JFB Construction Holdings 10-K/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operation. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and “our” refer to JFB Construction Holdings. Overview of Company JFB is a commercial and residential construction company specializing in retail buildouts, multifamily developments, luxury homes and general commercial construction. We have strong relationships with franchisees and franchisors, which has been the foundation of driving steady growth, especially in the Southern Atlantic region. Our expansion plans include vertically integrated real estate development projects and securing larger, more complex construction projects that require higher bond capacity. Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, and expenses. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and those differences may be material. While our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in this annual report, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and which require our most difficult, subjective and complex judgments. Principles of Consolidation The consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. The Company consolidates entities where it has a controlling financial interest, as defined by ASC 810, “Consolidation”. In accordance with ASC 810-10, consolidation applies to: ● Entities with more than 50% voting interest, unless control is not with the Company; and ● Variable Interest Entities (VIEs), where the Company is the primary beneficiary, possessing both (i) power over significant activities and (ii) the obligation to absorb losses or receive benefits. All intercompany transactions and balances are eliminated in consolidation per ASC 810-10-45. The Company continuously evaluates its investments and relationships to assess consolidation requirements. Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the recognition of revenues and expenses during the reporting period. Actual results may differ from these estimates, and such differences could be material. In accordance with ASC 250-10-50-4, changes in estimates are recorded in the period in which they become known and are accounted for prospectively. The Company bases its estimates on historical experience, industry trends, and other relevant factors, incorporating both quantitative and qualitative assessments that it believes are reasonable under the circumstances. 29 Significant estimates for the years ended December 31, 205, and 2024, respectively, include: ● Allowance for doubtful accounts and contract receivables ● Valuation of stock-based compensation ● Estimated useful lives of property and equipment ● Contract liabilities and Contract assets ● Implicit interest rate in right-of-use operating leases ● Uncertain tax positions ● Valuation allowance on deferred tax assets Risks and Uncertainties The Company operates in a highly competitive industry that is subject to intense market dynamics, shifting consumer demand, and economic fluctuations. The Company’s operations are exposed to significant financial, operational, and strategic risks, including potential business disruptions, supply chain constraints, and liquidity challenges. In accordance with ASC 275, “Risks and Uncertainties,” the Company evaluates and discloses risks that could materially affect its financial condition, results of operations, and business outlook. Key factors contributing to variability in sales and earnings include: 1. Industry Cyclicality (ASC 275-10-50-6) – The Company’s financial performance is affected by industry trends, seasonality, and shifts in market demand. 2. Macroeconomic Conditions (ASC 275-10-50-8) – Economic downturns, inflationary pressures, interest rate changes, and geopolitical risks may impact consumer purchasing behavior and the Company’s revenue streams. 3. Pricing Volatility (ASC 275-10-50-4) – The cost and availability of raw materials, supply chain disruptions, and competitive pricing pressures can lead to fluctuations in gross margins and profitability. Given these uncertainties, the Company faces challenges in accurately forecasting financial performance and may experience material risks affecting liquidity, business continuity, and long-term strategic growth. The Company continuously assesses these risks and implements measures to mitigate their potential impact. Revenue from Contracts with Customers Revenues and related costs on equipment contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined. In accordance with ASC 606-10-50-5, the Company identifies Revenue from Contracts with Customers using this 5- step model. 1. Identifying the Contract(s) with a Customer. The Company enters into written contract with customers that create enforceable rights and obligations. Contracts are assessed to ensure they meet criteria for being considered legally binding and capable of being accounted for. 2. Identify the Performance Obligations in the Contract. Performance obligations are identified as distinct promises to transfer goods or services to a customer. The Company identifies their scope of work and creates a schedule of values (SOV) outlining each individual scope of the project. Commercial construction performance obligations typically include delivering construction services for commercial construction and recognized the entire contract as a single performance obligation, Residential Construction is typically delivering the new construction of a residential construction or a remodel of an existing residential property, and we recognize the contract as a single performance obligation. 