{"url_path":"/sec/jfb/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.**","topic":"sec","document":{"doc_type":"10-K/A","doc_date":"2026-06-17","source_url":"https://www.sec.gov/Archives/edgar/data/2024306/0001493152-26-028959-index.html","accession_number":"0001493152-26-028959","cik":"0002024306","ticker":"JFB","issuer_name":"JFB Construction Holdings","edgar_url":"https://www.sec.gov/Archives/edgar/data/2024306/0001493152-26-028959-index.html","primary_entity_key":"0002024306","primary_entity_name":"JFB Construction Holdings"},"word_count":4433,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.**\n\n** **\n\n*The\nfollowing discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition,\nliquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial\ncondition and results of operations should be read in conjunction with our consolidated financial statements and related notes included\nin 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\nand the related Management’s Discussion and Analysis of Financial Condition and Results of Operation. Unless the context requires\notherwise, references in this Annual Report on Form 10-K to “we,” “us,” and “our” refer to JFB Construction\nHoldings.*\n\n* *\n\n**Overview\nof Company**\n\n** **\n\nJFB\nis a commercial and residential construction company specializing in retail buildouts, multifamily developments, luxury homes and general\ncommercial construction. We have strong relationships with franchisees and franchisors, which has been the foundation of driving steady\ngrowth, especially in the Southern Atlantic region. Our expansion plans include vertically integrated real estate development projects\nand securing larger, more complex construction projects that require higher bond capacity.\n\n \n\n**Critical\nAccounting Policies and Estimates**\n\n** **\n\nManagement’s\ndiscussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which\nwere prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated\nfinancial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, and expenses.\nOur estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances,\nthe results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent\nfrom other sources. Actual results may differ from these estimates under different assumptions or conditions, and those differences may\nbe material.\n\n \n\nWhile\nour significant accounting policies are more fully described in *Note 2*—*Summary of Significant Accounting Policies*of\nthe Notes to Consolidated Financial Statements included in this annual report, we believe the following discussion addresses our most\ncritical accounting policies, which are those that are most important to our financial condition and results of operations and which\nrequire our most difficult, subjective and complex judgments.\n\n \n\nPrinciples\nof Consolidation\n\n \n\nThe\nconsolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly\nowned subsidiaries. The Company consolidates entities where it has a controlling financial interest, as defined by ASC 810, “Consolidation”.\n\n \n\nIn\naccordance with ASC 810-10, consolidation applies to:\n\n \n\n●\nEntities with more than 50% voting interest, unless control is not with the Company; and\n\n \n\n●\nVariable Interest Entities (VIEs), where the Company is the primary beneficiary, possessing both (i) power over significant activities\nand (ii) the obligation to absorb losses or receive benefits.\n\n \n\nAll\nintercompany transactions and balances are eliminated in consolidation per ASC 810-10-45. The Company continuously evaluates its investments\nand relationships to assess consolidation requirements.\n\n \n\nUse\nof Estimates and Assumptions\n\n \n\nThe\npreparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make\nestimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities\nat the date of the financial statements, and the recognition of revenues and expenses during the reporting period. Actual results may\ndiffer from these estimates, and such differences could be material.\n\n \n\nIn\naccordance with ASC 250-10-50-4, changes in estimates are recorded in the period in which they become known and are accounted for prospectively.\nThe Company bases its estimates on historical experience, industry trends, and other relevant factors, incorporating both quantitative\nand qualitative assessments that it believes are reasonable under the circumstances.