NOTE 12—LEASES

The Company leases office and warehouse space, machinery and other equipment. The majority of the Company’s leases are classified as ROU operating leases, which are included in operating ROU assets and operating lease liabilities in the Company’s consolidated balance sheets. Finance leases are included in property and equipment and finance lease liabilities in the Company’s consolidated balance sheets.

Operating Leases

On December 16, 2024, in connection with the acquisition of CMD, 1847 CMD entered into a lease agreement with Delancey LLC relating to the properties leased by the CMD prior to the acquisition located in Las Vegas, Nevada. The lease provides for a base rent of $20,000 per month, which shall increase annually by an amount equal to three percent of the previous year’s base rent. In addition, 1847 CMD will be responsible for all taxes, insurance and certain operating costs during the lease term. The lease expires on December 31, 2029. The initial measurement of the ROU asset and liability associated with this operating lease was $884,163.

On December 16, 2024, in connection with the acquisition of CMD, 1847 CMD also entered into a lease agreement with CD Gowan LLC relating to the properties leased by the CMD prior to the acquisition located in North Las Vegas, Nevada. The lease provides for a base rent of $15,000 per month, which shall increase annually by an amount equal to three percent of the previous year’s base rent. In addition, 1847 CMD will be responsible for all taxes, insurance and certain operating costs during the lease term. The lease expires on December 31, 2029. The initial measurement of the ROU asset and liability associated with this operating lease was $663,122.

On February 15, 2025, CMD entered into a lease agreement for office space located in Lake Havasu City, Arizona. The lease commenced on February 15, 2025 and is for a term of three years. Under the terms of the lease, CMD will lease the premises at a monthly rate of $3,300, with scheduled annual increases. The lease agreement contains customary events of default, representations, warranties, and covenants. The measurement of the ROU asset and liability associated with this operating lease was $97,379.

On September 1, 2025, Kyle’s entered into a five-year industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, officers of Kyle’s, for office and warehouse space located in Boise, Idaho, which was amended on September 1, 2025 to extend the lease for an additional five years. Commencing on September 1, 2025, the lease provides for a base rent of $7,925, with scheduled annual increases. The lease agreement contains customary events of default, representations, warranties, and covenants. The measurement of the ROU asset and liability associated with this operating lease was $343,713.

In May 2025, ICD ceased use of a warehouse facility located in Reno, Nevada, and relocated operations to another site within the Construction operations. As the Company determined it no longer had the right to control the use of the identified asset, the associated ROU asset was written off and the Company recognized a loss on abandonment of $112,705 for the year ended December 31, 2025.

Operating leases as of December 31, 2025 and 2024 consist of the following:

The components of operating lease expense consist of the following for the years ended December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, cash paid for amounts included in the measurement of operating lease liabilities was $774,988 and $494,349, respectively.

As of December 31, 2025, maturities of operating lease liabilities were as follows:

Finance Leases

Finance leases as of December 31, 2025 and 2024 consist of the following:

The components of finance lease expense consist of the following for the years ended December 31, 2025 and 2024:

As of December 31, 2025, maturities of finance lease liabilities were as follows: