Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
Management’s Discussion and Analysis (MD&A) provides a narrative explanation of the Company’s financial statements and is intended to enhance understanding of its operating performance, financial condition, liquidity, and capital resources.
Fiscal year 2025 reflected a significant improvement in the Company’s operating performance. Revenue increased 29% year over year, gross margins expanded to 45%, and the Company generated positive operating income and net income following a loss in the prior year. These results reflect improved operating leverage, stronger distribution execution, and continued demand for the Company’s beverage portfolio. Management believes these developments demonstrate the increasing scalability of the Company’s business model.
Results of Operations
Revenue
Revenue for the year ended December 31, 2025 increased 29% to $4,191,049, compared to $3,246,913 in 2024. The increase was driven by higher demand across product lines, expanded shelf space, new retail placements, and increased points of distribution. Management believes this growth reflects continued brand momentum and disciplined execution within the Company’s hybrid distribution network.
Cost of Revenue and Gross Margin
Cost of revenue was $2,320,520, or 55% of revenue, compared to 62% in the prior year. Gross margin increased to 45% from 38%, representing an expansion of approximately 700 basis points. The improvement was primarily attributable to improved freight economics, supply chain efficiencies, and favorable product mix, partially offset by reciprocal tariffs on imported goods. These tariffs have since been eliminated. The Company previously paid $122,039 in tariffs and may be eligible for a refund from the U.S. Government. Management believes these improvements reflect structural operating efficiencies.
Operating Expenses
Operating expenses decreased to $1,786,803 in 2025 from $2,011,834 in 2024. Excluding non-cash restricted stock compensation, cash operating expenses increased approximately 17%, compared to revenue growth of 29%, reflecting improved operating leverage.
Restricted stock expense declined to $410,460 from $866,573 primarily due to a 38% lower share price in 2025 compared to 2024 and fewer stock awards issued in 2025 compared to the prior year.
Income from Operations
Income from operations was $83,726 in 2025, compared to an operating loss of $781,409 in 2024. The $865,135 year-over-year improvement was driven by revenue growth, gross margin expansion, controlled expense growth, and lower non-cash stock-based compensation.
Net Income
Net income was $49,213 for 2025, compared to a net loss of $801,144 in 2024. The year-over-year improvement of approximately $850,000 reflects enhanced operating discipline and improved gross margins.
Liquidity and Capital Resources
As of December 31, 2025, working capital was $555,973 and cash and cash equivalents totaled $219,457. Net cash provided by operating activities was $211,658 for the year, compared to $50,460 in 2024. Management believes existing liquidity and operating cash flows are sufficient to fund near-term operating needs and anticipated growth initiatives.
Borrowings
Borrowings during 2025 ranged from approximately $99,000 to $460,000, with an outstanding balance of $340,000 at year end. From January 1, 2026 through March 23, 2026, the outstanding balance decreased by $110,000 to $230,000. Management believes its sustainable growth rate will be adequate to meet future capital needs as evidenced by the reduction of the loan balance from its peak during 2025.
Share Repurchases
During 2025, the Company repurchased 225,000 shares of its Common Stock, reflecting management’s confidence in the Company’s long-term value and commitment to disciplined capital allocation.
Subsequent to year-end, the Company’s outstanding share count increased due to stock awards and other share transactions.
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OFF BALANCE SHEET ARRANGEMENTS
None
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.