\n\n \n\n29\n\n \n\n \n\nSignificant\nestimates for the years ended December 31, 205, and 2024, respectively, include:\n\n \n\n●\nAllowance for doubtful accounts and contract receivables\n\n \n\n●\nValuation of stock-based compensation\n\n \n\n●\nEstimated useful lives of property and equipment\n\n \n\n●\nContract liabilities and Contract assets\n\n \n\n●\nImplicit interest rate in right-of-use operating leases\n\n \n\n●\nUncertain tax positions\n\n \n\n●\nValuation allowance on deferred tax assets\n\n \n\nRisks\nand Uncertainties\n\n \n\nThe\nCompany operates in a highly competitive industry that is subject to intense market dynamics, shifting consumer demand, and economic\nfluctuations. The Company’s operations are exposed to significant financial, operational, and strategic risks, including potential\nbusiness disruptions, supply chain constraints, and liquidity challenges.\n\n \n\nIn\naccordance with ASC 275, “Risks and Uncertainties,” the Company evaluates and discloses risks that could materially affect\nits financial condition, results of operations, and business outlook. Key factors contributing to variability in sales and earnings include:\n\n \n\n1.\nIndustry Cyclicality (ASC 275-10-50-6) – The Company’s financial performance is affected by industry trends, seasonality,\nand shifts in market demand.\n\n \n\n2.\nMacroeconomic Conditions (ASC 275-10-50-8) – Economic downturns, inflationary pressures, interest rate changes, and geopolitical\nrisks may impact consumer purchasing behavior and the Company’s revenue streams.\n\n \n\n3.\nPricing Volatility (ASC 275-10-50-4) – The cost and availability of raw materials, supply chain disruptions, and competitive pricing\npressures can lead to fluctuations in gross margins and profitability.\n\n \n\nGiven\nthese uncertainties, the Company faces challenges in accurately forecasting financial performance and may experience material risks affecting\nliquidity, business continuity, and long-term strategic growth. The Company continuously assesses these risks and implements measures\nto mitigate their potential impact.\n\n \n\nRevenue\nfrom Contracts with Customers\n\n \n\nRevenues\nand related costs on equipment contracts are recognized as the performance obligations for work are satisfied over time in accordance\nwith Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated\nprofit will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations).\nAll un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the\nevent a loss on a contract is foreseen, the Company will recognize the loss as it is determined.\n\n \n\nIn\naccordance with ASC 606-10-50-5, the Company identifies Revenue from Contracts with Customers using this 5- step model.\n\n \n\n1.\nIdentifying the Contract(s) with a Customer. The Company enters into written contract with customers that create enforceable rights and\nobligations. Contracts are assessed to ensure they meet criteria for being considered legally binding and capable of being accounted\nfor.\n\n \n\n2.\nIdentify the Performance Obligations in the Contract. Performance obligations are identified as distinct promises to transfer goods or\nservices to a customer. The Company identifies their scope of work and creates a schedule of values (SOV) outlining each individual scope\nof the project. Commercial construction performance obligations typically include delivering construction services for commercial construction\nand recognized the entire contract as a single performance obligation, Residential Construction is typically delivering the new construction\nof a residential construction or a remodel of an existing residential property, and we recognize the contract as a single performance\nobligation.\n\n \n\n3.\nDetermine the Transaction Price. The transaction price is the amount of considerations the Company expects to be entitled to in exchange\nfor transferring promised services. The transaction price may include fixed amounts or cost-plus percentage method.\n\n \n\n30\n\n \n\n \n\n4.\nAllocate the Transaction Priced to Performance Obligations. The transaction price is allocated to each performance obligation (SOV) based\non its stand-alone selling price. The stand-alone selling price is the price which the Company would sell its service separately to a\ncustomer.\n\n \n\n5.\nRecognize Revenue when (or as) the Company Satisfies a Performance Obligation. The Company recognizes revenue over time based on the\nprogress towards completion of performance obligation. Revenue recognized during this reporting period is derived from the total contract\nvalue as allocated to performance obligations satisfied during that period. Commercial construction revenue is recognized over time,\nusing the cost-to cost method as we perform work on projects. Residential construction is similarly recognized over time for custom builds\nand remodel using the cost-to cost method.\n\n \n\nBy\ntreating our contracts as a single performance obligation, we ensure that our revenue recognition process accurately reflects the economic\nrealities of our business operations across all segments. This approach provides clarity to stakeholders regarding our revenue-generating\nactivities, aligning with the guidance provided in ASC 606-10-55-89 through 55-91.