-			-			-		-		-		-		-		-			-		(873,030	)		(54,178	)		(927,208	)		-			-			-		-		-		-		-		-			-		(873,030	)		(54,178	)		(927,208	)
Balance at March 31, 2022		1,684,849		$	1,415,100			426,999	$	1,113,650	$	1,000		4,995,232	$	4,995	$	(2,000,000	)	$	21,983,594	$	(22,012,401	)	$	876,634		$	(1,146,178	)		1,684,849		$	1,415,100			426,999	$	1,113,650	$	1,000		1,214,181	$	1,249	$	(2,000,000	)	$	21,987,340	$	(22,012,401	)	$	876,634		$	(1,146,178	)

~~Three Months Ended March 31, 2021~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

1847 HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended March 31,						Three Months Ended March 31,
	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(927,208	)	$	(755,811	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Income from discontinued operations		-			(98,181	)
Gain on forgiveness of debt		-			(360,302	)
Net income (loss)							$	1,047,481		$	(927,208	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on bargain purchase								(2,639,861	)		-
Gain on disposal of property and equipment		(32,747	)		-			-			(32,747	)
Loss on redemption of series A senior convertible preferred shares		-			757,792
Deferred tax asset (liability)		(89,000	)		-			(412,000	)		(89,000	)
Inventory reserve								30,000			-
Depreciation and amortization		511,371			122,106			573,609			511,371
Amortization of debt discounts		249,374			-			412,650			249,374
Amortization of right-of-use assets		98,031			16,928			185,516			98,031
Changes in operating assets and liabilities:
Receivables		(539,818	)		(124,065	)		(344,086	)		(539,818	)
Contract assets		18,731			-			28,622			18,731
Inventories		(378,192	)		(115,545	)		117,414			(378,192	)
Prepaid expenses and other current assets		311,511			(62,071	)		60,533			311,511
Accounts payable and accrued expenses		964,586			65,969			(253,717	)		964,586
Contract liabilities		(851,454	)		(122,247	)		(395,884	)		(851,454	)
Customer deposits		212,284			328,580			(82,184	)		212,284
Due to related parties		-			1,785
Operating lease liabilities		(83,729	)		(15,657	)		(179,859	)		(83,729	)
Net cash used in operating activities from continuing operations		(536,260	)		(360,719	)
Net cash used in operating activities from discontinued operations		-			(123,086	)
Net cash used in operating activities		(536,260	)		(483,805	)		(1,851,766	)		(536,260	)

CASH FLOWS FROM INVESTING ACTIVITIES
Net cash acquired in acquisitions		-			1,094,524
Cash paid in acquisitions, net of cash acquired								(3,670,887	)		-
Purchases of property and equipment		(66,291	)		(148,820	)		(63,443	)		(66,291	)
Proceeds from disposal of property and equipment		35,498			-			-			35,498
Investments in certificates of deposit		(262	)		-			(302	)		(262	)
Net cash (used in) provided by investing activities from continuing operations		(31,055	)		945,704
Net cash provided by investing activities from discontinued operations		-			534,343
Net cash (used in) provided by investing activities		(31,055	)		1,480,047
Net cash used in investing activities								(3,734,632	)		(31,055	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		-			123,405
Net proceeds from issuance of series A senior convertible preferred shares		-			3,000,000
Net proceeds from issuance of series B senior convertible preferred shares		1,266,000			-			-			1,266,000
Proceeds from line of credit		-			569,395
Net proceeds from notes payable								1,410,000			-
Net proceeds from issuance of common shares and warrants in connection with a private debt offering								3,549,518			-
Net proceeds from revolving line of credit								1,963,182			-
Repayments of notes payable and finance lease liabilities		(58,317	)		(143,432	)		(69,049	)		(58,317	)
Repayments to sellers		-			(3,033,630	)
Cash paid for financing costs		-			(165,229	)
Dividends on series A senior convertible preferred shares		(121,455	)		(176,950	)
Dividends on series B senior convertible preferred shares		(13,760	)		-
Dividends on common shares		(249,762	)		-
Net cash provided by financing activities from continuing operations		822,706			173,559
Net cash used in financing activities from discontinued operations		-			(119,197	)
Accrued series A preferred share dividends paid								-			(121,455	)
Accrued series B preferred share dividends paid								(48,681	)		(13,760	)
Accrued common share dividends paid								-			(249,762	)
Net cash provided by financing activities		822,706			54,362			6,804,970			822,706

NET CHANGE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS		255,391			758,544
NET CHANGE IN CASH AND CASH EQUIVALENT FROM DISCONTINUED OPERATIONS		-			292,060
CASH AND CASH EQUIVALENTS AVAILABLE FROM DISCONTINUED OPERATIONS		-			(292,060	)
NET CHANGE IN CASH AND CASH EQUIVALENTS								1,218,572			255,391

CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS
Beginning of the period		1,383,533			1,380,349			1,079,355			1,383,533
End of the period	$	1,638,924		$	2,138,893		$	2,297,927		$	1,638,924

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	484,360		$	-		$	646,974		$	484,360
Cash paid for income taxes	$	-		$	-		$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES
Net assets acquired in the acquisition of ICU Eyewear							$	7,139,861		$	-
Deemed dividend from issuance of warrants to common shareholders							$	618,000		$	-
Deemed dividend from down round provision in warrants							$	1,217,000		$	-
Accrued dividends on series A preferred shares							$	110,045		$	-
Accrued dividends on series B preferred shares							$	52,820		$	-
Issuance of common shares upon settlement of accrued series A dividends							$	152,668		$	-
Issuance of common shares upon conversion of series A preferred shares	$	111,986		$	-		$	-		$	111,986
Issuance of common shares upon cashless exercise of warrants							$	61		$	-
Debt discount on notes payable							$	2,405,419		$	-
Financed purchases of property and equipment	$	316,798		$	-		$	-		$	316,798

The accompanying notes are an integral part of these condensed consolidated financial statements.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION

The accompanying unaudited condensed consolidated financial statements of 1847 Holdings LLC (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, ~~2021~~2022 consolidated balance sheet data ~~were~~was derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on ~~March 31, 2022.~~April 11, 2023. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair ~~statement~~presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~

~~Reclassifications~~

Certain reclassifications within property and equipment, notes payable, and preferred shares have been made to prior period’s financial statements to conform to the current period financial statement presentation. There is no impact in total to the results of operations and cash flows in all periods presented.

~~Sequencing~~

Under ASC 815-40-35 (“ASC 815”), the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest maturity date of potentially dilutive instruments first, with the earliest maturity date of grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities to the Company’s employees and directors, or to compensate grantees in a share-based payment arrangement, are not subject to the sequencing policy.2023.

NOTE 2—RECENT ACCOUNTING ~~PRONOUCEMENTS~~PRONOUNCEMENTS

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ~~ASUs not listed below were assessed~~The Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to ~~be either~~the Company has not ~~applicable~~had or ~~are~~is not expected to have ~~minimal~~a material impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06 Accounting for Convertible Instruments and Contracts In An Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. Entities may adopt the ASU 2020-06 using either a full or modified retrospective approach, and it is effective for interim and annual reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2020. The Company adopted this guidance on January 1, 2022.

In October 2021, the FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company adopted this guidance on January 1, 2022. The adoption of this standard does not have a material impact on our condensed consolidated financial statements.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

NOTE 3—LIQUIDITY AND GOING CONCERN ASSESSMENT

Management assesses liquidity and going concern uncertainty in the Company’s condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

As of March 31, ~~2022, we~~2023, the Company had cash and cash equivalents of ~~$1,638,924.~~$2,297,927. For the three months ended March 31, ~~2022,~~2023, the Company incurred ~~operating income~~a loss from operations of ~~$69,470~~$77,833 (before deducting losses attributable to non-controlling interests), cash flows used in operations of ~~$536,260,~~$1,851,766, and ~~negative~~ working capital deficit of ~~$924,324.~~$1,235,919. The Company has generated operating losses since its inception and has relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related party debt to support cashflow from ~~operations.~~

~~Management has prepared estimates of~~ operations, which creates substantial doubt about its ability to continue as a going concern for ~~fiscal year 2022 and 2023 believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for~~a period at least one year from the date of ~~the filing~~issuance of these condensed consolidated financial ~~statements, which indicate improved operations~~statements.

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 the ~~Company’s ability~~Company to continue ~~operations~~ as a going ~~concern. The impact of COVID-19 on~~concern is dependent upon its ability to successfully accomplish the ~~Company’s business has been considered~~plans described in ~~these assumptions; however, it is too early~~the preceding paragraph and to ~~know the full impact of COVID-19 or its timing on a return to more normal~~eventually attain profitable operations.

The accompanying condensed consolidated financial statements ~~have been prepared on a going concern basis under which~~do not include any adjustments that might be necessary if the Company is ~~expected~~unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be ~~able~~forced to realize its assets and satisfy its liabilities in the normal course of business. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of these condensed consolidated financial statements. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.cease operations.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

NOTE 4—DISAGGREGATION OF REVENUES AND SEGMENT REPORTING

The Company has 3four reportable segments:

The Retail and Appliances Segment provides a wide variety of appliance products (laundry, refrigeration, cooking, dishwashers, outdoor, accessories, parts, and other appliance related products) and services (delivery, installation, service and repair, extended warranties, and financing).

The Retail and Eyewear Segment provides a wide variety of eyewear products (non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers and outdoor specialty sunglasses).

The Construction Segment provides finished carpentry products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace mantles, windows, and custom design and build of cabinetry and countertops).

The Automotive Supplies Segment provides 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.

The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate Services” below and these include costs associated with executive management, financing activities and public company compliance.

The Company’s revenues for the three months ended March 31, 2023 and 2022 are disaggregated as follows:

	Three Months Ended March 31, 2023
	Retail and Appliances		Retail and Eyewear		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,144,825	$	-	$	-	$	-	$	2,144,825
Appliance accessories, parts, and other		293,110		-		-		-		293,110
Eyewear		-		2,792,712		-		-		2,792,712
Automotive horns		-		-		-		995,417		995,417
Automotive lighting		-		-		-		264,749		264,749
Custom cabinets and countertops		-		-		2,116,182		-		2,116,182
Finished carpentry		-		-		6,796,543		-		6,796,543
Total Revenues	$	2,437,935	$	2,792,712	$	8,912,725	$	1,260,166	$	15,403,538

	Three Months Ended March 31, 2022
	Retail and Appliances		Retail and Eyewear		Construction		Automotive Supplies		Total
Revenues
Appliances	$	2,204,625	$	-	$	-	$	-	$	2,204,625
Appliance accessories, parts, and other		316,159		-		-		-		316,159
Eyewear		-		-		-		-		-
Automotive horns		-		-		-		1,199,856		1,199,856
Automotive lighting		-		-		-		442,135		442,135
Custom cabinets and countertops		-		-		4,167,801		-		4,167,801
Finished carpentry		-		-		3,743,302		-		3,743,302
Total Revenues	$	2,520,784	$	-	$	7,911,103	$	1,641,991	$	12,073,878

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

~~The Company’s revenues for the three months ended March 31, 2022 and 2021 are disaggregated as follows:~~

Three Months Ended March 31, 2022
Retail and
Appliances Construction Automotive
Supplies Total
Revenues
Appliances $ 2,204,625 $ - $ - $ 2,204,625
Appliance accessories, parts, and other 316,159 - - 316,159
Automotive horns - - 1,199,856 1,199,856
Automotive lighting - - 442,135 442,135
Custom cabinets and countertops - 4,167,801 - 4,167,801
Finished carpentry - 3,743,302 - 3,743,302
Total Revenues $ 2,520,784 $ 7,911,103 $ 1,641,991 $ 12,073,878

Three Months Ended March 31, 2021
Retail and
Appliances Construction Automotive
Supplies Total
Revenues
Appliances $ 2,899,361 $ - $ - $ 2,899,361
Appliance accessories, parts, and other 365,005 - - 365,005
Automotive horns - - - -
Automotive lighting - - - -
Custom cabinets and countertops - 1,515,909 - 1,515,909
Finished carpentry - - - -
Total Revenues $ 3,264,366 $ 1,515,909 $ - $ 4,780,275

Segment information for the three months ended March 31, 2023 and 2022 ~~and 2021 is~~are as follows:

	Three Months Ended March 31, 2022													Three Months Ended March 31, 2023
	Retail and Appliances			Construction		Automotive Supplies			Corporate Services			Total		Retail and Appliances			Retail and Eyewear		Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	2,520,784		$	7,911,103	$	1,641,991		$	-		$	12,073,878	$	2,437,935		$	2,792,712	$	8,912,725	$	1,260,166		$	-		$	15,403,538
Operating expenses										-
Cost of sales		1,871,450			4,879,591		998,089			-			7,749,130
Operating Expenses
Cost of revenues															1,813,783			1,667,442		5,375,027		710,256			-			9,566,508
Personnel		230,388			1,134,210		300,328			(87,226	)		1,577,700		273,204			806,644		1,771,936		332,320			(157,911	)		3,026,193
Depreciation and amortization		79,797			379,704		51,870			-			511,371		46,603			62,078		412,989		51,939			-			573,609
General and administrative		449,494			1,116,558		386,781			213,374			2,166,207		425,601			177,803		1,093,322		337,233			281,102			2,315,061
Total Operating Expenses		2,631,129			7,510,063		1,737,068			126,148			12,004,408		2,559,191			2,713,967		8,653,274		1,431,748			123,191			15,481,371
Income (Loss) from Operations	$	(110,345	)	$	401,040	$	(95,077	)	$	(126,148	)	$	69,470
Income (loss) from operations														$	(121,256	)	$	78,745	$	259,451	$	(171,582	)	$	(123,191	)	$	(77,833	)

	Three Months Ended March 31, 2021													Three Months Ended March 31, 2022
	Retail and Appliances		Construction		Automotive Supplies			Corporate Services			Total			Retail and Appliances			Retail and Eyewear		Construction		Automotive Supplies			Corporate Services			Total
Revenues	$	3,264,366	$	1,515,909	$	-		$	-		$	4,780,275		$	2,520,784		$	-	$	7,911,103	$	1,641,991		$	-		$	12,073,878
Operating expenses						-			-
Cost of sales		2,506,652		754,030		-			-			3,260,682
Operating Expenses
Cost of revenues															1,871,450			-		4,879,591		998,089			-			7,749,130
Personnel		253,083		231,589		-			-			484,672			230,388			-		1,134,210		300,328			(87,226	)		1,577,700
Depreciation and amortization		44,675		77,431		-			-			122,106			79,797			-		379,704		51,870			-			511,371
General and administrative		434,587		215,311		598,295			76,003			1,324,196			449,494			-		1,116,558		386,781			213,374			2,166,207
Total Operating Expenses		3,238,997		1,278,361		598,295			76,003			5,191,656			2,631,129			-		7,510,063		1,737,068			126,148			12,004,408
Income (Loss) from Operations	$	25,369	$	237,548	$	(598,295	)	$	(76,003	)	$	(411,381	)
Income (loss) from operations														$	(110,345	)	$	-	$	401,040	$	(95,077	)	$	(126,148	)	$	69,470

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

NOTE 5—PROPERTY AND EQUIPMENT

Property and equipment at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Equipment and machinery	$	1,127,897		$	808,592		$	1,403,817		$	1,403,817
Office furniture and equipment		107,903			105,203			156,960			156,960
Transportation equipment		901,426			864,121			883,077			883,077
Displays								595,841			-
Leasehold improvements		123,651			112,356			180,032			166,760
Total property and equipment		2,260,877			1,890,272			3,219,727			2,610,614
Less: Accumulated depreciation		(339,910	)		(194,961	)		(934,325	)		(725,408	)
Property and equipment, net	$	1,920,967		$	1,695,311		$	2,285,402		$	1,885,206

Depreciation expense for the three months ended March 31, 2023 and 2022 was $208,917 and ~~2021 was~~ $146,679, ~~and $24,309,~~ respectively.