3. Determine the Transaction Price. The transaction price is the amount of considerations the Company expects to be entitled to in exchange for transferring promised services. The transaction price may include fixed amounts or cost-plus percentage method. 30 4. Allocate the Transaction Priced to Performance Obligations. The transaction price is allocated to each performance obligation (SOV) based on its stand-alone selling price. The stand-alone selling price is the price which the Company would sell its service separately to a customer. 5. Recognize Revenue when (or as) the Company Satisfies a Performance Obligation. The Company recognizes revenue over time based on the progress towards completion of performance obligation. Revenue recognized during this reporting period is derived from the total contract value as allocated to performance obligations satisfied during that period. Commercial construction revenue is recognized over time, using the cost-to cost method as we perform work on projects. Residential construction is similarly recognized over time for custom builds and remodel using the cost-to cost method. By treating our contracts as a single performance obligation, we ensure that our revenue recognition process accurately reflects the economic realities of our business operations across all segments. This approach provides clarity to stakeholders regarding our revenue-generating activities, aligning with the guidance provided in ASC 606-10-55-89 through 55-91. In accordance with ASC 606-10-50-8, the Company has disclosed significant judgements and changes in judgements related to the recognition of revenue from construction contracts. The application of ASC 606 requires the use of judgment in various aspects of revenue recognition, particularly in the use of the cost-to-cost method. The Company applies the cost-to-cost method to measure progress toward completion. This involves estimating the total contract cost and recognizing revenue based on the ration of cost incurred to the estimated total cost. The Company makes judgements regarding the recognition of revenue related to change orders and claims. Revenue from change orders is included in the transaction price when it is probable the customer will approve the change and the amount can be reliably estimated. In accordance with ASC 606-10-50-8, the Company recognizes contract assets and liabilities that reflect timing of revenue relative to the amounts billed or paid. Contract balances are reported in the balance sheet as follows: 1. Contract Assets. Contract Assets represent the Company’s right to consideration for work completed to date but not yet billed to the customer. These amounts typically arise when revenue is recognized before an invoice is issued. 2. Contract Liabilities. Contract Liabilities represent the Company’s obligation to transfer goods or service to a customer for which it has received consideration or has the right to receive consideration before performing under the contract. Contract liabilities include advance payments or progress billing received from customers before the Company has satisfied its performance obligations. Contract assets represent revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represent billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share.” The calculation of basic EPS follows the two-class method and is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding, including certain other shares committed to be issued. Basic Earnings Per Share (EPS) Basic EPS is calculated using the two-class method, as prescribed by ASC 260-10-45-60, and is computed as follows: ● Net earnings available to common shareholders represent net earnings to common shareholders, adjusted for the allocation of earnings to participating securities. ● Losses are not allocated to participating securities in accordance with ASC 260-10-45-61. ● The denominator includes common shares outstanding and certain other shares committed to be issued, such as restricted stock and restricted stock units (“RSUs”), for which no future service is required. 31 Diluted Earnings Per Share (EPS) Diluted EPS is calculated under both the two-class method and the treasury stock method, and the more dilutive result is reported, as required by ASC 260-10-45-45. ● Diluted EPS is computed by taking the sum of: ○ Net earnings available to common shareholders ○ Dividends on preferred shares ○ Dividends on dilutive mandatorily redeemable convertible preferred shares ○ Divided by the weighted average number of common shares outstanding and certain other shares committed to be issued, plus all dilutive common stock equivalents during the period, such as: ■ Stock options ■ Warrants ■ Convertible preferred stock ■ Convertible debt ● Preferred shares and unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) qualify as participating securities under the two-class method, per ASC 260-10-45-62. Net Loss Per Share Considerations In computing net loss per share, unvested shares of common stock are excluded from the denominator, as