\n\n \n\nIn\naccordance with ASC 606-10-50-8, the Company has disclosed significant judgements and changes in judgements related to the recognition\nof revenue from construction contracts. The application of ASC 606 requires the use of judgment in various aspects of revenue recognition,\nparticularly in the use of the cost-to-cost method. The Company applies the cost-to-cost method to measure progress toward completion.\nThis involves estimating the total contract cost and recognizing revenue based on the ration of cost incurred to the estimated total\ncost. The Company makes judgements regarding the recognition of revenue related to change orders and claims. Revenue from change orders\nis included in the transaction price when it is probable the customer will approve the change and the amount can be reliably estimated.\n\n \n\nIn\naccordance with ASC 606-10-50-8, the Company recognizes contract assets and liabilities that reflect timing of revenue relative to the\namounts billed or paid. Contract balances are reported in the balance sheet as follows:\n\n \n\n1.\nContract Assets. Contract Assets represent the Company’s right to consideration for work completed to date but not yet billed to\nthe customer. These amounts typically arise when revenue is recognized before an invoice is issued.\n\n \n\n2.\nContract Liabilities. Contract Liabilities represent the Company’s obligation to transfer goods or service to a customer for which\nit has received consideration or has the right to receive consideration before performing under the contract. Contract liabilities include\nadvance payments or progress billing received from customers before the Company has satisfied its performance obligations.\n\n \n\nContract\nassets represent revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represent billings in\nexcess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current\nassets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion.\n\n \n\nThe\nCompany computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share.” The calculation\nof basic EPS follows the two-class method and is determined by dividing net earnings available to common shareholders by the weighted\naverage number of common shares outstanding, including certain other shares committed to be issued.\n\n \n\nBasic\nEarnings Per Share (EPS)\n\n \n\nBasic\nEPS is calculated using the two-class method, as prescribed by ASC 260-10-45-60, and is computed as follows:\n\n \n\n●\nNet earnings available to common shareholders represent net earnings to common shareholders, adjusted for the allocation of earnings\nto participating securities.\n\n \n\n●\nLosses are not allocated to participating securities in accordance with ASC 260-10-45-61.\n\n \n\n●\nThe denominator includes common shares outstanding and certain other shares committed to be issued, such as restricted stock and restricted\nstock units (“RSUs”), for which no future service is required.\n\n \n\n31\n\n \n\n \n\nDiluted\nEarnings Per Share (EPS)\n\n \n\nDiluted\nEPS is calculated under both the two-class method and the treasury stock method, and the more dilutive result is reported, as required\nby ASC 260-10-45-45.\n\n \n\n●\nDiluted EPS is computed by taking the sum of:\n\n \n\n○\nNet earnings available to common shareholders\n\n \n\n○\nDividends on preferred shares\n\n \n\n○\nDividends on dilutive mandatorily redeemable convertible preferred shares\n\n \n\n○\nDivided by the weighted average number of common shares outstanding and certain other shares committed\nto be issued, plus all dilutive common stock equivalents during the period, such as:\n\n \n\n■\nStock options\n\n \n\n■\nWarrants\n\n \n\n■\nConvertible preferred stock\n\n \n\n■\nConvertible debt\n\n \n\n●\nPreferred shares and unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether\npaid or unpaid) qualify as participating securities under the two-class method, per ASC 260-10-45-62.\n\n \n\nNet\nLoss Per Share Considerations\n\n \n\nIn\ncomputing net loss per share, unvested shares of common stock are excluded from the denominator, as required by ASC 260-10-45-48.\n\n \n\nParticipating\nSecurities & Share-Based Compensation\n\n \n\nRestricted\nstock and RSUs granted as part of share-based compensation contain nonforfeitable rights to dividends and dividend equivalents, respectively.\nTherefore:\n\n \n\n●\nBefore the requisite service is rendered for the right to retain the award, these instruments meet the definition of a participating\nsecurity under ASC 260-10-45-59.\n\n \n\n●\nRSUs granted under an executive compensation plan, however, are not considered participating securities because the rights to dividend\nequivalents are forfeitable (ASC 718-10-25).