NOTE 6—INTANGIBLE ASSETS

Intangible assets at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

	March 31, 2022			December 31, 2021
							March 31, 2023			December 31, 2022
Customer relationships	$	5,791,000		$	5,791,000		$	9,024,000		$	9,024,000
Marketing related		5,917,000			5,917,000
Technology related		623,000			623,000
Marketing-related								2,992,000			2,684,000
Technology-related								623,000			623,000
Total intangible assets		12,331,000			12,331,000			12,639,000			12,331,000
Less: accumulated amortization		(1,251,795	)		(887,103	)		(2,710,563	)		(2,345,871	)
Intangible assets, net	$	11,079,205		$	11,443,897		$	9,928,437		$	9,985,129

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

Amortization expense for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was $364,692, ~~and $97,797,~~ respectively.

Estimated amortization expense for intangible assets for the next five years consists of the following as of March 31, ~~2022:~~2023:

Year Ending December 31, Amount
2022 – remaining $ 1,094,088
2023 1,458,780
2024 1,458,750
2025 1,325,745
2026 1,157,523
Thereafter 4,584,319
Total $ 11,079,205

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

Year Ending December 31,	Amount
2023 - remaining	$	1,094,076
2024		1,458,768
2025		1,325,778
2026		1,150,640
2027		909,142
Thereafter		3,990,032
Total	$	9,928,437

NOTE 7—SELECTED ACCOUNT INFORMATION

Receivables

Receivables at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Trade accounts receivable	$	3,235,644		$	2,691,702		$	6,953,068		$	4,867,749
Vendor rebates receivable		12,194			126,118			3,260			460
Credit card payments in process of settlement		-			116,187			160,353			102,917
Retainage		1,029,976			803,989			724,025			603,442
Total receivables		4,277,814			3,737,996			7,840,706			5,574,568
Allowance for doubtful accounts		(359,000	)		(359,000	)		(359,000	)		(359,000	)
Accounts receivable, net	$	3,918,814		$	3,378,996
Total receivables, net							$	7,481,706		$	5,215,568

Inventories

Inventories at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:

	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Appliances	$	2,554,539		$	2,206,336		$	1,972,631		$	2,155,839
Eyewear								9,768,324			-
Automotive		1,824,260			2,064,834			1,042,267			934,683
Construction		1,814,543			1,543,980			1,706,563			1,519,345
Total inventories		6,193,342			5,815,150			14,489,785			4,609,867
Less reserve for obsolescence		(387,848	)		(387,848	)		(425,848	)		(425,848	)
Total inventories, net	$	5,805,494		$	5,427,302		$	14,033,937		$	4,184,019

Inventory balances are composed of finished goods. Raw materials and work in process inventory are immaterial to the condensed consolidated financial statements.

~~Accounts payable and accrued expenses at March 31, 2022 and December 31, 2021 consisted of the following:~~

March 31,
2022 December 31,
2021
Trade accounts payable $ 3,810,165 $ 3,117,825
Credit cards payable 80,536 52,300
Accrued payroll liabilities 397,717 263,590
Accrued interest 853,402 711,258
Accrued dividends 384,977 242,160
Other accrued liabilities 384,779 431,539
Total accounts payable and accrued expenses $ 5,911,576 $ 4,818,672

~~NOTE 8—LEASES~~

~~Operating Leases~~

~~The following was included in our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021:~~

March 31,
2022 December 31,
2021
Operating lease right-of-use assets $ 3,094,573 $ 3,192,604
Lease liabilities, current portion 595,039 613,696
Lease liabilities, long-term 2,542,790 2,607,862
Total operating lease liabilities $ 3,137,829 $ 3,221,558
Weighted-average remaining lease term (months) 54 59
Weighted average discount rate 4.29 % 4.29 %

~~Operating lease expense was expense was $235,438 and $85,924 for the three months ended March 31, 2022 and March 31, 2021, respectively.~~

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

Accounts payable and accrued expenses

Accounts payable and accrued expenses at March 31, 2023 and December 31, 2022 consisted of the following:

	March 31, 2023		December 31, 2022
Trade accounts payable	$	8,555,914	$	4,129,393
Credit cards payable		57,090		357,964
Accrued payroll liabilities		898,781		824,369
Accrued interest		1,891,786		1,179,875
Accrued dividends		97,568		136,052
Other accrued liabilities		965,312		114,116
Total accounts payable and accrued expenses	$	12,466,451	$	6,741,769

NOTE 8—LEASES

Operating Leases

The following was included in the condensed consolidated balance sheets at March 31, 2023 and December 31, 2022:

	March 31, 2023			December 31, 2022
Operating lease right-of-use assets	$	2,668,680		$	2,854,196
Lease liabilities, current portion		718,868			713,100
Lease liabilities, long-term		2,052,170			2,237,797
Total operating lease liabilities	$	2,771,038		$	2,950,897
Weighted-average remaining lease term (months)		44			47
Weighted average discount rate		4.35	%		4.36	%

Rent expense for the three months ended March 31, 2023 and 2022 was $340,592 and $235,438, respectively.

As of March 31, ~~2022,~~2023, maturities of operating lease liabilities were as follows:

Year Ending December 31,	Amount			Amount
2022 – remaining	$	524,519
2023		738,690
2023 - remaining				$	617,178
2024		753,868			846,987
2025		747,860			802,413
2026		495,994			512,756
2027					228,889
Thereafter		212,580			-
Total		3,473,511			3,008,223
Less: imputed interest		(335,682	)		(237,185	)
Total operating lease liabilities	$	3,137,829		$	2,771,038

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

Finance Leases

~~During the period ending March 31, 2022, the Company entered in an equipment financing lease to purchase machinery and equipment totaling $316,798, maturing in January 2028.~~

As of March 31, ~~2022,~~2023, maturities of ~~finance~~financing lease liabilities were as follows:

Year Ending December 31,	Amount			Amount
2022 – remaining	$	137,882
2023		184,711
2023 - remaining				$	176,013
2024		168,254			218,099
2025		161,487			211,332
2026		161,487			211,332
2027					210,042
Thereafter		166,688			28,833
Total payments		980,509
Total					1,055,651
Less: amount representing interest		(138,235	)		(131,229	)
Present value of minimum finance lease payments	$	842,274
Present value of minimum lease payments				$	924,422

As of March 31, ~~2022,~~2023, the weighted-average remaining lease term for all finance leases is ~~5.50~~4.80 years.

NOTE 9—~~ACQUISITIONS~~BUSINESS COMBINATIONS

ICU Eyewear

On ~~March 30, 2021,~~December 21, 2022, the ~~Company acquired 100%~~Company’s newly formed wholly owned subsidiaries 1847 ICU Holdings Inc. (“1847 ICU”) and 1847 ICU Acquisition Sub Inc. entered into an agreement and plan of ~~the outstanding capital stock of Wolo Mfg. Corp and Wolo Industrial Horn & Signal,~~merger with ICU Eyewear Holdings, Inc. (“~~Wolo”~~ICU Eyewear”) ~~for an aggregate purchase price of $8,344,056.~~and San Francisco Equity Partners, as the stockholder representative, which was amended on February 9, 2023.

~~Wolo~~On February 9, 2023, closing of the transactions contemplated by the agreement and plan of merger was completed. Pursuant to the agreement and plan of merger, 1847 ICU Acquisition Sub Inc. merged with and into ICU Eyewear, with ICU Eyewear surviving the merger as a wholly owned subsidiary of 1847 ICU. The merger consideration paid by 1847 ICU to the stockholders of ICU Eyewear consists of (i) $4,000,000 in cash, minus any unpaid debt of ICU Eyewear and certain transaction expenses, and (ii) 6% subordinated promissory notes in the aggregate principal amount of $500,000.

The Company accounted for the acquisition using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. In accordance with ASC 805, the Company used its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill is measured as the excess of the purchase consideration over the fair value of the net tangible assets and identifiable assets acquired, or if the fair value of the net assets acquired exceeds the purchase consideration, a bargain purchase gain is recorded.

The preliminary fair value of the purchase consideration issued to the ICU Eyewear stockholders was allocated to the net tangible assets acquired. The preliminary fair value of the net assets acquired was $7,139,861. The preliminary fair value of the net assets acquired exceeded the purchase consideration, resulting in a bargain purchase gain of $2,639,861. For the three months ended March 31, 2023, ICU Eyewear contributed revenue of ~~$1,661,754~~$2,792,712 and net ~~loss from continuing operations~~income of ~~$325,417,~~$2,581,437, which are included in our condensed consolidated statements of operations for the three months ended March 31, ~~2022.~~2023.

~~On October 8, 2021,~~

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

The table below represents the ~~Company acquired 100% of the outstanding capital stock of High Mountain Door & Trim, Inc. (“High Mountain”) and Sierra Homes, LLC (“Sierra Homes”) for an aggregate~~estimated preliminary purchase price ~~of $15,441,173.~~allocation to the net assets acquired:

High Mountain and Sierra Homes contributed revenue of $6,249,349 and net loss from continuing operations of $271,647, which are included in our condensed consolidated statements of operations for the three months ended March 31, 2022.

Provisional purchase consideration at preliminary fair value:
Cash	$	4,000,000
Notes payable		500,000
Amount of consideration	$	4,500,000

Assets acquired and liabilities assumed at preliminary fair value
Cash	$	329,113
Accounts receivable		1,922,052
Inventory		9,997,332
Prepaids and other current assets		79,777
Property and equipment		545,670
Other assets		74,800
Marketing related intangibles		308,000
Accounts payable and accrued expenses		(6,116,883	)
Net tangible assets acquired	$	7,139,861

Consideration paid		4,500,000
Preliminary gain on bargain purchase	$	(2,639,861	)

Pro Forma Information

The following unaudited pro forma results presented below include the effects of the ~~Wolo, High Mountain and Sierra Homes acquisitions~~ICU Eyewear acquisition as if ~~they~~it had been consummated as of January 1, ~~2021,~~2022, with adjustments to give effect to pro forma events that are directly attributable to ~~the acquisitions.~~this acquisition.

March 31, March 31,
2022 2021

Revenues $ 12,073,878 $ 13,373,918
Net income (loss) (927,208 ) 317,547
Net loss attributable to 1847 Holdings common shareholders’ (1,008,245 ) (1,398,248 )
Loss per share attributable to 1847 Holdings common shareholders’:
Basic and diluted $ (0.21 ) $ (0.29 )

	Three Months Ended March 31,
	2023			2022
Revenues	$	17,479,875		$	18,561,294
Net loss		1,027,971			(441,479	)
Net loss attributable to common shareholders		(904,841	)		(522,516	)
Loss per share attributable to common shareholders:
Basic	$	(0.20	)	$	(0.11	)
Diluted	$	(0.20	)	$	(0.11	)

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

NOTE 10—NOTES PAYABLE

6% Subordinated Promissory Notes

As part of the consideration paid in the acquisition of ICU Eyewear, 1847 ICU issued the sellers 6% subordinated promissory notes in the aggregate principal amount of $500,000. The notes bear interest at the rate of 6% per annum with all principal and accrued interest being due and payable in one lump sum on February 9, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. 1847 ICU may prepay all or any portion of the notes at any time prior to the maturity date without premium or penalty of any kind. The notes contain customary events of default, including, without limitation, in the event of (i) non-payment, (ii) a default by 1847 ICU of any of its covenants in the notes, the agreement and plan of merger or any other agreement entered into in connection with the agreement and plan of merger, or a breach of any of the representations or warranties under such documents, (iii) the insolvency or bankruptcy of 1847 ICU or ICU Eyewear or (iv) a change of control (as defined in the notes) of 1847 ICU or ICU Eyewear. The notes are unsecured and subordinated to all senior indebtedness.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

~~NOTE 10—RELATED PARTIES~~Revolving Line of Credit

On February 9, 2023, 1847 ICU and ICU Eyewear entered into a loan and security agreement with Industrial Funding Group, Inc. for a revolving loan of up to $5,000,000, which is evidenced by a secured promissory note in the principal amount of up to $5,000,000. On February 9, 2023, 1847 ICU received an advance of $2,063,182 under the note, of which $1,963,182 was used to repay certain debt of ICU Eyewear in connection with the agreement and plan of merger, with the remaining $100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and assigned the loan and security agreement, the note and related loan documents to GemCap Solutions, LLC.

The note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime rate changes, plus (b) eight percent (8.00%), and (ii) fifteen percent (15.00%); provided that following and during the continuation of an event of default (as defined in the loan and security agreement), interest on the unpaid principal balance of the advances shall accrue at an annual rate equal to such rate plus three percent (3.00%). Interest accrued on the advances shall be payable monthly commencing on March 7, 2023. The borrowers may voluntarily prepay the entire unpaid principal amount of the note without premium or penalty; provided that in the event that we make such prepayment on or before February 9, 2024, then the borrowers must pay certain fees set forth in the note. The note is secured by all of the assets of 1847 ICU and ICU Eyewear.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for loans of this type. The loan and security agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the note when due, or to pay any fees due under the loan and security agreement; (ii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iii) if any statement, representation or warranty in the loan and security agreement or any document delivered in connection therewith is at any time found to have been false in any material respect at the time such representation or warranty was made; (iv) if the borrowers default under any agreement or contract with a third party which default would result in a liability to us in excess of $25,000; (v) for any voluntary or involuntary bankruptcy, insolvency, or dissolution or assignment to creditors; (vi) if any judgments or attachments aggregating in excess of $10,000 at any given time are obtained against the borrowers which remain unstayed for a period of ten (10) days or are enforced or if there is an indictment under an criminal statute or proceeding pursuant to which remedies sought may include the forfeiture of any property; (vii) if a material adverse effect or change of control (each as defined in the loan and security agreement) shall have occurred; (viii) for certain environmental claims; and (ix) for failure to notify the lender of certain events or failure to deliver certain documentation required by the loan and security agreement.

Private Placements

On February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $604,000 and (ii) five-year warrants for the purchase of an aggregate of 125,833 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $540,000. As additional consideration, the Company issued an aggregate of 125,833 common shares to the investors as a commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 892 common shares at an exercise price of $5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrants and common shares based on their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation (see Note 12).

On February 9, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $2,557,575 and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $2,271,818. As additional consideration, the Company issued 289,772 common shares to one investor and issued to the other investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment), which were issued as a commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 11,923 common shares at an exercise price of $5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrants and common shares based on their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation (see Note 12).

On February 22, 2023, the Company entered into securities purchase agreement with one accredited investor, pursuant to which the Company issued to such investor (i) a promissory note in the principal amount of $878,000 and (ii) five-year warrants for the purchase of an aggregate of 182,917 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $737,700. As additional consideration, the Company issued a five-year warrant for the purchase of 198,343 common shares at an exercise price of $0.01 per share (subject to adjustment) to the investor as a commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 7,526 common shares at an exercise price of $5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrants based on their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation (see Note 12).

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

These notes bear interest at a rate of 12% per annum and mature on the first anniversary of the date of issuance; provided that any principal amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16% per annum or the maximum amount permitted by law from the due date thereof until the same is paid. The notes require monthly payments of principal and interest commencing in May 2023. The Company may voluntarily prepay the outstanding principal amount and accrued interest of each note in whole upon payment of certain prepayment fees. In addition, if at any time the Company receives cash proceeds from any source or series of related or unrelated sources, including, but not limited to, the issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities pursuant to an equity line of credit (as defined in the notes) or the sale of assets outside of the ordinary course of business, each holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of such proceeds to repay all or any portion of the outstanding principal amount and interest then due under the notes. The notes are unsecured and have priority over all other unsecured indebtedness. The notes contain customary affirmative and negative covenants and events of default for a loan of this type.

The notes become convertible into common shares at the option of the holders at any time on or following the date that an event of default (as defined in the notes) occurs under the notes at a conversion price equal the lower of (i) $4.20 (subject to adjustments) and (ii) 80% of the lowest volume weighted average price of the common shares on any trading day during the five (5) trading days prior to the conversion date; provided that such conversion price shall not be less than $0.03 (subject to adjustments).

Purchase and Sale of Future Receivables Agreement

On March 31, 2023, the Company and its subsidiary 1847 Cabinet Inc. (“1847 Cabinet”) entered into a non-recourse funding agreement with a third-party for the sale of future receivables totaling $1,965,000 for net cash proceeds of $1,410,000. The Company is required to make weekly ACH payments in the amount of $39,300. The agreement also allows for the third-party to file UCCs securing their interest in the receivables and includes customary events of default.

The Company recorded a debt discount of $555,000, which will be amortized under the effective interest method. The Company is utilizing the prospective method to account for subsequent changes in the estimated future payments, whereby if there is a change in the estimated future cash flows, a new effective interest rate is determined based on the revised estimate of remaining cash flows. As of March 31, 2023 the effective interest rate was approximately 72%.

NOTE 11—RELATED PARTIES

Related Party Notes Payable

On September 30, 2020, a portion of the purchase price for the acquisition of Kyle’s Custom Wood Shop, Inc. (“Kyle’s”) was paid by the issuance of a promissory note by 1847 Cabinet to the sellers in the principal amount of $1,260,000. Payment of the principal and accrued interest on the note was subject to vesting. As of December 31, 2021, the vested principal and accrued interest balance of the related party note was $1,001,183 and $103,156, respectively.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

On July 26, 2022, the Company and 1847 Cabinet entered into a conversion agreement with sellers, pursuant to which they agreed to convert $797,221 of the vesting note into 189,815 common shares of the Company at a conversion price of $4.20 per share. As a result, the Company recognized a loss on extinguishment of debt of $303,706. Pursuant to the conversion agreement, the note was cancelled, and the Company agreed to pay $558,734 to the sellers no later than October 1, 2022.

On March 30, 2023, the Company entered into an amendment to the conversion agreement, effective retroactively to October 1, 2022. Pursuant to the amendment, the Company agreed to pay a total of $642,544 in three monthly payments commencing on April 5, 2023.

Management Services Agreement

On April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (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 the 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) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the 3three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Offsetting Management Services Agreements

The Company’s subsidiary 1847 Asien Inc. (“1847 Asien”) entered into an offsetting management services agreement with the Manager on May 28, 2020, ~~the Company’s subsidiary~~ 1847 Cabinet ~~Inc. (“1847 Cabinet”)~~ entered into an offsetting management services agreement with the Manager on August 21, 2020 (which was amended and restated on October 8, 2021) ~~and~~, the Company’s subsidiary 1847 Wolo Inc. (“1847 Wolo”) entered into an offsetting management services agreement with the Manager on March 30, ~~2021.~~2021 and 1847 ICU entered into an offsetting management services agreement with the Manager on February 9, 2023. Pursuant to the offsetting management services agreements, each of 1847 Asien, 1847 Wolo and 1847 ICU appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), and 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of ~~$75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to~~ $125,000 ~~or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000~~ or 2% of adjusted net assets (as defined in the management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of ~~our~~the Company’s 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 the Manager under other offsetting management services agreements.

1847 Asien expensed management fees of $75,000 and ~~$75,000~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

1847 Cabinet expensed management fees of $125,000 and ~~$75,000~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

1847 Wolo expensed management fees of $75,000 and $0 for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

1847 ICU expensed management fees of $0 and for the three months ended March 31, 2023.

On a consolidated basis, the Company expensed total management fees of $275,000 ~~and $260,000~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, a total of $118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Manager has funded the Company $74,928 ~~and $74,928~~ in related party ~~advances, respectively.~~advances. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

Building Lease

On September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, the sellers of Kyle’s, who are officers of Kyle’s and principal shareholders of the Company. The lease is for a term of five years, with an option for a renewal term of five years and provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term.

The total rent expense under this related party ~~leases~~lease was ~~$21,776~~$21,777 for the three months ended March 31, 2023 and 2022.

NOTE ~~11—MEZZANINE~~12—SHAREHOLDERS’ EQUITY (DEFICIT)

Series A Senior Convertible Preferred Shares

~~On September 30, 2020,~~During the three months ended March 31 2023, the Company ~~executed a share designation, which was amended on November 20, 2020, March 26, 2021 and September 29, 2021,~~accrued dividends attributable to ~~designate 4,450,460 of its shares as~~the series A senior convertible preferred shares in the amount of $110,045 and settled $152,668 of previously accrued dividends through the issuance of common shares (see below).

As of March 31, 2023 and December 31, 2022, the Company had 1,593,940 series A senior convertible preferred shares issued and outstanding.

Series B Senior Convertible Preferred Shares

During the three months ended March 31 2023, the Company accrued dividends attributable to the series B senior convertible preferred shares in the amount of $52,820 and paid $48,681 of previously accrued dividends.

As of March 31, 2023 and December 31, 2022, the Company had 464,899 series B senior convertible preferred shares issued and outstanding.

Common Shares

As of March 31, 2023 and December 31, 2022, the Company was authorized to issue 500,000,000 common shares. ~~Following is a description~~As of March 31, 2023 and December 31, 2022, the ~~rights~~Company had 4,655,636 and 4,079,137 common shares issued and outstanding, respectively.

On January 30, 2023, the Company issued an aggregate of 99,505 common shares to the holders of the series A senior convertible preferred ~~shares.~~

~~Ranking.~~ ~~The series A senior convertible preferred~~ shares, ~~rank, with respect to the payment~~in settlement of ~~dividends and the distribution~~$152,668 of assets upon liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to or on parity with the series A senior convertible preferred shares; (ii) on parity with the series B senior convertible preferred shares and each other class or series that is not expressly subordinated or made senioraccrued dividends. Pursuant to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series A senior convertible preferred shares.

~~Dividend Rights.~~ ~~Holders of series A senior convertible preferred~~ shares ~~are entitled to~~designations, dividends at a rate per annum of 14.0% of the stated value ($2.00 per share, subject to adjustment). Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common shares at the Company’s discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common shares on the Company’s principal trading market ~~(the “VWAP”)~~ during the five (5) trading days immediately prior to the applicable dividend payment date; provided, however, that if the common shares are not registered, and Rule 144 rulemaking referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $1.57; provided further, that the Company may only elect to pay dividends in common shares based upon such fixed price if the VWAP for the five (5) trading days immediately prior to the applicable dividend payment date is $1.57 or higher.date.

~~Liquidation Rights.~~ ~~Subject to the rights of creditors~~On February 3, 2023 and ~~the holders of any senior securities or parity securities (in each case, as defined in the share designation), upon any liquidation of~~February 9, 2023, the Company ~~or its subsidiaries, before any payment or distribution~~issued an aggregate of ~~the assets of~~415,605 common shares to two accredited investors as a commitment fee (see Note 10).

On February 13, 2023, the Company (whether capital or surplus) shall be made to or set apart for the holders of securities that are junior to the series A senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, including theissued 61,389 common shares ~~and allocation shares, each holder~~upon the cashless exercises of outstanding series A senior convertible preferred shares shall 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) to, but not including the date of final distribution to such holders. If, upon any liquidation, the assets, or proceeds thereof, distributable among the holders of the series A senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series A senior 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 A senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series A senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.warrants.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2022~~2023

(UNAUDITED)

~~Voting Rights~~. The series A senior convertible preferred shares do not have any voting rights; provided that, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series A senior convertible preferred shares, which majority must include Leonite Capital LLC so long as it holds any series A senior convertible preferred shares (the “Requisite Holders”), voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the share designation. In addition, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of the Requisite Holders shall be required prior to the creation or issuance by the Company or by its subsidiaries Kyle’s Custom Wood Shop, Inc. (“Kyle’s”) and Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (together, “Wolo”) of (i) any parity securities; (ii) any senior securities; and (iii) any new indebtedness other than (A) intercompany indebtedness by Kyle’s or Wolo in favor of the Company, (B) indebtedness incurred in favor of the sellers of Kyle’s or Wolo in connection with the acquisition of Kyle’s or Wolo, or (C) indebtedness (or the refinancing of such indebtedness) the proceeds of which are used to complete the acquisition of Kyle’s or Wolo related expenses or working capital to operate the business of Kyle’s or Wolo. Notwithstanding the foregoing, this shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series A senior convertible preferred shares and the warrants issued in connection therewith.

~~Conversion Rights~~. Each series A senior convertible preferred share, plus all accrued and unpaid dividends thereon, 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 ($2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $1.75 per share (subject to adjustment); provided that in no event shall the holder of any series A senior convertible preferred shares be entitled to convert any number of series A senior convertible preferred shares that upon conversion the sum of (i) the number of common shares beneficially owned by the holder and its affiliates and (ii) the number of common shares issuable upon the conversion of the series A senior convertible preferred shares with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common shares. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

~~Redemption Rights~~. The Company may redeem in whole, or upon the written consent of the Requisite Holders and in the manner provided for in such written consent, in part, the series A senior convertible preferred shares by paying in cash therefore a sum equal to 115% of the stated value plus the amount of accrued and unpaid plus any other amounts due pursuant to the terms of the series A senior convertible preferred shares. On October 12, 2021, the Company redeemed 2,632,278 series A senior convertible preferred shares for a total redemption price, including dividends through such date, of $6,395,645.

~~Adjustments~~. The share designation contains standard adjustments to the conversion price in the event of any share splits, share combinations, share reclassifications, dividends paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations or similar transactions. In addition, the share designation provides that if, but only if, the Requisite Holders provide the Company with at least ten (10) business day’s prior written notice, then, from and after the date of such notice, the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

~~On the first day of the 12~~^th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.

~~On the first day of the 24~~^th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

~~On the first day of the 36~~^th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding the third adjustment date.

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075. In addition, if any legislation or rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933, as amended, for convertible securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible securities like the series A senior convertible preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that are based upon the lowest VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed unless the common shares issuable upon conversion are then registered under an effective registration statement.

~~Additional Equity Interest.~~ On the third adjustment date set forth above, the Company is required to cause Kyle’s and Wolo to issue to the holders of series A senior convertible preferred shares, on a pro rata basis, a ten percent (10%) equity stake Kyle’s and/or Wolo. The holders of series A senior convertible preferred shares issued in connection with the financing to complete the acquisition of Kyle’s shall receive the equity stake in Kyle’s and the holders of series A senior convertible preferred shares issued in connection with the financing to complete the acquisition of Wolo shall receive the equity stake in Wolo. The Company is required to cause Kyle’s and Wolo to grant to the holders of the series A senior convertible preferred shares upon the issuance to them of such equity interest a right to receive an additional number of shares of common stock of Kyle’s or Wolo if Kyle’s or Wolo issues to any third-party equity securities at a price below the acquisition price (as defined below). Such additional number of shares of common stock of Kyle’s or Wolo to be issued in such instance shall be equal to a number of shares of common stock of Kyle’s or Wolo which, when added to the number of shares of common stock of Kyle’s or Wolo constituting the initial additional equity interest, would be equal to the total number of shares of common stock which would have been issued to a holder of series A senior convertible preferred shares if the price per share of common stock of Kyle’s or Wolo was equivalent to the price per equity security paid by such third-party in Kyle’s or Wolo. For purposes of this provision, “acquisition price” means the price per share of Kyle’s and Wolo that was paid by the Company upon the acquisition of Kyle’s and Wolo, respectively.

~~As of March 31, 2022 and December 31, 2021, the Company had 1,684,849 and 1,818,182 series A senior convertible preferred shares issued and outstanding, respectively.~~

During the three months ended March 31, 2022, the Company accrued dividends attributable to the series A senior convertible preferred shares in the amount of $121,455 and paid prior period accrued dividends of $128,318.

~~On February 16, 2022, 133,333 shares of series A senior convertible preferred shares were converted into 152,381 common shares.~~

~~Series B Senior Convertible Preferred Shares~~

On February 17, 2022, the Company executed a share designation to designate 583,334 of its shares as series B senior convertible preferred shares. Following is a description of the rights of the series B senior convertible preferred shares.

~~Ranking.~~ The series B senior 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, and each other class or series that is not expressly made senior to or on parity with the series B senior convertible preferred shares; (ii) on parity with the series A senior convertible preferred shares and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each other class or series that is expressly made senior to the series B senior convertible preferred shares.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

~~Dividend Rights~~Warrants. Holders of series B senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0% of the stated value ($3.00 per share, subject to adjustment). Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common shares at the Company’s discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the VWAP during the five (5) trading days immediately prior to the applicable dividend payment date; provided, however, that if the common shares are not registered, and rulemaking regarding the Rule 144 holding period referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon the fixed price of $2.70; provided further, that the Company may only elect to pay dividends in common shares based upon such fixed price if the VWAP for the five (5) trading days immediately prior to the applicable dividend payment date is $2.70 or higher.

~~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~~On January 3, 2023, the Company ~~or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart~~issued warrants for the ~~holders~~purchase of ~~securities that are junior to the series B senior convertible preferred~~407,872 common shares as a dividend to ~~the distribution~~common shareholders of ~~assets on any liquidation~~record as of ~~the Company, including the common shares and allocation shares, each~~December 23, 2022 pursuant to a warrant agent agreement, dated January 3, 2023, with VStock Transfer, LLC. Each holder of outstanding series B senior convertible preferred shares shall 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) to, but not including the date of final distribution to such holders. If, upon any liquidation, the assets, or proceeds thereof, distributable among the holders of the series B senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series B senior 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 B senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.

~~Voting Rights~~. The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal of any of the provisions of the share designation or (ii) the Company’s creation or issuance of any parity securities or any senior securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding series B senior convertible preferred shares.