required by ASC 260-10-45-48. Participating Securities & Share-Based Compensation Restricted stock and RSUs granted as part of share-based compensation contain nonforfeitable rights to dividends and dividend equivalents, respectively. Therefore: ● Before the requisite service is rendered for the right to retain the award, these instruments meet the definition of a participating security under ASC 260-10-45-59. ● RSUs granted under an executive compensation plan, however, are not considered participating securities because the rights to dividend equivalents are forfeitable (ASC 718-10-25). Related Parties The Company defines related parties in accordance with ASC 850, “Related Party Disclosures,” and SEC Regulation S-X, Rule 4-08(k). Related parties include entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties include, but are not limited to: ● Principal owners of the Company. ● Members of management (including directors, executive officers, and key employees). ● Immediate family members of principal owners and members of management. ● Entities affiliated with principal owners or management through direct or indirect ownership. ● Entities with which the Company has significant transactions, where one party has the ability to exercise control or significant influence over the management or operating policies of the other. A party is considered related if it has the ability to control or significantly influence the management or operating policies of the Company in a manner that could prevent either party from fully pursuing its own separate economic interests. The Company discloses all material related party transactions, including: ● The nature of the relationship between the parties. ● A description of the transaction(s), including terms and amounts involved. ● Any amounts due to or from related parties as of the reporting date. ● Any other elements necessary for a clear understanding of the transactions’ effects on the financial statements. 32 Disclosures are made in accordance with ASC 850-10-50-1 through 50-6 and SEC Regulation S-X, Rule 4-08(k), which requires registrants to disclose material related party transactions and their effects on the financial position and results of operations. Recently Issued Accounting Standards Not Yet Adopted ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, which enhances income tax disclosure requirements by: ● Standardizing and disaggregating rate reconciliation categories. ● Requiring disclosure of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, and may be applied on a prospective or retrospective basis. Early adoption is permitted. The Company is currently assessing the impact of ASU 2023-09 on its income tax disclosures and reporting requirements. Other Accounting Standards Updates The FASB has issued various technical corrections and industry-specific updates that are not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. Results of Operations For the Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 The following table summarizes the results of condensed consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025 and 2024 in U.S. dollars, and provides information regarding the dollar and percentage increase or (decrease) during such periods. Fiscal Year Ended December 31, Change 2025 2024 Amount Revenues $ 30,541,443 $ 23,087,885 $ 7,453,558 Cost of revenues 27,391,163 18,053,324 9,337,839 Gross profit 3,150,280 5,034,561 (1,884,281 ) Operating expenses: Selling and marketing expense 1,011,092 51,635 959,457 General and administrative 7,373,892 4,836,781 2,537,111 Depreciation and amortization expense 251,913 179,649 72,264 Total operating expenses 8,804,847 5,068,065 3,736,782 Income from operations (5,654,567 ) (33,504 ) (5,621,063 ) Other income (expense): Other income, net (124,053 ) (8,142 ) (115,911 ) Interest expense (489 ) (32,649 ) 32,160 Interest income 506,558 193,300 313,258 Total other income (expense), net 382,016 152,509 229,507 Net income $ (5,272,551 ) $ 119,005 $ (5,391,556 ) Revenues. Revenues increased by $7,453,558, or 32.3%, to approximately $30.5 million in the year ended December 31, 2025 from approximately $23 million for the year ended December 31, 2024. The increase in revenue was primarily driven by a higher volume of project completions and revenue recognition in the second half of 2025, despite a slowdown in new contract awards earlier in the year. As is typical in the construction industry, JFB experiences significant seasonality, with Q3 and Q4 historically representing the strongest periods for project execution and closeout. Many clients aim to complete construction before year-end to maximize tax benefits, which results in a concentrated surge of activity and revenue recognition during these quarters. Although inflation and elevated interest rates reduced the number of new contracts awarded in the first nine months of 2025—due to higher material costs, increased financing costs, and client hesitancy to initiate new projects—the company benefited from a robust backlog entering the year. This backlog, combined with improved operational efficiency and timely project delivery, enabled JFB to convert a larger portion of its work-in-progress into recognized revenue during the latter half of 2025. JFB continues to mitigate inflationary and financing pressures through strategic procurement initiatives, supplier diversification, and the evaluation of alternative financing strategies to optimize its capital structure in the current market environment. 