BUDA JUICE, INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read together with our audited financial statements and the related notes to those statements included under Item 8 of this Annual Report on Form 10-K. For purposes of this section, “Buda Juice”, the “Company”, “we”, or “our” refer to Buda Juice, Inc. and its subsidiaries, unless the context otherwise requires. Certain figures have been rounded for ease of presentation and may not sum due to rounding. 26 Table of Contents Cautionary Note Regarding Forward-Looking Statements This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans, and expectations that involve risks, uncertainties, and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K. You should carefully read the “Risk Factors” section to understand the important factors that could cause actual results to differ materially from our forward-looking statements. Overview Buda Juice, LLC (the Company) was founded in Dallas, Texas in October 2013. We operate in a highly competitive beverage industry, focused on UltraFreshTM, juice production for business-to-business (B2B) distribution. Buda Juice offers a growing portfolio of UltraFresh™, cold-crafted citrus-based beverages designed to meet the evolving preferences of consumers wanting ‘fresh’ products and the operational needs of modern grocery retailers. Buda Juice offers a core branded line, a Buda Fresh® value-forward range, and select white-label/private label solutions—each built on the same cold-crafted citrus platform and produced in our centralized, Juice HACCP- and SQF-certified facility. This multi-tiered strategy allows us to serve a broad range of customers while maintaining high margins, operational leverage, and product consistency. These products are sold in the produce department refrigerated sections and, in some stores, also on the perimeter beverage set. Our product portfolio consists of: Results of Operations for the Year Ended December 31, 2025, and 2024 The following table summarizes our results of operations for the years ended December 31, 2025 and 2024, respectively: Year Ended December 31, Change 2025 2024 Amount Percentage (in thousands) (in thousands) Net sales $ 12,609 $ 11,274 $ 1,335 11.8 % Cost of goods sold 6,980 6,065 915 15.1 % Gross profit $ 5,629 $ 5,209 $ 420 8.1 % Operating expenses: Delivery and handling 509 501 8 1.6 % Selling, general and administrative 1,671 1,297 374 28.8 % Total operating expenses $ 2,180 $ 1,798 $ 382 21.3 % Income from operations $ 3,449 $ 3,411 $ 38 1.4 % Other income (expense): Other income 29 252 (223 ) -88.5 % Interest income / (expense) 55 (89 ) 144 161.8 % Net income $ 3,533 $ 3,574 $ (41 ) -1.4 % For the years ended December 31, 2025 and 2024, the Company reported net income of approximately $3.5 million and $3.6 million, respectively. The change in net income between the years ended December 31, 2025 and 2024 reflects strong revenue growth offset by increased costs of produce, primarily citrus, as well as an increase in general and administrative costs in preparation for the Company’s initial public offering in January 2026. Net Sales : Net sales increased $1,335, or 11.8%, to $12,609 for the year ended December 31, 2025, from $11,274 for the year ended December 31, 2024. The increase was mainly driven by an increase in sales by our primary customer. 27 Table of Contents Gross Profit Year Ended December 31, Change 2025 2024 Amount Percentage (in thousands) (in thousands) Cost of goods sold $ 6,980 $ 6,065 $ 915 15.1 % Gross profit 5,629 5,209 420 8.1 % Gross margin (percentage of net sales) 44.6 % 46.2 % Gross Profit: Gross profit margin was 44.6% and 46.2% for the years ended December 31, 2025 and 2024, respectively. The decrease in gross profit margin was primarily driven by an increase in produce costs, primarily citrus. Operating Expenses Year Ended December 31, Change 2025 2024 Amount Percentage (in thousands) (in thousands) Delivery and handling expense $ 509 $ 501 $ 8 1.6 % Selling, general and administrative 1,671 1,297 374 28.8 % Total operating expenses $ 2,180 $ 1,798 382 21.3 % Delivery and Handling Expense: Delivery and handing expense increased by 1.6%, to $509 for the year ended December 31, 2025. Although in total, delivery and handling expense did not change materially, there was an increase in third-party freight costs due to the increase in delivered volume to our largest customer for the year ended December 31, 2025 as compared to the same period in 2024. However, those increases were equally offset with a decrease in certain retail related delivery expenses when the Company closed all remaining retail stores in 2024. Selling, General and Administrative Expenses: Selling, general, and administrative expense increased by $374, or 28.8%, to $1,671 for the year ended December 31, 2025, from $1,297 for the year ended December 31, 2024. The increase in selling, general and administrative expense was primarily driven by a decrease in retail related expenses such as rent and personnel, while offset with an increase in administrative personnel expenses as the Company prepared for the initial public offering in January 2026. Other Income / (Expense), Net Year Ended December 31, Change 2025 2024 Amount Percentage (in thousands) (in thousands) Other income / (expense) $ 29 $ 252 $ (223 ) -88.5 % Interest income / (expense) 55 (89 ) 144 161.8 % Total other income / (expense) $ 84 $ 163 (79 ) -48.5 % Other income : Other income was $29 for the year ended December 31, 2025, a decrease of $223 from the year ended December 31, 2024. The decrease in other income was mainly a result of $252 of insurance proceeds being received during the year ended December 31, 2024 as compared to $22 for the same period in 2025. Interest income / (expense) : Net interest income was $55 for the year ended December 31, 2025, while the Company incurred $89 of interest expense for the year ended December 31, 2024. The change of $144 from interest expense to interest income is a result of the Company’s line of credit being paid off during 2024 and no further borrowing during the year ended December 31, 2025, while also earning interest on daily cash balances. Liquidity and Capital Resources In the past few years, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities. We had $1,840 and $1,887 of cash and cash equivalents as of December 31, 2025, and 2024, respectively. 28 Table of Contents Working Capital: The following table summarizes total current assets, liabilities and working capital at December 31, 2025 compared to December 31, 2024 (in thousands): December 31, 2025 December 31, 2024 Change Current Assets $ 3,219 $ 2,697 $ 522 Current Liabilities 585 575 10 Working Capital $ 2,634 $ 2,122 $ 512 As of December 31, 2025, we had working capital of approximately $2.6 million as compared to working capital of approximately $2.1 million as of December 31, 2024, an increase of $0.5 million. The increase in working capital is primarily attributable to Company earnings of $3.5 million for the year ended December 31, 2025, while offset by $2.9 million in cash distributions to members related to tax year 2024 and 2025 member pass-through tax liabilities. Short-Term Cash Requirements Our short-term cash requirements primarily include working capital needs to support inventory build, payroll, marketing, and other operating expenses, as well as approximately $0.1 million of lease obligations due within the next 12 months. We expect to fund these requirements with cash on hand, cash generated from operations, and borrowings under our credit facility, if needed. Long-Term Cash Requirements Our long-term cash requirements include approximately $0.7 million in lease obligations due beyond 12 months, along with anticipated capital expenditures to support our planned regional production facilities. These facilities will represent material investments and are expected to be funded through a combination of operating cash flows and proceeds from the initial public offering in January 2026. We may also pursue additional equity or debt financing in order to acquire or invest in complementary business, products, and/or new IT infrastructure. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. Lease Commitments As of December 31, 2025, we were party to non-cancellable operating lease agreements related to our production facility and office space. Future minimum lease payments under this agreement total approximately $0.8 million, with $0.1 million due within the next 12 months and $0.7 million due thereafter through July 2030. These commitments represent a significant use of cash and we expect to fund them through a combination of existing cash balances and cash flows from operations. Cash Flows The following tables summarize our sources and uses of cash (amounts in thousands): Year Ended December 31, Change 2025 2024 Amount Percentage (in thousands) (in thousands) Cash flows provided by (used in) Operating activities $ 3,150 $ 3,974 $ (824 ) -20.7 % Investing activities (246 ) (684 ) 438 -64.0 % Financing activities (2,951 ) (2,829 ) (122 ) -4.3 % Net increase / (decrease) in cash and cash equivalents $ (47 ) $ 461 $ (508 ) -110.2 % Net cash provided by operating activities for the year ended December 31, 2025, was approximately $3,150 compared to cash provided of $3,974 for the same period in 2024. Net income for the years ended December 31, 2025 and 2024 was approximately $3,533 and $3,574, respectively. During the year ended December 31, 2025, operating activities were impacted by approximately $503 of IPO-related expenses paid and temporarily capitalized until effectiveness of the initial public offering in January 2026. Additionally, during the year ended December 31, 2024, the Company received approximately $252 of one-time insurance proceeds. Net cash used in investing activities for the year ended December 31, 2025, was $246 as compared to $684 for the year ended December 31, 2024. During the year ended December 31, 2024, the Company spent approximately $400 for the expansion of the manufacturing facility, including additional equipment to facilitate the increase in sales volume. While the year ended December 31, 2025, saw additional capital spending of $246, much of the one-time expansion spending occurred in 2024. Net cash used in financing activities during the year ended December 31, 2025, was $2,951 as compared to $2,829 for the year ended December 31, 2024. During the year ended December 31, 2025, the Company paid member distributions related to member tax pass-through liabilities for the tax years 2025 and 2024, in the amount of $2,951. During the year ended December 31, 2024, the company paid member distributions related to member tax pass-through liabilities for the tax year 2023, in the amount of $819 while also making $2,010 of debt repayments made on the line of credit while no payments were made for the year ended December 31, 2025, due to the Company having no balance on the line of credit during that time. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Recently Issued Accounting Pronouncements See Note 2 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements. 29 Table of Contents Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and judgments that affect the amounts reported in the financial statements and related notes. Critical accounting estimates are those estimates that, in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial statements. Management has determined that our most critical accounting estimates are those relating to accounts receivable and allowance for credit losses, and credit risk. Although we believe that the estimates we use are reasonable, actual results reported in future periods could differ materially from those estimates. The following is a summary of certain accounting estimates we consider critical. For further discussion about our accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our financial statements appearing elsewhere in this Annual Report. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 defines a five-step model that requires entities exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying the performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Revenue is recognized at a point in time when control of the product transfers to the customer, which typically occurs upon delivery and customer acceptance. Each contract includes a single performance obligation to transfer control of the product to the customer. Our revenue is recognized net of allowances for returns, discounts, credits and any taxes collected from consumers. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that would meet the criteria for a distinct good or service that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent fulfillment costs, which are included in cost of goods sold, rather than revenue. Accounts Receivable and Allowance for Credit Losses Accounts receivables are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability of its accounts receivable on an ongoing basis. As of December 31, 2025 and 2024, management determined that all receivables were fully collectible; therefore, no allowance for doubtful accounts has been recorded. Customer accounts receivable are stated at the amount management expects to collect on balances. The Company accounts for credit losses in accordance with ASC Topic 326, Financial Instruments – Credit Losses (“ASC Topic 326”). ASC 326 impacts the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss (“CECL”) methodology to estimate expected credit losses over the entire life of the financial asset, recorded at inception or purchase. The Company has the ability to determine if there are no expected credit losses in certain circumstances. We evaluate the credit worthiness of our portfolio on an individual loan basis and on a portfolio basis. The allowance is subjective as it requires material estimates, including such factors as historical trends, known and inherent risks in the loan portfolio, adverse situations that may affect borrowers’ ability to repay and current economic conditions. Other qualitative factors considered may include items such as uncertainties in forecasting and modeling techniques, changes in portfolio composition, business conditions and emerging trends. Recovery of the carrying value of loans is dependent to a great extent on conditions that may be beyond our control. Any combination of the aforementioned factors may adversely affect our loan portfolio resulting in increased delinquencies and loan losses and could require additional provisions for loan losses, which could impact future periods. Credit Risk Credit risk is the risk of financial loss if a customer or counterparty fails to meet its contractual obligations. The Company manages this risk by performing credit evaluations of its customers and maintaining an ongoing review of their financial condition. Based on its review, management believes that credit risk is minimal and collection of outstanding receivables is probable. For the years ended December 31, 2025 and 2024, the Company derived a significant portion of its revenue from a limited number of customers which is disclosed in Note 14 – Concentration of Risk. The Company does not require collateral and maintains credit policies intended to reduce overall credit risk. Item 7A. Qualitative And Quantitative Disclosures About Market Risk We are a smaller reporting company as defined in Regulation S-K of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.