~~Conversion Rights~~. Each series B senior convertible preferred share, plus all accrued and unpaid dividends thereon, 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 ($3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred shares be entitled to convert any number of series B senior convertible preferred shares that upon conversion the sum of (i) the number of common shares beneficially owned by the holder and its affiliates and (ii) the number of common shares issuable upon the conversion of the series B senior convertible preferred shares with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common shares. This limitation may be waived (up toreceived a ~~maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.~~

~~Redemption Rights~~. The Company may redeem in whole (but not in part) the series B senior convertible preferred shares by paying in cash therefore a sum equal to 115% of the stated value plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the series B senior convertible preferred shares.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

~~Adjustments~~. The share designation contains standard adjustments to the conversion price in the event of any share splits, share combinations, share reclassifications, dividends paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations or similar transactions. In addition, the share designation provides that the stated dividend rate, the stated value and the conversion price shall automatically adjust as follows:

~~On the first day of the 12~~^th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by five percent (5.0%) per annum and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.

On the first day of the 24th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.

On the first day of the 36th month following the issuance of the first series B senior convertible preferred share, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.

Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075 per share (subject to adjustment for splits or dividends of the common shares). In addition, if any legislation or rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933, as amended, for convertible securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible securities like the series B senior convertible preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that are based upon the lowest VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed unless the common shares issuable upon conversion are then registered under an effective registration statement.

On February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of approximately $320,000. The Company had issuance costs relating to the offering of approximately $15,000, resulting in net proceeds of $1,266,000. Each unit consists of one (1) series B senior convertible preferred share and a three-year warrant to purchase one (1) common share for every ten (10) common shares owned as of the record date (with the number of shares underlying the warrant received rounded down to the nearest whole number). Each warrant represents the right to purchase common shares at an initial exercise price of $4.20 per share (subject to certain adjustments as set forth in the warrants). The Company may, at its option, voluntarily reduce the then-current exercise price to such amount and for such period or periods of time which may be through the expiration date as may be deemed appropriate by the board of directors. Cashless exercises of the warrants are not permitted.

The warrants will generally be exercisable in whole or in part beginning on the later of (i) January 3, 2024 or (ii) the date that a registration statement on Form S-3 with respect to the issuance and registration of the common shares underlying the warrants has been filed with and declared effective by the SEC, and thereafter until January 3, 2026.

The Company may redeem the warrants at any time in whole or in part at $0.001 per warrant (subject to equitable adjustment to reflect share splits, share dividends, share combinations, recapitalizations and like occurrences) upon not less than 30 days’ prior written notice to the registered holders of the warrants.

As a result of the issuance of warrants as a dividend to common shareholders, the Company recognized a deemed dividend of approximately $0.6 million, which was calculated using a Black-Scholes pricing model.

On February 3, 2023 (as described in Note 10), the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $604,000 and (ii) five-year warrants for the purchase of an aggregate of 125,833 common shares at an exercise price of ~~$3.00~~$4.20 per ~~common~~ share (subject to adjustment)~~, which may be exercised on a cashless basis under certain circumstances. The embedded conversion options~~ for total cash proceeds of the series B senior convertible preferred shares and warrants were clearly and closely related to the equity host and did not require bifurcation. The $1,266,000 of net proceeds were allocated on a relative fair value basis of $1,113,650 to the series B preferred shares and $152,350 to the warrants. The series B preferred shares fair value was derived using an Option Pricing Method and the warrants fair value was derived using a Monte Carlo Simulation Model.

$540,000. As ~~of March 31, 2022 and December 31, 2021, the Company had 426,999 and 0 series B senior convertible preferred shares issued and outstanding, respectively.~~

~~During the three months ended March 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares in the amount of $13,760.~~

~~Mezzanine Equity Classification~~

We applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”), in order to determine the appropriate classification for both the series A senior convertible preferred shares and the series B senior convertible preferred shares.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

ASC 480 requires equity instruments to be evaluated on an ongoing basis for mezzanine equity (temporary equity) vs permanent equity classification. As a result of the maximum number of common shares that may be issuable (upon conversion of the preferred securities) exceeded the number of authorized but unissued common shares available, temporary equity classification is required. As of March 31, 2022 and December 31, 2021, there were 1,684,849 and 1,818,182 series A senior convertible preferred shares presented in mezzanine equity, respectively. As of March 31, 2022 and December 31, 2021, there were 426,999 and 0 series B senior convertible preferred shares presented in mezzanine equity, respectively.

~~NOTE 12—SHAREHOLDERS’ DEFICIT~~

~~Common Shares~~

As of March 31, 2022, the Company was authorized to issue 500,000,000 common shares. As of March 31, 2022 and December 31, 2021, the Company had 4,995,232 and 4,842,851 common shares issued and outstanding, respectively.

~~On February 16, 2022,~~additional consideration, the Company issued ~~152,851 common shares upon the conversion of 133,333 series A senior convertible preferred shares.~~

~~On March 23, 2022, the Company declared a common share dividend of $0.05 per share, or $249,762, to shareholders of record as of March 31, 2022. This dividend was paid on April 15, 2022.~~

~~Warrants~~

~~On February 24, 2022, the Company sold~~ an aggregate of ~~320,333 units, at~~125,833 common shares to the investors as a ~~price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022,~~commitment fee. Additionally, the Company ~~sold an additional 106,666 units for aggregate gross proceeds of $320,000. Each unit consists of one (1) series B senior convertible preferred share and~~issued a ~~three-year~~five-year warrant to J.H. Darbie & Co (the broker) for the purchase ~~one (1)~~of 892 common ~~share~~shares at an exercise price of ~~$3.00 per common share~~$5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the ~~warrant~~warrants and common shares based on ~~its~~their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of ~~51.81%~~162.3%; (iii) weighted average risk-free interest rate of ~~0.31%~~4.1%; (iv) expected life of ~~three~~five years; (v) estimated fair value of the common shares of ~~$1.94~~$1.93 per share; (vi) exercise price ranging from $4.20 to $5.25; and ~~(vi)~~(vii) various probability assumptions related to ~~redemption, calls and~~down round price ~~resets.~~adjustments. The fair value of the warrants was ~~$379,533 or $0.89~~$222,129 and the fair value of the commitment shares was $242,858, resulting in the amount allocated to the warrants and commitment shares, based on their relative fair value of $218,172, which was recorded as additional paid-in capital.

On February 9, 2023 (as described in Note 10), the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $2,557,575 and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $2,271,818. As additional consideration, the Company issued 289,772 common shares to one investor and issued to the other investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment), which were issued as a commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 11,923 common shares at an exercise price of $5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrants and common shares based on their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 162.0%; (iii) weighted average risk-free interest rate of 4.3%; (iv) expected life of five years; (v) estimated fair value of the common shares of $1.80 per share; (vi) exercise price ranging from $0.01 to $5.25; and (vii) various probability assumptions related to down round price adjustments. The fair value of the warrants was $1,323,774 and the fair value of the commitment shares was $521,590, resulting in the amount allocated to the warrants and commitment shares, based on their relative fair value of $879,829, which was recorded as additional paid-in capital.

On February 22, 2023 (as described in Note 10), the Company entered into securities purchase agreement with one accredited investor, pursuant to which the Company issued to such investor (i) a promissory note in the aggregate principal amount of $878,000 and (ii) five-year warrants for the purchase of an aggregate of 182,917 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $737,700. As additional consideration, the Company issued five-year warrants for the purchase of an aggregate of 198,343 common shares at an exercise price of $0.01 per share (subject to adjustment) to the investor as a commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 7,526 common shares at an exercise price of $5.25 (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrants based on their relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 161.6%; (iii) weighted average risk-free interest rate of 4.5%; (iv) expected life of five years; (v) estimated fair value of the common shares of $1.51 per share; (vi) exercise price ranging from $0.01 to $5.25; and (vii) various probability assumptions related to down round price adjustments. The fair value of the warrants was $556,485, resulting in the amount allocated to the warrants, based on their relative fair value of ~~$152,350,~~$261,945, which was recorded as additional ~~paid in~~paid-in capital.

~~The warrants allow~~As a result of the ~~holder to purchase one (1)~~issuance of common ~~share at an~~shares in settlement of series A senior convertible preferred shares accrued dividends on January 30, 2023, the exercise price of ~~$3.00 per common share (subject to adjustment including upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under~~ certain ~~circumstances. The Company may force the exercise~~ of the Company’s outstanding warrants ~~at any time after the one year anniversary~~was adjusted to $1.53 pursuant to certain antidilution provisions of ~~the date of the~~such warrants ~~if (i)~~(down round feature). As a result, the Company ~~is listed on~~recognized a ~~national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered or the holder~~deemed dividend of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months.approximately $1.2 million, which was calculated using a Black-Scholes pricing model.

1847 HOLDINGS LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(UNAUDITED)

Below is a table summarizing the changes in warrants outstanding during the three months ended March 31, ~~2022:~~2023:

Warrants
Weighted-
Average
Exercise Price

Outstanding at December 31, 2021 5,200,460 $ 2.38
Granted 426,999 3.00
Exercised - -
Forfeited - -
Outstanding at March 31, 2022 5,627,459 $ 2.43
Exercisable at March 31, 2022 5,627,459 $ 2.43

	Warrants			Weighted- Average Exercise Price
Outstanding at December 31, 2022		3,068,919		$	4.14
Granted		1,711,188			3.13
Exercised		(62,500	)		(0.04	)
Outstanding at March 31, 2023		4,717,607		$	2.11
Exercisable at March 31, 2023		4,309,735		$	1.92

As of March 31, ~~2022,~~2023, the outstanding warrants have a weighted average remaining contractual life of ~~2.17~~2.31 years and a total intrinsic value of ~~$497,500.~~$432,570.

~~1847 HOLDINGS LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(UNAUDITED)~~

NOTE 13—~~LOSS~~EARNINGS (LOSS) PER SHARE

The computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to ~~1847 Holdings~~ common shareholders for the three months ended March 31, 2023 and 2022 consisted of the following:

Basic and Diluted Loss Per Share
March 31,
2022
Net loss per common share attributable to 1847 Holdings common shareholders’ $ (1,008,245 )
Weighted average common shares outstanding 4,915,655
Basic and diluted loss per share $ (0.21 )

	Three Months Ended March 31,
	2023			2022
Net loss attributable to common shareholders’	$	(885,331	)	$	(1,008,245	)

Loss per common share attributable to 1847 holdings common shareholders’
Basic and diluted	$	(0.20	)	$	(0.21	)

Weighted-average common shares outstanding
Basic and diluted		4,419,917			4,915,655

For the three months ended March 31, 2023, there were 8,991,587 potential common share equivalents from warrants excluded from the diluted earnings per share calculations as their effect is anti-dilutive.

For the three months ended March 31, 2022, there were ~~20,871,528~~5,217,882 potential common share equivalents from warrants, convertible debt, and series A and B convertible preferred shares ~~were~~ excluded from the diluted ~~EPS~~earnings per share calculations as their effect is anti-dilutive.

NOTE 14—SUBSEQUENT EVENTS

For the three months ended March 31, 2021, there were 4,450,460 potential common share equivalents from warrants, convertible debt, and series A convertible preferred shares were excluded from the diluted EPS calculations as their effect is anti-dilutive.

Amendment to 6% Amortizing Promissory Note

~~NOTE 14—SUBSEQUENT EVENTS~~

On April 6, 2023, 1847 Asien entered into an amendment to the 6% amortizing promissory note described in Note 12, effective retroactively to October 20, ~~2022,~~2022. Pursuant to the amendment, the parties agreed to extend the maturity date of the note to July 30, 2023 and revised the repayment terms so that the outstanding principal amount and all accrued interest thereon shall be payable in three payments on April 6, 2023, June 30, 2023 and July 30, 2023. As additional consideration for entering into the amendment, 1847 Asien also agreed to pay an amendment fee of $84,362 on the maturity date.

Common Share Issuances

On April 30, 2023, the Company issued 187,075 common shares as payment of dividends on the series A senior convertible preferred shares.

On May 10, 2023, the Company issued 232,216 common shares upon the exercise of warrants.

Amendments to Securities Purchase Agreements

On May 15, 2023, the Company entered into aamendments to the securities purchase ~~agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant~~agreements relating to ~~which~~ the Company sold 28,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. On May 12, 2022, the Company sold an additional 16,667 units to Mr. Roberts for aggregate gross proceeds of $50,000. Each unit consists of one (1)series A senior convertible preferred shares and series B senior convertible preferred ~~share and~~shares, pursuant to which the securities purchase agreements were amended to include a ~~three-year warrant~~provision requiring the exercise of warrants issued pursuant to such securities purchase ~~one (1)~~agreements for the issuance of a number of common ~~share at an~~shares equal to the quotient of (i) eighty percent (80%) of the Black Scholes Value of the warrants divided by (ii) the applicable exercise price of ~~$3.00 per share (subject~~the warrants. The Company expects to ~~adjustment),~~issue a forced exercise notice on May 16, 2023 with the requisite shares being issued on May 17, 2023. The Company is effecting the forced exercise in part to eliminate the anti-dilution adjustment provisions of the warrants, including the “exploding” feature of the warrants issued in connection with the series A preferred financing which ~~may be exercised on a cashless basis under certain circumstances.~~would result not just in the exercise price of the warrants being reduced, but in the number of underlying warrant shares being increased proportionately.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and ~~the “Company”~~“our company” refer to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated subsidiaries. References to ~~the “Manager”~~“our manager” refer to 1847 Partners LLC, a Delaware limited liability company.

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

●

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

●

our ability to successfully identify and acquire additional businesses;

●

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

●

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

●

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

●

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

●

labor disputes, strikes or other employee disputes or grievances;

●

the regulatory environment in which our businesses operate under;

●

trends in the industries in which our businesses operate;

●

the competitive environment in which our businesses operate;

●

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

●

our and ~~the Manager’s~~our manager’s ability to retain or replace qualified employees of our businesses and ~~the Manager;~~our manager;

●

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

●

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

●

extraordinary or force majeure events affecting the business or operations of our businesses.

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022 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. ~~To date, we have completed six acquisitions and subsequently spun off two of the acquired companies.~~

On May 28, 2020, our subsidiary 1847 Asien Inc. (“, or 1847 ~~Asien”)~~Asien, acquired Asien’s Appliance, Inc., a California corporation, ~~(“Asien’s”).~~or Asien’s. Asien’s has been in business since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and exceptional service to its customers at competitive prices.

On September 30, 2020, our subsidiary 1847 Cabinet Inc. (“, or 1847 ~~Cabinet”)~~Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, ~~(“Kyle’s”).~~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”)~~Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation ~~(together, “Wolo”)~~(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.

On October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain Door & Trim Inc., a Nevada corporation, (“or High ~~Mountain”),~~Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited liability company, (“or Innovative ~~Cabinets”).~~Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain specializes in all aspects of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, and fireplace mantles, among others, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. 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.

~~Our first acquisition was on March 3, 2017, pursuant to which~~On February 9, 2023, our subsidiary, 1847 ~~Neese~~ICU Holdings Inc. (“, or 1847 ~~Neese”)~~ICU, acquired ~~Neese,~~ICU Eyewear Holdings, Inc., a ~~business specializing~~California corporation, and its subsidiary ICU Eyewear, Inc., a California corporation, which we collectively refer to as ICU Eyewear. Headquartered in ~~providing a wide range~~Hollister, California and founded in 1956, ICU Eyewear specializes in the sale and distribution of ~~land application services~~reading eyewear and ~~selling equipment~~sunglasses, blue light blocking eyewear, sun readers, and ~~parts in Grand Junction, Iowa. On April 19, 2021, we sold 1847 Neese back to the original owners.~~other outdoor specialty sunglasses, as well as select health and personal care items, including face masks.