33 Cost of revenues increased $9,337,839, or 51.7%, to approximately $27 million in the year ended December 31, 2025 from approximately $18 million for the year ended December 31, 2024. The increase in cost of revenues was primarily driven by the overall increase in revenue during the period, which resulted in a higher volume of project activity and corresponding direct costs. In addition, rising material prices—particularly for key inputs such as steel, lumber, concrete, and other construction components—further contributed to the increase. Industry-wide inflation and supply-chain pressures elevated procurement costs throughout the year, resulting in higher direct project expenditures compared to the prior period. Gross profit Our gross profit decreased by $1,884,281, or 37%, to $3.1 million in the year ended December 31, 2025 from $5 million in the year ended December 31, 2024. The decline in gross profit was primarily driven by a significant increase in cost of revenues that outpaced the growth in revenue. Although revenues increased year over year, the projects completed in 2025 carried lower gross margins due to elevated material costs, industry-wide inflation, and higher pricing for key construction inputs such as steel, lumber, and concrete. These cost pressures reduced the profitability of projects delivered during the period. In addition, the mix of work completed in 2025 included a greater proportion of projects with inherently lower margin profiles, further contributing to the decline in gross profit. As a result, despite higher revenue, the combination of rising direct costs and margin compression led to a reduction in overall gross profitability for the year. Selling and marketing expenses Our selling and marketing expenses increased by $959,457, or 1,858%, to $1,011,092 in the year ended December 31, 2025 from $51,635 in the year ended December 31, 2024. The increase was primarily attributable to significant investments made to enhance recognition and visibility of the JFB stock symbol in the marketplace. During the year, the Company expanded its advertising efforts, implemented targeted investor-awareness campaigns, and launched new marketing initiatives designed to strengthen brand presence and support capital-markets positioning. These activities resulted in higher promotional, advertising, and outreach costs compared to the prior period. General and administrative expenses Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, and insurance expenses. General and administrative expenses increased by approximately $2.5 million, or 52%, to approximately $7.3 million in the year ended December 31, 2025 from approximately $4.8 million in the year ended December 31, 2024. The increase was mainly due to the enhancement of talent acquisition and retention. To support our growing operations and maintain high standards of service, we have invested in recruiting and training top talent. We have also increased our administrative infrastructure which includes out IT systems, increasing office staff, office space and investing in new software and tools to enhance efficiency and support our operations. Our general and administrative expenses represented 24% and 21% of our total revenue for the years ended December 31, 2025 and 2024, respectively. Depreciation and amortization expenses Depreciation and amortization expenses increased by $72,264, or 40%, to $251,913 in the year ended December 31, 2025 from $179,649 in the year ended December 31, 2024.The increase was primarily driven by the expansion of the Company’s asset base, including the acquisition of additional Company vehicles and the depreciation associated with the new corporate headquarters leased beginning in 2025. The larger facility and related leasehold improvements contributed to higher depreciation expense during the period. Overall, the increase in depreciation and amortization reflects the Company’s continued investment in infrastructure and operational capacity, which management believes is essential to supporting long-term growth and improved efficiency. Other income, net Our other income increased by $115,911, or 1,424%, to ($124,053) in the year ended December 31, 2025 from ($8,142) in year ended December 31, 2024.The increase was primarily due to the recognition of a bad debt write-off during the period, which increased other income compared to the prior year. This adjustment reflects the Company’s assessment of uncollectible amounts and the corresponding impact on non-operating income. 