\n\n \n\nRelated\nParties\n\n \n\nThe\nCompany defines related parties in accordance with ASC 850, “Related Party Disclosures,” and SEC Regulation S-X, Rule 4-08(k).\nRelated parties include entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled\nby, or are under common control with the Company.\n\n \n\nRelated\nparties include, but are not limited to:\n\n \n\n●\nPrincipal owners of the Company.\n\n \n\n●\nMembers of management (including directors, executive officers, and key employees).\n\n \n\n●\nImmediate family members of principal owners and members of management.\n\n \n\n●\nEntities affiliated with principal owners or management through direct or indirect ownership.\n\n \n\n●\nEntities with which the Company has significant transactions, where one party has the ability to exercise control or significant influence\nover the management or operating policies of the other.\n\n \n\nA\nparty is considered related if it has the ability to control or significantly influence the management or operating policies of the Company\nin a manner that could prevent either party from fully pursuing its own separate economic interests.\n\n \n\nThe\nCompany discloses all material related party transactions, including:\n\n \n\n●\nThe nature of the relationship between the parties.\n\n \n\n●\nA description of the transaction(s), including terms and amounts involved.\n\n \n\n●\nAny amounts due to or from related parties as of the reporting date.\n\n \n\n●\nAny other elements necessary for a clear understanding of the transactions’ effects on the financial statements.\n\n \n\n32\n\n \n\n \n\nDisclosures\nare 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\nmaterial related party transactions and their effects on the financial position and results of operations.\n\n \n\nRecently\nIssued Accounting Standards Not Yet Adopted\n\n \n\nASU\n2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures\n\n \n\nIn\nDecember 2023, the FASB issued ASU 2023-09, which enhances income tax disclosure requirements by:\n\n \n\n●\nStandardizing and disaggregating rate reconciliation categories.\n\n \n\n●\nRequiring disclosure of income taxes paid by jurisdiction.\n\n \n\nThis\nASU is effective for annual periods beginning after December 15, 2024, and may be applied on a prospective or retrospective basis. Early\nadoption is permitted.\n\n \n\nThe\nCompany is currently assessing the impact of ASU 2023-09 on its income tax disclosures and reporting requirements.\n\n \n\nOther\nAccounting Standards Updates\n\n \n\nThe\nFASB has issued various technical corrections and industry-specific updates that are not expected to have a material impact on the Company’s\nconsolidated financial position, results of operations, or cash flows.\n\n \n\n**Results\nof Operations**\n\n** **\n\n**For\nthe Year Ended December 31, 2025 Compared to Year Ended December 31, 2024**\n\n** **\n\nThe\nfollowing table summarizes the results of condensed consolidated statements of operations and comprehensive income (loss) for the years\nended December 31, 2025 and 2024 in U.S. dollars, and provides information regarding the dollar and percentage increase or (decrease)\nduring such periods.\n\n \n\n \n\n  \nFiscal\nYear Ended December 31,  \nChange \n\n  \n2025  \n2024  \nAmount \n\nRevenues \n$30,541,443  \n$23,087,885  \n$7,453,558 \n\nCost of revenues \n 27,391,163  \n 18,053,324  \n 9,337,839 \n\nGross\nprofit \n 3,150,280  \n 5,034,561  \n (1,884,281)\n\nOperating expenses: \n    \n    \n   \n\nSelling and marketing expense \n 1,011,092  \n 51,635  \n 959,457 \n\nGeneral and administrative \n 7,373,892  \n 4,836,781  \n 2,537,111 \n\nDepreciation\nand amortization expense \n 251,913  \n 179,649  \n 72,264 \n\nTotal\noperating expenses \n 8,804,847  \n 5,068,065  \n 3,736,782 \n\nIncome from operations \n (5,654,567) \n (33,504) \n (5,621,063)\n\nOther income (expense): \n    \n    \n   \n\nOther income, net \n (124,053) \n (8,142) \n (115,911)\n\nInterest expense \n (489) \n (32,649) \n 32,160 \n\nInterest\nincome \n 506,558  \n 193,300  \n 313,258 \n\nTotal other income (expense),\nnet \n 382,016  \n 152,509  \n 229,507 \n\nNet income \n$(5,272,551) \n$119,005  \n$(5,391,556)\n\n \n\n**Revenues.