On April 5, 2019, our subsidiary 1847 Goedeker Inc. (“1847 Goedeker”) acquired substantially all of the assets of Goedeker Television Co., a one-stop e-commerce destination for home furnishings, including appliances, furniture, home goods and related products. On October 23, 2020, we distributed all of the shares of 1847 Goedeker that we held to our shareholders, so we no longer own 1847 Goedeker.

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 ~~increasing~~increase common shareholder value over time.

We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.

Recent Developments

Amendment to 6% Amortizing Promissory Note

On April ~~20, 2022,~~6, 2023, we entered into aan amendment to the 6% amortizing promissory note described in “—Liquidity and Capital Resources—Debt—6% Amortizing Promissory Note” below, effective retroactively to October 20, 2022. Pursuant to the amendment, the parties agreed to extend the maturity date of the note to July 30, 2023 and revised the repayment terms so that the outstanding principal amount and all accrued interest thereon shall be payable in three payments on April 6, 2023, June 30, 2023 and July 30, 2023. As additional consideration for entering into the amendment, we also agreed to pay an amendment fee of $84,362 on the maturity date.

Amendments to Securities Purchase Agreements

On May 15, 2023, we entered into amendments to the securities purchase ~~agreement with Ellery W. Roberts, our Chief Executive Officer, pursuant~~agreements relating to which we sold 28,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $85,000. On May 12, 2022, we sold an additional 16,667 units to Mr. Roberts for aggregate gross proceeds of $50,000. Each unit consists of one (1)the series A senior convertible preferred shares and series B senior convertible preferred ~~share and~~shares, pursuant to which the securities purchase agreements were amended to include a ~~three-year warrant~~provision requiring the exercise of warrants issued pursuant to such securities purchase ~~one (1)~~agreements for the issuance of a number of common ~~share at an~~shares equal to the quotient of (i) eighty percent (80%) of the Black Scholes Value of the warrants divided by (ii) the applicable exercise price of ~~$3.00 per share (subject~~the warrants. We expect to ~~adjustment),~~issue a forced exercise notice on May 16, 2023 with the requisite shares being issued on May 17, 2023. We are effecting the forced exercise in part to eliminate the anti-dilution adjustment provisions of the warrants, including the “exploding” feature of the warrants issued in connection with the series A preferred financing which ~~may be exercised on a cashless basis under certain circumstances.~~would result not just in the exercise price of the warrants being reduced, but in the number of underlying warrant shares being increased proportionately.

~~Impact of Coronavirus Pandemic~~

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

Asien’s was qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results. Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s profitability and financial condition.

Kyle’s was also qualified as an essential business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment. Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees. Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial condition.

High Mountain was qualified as an essential business and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety.

Innovative Cabinets was also qualified as an essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities. Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher supply costs, which could adversely impact its profitability and financial condition.

Wolo qualified as an essential business and remained open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business. The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately 90% of Wolo’s vendor base is located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers. We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position.Management Fees

The spread of COVID-19 has also adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

~~Management Fees~~

On April 15, 2013, ~~the Company~~we and ~~the Manager~~our manager entered into a management services agreement, pursuant to which ~~the Company is~~we are required to pay ~~the Manager~~our manager a quarterly management fee equal to 0.5% of ~~its~~our adjusted net assets for services performed ~~(the “Parent Management Fee”)~~(which we refer to as the parent management fee). The amount of the ~~Parent Management Fee~~parent management fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by ~~the Manager~~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~~parent management fees received by (or owed to) ~~the Manager~~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. The Company expensed $0 in Parent Management Fees~~parent management fees. We did not expense any parent management fees for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

~~1847 Neese entered into an offsetting management services agreement with the Manager on March 3, 2017, which is included in discontinued operations,~~ 1847 Asien entered into an offsetting management services agreement with ~~the Manager~~our manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with ~~the Manager~~our manager on August 21, 2020 (which was amended and restated on October 8, 2021) ~~and~~, 1847 Wolo entered into an offsetting management services agreement with ~~the Manager~~our manager on March 30, ~~2021.~~2021 and 1847 ICU entered into an offsetting management services agreement with our manager on February 9, 2023. Pursuant to the offsetting management services agreements, ~~1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500,~~each of 1847 Asien, 1847 Wolo and 1847 ICU appointed ~~the Manager~~our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), and 1847 Cabinet appointed ~~the Manager~~our manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement);2021; provided, however, in each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees paid or to be paid to ~~the Manager~~our manager under other 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~~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 ~~the Manager~~our manager under other offsetting management services agreements.

Each of these ~~subsidiaries~~entities shall also reimburse ~~the Manager~~our manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs and expenses, which are actually incurred by ~~the Manager~~our manager or its affiliates on behalf of these ~~subsidiaries~~entities in connection with performing services under the offsetting management services agreements.

1847 Asien expensed management fees of ~~$75,000 and~~ $75,000 for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

1847 Cabinet expensed management fees of $125,000 ~~and $75,000~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

1847 Wolo expensed management fees of $75,000 for the three months ended March 31, 2023 and 2022.

~~On a consolidated basis, the Company~~1847 ICU expensed ~~total~~ management fees of ~~$275,000 and $260,000~~$0 for the three months ended March 31, ~~2022 and 2021, respectively.~~2023.

~~Segments~~On a consolidated basis, our company expensed total management fees of $275,000 for the three months ended March 31, 2023 and 2022, respectively.

Segments

The Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its shareholders. As of March 31, ~~2022,~~2023, we have ~~three~~four reportable segments -– the retail and appliances segment, which is operated by Asien’s, the retail and eyewear segment, which is operated by ICU Eyewear, the construction segment, which is operated by Kyle’s, High Mountain and Innovative Cabinets, and the automotive supplies segment, which is operated by Wolo.

The retail and appliances segment ~~is comprised of the business of Asien’s, which is based in Santa Rosa, California, and~~ provides a wide variety of appliance products (laundry, refrigeration, cooking, dishwashers, outdoor, accessories, parts, and other appliance related products) and services ~~including sales, delivery,~~(delivery, installation, service and repair, extended warranties, and ~~financing.~~financing).

The ~~construction~~retail and eyewear segment ~~is comprised of the businesses of Kyle’s, High Mountain and Innovative Cabinets. Kyle’s, which is based in Boise, Idaho,~~ provides a wide variety of eyewear products (non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers and outdoor specialty sunglasses).

The construction services including custom design and build of kitchen and bathroom cabinetry, delivery, installation, service and repair, extended warranties, and financing. High Mountain, which is based in Reno, Nevada, specializes in all aspects ofsegment provides finished carpentry products and services ~~including doors, door~~(door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, ~~and~~ fireplace mantles, ~~among others, as well as window installation. Innovative Cabinets, also based in Reno, Nevada, specializes in~~windows, and custom design and build of cabinetry and ~~countertops.~~countertops).

The automotive supplies segment ~~is comprised of the business of Wolo, which is based in Deer Park, New York, and designs and sells~~provides 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.

We provide general corporate services to our segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate Services” below and these include costs associated with executive management, financing activities and public company compliance.

~~Discontinued Operations~~

On April 19, 2021, we entered into a stock purchase agreement with Alan Neese and Katherine Neese, pursuant to which they purchased our 55% ownership interest in 1847 Neese for a purchase price of $325,000 in cash. As a result of this transaction, 1847 Neese is no longer a subsidiary of the Company. All financial information of 1847 Neese previously presented as part of land management services operations are classified as discontinued operations and not presented as part of continuing operations for the three months ended March 31, 2021.

Results of Operations

Comparison of the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

The following table sets forth key components of our results of operations during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, both in dollars and as a percentage of our revenues.

	Three Months Ended March 31,												Three Months Ended March 31,
	2022						2021						2023						2022
	Amount			% of Revenues			Amount			% of Revenues			Amount			% of Revenues			Amount			% of Revenues
Revenues	$	12,073,878			100.0	%	$	4,780,275			100.0	%	$	15,403,538			100.0	%	$	12,073,878			100.0	%
Operating expenses
Cost of sales		7,749,130			64.2	%		3,260,682			68.2	%
Cost of revenues														9,566,508			62.1	%		7,749,130			64.2	%
Personnel		1,577,700			13.1	%		484,672			10.1	%		3,026,193			19.6	%		1,577,700			13.1	%
Depreciation and amortization		511,371			4.2	%		122,106			2.6	%		573,609			3.7	%		511,371			4.2	%
General and administrative		2,166,207			17.9	%		1,324,196			27.7	%		2,315,061			15.0	%		2,166,207			17.9	%
Total operating expenses		12,004,408			99.4	%		5,191,656			108.6	%		15,481,371			100.5	%		12,004,408			99.4	%
Income (loss) from operations		69,470			0.6	%		(411,381	)		(8.6	)%		(77,833	)		(0.5	)%		69,470			0.6	%
Other income (expenses)
Other income		318			0.0	%		-			-			33,168			0.2	%		318			0.0	%
Interest expense		(906,743	)		(7.5	)%		(45,121	)		(0.9	)%		(1,817,715	)		(11.8	)%		(906,743	)		(7.5	)%
Gain on forgiveness of debt		-			-			360,302			7.5	%
Gain on sale of property and equipment		32,747			0.3	%		-			-			-			-			32,747			0.3	%
Loss on adjustment shares		-			-			(757,792	)		(15.9	)%
Gain on bargain purchase														2,639,861			17.1	%		-			-
Total other income (expense)		(873,678	)		(7.2	)%		(442,611	)		(9.3	)%		855,314			5.6	%		(873,678	)		(7.2	)%
Net loss before income taxes		(804,208	)		(6.7	)%		(853,992	)		(17.9	)%
Income expense		(123,000	)		(1.0	)%		-			-
Net loss from continuing operations	$	(927,208	)		(7.7	)%	$	(853,992	)		(17.9	)%
Net income (loss) before income taxes														777,481			5.0	%		(804,208	)		(6.7	)%
Income tax benefit (expense)														270,000			1.8	%		(123,000	)		(1.0	)%
Net income (loss)													$	1,047,481			6.8	%	$	(927,208	)		(7.7	)%

Revenues. Our total revenues were $15,403,538 for the three months ended March 31, 2023, as compared to $12,073,878 for the three months ended March 31, ~~2022, as compared to $4,780,275 for the three months ended March 31, 2021.~~2022.

The retail and appliances segment generates revenue through ~~the~~ sales of home furnishings, including appliances and related products. Revenues from the retail and appliances segment decreased by ~~$743,582,~~$82,849, or ~~22.8%~~3.3%, to $2,437,935 for the three months ended March 31, 2023 from $2,520,784 for the three months ended March 31, ~~2022 from $3,264,366 for the three months ended March 31, 2021.~~2022. Such decrease was primarily due to ongoing supply chain delays and cost increases with appliance ~~manufactures and the~~manufacturers, increased time it takes to receive ~~products.~~products, and decreased customer demand.

The retail and eyewear segment generates revenue through sales of eyewear products, including non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers and outdoor specialty sunglasses. Revenues for the retail and eyewear segment were $2,792,712 for the period from February 9, 2023 (date of acquisition) to March 31, 2023.

The construction segment generates revenue through the sale of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, and fireplace mantles, among others, as well as kitchen countertops. Revenues from the construction segment increased by ~~$6,395,194,~~$1,001,622, or ~~421.9%~~12.7%, to $8,912,725 for the three months ended March 31, 2023 from $7,911,103 for the three months ended March 31, 2022 from $1,515,909 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, revenues from the construction segment increased by $145,845, or 9.6%.2022. Such increase was primarily due to increases in the average customer contract in the construction segment.

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 ~~were~~decreased by $381,825, or 23.3%, to $1,260,166 for the three months ended March 31, 2023 from $1,641,991 for the three months ended March 31, 2022. Such decrease was primarily due to ongoing supply chain delays with manufacturers and increased time it takes to receive products.

Cost of ~~sales~~revenues. Our total cost of ~~sales~~revenues was $9,566,508 for the three months ended March 31, 2023, as compared to $7,749,130 for the three months ended March 31, ~~2022, as compared to $3,260,682 for the three months ended March 31, 2021.~~2022.

Cost of ~~sales~~revenues for the retail and appliances segment consists of the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors. Cost of ~~sales~~revenues for the retail and appliances segment decreased by ~~$635,202,~~$57,667, or ~~25.3%~~3.1%, to $1,813,783 for the three months ended March 31, 2023 from $1,871,450 for the three months ended March 31, ~~2022 from $2,506,652 for the three months ended March 31, 2021.~~2022. Such decrease was primarily due to corresponding the decrease in revenues from the retail and appliance segment. As a percentage of retail and appliances revenues, cost of ~~sales~~revenues for the retail and appliances segment was ~~74.2%~~74.4% and ~~76.8%~~74.2% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Cost of ~~sales~~revenues for the retail and eyewear segment consists of the costs of purchased finished goods plus freight and tariff costs. Cost of revenues for the retail and eyewear segment was $1,667,442, or 59.7% of retail and eyewear revenues, for the period from February 9, 2023 (date of acquisition) to March 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 ~~sales~~revenues for the construction segment increased by ~~$4,125,561,~~$495,436, or ~~547.1%~~10.2%, to $5,375,027 for the three months ended March 31, 2023 from $4,879,591 for the three months ended March 31, 2022 from $754,030 for the three months ended March 31, 2021. Such increase was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, cost of sales for the construction segment increased by $151,350, or 20.1%.2022. Such increase was primarily due to corresponding the increase in revenues from the construction ~~segment, as well as increased product and delivery costs.~~segment. As a percentage of construction revenues, cost of ~~sales~~revenues for the construction segment was ~~54.5%~~60.3% and ~~49.7%~~61.7% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Cost of ~~sales~~revenues for the automotive supplies segment consists of the costs of purchased finished goods plus freight and tariff costs. Cost of ~~sales~~revenues for the automotive supplies segment ~~was~~decreased by $287,833, or 28.8%, to $710,256 for the three months ended March 31, 2023 from $998,089 for the three months ended March 31, 2022. Such decrease was primarily due to corresponding the decrease in revenues from the automotive supplies segment and decreased freight costs. As a percentage of automotive supplies revenues, cost of ~~sales~~revenues for the automotive supplies segment was 56.4% and 60.8% for the three months ended March 31, ~~2022.~~2023 and 2022, 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 $3,026,193 for the three months ended March 31, 2023, as compared to $1,577,700 for the three months ended March 31, ~~2021, as compared to $484,672 for the three months ended March 31, 2021.~~2022.

Personnel costs for the retail and appliances segment ~~decreased~~increased by ~~$22,695,~~$42,816, or ~~9.0%~~18.6%, to $273,204 for the three months ended March 31, 2023 from $230,388 for the three months ended March 31, ~~2022 from $253,083 for the three months ended March 31, 2021.~~2022. Such ~~decrease~~increase was primarily ~~due~~ to ~~decreased~~increased employee headcount as a result of ~~decreased operations from~~previous staffing shortages in the retail and appliances segment. As a percentage of retail and appliances revenue, personnel costs for the retail and appliances segment were ~~9.1%~~11.2% and ~~7.8%~~9.1% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Personnel costs for the retail and eyewear segment was $806,644, or 28.9% of retail and eyewear revenues, for the period from February 9, 2023 (date of acquisition) to March 31, 2023.