34 Interest expenses Our interest decreased increased by $32,160, or 99%, to $489 in the year ended December 31, 2025 from $32,649 in the year ended December 31, 2024. The decrease was primarily attributable to a reduction in bank service charges recorded within interest expense during the current period. Lower fees and reduced banking-related costs contributed to the significant decline in interest expense year over year. Interest income Our interest income increased by $313,258, or 162%, to $506,558 in the year ended December 31, 2025 from $193,300 in the year ended December 31, 2024. The increase in our interest income was the result of higher interest paid on bank balances. The improvement in these rates has led to higher earnings on interest bearing deposits and cash balances held at Sea Coast Bank. The increase in interest income reflects the Company’s successful efforts to capitalized on improved banking terms and optimize its cash management practices. We continue to monitor interest rate trends and banking relationships to ensure sustained benefits from these favorable conditions. Net income Our net income decreased by $5,391,556, or 4,530%, to $(5,272,551) in the year ended December 31, 2025 from $119,005 in year ended December 31, 2024. The decrease in net income was primarily driven by a significant increase in cost of revenues, which outpaced the growth in revenue due to higher material costs and margin compression on projects completed during the year. Additionally, increased depreciation and amortization expense resulting from the expansion of the Company’s asset base—including new vehicles and the new corporate headquarters—further contributed to the decline. Higher selling and marketing expenses, largely associated with initiatives to increase recognition of the JFB stock symbol, also impacted profitability. Collectively, these factors led to a substantial reduction in net income despite the overall increase in revenue. For the Years Ended December 31, 2025 and 2024 The following table sets forth summary of our cash flows for the periods indicated: Years Ended December 31, 2025 2024 Net cash provided by (used in) operating activities $ (11,789,888 ) $ 3,481,850 Net cash used in investing activities (1,266,755 ) (817,534 ) Net cash provided by (used in) financing activities 35,568,844 (1,204,877 ) Net (decreased) increase in cash 22,512,201 1,459,439 Cash, beginning of the period 2,696,183 1,236,744 Cash, end of the period $ 25,208,384 $ 2,696,183 Operating Activities Net cash used in operating activities was ($11,789,888) in the year ended December 31, 2025, compared to cash provided in operating activities of approximately $3,481,850 in the year ended December 31, 2024. This is a 439% decrease primarily driven primarily by a significant rise in operational expenses associated with the Company’s initial IPO preparations and PIPE transaction activities during the year. These costs included professional fees, legal and accounting services, regulatory readiness, and other transaction-related expenditures that increased operating outflows. The concentration of these expenses in 2025 materially reduced cash generated from operations and was the primary factor contributing to the overall decline in operating cash flow for the period. Investing Activities Net cash used in investing activities was $1,266,755 in the year ended December 31, 2025, compared to net cash used in investing activities of $817,534 in the year ended December 31, 2024. The increase was primarily driven by real estate investments the Company has made as part of its expanded development strategy. During 2025, the Company increased its deployment of capital into new real estate projects and investment opportunities, resulting in higher cash outflows compared to the prior year. 35 Financing Activities Net cash provided by financing activities was $35,568,844 in the year ended December 31, 2025, compared to net cash used by financing activities of $(1,204,877) in the year ended December 31, 2024. The increase in net cash used in financing activities is attributed to the PIPE transaction completed on October 2, 2025. Liquidity and Capital Resources Overview The general objectives of our capital management strategy reside in the preservation of our capacity to continue operating, in providing benefits to our stakeholders and in providing an adequate return on investment to our shareholders by selling our products at a price commensurate with the level of operating risk assumed by us. We thus determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis depending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital requirements. Working Capital As of December 31, 2025, we had cash of approximately $25,208,384. Our current assets were approximately $37,300,878, including approximately $9,243,354 million in accounts receivable, approximately $2,630,561 contract assets, $218,579 in prepaid expenses, and our current liabilities were approximately $2,198,866, including $978,103 accounts payable, $383,869 contract liabilities, which resulted in a positive working capital of $35,102,014. Our primary source of cash is currently generated from our business. In the coming years, we will be looking to other sources, such as raising additional capital by issuing shares of stock, to meet our cash needs. While facing uncertainties regarding the size and timing of future capital raises, we are reasonably confident that we can continue to meet operational needs solely by utilizing cash flows generated from our operating activities. Off-balance Sheet Commitments and Arrangements There were no off-balance sheet arrangements for the years ended December 31, 2025 and 2024, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations. Liquidity Risk Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. We achieve this by maintaining sufficient cash and banking facilities.