Personnel costs for the construction segment increased by ~~$902,621,~~$637,726, or ~~389.8%~~56.2%, to $1,771,936 for the three months ended March 31, 2023 from $1,134,210 for the three months ended March 31, ~~2022 from $231,589 for the three months ended March 31, 2021.~~2022. Such increase was primarily due to ~~the acquisitions~~increased employee headcount as a result of ~~High Mountain~~increased revenues and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, personnel costs for the construction segment decreased by $26,290, or 11.4%. Such decrease was primarily due to decreased office personnel headcountprevious staffing shortages in the construction segment. As a percentage of construction revenue, personnel costs for the construction segment were ~~12.4%~~19.9% and ~~15.3%~~14.3% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Personnel costs for the automotive supplies segment ~~were~~increased by $31,992, or 10.7%, to $332,320 for the three months ended March 31, 2023 from $300,328 for the three months ended March 31, 2022. Such increase was primarily due to increased employee headcount as a result of previous staffing shortages in the automotive supplies segment. As a percentage of automotive supplies revenue, personnel costs for the automotive supplies segment were 26.4% and 18.3% for the three months ended March 31, ~~2022.~~2023 and 2022, respectively.

Depreciation and amortization. Our total depreciation and amortization expense ~~was~~increased by $62,238, or 12.2%, to $573,609 for the three months ended March 31, 2023 from $511,371 for the three months ended March 31, ~~2022, as compared to $122,106 for the three months ended March 31,~~ 2022.

General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, stock-based compensation, bad debts reserve, rent expense, advertising, bank fees, and other expenses incurred in connection with general operations. Our total general and administrative expenses were $2,315,061 for the three months ended March 31, 2023, as compared to $2,166,207 for the three months ended March 31, ~~2022, as compared to $1,324,196 for the three months ended March 31, 2021.~~2022.

General and administrative expenses for the retail and appliances segment ~~increased~~decreased by ~~$14,907,~~$23,893, or ~~3.4%~~5.3%, to $425,601 for the three months ended March 31, 2023 from $449,494 for the three months ended March 31, ~~2022 from $434,587 for the three months ended March 31, 2021.~~2022. Such ~~increase~~decrease was primarily due to ~~increased marketing~~the decrease in revenues from the retail and ~~professional fees.~~appliance segment. As a percentage of retail and appliances revenue, general and administrative expenses for the retail and appliances segment were ~~17.8%~~17.5% and ~~13.3%~~17.8% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

General and administrative expenses for the retail and eyewear segment was $177,803, or 6.4% of retail and eyewear revenues, for the period from February 9, 2023 (date of acquisition) to March 31, 2023.

General and administrative expenses for the construction segment ~~increased~~decreased by ~~$901,247,~~$23,236, or ~~418.6%~~2.1%, to $1,093,322 for the three months ended March 31, 2023 from $1,116,558 for the three months ended March 31, ~~2022 from $215,311 for the three months ended March 31, 2021.~~2022. Such ~~increase~~decrease was primarily due to the acquisitions of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, general and administrative expenses for the construction segment increased by $45,097, or 20.9%. Such increase was primarily due to increased rent from a new facility lease, as well as increaseddecreased professional fees in the construction segment. As a percentage of construction revenue, general and administrative expenses for the construction segment were ~~15.7%~~12.3% and ~~14.2%~~14.1% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

General and administrative expenses for the automotive supplies segment ~~were~~decreased by $49,548, or 12.8%, to $337,233 for the three months ended March 31, 2023 from $386,781 for the three months ended March 31, 2022. Such decrease was primarily due to decreased professional fees in the automotive supplies segment. As a percentage of automotive supplies revenue, general and administrative expenses for the automotive supplies segment were 26.8% and 23.6% for the three months ended March 31, ~~2022.~~2023 and 2022, respectively.

General and administrative expenses for our holding company increased by ~~$137,371,~~$67,728, or ~~180.7%~~31.7%, to $281,102 for the three months ended March 31, 2023 from $213,374 for the three months ended March 31, ~~2022 from $76,003 for the three months ended March 31, 2021.~~2022. Such increase was primarily due to increased corporate costs and professional fees.

Total other income (expense). We had ~~$873,678~~$855,314 in total other income, net, for the three months ended March 31, 2023, as compared to other expense, net, of $873,678 for the three months ended March 31, 2022. Other income, net, for the three months ended March 31, 2023 consisted of a gain on bargain purchase of $2,639,861 related to the acquisition of ICU Eyewear and other income of $33,168, offset by interest expense of $1,817,715, while other expense, net, for the three months ended March 31, 2022 ~~as compared to other~~consisted interest expense ~~net, of $442,611 for the three months ended March 31, 2021. Other expense, net, for the three months ended March 31, 2022 consisted~~ of $906,743, ~~of interest expense,~~ offset by a gain on disposal of property of equipment of $32,747 and other income of $318, while other expense, net, for the three months ended March 31, 2021 consisted of loss on adjustment shares of $757,792 and interest expense of $45,121, offset by a gain on forgiveness of debt of $360,302.$318.

Income tax ~~expense~~benefit (expense). We had an income an income tax benefit of $270,000 and income tax expense of $123,000 for the three months ended March 31, 2023 and 2022, ~~as compared to $0 for the three months ended March 31, 2021.~~respectively.

Net ~~loss from continuing operations~~income (loss). As a result of the cumulative effect of the factors described above, ~~our~~we had a net income of $1,047,481 for the three months ended March 31, 2023, as compared to a net loss ~~from continuing operations was~~of $927,208 for the three months ended March 31, ~~2022, as compared to a net loss of $853,992 for the three months ended March 31, 2021.~~2022.

Liquidity and Capital Resources

As of March 31, ~~2021,~~2023, we had cash and cash equivalents of ~~$1,638,924.~~$2,297,927. 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.

Although we do not believe that we will require additional cash to continue our operations over the next twelve months, 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. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $5,000,000 . 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 ~~the Manager~~our manager pursuant to the management services agreement, potential payment of profit allocation to ~~the Manager~~our manager and potential put price to ~~the Manager~~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 our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for more information concerning the management fee, the profit allocation and put price.

The amount of management fee paid to ~~the Manager~~our manager by us is reduced by the aggregate amount of any offsetting management fees, if any, received by ~~the Manager~~our manager from any of our businesses. As a result, the management fee paid to ~~the Manager~~our manager may fluctuate from quarter to quarter. The amount of management fee paid to ~~the Manager~~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.

~~The Manager,~~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 ~~company~~ subsidiary, ~~the Manager~~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~~high-water mark plus (ii) the subsidiary’s net income since its acquisition by ~~the Company~~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 ~~the Company,~~us, multiplied by (iii) the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according to ~~United States~~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, ~~the Manager~~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 our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for more information on the calculation of the profit allocation.

Our operating agreement also contains a supplemental put provision, which gives ~~the Manager~~our manager the right, subject to certain conditions, to cause us to purchase the allocation shares then owned by ~~the Manager~~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 ~~the Manager’s~~our manager’s resignation, the payment to ~~the Manager~~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 our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for more information on the calculation of the put price. The put price obligation, if ~~the Manager~~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 flow for the period indicated:

Three Months Ended
March 31,
2022 2021
Net cash used in operating activities from continuing operations $ (536,260 ) $ (360,719 )
Net cash provided by (used in) investing activities from continuing operations (31,055 ) 945,704
Net cash provided by financing activities from continuing operations 822,706 173,559
Net increase in cash and cash equivalents from continuing operations 255,391 758,544
Cash and cash equivalents from continuing operations at beginning of period 1,383,533 1,380,349
Cash and cash equivalents from continuing operations at end of period $ 1,638,924 $ 2,138,893

	Three Months Ended March 31,
	2023			2022
Net cash used in operating activities	$	(1,851,766	)	$	(536,260	)
Net cash used in investing activities		(3,734,632	)		(31,055	)
Net cash provided by financing activities		6,804,970			822,706
Net increase in cash and cash equivalents		1,218,572			255,391
Cash and cash equivalents at beginning of period		1,079,355			1,383,533
Cash and cash equivalents at end of period	$	2,297,927		$	1,638,924

Net cash used in operating activities was $1,851,766 for the three months ended March 31, 2023, as compared to $536,260 for the three months ended March 31, 2022. The increase in the net cash used in operating activities was primarily a result of the gain on bargain purchase of $2,639,861 related to the acquisition of ICU Eyewear, increased payments to accounts payable and accrued expenses, offset by an increase in inventories.

Net cash used in investing activities was $3,734,632 for the three months ended March 31, 2023, as compared to $31,055 for the three months ended March 31, 2022. The increase in the net cash used in investing activities was primarily a result of the cash paid for the acquisition of ICU Eyewear.

Net cash provided by financing activities was $6,804,970 for the three months ended March 31, 2023, as compared to $822,706 for the three months ended March 31, 2022. The increase in the net cash provided by investing activities was primarily a result of the proceeds from the private placements and revolving loan described below.

Debt

Revolving Loan

On February 9, 2023, 1847 ICU and ICU Eyewear entered into a loan and security agreement, or the loan agreement, with Industrial Funding Group, Inc. for a revolving loan of up to $5,000,000, which is evidenced by a secured promissory note in the principal amount of up to $5,000,000. On February 9, 2023, we received an advance of $2,063,182 under the note, of which $1,963,182 was used to repay certain debt of ICU Eyewear in connection with the merger agreement, with the remaining $100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and assigned the loan agreement, the note and related loan documents to GemCap Solutions, LLC. The remaining principal balance of the note at March 31, 2023 is $2,063,182 and an accrued interest balance of $42,042.

The note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime rate changes, plus (b) eight percent (8.00%), and (ii) fifteen percent (15.00%); provided that following and during the continuation of an event of default (as defined in the loan agreement), interest on the unpaid principal balance of the advances shall accrue at an annual rate equal to such rate plus three percent (3.00%). Interest accrued on the advances shall be payable monthly commencing on March 7, 2023. We may voluntarily prepay the entire unpaid principal amount of the note without premium or penalty; provided that in the event that we make such prepayment on or before February 9, 2024, then we must pay certain fees set forth in the note. The note is secured by all of the assets of 1847 ICU and ICU Eyewear.

The loan agreement contains customary representations, warranties and affirmative and negative financial and other covenants for loans of this type. The loan agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the note when due, or to pay any fees due under the loan agreement; (ii) for failure to perform any covenant or agreement contained in the loan agreement or any document delivered in connection therewith; (iii) if any statement, representation or warranty in the loan agreement or any document delivered in connection therewith is at any time found to have been false in any material respect at the time such representation or warranty was made; (iv) if we default under any agreement or contract with a third party which default would result in a liability to us in excess of $25,000; (v) for any voluntary or involuntary bankruptcy, insolvency, or dissolution or assignment to creditors; (vi) if any judgments or attachments aggregating in excess of $10,000 at any given time are obtained against us which remain unstayed for a period of ten (10) days or are enforced or if there is an indictment under an criminal statute or proceeding pursuant to which remedies sought may include the forfeiture of any property; (vii) if a material adverse effect or change of control (each as defined in the loan agreement) shall have occurred; (viii) for certain environmental claims; and (ix) for failure to notify the lender of certain events or failure to deliver certain documentation required by the loan agreement.

~~Net cash used in operating activities from continuing operations was $536,260~~Purchase and Sale of Future Receivables Agreement

On March 31, 2023, we entered into a non-recourse funding agreement with a third-party for the ~~three months ended~~sale of future receivables totaling $1,965,000 for net cash proceeds of $1,410,000. We are required to make weekly ACH payments in the amount of $39,300. The agreement also allows for the third-party to file UCCs securing their interest in the receivables and includes customary events of default. We recorded a debt discount of $555,000, which will be amortized under the effective interest method. We are utilizing the prospective method to account for subsequent changes in the estimated future payments, whereby if there is a change in the estimated future cash flows, a new effective interest rate is determined based on the revised estimate of remaining cash flows. As of March 31, ~~2022, as compared to $360,719 for~~2023 the three months ended March 31, 2021. For the three months ended March 31, 2022, the net loss from continuing operations of $927,208, changes in receivables of 539,818, inventory of $378,192, contract liabilities of $851,454, and operating lease liabilities of $83,729, offset by changes in depreciation and amortization of $511,371, amortization and of debt discounts of $249,374, amortization of right-of-use assets of $98,031, prepaid expenses and other current assets of $311,511, accounts payable and accrued expenses of $964,586, and customer deposits of $212,284, were the primary drivers of the net cash used in operating activities. For the three months ended March 31, 2021, the net loss from continuing operations of $755,811, changes in receivables of $124,065, inventory of $115,545, prepaids and other costs of $62,071, contract liabilities of $122,247, and non-cash forgiveness of debt of $360,302, offset by an changes in accounts payable and accrued expenses of $65,969, customer deposits of $328,580, depreciation and amortization of $122,106, and loss on adjustment shares of $757,792 in common share issuances, were the primary drivers of the net cash provided by operating activities.effective interest rate was approximately 72%.

~~Net cash used~~Promissory Notes issued in ~~investing activities from continuing operations was $31,055~~Private Placement

On February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $604,000 and (ii) five-year warrants for the three months ended March 31, 2022, as compared to net cash provided by investing activities from continuing operations of $945,704 for the three months ended March 31, 2021. Net cash used in investing activities for the three months ended March 31, 2022 consisted of purchases of property and equipment of $66,291 and investments in certificates of deposit of $262, offset by proceeds from the disposal of property of equipment of $35,498, while net cash provided by investing actives for the three months ended March 31, 2021 consisted of net cash acquired from the acquisition of Wolo of $1,094,524, offset by the purchase of ~~equipment and vehicles of $148,820.~~

Net cash provided by financing activities from continuing operations was $822,706 for the three months ended March 31, 2022, as compared to $173,559 for the three months ended March 31, 2021. Net cash provided by financing activities for the three months ended March 31, 2022 consisted of net proceeds from the issuance of series B senior convertible preferred shares of $1,266,000, offset by repayments of notes payables and finance lease liabilities of $58,317, dividends on preferred shares of $135,215, and dividends on common shares of $249,762, while net cash provided by financing activities for the three months ended March 31, 2021 consisted of net proceeds of $3,000,000 from the sale of units described below, net line of credit proceeds of $569,395 and proceeds from vehicle loans of $123,405, offset by the repayments of notes payable and finance lease liabilities of $143,432, payments to Wolo’s seller of $3,000,000 and to Kyle’s seller of $33,630, payments of preferred dividends of $176,950 and the payment of financing costs of $165,229.

~~Series A Unit Offering~~

~~On March 26, 2021, we sold~~ an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each unit consists of one (1) series A senior convertible preferred share and a three-year warrant to purchase one (1)125,833 common ~~share~~shares at an exercise price of ~~$2.50~~$4.20 per ~~common~~ share (subject to adjustment)~~, which may be exercised on a cashless basis under certain circumstances.~~ for total cash proceeds of $540,000. As ~~described in further detail below, we contributed to 1847 Wolo~~additional consideration, the $3,000,000 raised in this offering in exchange for 1,000 shares of 1847 Wolo’s series A preferred stock, at a price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847 Wolo.

In exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units at a lower purchase price than such holders paid for their shares, weCompany issued an aggregate of ~~398,838~~125,833 common shares to ~~such holders.~~

~~Series B Unit Offering~~

~~On February 24, 2022, we sold an aggregate of 320,333 units, at~~the investors as a price of $3.00 per unit, for aggregate gross proceeds of $961,000. On March 24, 2022, we sold an additional 106,666 units for aggregate gross proceeds of $320,000. Each unit consists of one (1) series B senior convertible preferred share andcommitment fee. Additionally, the Company issued a ~~three-year~~five-year warrant to J.H. Darbie & Co (the broker) for the purchase ~~one (1)~~of 892 common ~~share~~shares at an exercise price of ~~$3.00~~$5.25 (subject to adjustment).

On February 9, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company issued to such investors (i) promissory notes in the aggregate principal amount of $2,557,575 and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise price of $4.20 per share (subject to adjustment) for total cash proceeds of $2,271,818. As additional consideration, the Company issued 289,772 common shares to one investor and issued to the other investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment), which ~~may be exercised on~~were issued as a ~~cashless basis under certain circumstances.~~commitment fee. Additionally, the Company issued a five-year warrant to J.H. Darbie & Co (the broker) for the purchase of 11,923 common shares at an exercise price of $5.25 (subject to adjustment).

In the aggregate, the Company issued promissory notes in the aggregate principal amount of $4,039,575, warrants for the purchase of an aggregate of 1,303,316 common shares, and 415,605 common shares for net proceeds of $3,549,518. The remaining principal balance of the notes at March 31, 2023 is $2,405,234, net of debt discounts of $1,634,341, and an accrued interest balance of $63,842.

~~Subscription Agreement~~

On March 29, 2021, we entered into a subscription agreement with 1847 Wolo, pursuant to which 1847 Wolo issued 1,000 shares of its series A preferred stock to us for gross proceeds to 1847 Wolo of $3,000,000. The series A preferred stock has no voting rights and is not convertible into the common stock or any other securities of 1847 Wolo. Dividends at the rate per annum of 16.0% of the stated value of $3,000 per share shall accrue on the series A preferred stock (subject to adjustment) and shall accrue from day to day, whether or not declared, and shall be cumulative. Accruing dividends are payable quarterly in arrears on each of the following dividend payment dates: January 15, April 15, July 15 and October 15 beginning on April 15, 2021. Upon any liquidation, dissolution or winding up of 1847 Wolo, before any payment shall be made to the holders of 1847 Wolo’s common stock, the series A preferred stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to 1847 Wolo’s stockholders an amount per share equal to the stated value of $3,000 per share, plus any accrued, but unpaid dividends.

~~Debt~~

Secured Convertible Promissory Notes

On October 8, 2021, we and each of our subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain and Innovative Cabinets, entered into a note purchase agreement with two institutional investors, ~~including Leonite,~~ pursuant to which we issued to these purchasers secured convertible promissory notes in the aggregate principal amount of $24,860,000. The notes contain an aggregate original issue discount of $497,200. As a result, the total purchase price was $24,362,800. After payment of expenses of $617,825, we received net proceeds of $23,744,975, of which $10,687,500 was used to fund the cash portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets. In addition, as consideration for the financing, we granted the financing agent ~~750,000~~187,500 warrants with a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803. The agent fees were reflected as a discount against the convertible note payable with the warrants being included in additional paid in capital and the equity interest being ~~including~~included within noncontrolling interest on the consolidated balance sheet. The remaining principal balance of the convertible notes at March 31, ~~2022~~2023 is ~~$21,948,421,~~$22,589,681, net of debt discounts of ~~$2,911,579,~~$2,270,319, and ~~they have~~an accrued interest balance of ~~$489,698.~~$982,572.

The notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street Journal from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase to 24% or the maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and payable quarterly in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through and including the maturity date, October 8, 2026.

We may voluntarily prepay the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10% of the principal and interest paid in connection with such prepayment. In addition, immediately upon receipt by ~~the Company~~our company or any subsidiary of any proceeds from any issuance of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by ~~the Company~~our company or any subsidiary of any of the collateral or any of its respective assets (other than asset sales or dispositions in the ordinary course of business which are permitted by the note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceedings, we must prepay the notes in an amount equal to all such proceeds, net of reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by ~~the Company~~our company or a subsidiary in connection therewith (in each case, paid to non-affiliates).

The holders of the notes may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any accrued but unpaid interest on such portion, into our common shares at a conversion price equal to ~~$2.50~~$10.00 (subject to standard adjustments, including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations.

Pursuant to the terms of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the right, but not the obligation, to participate in any securities offering other than a permitted issuance (as defined in the note purchase agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of first refusal to participate in any issuance of indebtedness until the notes have been terminated; provided, however, that this right of first refusal shall not apply to permitted issuances.

The note purchase agreement and the notes contain customary representations, warranties, affirmative and negative financial and other covenants and events of default for loans of this type. The notes are guaranteed by each subsidiary and are secured by a first priority security interest in all of ~~the assets of the Company and its subsidiaries.~~our assets.

6% Subordinated Convertible Promissory Notes

~~A portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets on~~

On October 8, 2021, ~~was paid by the issuance of~~1847 Cabinet issued 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345 ~~by 1847 Cabinet~~ to Steven J. Parkey and Jose D. Garcia-Rendon, the sellers of High Mountain and Innovative Cabinets. On July 26, 2022, we and 1847 Cabinet entered into a conversion agreement with Steven J. Parkey and Jose D. Garcia-Rendon, pursuant to which they agreed to convert an aggregate of $3,360,000 of the convertible notes into an aggregate of 800,000 common shares at a conversion price of $4.20 per share. As a result, we recognized a loss on extinguishment of debt of $1,280,000. The remaining principal balance of the notes at March 31, ~~2022~~2023 is ~~$4,931,608,~~$2,274,690, net of debt ~~discount at $948,738,~~discounts of $245,656, and ~~they have~~an accrued interest balance of ~~$196,468.~~$419,232.

The notes bear interest at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes.

At any time prior to October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent (20%) of the original principal amount of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined by dividing the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined in accordance with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In addition, on October 8, 2021, we entered into an exchange agreement with the holders, pursuant to which we granted them the right to exchange all of the principal amount and accrued but unpaid interest under the notes or any portion thereof for a number of our common shares to be determined by dividing the amount to be converted by an exchange price equal to the higher of (i) the 30-day volume weighted average price for our common shares on the primary national securities exchange or over-the-counter market on which our common shares are traded over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) ~~$2.50~~$10.00 (subject to equitable adjustments for stock splits, stock combinations, recapitalizations and similar transactions).

The notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described above. The rights of the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible promissory notes described above.

6% Amortizing Promissory Note

On July 29, 2020, 1847 Asien entered into a securities purchase agreement with Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992, ~~(the “Asien’s Seller”),~~or the Asien’s Seller, pursuant to which the Asien’s Seller sold ~~415,000~~103,750 of our common shares to 1847 Asien a purchase price of ~~$2.50~~$10.00 per share. As consideration, 1847 Asien issued to the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, ~~1847 Asien and~~ the ~~Asien’s Seller~~parties entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the senior convertible promissory notes described above, and the second-half (50%) of the outstanding principal amount ($518,750) and all accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along with any other unpaid principal or accrued interest thereon. On October 20, 2022, the parties entered into a letter agreement pursuant to which the parties agreed to extend the maturity date of the note to February 28, 2023 and revised the repayment terms so that the outstanding principal amount and all accrued interest thereon shall be payable monthly, beginning on November 30, 2022, in accordance with the payment schedule set forth on Exhibit A to the letter agreement. As additional consideration for entering into the letter agreement, 1847 Asien also agreed to pay the Asien’s Seller $87,707 as an amendment fee. The note is unsecured and contains customary events of default. The remaining principal and accrued interest balance of the note at March 31, ~~2022~~2023 was ~~$581,963 and it had accrued interest of $40,880.~~$567,248.

~~Vesting~~Related Party Promissory Note

AOn September 30, 2020, a portion of the purchase price for the acquisition of Kyle’s ~~on September 30, 2020~~ was paid by the issuance of a ~~vesting~~ promissory note by 1847 Cabinet to Stephen Mallatt, Jr. and Rita Mallatt, or the Kyle’s Sellers, in the principal amount of ~~$1,050,000, which increased to a principal amount of up to $1,260,000 pursuant to the vested percentage calculation described below.~~$1,260,000. Payment of the principal and accrued interest on the note iswas subject to ~~vesting as described below. The note bears interest on~~vesting. On July 26, 2022, we and 1847 Cabinet entered into a conversion agreement with the ~~vested portion of principal amount at the rate of eight percent (8%) per annum. To the extent vested, the vested portion~~Kyle’s Sellers, pursuant to which they agreed to convert $797,221 of the ~~principal~~vesting note into 189,815 common shares at a conversion price of $4.20 per share. As a result, we recognized a loss on extinguishment of debt of $303,706. Pursuant to the conversion agreement, the note was cancelled, and ~~all accrued but unpaid interest~~we agreed to pay $558,734 to the Kyle’s Sellers no later than October 1, 2022. On March 30, 2023, we entered into an amendment to the conversion agreement, effective retroactively to October 1, 2022. Pursuant to the amendment, we agreed to pay a total of $642,544 in three monthly payments commencing on ~~such vested portion of the principal shall be paid in one lump sum on the last day of the thirty-sixth (36th) month following the date of the note.~~April 5, 2023.

The vested principal of the note due at the maturity date shall be calculated each year based on the average annual consolidated EBITDA (as defined in the note) of 1847 Cabinet for each of the years ended December 31, 2020, 2021 and 2022. The EBITDA for each year shall be divided by $1.4 million multiplied by 100 to obtain the vested percentage. The vested principal for each year shall be equal to the vested percentage for that year multiplied by $350,000. To the extent that the vested percentage for the subject year is less than 80%, no portion of the note for that year shall vest. To the extent that the vested percentage for the subject year is equal to or greater than 120%, the vested principal shall be equal to $420,000 for that year and no more. For the year ended December 31, 2020, EBITDA of 1847 Cabinet was approximately $1,531,000, resulting in a vested amount of approximately $415,000. For the year ended December 31, 2021, EBITDA of 1847 Cabinet was approximately $427,504, resulting in an additional vested amount of approximately $602,204. As of March 31, 2022, the outstanding balance of this note was $1,001,183.

1847 Cabinet will have the right to redeem all but no less than all of the note at any time prior to the maturity date. If 1847 Cabinet elects to redeem the note, the redemption price will be payable in cash and is equal to the then outstanding vested portion of the principal plus any remaining unvested principal amount plus accrued but unpaid interest thereon (calculated over 36 months). For purposes of this redemption calculation, the “unvested principal amount” shall be $350,000 per year.

The note contains customary events of default. The right of the holders to receive payments under the note is subordinated to all indebtedness of 1847 Cabinet, whether outstanding as of the closing date or thereafter created, to banks, insurance companies and other financial institutions or funds, and federal or state taxation authorities.

Financing Leases

On February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, which matures on January 19, 2024. The balance payable was $9,792 as of March 31, 2022.

~~On April 10, 2019, High Mountain entered in an equipment financing lease to purchase equipment for $67,577, which matures on April 1, 2024. The balance payable was $30,961 as of March 31, 2022.~~

~~On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, which matures on May 2, 2024. The balance payable was $5,187 as of March 31, 2022.~~

On May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, which matures onin December 1, 2027. The balance payable was ~~$258,821~~$218,977 as of March 31, ~~2022.~~2023.

On October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for ~~$245,375,~~$245,376, which matures onin December 1, 2027. The balance payable was ~~$228,842~~$194,359 as of March 31, ~~2022.~~2023.

On March 28, 2022, Kyle’s entered an equipment financing lease to purchase machinery and equipment for $316,798, which matures in January 2028. The balance payable was $262,815 as of March 31, 2023.

On April 11, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for ~~$245,395,~~$11,706, which matures ~~on January 28, 2028.~~in June 2027. The balance payable was ~~$239,208~~$9,734 as of March 31, ~~2022.~~2023.

On ~~March 28,~~July 13, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for ~~$71,403,~~$240,260, which matures ~~on January 28,~~in June 2028. The balance payable was ~~$69,463~~$214,457 as of March 31, ~~2022.~~2023.

Vehicle Loans

Asien’s has entered into seven retail installment sale contracts pursuant to which ~~Asien’s~~it agreed to finance its delivery trucks at rates ranging from 3.74% to 8.72% with an aggregate remaining principal amount of ~~$136,781~~$85,899 as of March 31, ~~2022.~~2023.

Kyle’s has entered into two retail installment sale contracts pursuant to which ~~Kyle’s~~it agreed to finance its delivery trucks at rates ranging from 5.90% to 6.54% with an aggregate remaining principal amount of ~~$61,022~~$47,486 as of March 31, ~~2022.~~2023.

High Mountain has entered into twelve retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment at rates ranging from 3.74% to 6.34% with an aggregate remaining principal amount of ~~$110,285~~$60,255 as of March 31, ~~2022.~~2023.

Innovative Cabinets has entered into two retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment at rates of 3.74% with an aggregate remaining principal amount of ~~$18,633~~$12,990 as of March 31, ~~2022.~~2023.

Total Debt

The following table shows aggregate figures for the total debt, net of discounts, described above that is coming due in the short and long term as of March 31, ~~2022.~~2023. See the above disclosures for more details regarding these loans.

	Short-Term		Long-Term		Total Debt		Short-Term		Long-Term		Total Debt
Revolving Loan							$	2,063,182	$	-	$	2,063,182
Sale of Future Receivables Note								1,410,000		-		1,410,000
Promissory Notes issued in Private Placements								2,405,234		-		2,405,234
6% Subordinated Promissory Note								500,000		-		500,000
Secured Convertible Promissory Notes	$	-	$	21,948,421	$	21,948,421		-		22,589,681		22,589,681
6% Subordinated Convertible Promissory Notes		-		4,931,608		4,931,608		-		2,274,690		2,274,690
6% Amortizing Promissory Note		581,961		-		581,961		465,805		-		465,805
Vesting Promissory Note		-		1,011,183		1,011,183
Related Party Promissory Note								362,779		-		362,779
Financing Leases		143,865		698,409		842,274		187,429		736,993		924,422
Vehicle Loans		104,322		222,399		326,721		78,777		127,853		206,630
Total	$	830,148	$	28,812,020	$	29,642,168	$	7,473,206	$	25,729,217	$	33,202,423

Contractual Obligations

Our principal commitments consist mostly of obligations under the loans described above and other contractual commitments described below.

We have engaged ~~the Manager~~our manager to manage our day-to-day operations and affairs. Our relationship with ~~the Manager~~our manager will be governed principally by the following agreements:

●

the management services agreement and offsetting management services agreements relating to the management services ~~the Manager~~our manager will perform for us and the businesses we own and the management fee to be paid to ~~the Manager~~our manager in respect thereof; and

●

our operating agreement setting forth ~~the Manager’s~~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 ~~the Manager’s~~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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission, ~~(the “SEC”)~~or the SEC, on ~~March 31, 2022.~~April 11, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”))~~or the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the ~~Securities and Exchange Commission~~SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, ~~2022.~~2023. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, which we are still in the process of remediating as of March 31, ~~2022,~~2023, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 for the description of these weaknesses.

Changes in Internal Control Over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During its evaluation of the effectiveness of our internal control over financial reporting as of March 31, ~~2022,~~2023, our management identified the following material weaknesses:

●

We did not have appropriate policies and procedures in place to evaluate the proper accounting and disclosures of key documents and agreements.

●

We do not have adequate segregation of duties with our limited accounting personnel and rely upon outsourced accounting services.

●

We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of GAAP commensurate with our financial reporting requirements.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, our management has identified the steps necessary to address the material weaknesses, and in the first quarter of ~~2022,~~2023, we continued to implement the following remedial procedures:

●

On September 7, 2021, we hired Vernice Howard as our Chief Financial Officer. Ms. Howard has over 30 years of experience in the fields of finance and accounting and has significant GAAP and SEC reporting experience.

●

We plan to make necessary changes by providing training to our financial team and our other relevant personnel on the GAAP accounting guidelines applicable to financial reporting requirements.

●

In the first quarter of 2022, we engaged a financial reporting consultant to provide outsourced accounting and financial reporting services.

●

In the first quarter of 2022, we also put in place new policies and procedures at the subsidiary level to standardize accounting procedures across all business units. We also plan to hire additional skilled accounting personnel at the subsidiary companies to implement the policies and procedures.

●

In the third quarter of 2022, we hired a corporate controller.

We intend to complete the remediation of the material weaknesses discussed above as soon as practicable but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the first quarter of ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

~~PART II~~

~~OTHER INFORMATION~~

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the three months ended March 31, ~~2022~~2023 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

We did not repurchase any of our common shares during the three months ended March 31, ~~2022.~~2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the first quarter of fiscal 2022 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.None.

ITEM 6. EXHIBITS.

Exhibit No.		Description of Exhibit
3.1		Certificate of Formation of 1847 Holdings LLC (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed on February 7, 2014)
3.2		Second Amended and Restated Operating Agreement of 1847 Holdings LLC, dated January 19, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 22, 2018)
3.3		Amendment No. 1 to Second Amended and Restated Operating Agreement of 1847 Holdings LLC, dated August 5, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 11, 2021)
4.1		Amended and Restated Share Designation of Series A Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 1, 2021)
4.2		Amendment No. 1 to Amended and Restated Share Designation of Series A Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 5, 2021)
4.3		Share Designation of Series B Senior Convertible Preferred Shares (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on March 2, 2022)
4.4		~~Form of~~ Common Share Purchase Warrant ~~relating~~issued by 1847 Holdings LLC to ~~2020 private placement~~Mast Hill Fund, L.P. on February 22, 2023 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 28, 2023)
4.5		Common Share Purchase Warrant issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 22, 2023 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on ~~October 7, 2020)~~February 28, 2023)
~~4.5~~4.6		~~Form of~~ Common Share Purchase Warrant ~~relating~~issued by 1847 Holdings LLC to ~~2021 private placement~~J.H. Darbie & Co., Inc. on February 22, 2023 (incorporated by reference to Exhibit 4.6 to Amendment No. 1 to Registration Statement on Form S-3 filed on April 28, 2023)
4.7		Common Share Purchase Warrant issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 13, 2023)
4.8		Common Share Purchase Warrant issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on ~~April 1, 2021)~~February 13, 2023)
~~4.6~~4.9		~~Form of~~ Common Share Purchase Warrant ~~relating~~issued by 1847 Holdings LLC to ~~2022 private placement~~Mast Hill Fund, L.P. on February 9, 2023 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on February 13, 2023)
4.10		Common Share Purchase Warrant issued by 1847 Holdings LLC to J.H. Darbie & Co., Inc. on February 9, 2023 (incorporated by reference to Exhibit 4.10 to Amendment No. 1 to Registration Statement on Form S-3 filed on April 28, 2023)
4.11		Common Share Purchase Warrant issued by 1847 Holdings LLC to Leonite Fund I, LP on February 3, 2023 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 9, 2023)
4.12		Common Share Purchase Warrant issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 3, 2023 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on ~~March 2, 2022)~~February 9, 2023)
~~4.7~~4.13		~~Warrant for~~ Common ~~Shares~~Share Purchase Warrant issued by 1847 Holdings LLC to ~~Leonite Capital~~J.H. Darbie & Co., Inc. on February 3, 2023 (incorporated by reference to Exhibit 4.13 to Amendment No. 1 to Registration Statement on Form S-3 filed on April 28, 2023)
4.14		Warrant Agent Agreement, dated January 3, 2023, between 1847 Holdings LLC ~~on October 8, 2021~~and VStock Transfer, LLC and form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on ~~October 13, 2021)~~January 9, 2023)
~~4.8~~4.15		Common Share Purchase Warrant issued to Craft Capital Management LLC on August 5, 2022 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 8, 2022)
4.16		Common Share Purchase Warrant issued to R.F. Lafferty & Co. Inc. on August 5, 2022 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on August 8, 2022)
4.17		Warrant for Common Shares issued by 1847 Holdings LLC to J.H. Darbie & Co., Inc. on July 8, 2022 (incorporated by reference to Exhibit 4.18 to the Registration Statement on Form S-3 filed on February 1, 2023)
4.18		Warrant for Common Shares issued by 1847 Holdings LLC to Leonite Capital LLC on October 8, 2021 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 13, 2021)
~~10.1~~4.19		Form of ~~Securities~~Common Share Purchase ~~Agreement~~Warrant relating to 2022 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 2, 2022)
4.20		Form of Common Share Purchase Warrant relating to 2021 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on April 1, 2021)
4.21		Form of Common Share Purchase Warrant relating to 2020 private placement (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 7, 2020)
10.1		Management Services Agreement, dated February 9, 2023, between 1847 ICU Holdings Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on February 13, 2023)
10.2		Amendment No. 1 to Management Services Agreement, dated March 30, 2023, between 1847 ICU Holdings Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on April 5, 2023)
10.3		Amendment No. 1 to Management Services Agreement, dated March 30, 2023, between 1847 Wolo Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on April 5, 2023)
10.4		Amendment No. 1 to Management Services Agreement, dated March 30, 2023, between 1847 Asien Inc. and 1847 Partners LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on April 5, 2023)
10.5		First Amendment to Agreement and Plan of Merger, dated February 9, 2023, among 1847 ICU Holdings Inc., 1847 ICU Acquisition Sub Inc., ICU Eyewear Holdings Inc. and San Francisco Equity Partners (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 13, 2023)
10.6		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Oceanus Investment Inc. on February 9, 2023 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 13, 2023)

10.7		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to San Francisco Equity Partners III, LP on February 9, 2023 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on February 13, 2023)
10.8		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Richard Conti on February 9, 2023 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on February 13, 2023)
10.9		6% Subordinated Promissory Note issued by 1847 ICU Holdings Inc. to Kirk Hobbs on February 9, 2023 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on February 13, 2023)
10.10		Letter Agreement, dated March 30, 2023, among 1847 Holdings LLC, 1847 Cabinet Inc., Stephen Mallatt, Jr. and Rita Mallatt (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on April 5, 2023)
10.11		Securities Purchase Agreement, dated February 22, 2023, between 1847 Holdings LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on ~~March 2, 2022)~~February 28, 2023)
10.12		Promissory Note issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 22, 2023 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 28, 2023)
10.13		Securities Purchase Agreement, dated February 9, 2023, between 1847 Holdings LLC and Leonite Fund I, LP (incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on February 13, 2023)
10.14		Promissory Note issued by 1847 Holdings LLC to Leonite Fund I, LP on February 9, 2023 (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on February 13, 2023)
10.15		Securities Purchase Agreement, dated February 9, 2023, between 1847 Holdings LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on February 13, 2023)
10.16		Promissory Note issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 9, 2023 (incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on February 13, 2023)
10.17		Securities Purchase Agreement, dated February 3, 2023, between 1847 Holdings LLC and Leonite Fund I, LP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 9, 2023)
10.18		Promissory Note issued by 1847 Holdings LLC to Leonite Fund I, LP on February 3, 2023 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 9, 2023)
10.19		Securities Purchase Agreement, dated February 3, 2023, between 1847 Holdings LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 9, 2023)
10.20		Promissory Note issued by 1847 Holdings LLC to Mast Hill Fund, L.P. on February 3, 2023 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on February 9, 2023)
10.21		Loan and Security Agreement, dated February 9, 2023, among Industrial Funding Group, Inc., 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on February 13, 2023)
10.22		Secured Promissory Note issued by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. to Industrial Funding Group, Inc. on February 9, 2023 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on February 13, 2023)
10.23		Domain Name, URL and IP Address Agreement, dated February 9, 2023, by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. in favor of Industrial Funding Group, Inc. (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on February 13, 2023)
10.24		Trademark Security Agreement, dated February 9, 2023, by 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. in favor of Industrial Funding Group, Inc. (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on February 13, 2023)
10.25		Indemnity and Release Letter, dated February 11, 2023, among GemCap Solutions, LLC, Industrial Funding Group, Inc., 1847 ICU Holdings Inc., ICU Eyewear Holdings Inc. and ICU Eyewear, Inc. (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on February 13, 2023)
31.1*		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certifications of Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	*	Filed herewith

Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 16, ~~2022~~2023	1847 HOLDINGS LLC

	/s/ Ellery W. Roberts
	Name:	Ellery W. Roberts
	Title:	Chief Executive Officer
		(Principal Executive Officer)

	/s/ Vernice L. Howard
	Name:	Vernice L. Howard
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

3736

10-Q --12-31 1847 Holdings LLC 0.20 0.21 4419917 4915655 0.20 0.21 4419917 4915655 false Q1 0001599407 ~~us-gaap:SeriesBPreferredStockMember us-gaap:PreferredStockMember 2020-12-31~~ iso4217:USD xbrli:shares

	March 31, 2022			December 31, 2021
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	1,638,924		$	1,383,533
Investments		276,691			276,429
Receivables, net		3,918,814			3,378,996
Contract assets		69,735			88,466
Inventories, net		5,805,494			5,427,302
Prepaid expenses and other current assets		270,537			582,048
Total Current Assets		11,980,195			11,136,774

Property and equipment, net		1,920,967			1,695,311
Operating lease right-of-use assets		3,094,573			3,192,604
Goodwill		19,452,270			19,452,270
Intangible assets, net		11,079,205			11,443,897
Other long-term assets		85,691			85,691
TOTAL ASSETS	$	47,612,901		$	47,006,547

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT

Current Liabilities
Accounts payable and accrued expenses	$	5,911,576		$	4,818,672
Contract liabilities		1,696,449			2,547,903
Customer deposits		3,677,543			3,465,259
Due to related parties		193,762			193,762
Current portion of operating lease liabilities		595,039			613,696
Current portion of finance lease liabilities		143,865			100,652
Current portion of notes payable, net		686,285			692,522
Total Current Liabilities		12,904,519			12,432,466

Operating lease liabilities, net of current portion		2,542,790			2,607,862
Finance lease liabilities, net of current portion		698,409			455,905
Notes payable, net of current portion		222,399			251,401
Convertible notes payable, net of current portion		26,880,029			26,630,655
Contingent note payable, net of current portion		1,001,183			1,001,183
Deferred tax liability, net		1,981,000			2,070,000
TOTAL LIABILITIES		46,230,329			45,449,472

Mezzanine Equity
Series A senior convertible preferred shares, 4,450,460 shares designated; 1,684,849 and 1,818,182 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,415,100			1,655,404
Series B senior convertible preferred shares, 583,334 shares designated; 426,999 and 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,113,650			-
TOTAL MEZZANINE EQUITY		2,528,750			1,655,404

Shareholders’ Deficit
Allocation shares, 1,000 shares authorized; 1,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021		1,000			1,000
Common shares, $0.001 par value, 500,000,000 shares authorized; 4,995,232 and 4,842,851 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		4,995			4,843
Distribution receivable		(2,000,000	)		(2,000,000	)
Additional paid-in capital		21,983,594			21,719,410
Accumulated deficit		(22,012,401	)		(20,754,394	)
TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT		(2,022,812	)		(1,029,141	)
NON-CONTROLLING INTERESTS		876,634			930,812
TOTAL SHAREHOLDERS’ DEFICIT		(1,146,178	)		(98,329	)
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT	$	47,612,901		$	47,006,547

	Series A Senior Convertible Preferred Shares				Series B Senior Convertible Preferred Shares				Allocation		Common Shares				Distribution			Additional Paid-In			Accumulated			Non- Controlling			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Shares		Amount		Receivable			Capital			Deficit			Interests			Equity
Balance at December 31, 2022		1,593,940	$	1,338,746		464,899	$	1,214,181	$	1,000		4,079,137	$	4,079	$	(2,000,000	)	$	43,962,606		$	(41,919,277	)	$	288,499		$	2,889,834
Issuance of common shares upon settlement of accrued series A preferred shares dividends		-		-		-		-		-		99,505		100		-			152,568			-			-			152,668
Issuance of common shares and warrants in connection with a private debt offering		-		-		-		-		-		415,605		416		-			1,359,946			-			-			1,360,362
Issuance of common shares upon cashless exercise of warrants		-		-		-		-		-		61,389		61		-			(61	)		-			-			-
Deemed dividend from issuance of warrants to common shareholders		-		-		-		-		-		-		-		-			618,000			(618,000	)		-			-
Deemed dividend from down round provision in warrants		-		-		-		-		-		-		-		-			1,217,000			(1,217,000	)		-			-
Dividends - series A senior convertible preferred shares		-		-		-		-		-		-		-		-			-			(110,045	)		-			(110,045	)
Dividends - series B senior convertible preferred shares		-		-		-		-		-		-		-		-			-			(52,820	)		-			(52,820	)
Net income		-		-		-		-		-		-		-		-			-			1,112,534			(65,053	)		1,047,481
Balance at March 31, 2023		1,593,940	$	1,338,746		464,899	$	1,214,181	$	1,000		4,655,636	$	4,656	$	(2,000,000	)	$	47,310,059		$	(42,804,608	)	$	223,446		$	5,287,480

	March 31,			March 31,
	2022			2021

Revenues	$	12,073,878		$	13,373,918
Net income (loss)		(927,208	)		317,547
Net loss attributable to 1847 Holdings common shareholders’		(1,008,245	)		(1,398,248	)
Loss per share attributable to 1847 Holdings common shareholders’:
Basic and diluted	$	(0.21	)	$	(0.29	)

	Warrants		Weighted- Average Exercise Price
Outstanding at December 31, 2021		5,200,460	$	2.38
Granted		426,999		3.00
Exercised		-		-
Forfeited		-		-
Outstanding at March 31, 2022		5,627,459	$	2.43
Exercisable at March 31, 2022		5,627,459	$	2.43

Basic and Diluted Loss Per Share	March 31, 2022
Net loss per common share attributable to 1847 Holdings common shareholders’	$	(1,008,245	)
Weighted average common shares outstanding		4,915,655
Basic and diluted loss per share	$	(0.21	)