**\n\n** **\n\nRevenues\nincreased by $7,453,558, or 32.3%, to approximately $30.5 million in the year ended December 31, 2025 from approximately $23 million\nfor the year ended December 31, 2024. The increase in revenue was primarily driven by a higher volume of project completions and revenue\nrecognition in the second half of 2025, despite a slowdown in new contract awards earlier in the year. As is typical in the construction\nindustry, JFB experiences significant seasonality, with Q3 and Q4 historically representing the strongest periods for project execution\nand closeout. Many clients aim to complete construction before year-end to maximize tax benefits, which results in a concentrated surge\nof activity and revenue recognition during these quarters. Although inflation and elevated interest rates reduced the number of new contracts\nawarded in the first nine months of 2025—due to higher material costs, increased financing costs, and client hesitancy to initiate\nnew projects—the company benefited from a robust backlog entering the year. This backlog, combined with improved operational efficiency\nand timely project delivery, enabled JFB to convert a larger portion of its work-in-progress into recognized revenue during the latter\nhalf of 2025. JFB continues to mitigate inflationary and financing pressures through strategic procurement initiatives, supplier diversification,\nand the evaluation of alternative financing strategies to optimize its capital structure in the current market environment.\n\n \n\n33\n\n \n\n \n\nCost\nof revenues increased $9,337,839, or 51.7%, to approximately $27 million in the year ended December 31, 2025 from approximately $18 million\nfor the year ended December 31, 2024. The increase in cost of revenues was primarily driven by the overall increase in revenue during\nthe period, which resulted in a higher volume of project activity and corresponding direct costs. In addition, rising material prices—particularly\nfor key inputs such as steel, lumber, concrete, and other construction components—further contributed to the increase. Industry-wide\ninflation and supply-chain pressures elevated procurement costs throughout the year, resulting in higher direct project expenditures\ncompared to the prior period.\n\n \n\n**Gross\nprofit**\n\n** **\n\nOur\ngross 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\n31, 2024. The decline in gross profit was primarily driven by a significant increase in cost of revenues that outpaced the growth in\nrevenue. Although revenues increased year over year, the projects completed in 2025 carried lower gross margins due to elevated material\ncosts, industry-wide inflation, and higher pricing for key construction inputs such as steel, lumber, and concrete. These cost pressures\nreduced the profitability of projects delivered during the period. In addition, the mix of work completed in 2025 included a greater\nproportion of projects with inherently lower margin profiles, further contributing to the decline in gross profit. As a result, despite\nhigher revenue, the combination of rising direct costs and margin compression led to a reduction in overall gross profitability for the\nyear.\n\n \n\n**Selling\nand marketing expenses**\n\n** **\n\nOur\nselling 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\nyear ended December 31, 2024. The increase was primarily attributable to significant investments made to enhance recognition and visibility\nof the JFB stock symbol in the marketplace. During the year, the Company expanded its advertising efforts, implemented targeted investor-awareness\ncampaigns, and launched new marketing initiatives designed to strengthen brand presence and support capital-markets positioning. These\nactivities resulted in higher promotional, advertising, and outreach costs compared to the prior period.\n\n \n\n**General\nand administrative expenses**\n\n** **\n\nOur\ngeneral and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, and\ninsurance expenses. General and administrative expenses increased by approximately $2.5 million, or 52%, to approximately $7.3 million\nin the year ended December 31, 2025 from approximately $4.8 million in the year ended December 31, 2024. The increase was mainly due\nto the enhancement of talent acquisition and retention. To support our growing operations and maintain high standards of service, we\nhave invested in recruiting and training top talent. We have also increased our administrative infrastructure which includes out IT systems,\nincreasing office staff, office space and investing in new software and tools to enhance efficiency and support our operations. Our general\nand administrative expenses represented 24% and 21% of our total revenue for the years ended December 31, 2025 and 2024, respectively.\n\n \n\n**Depreciation\nand amortization expenses**\n\n** **\n\nDepreciation\nand 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\nDecember 31, 2024.The increase was primarily driven by the expansion of the Company’s asset base, including the acquisition of\nadditional Company vehicles and the depreciation associated with the new corporate headquarters leased beginning in 2025. The larger\nfacility and related leasehold improvements contributed to higher depreciation expense during the period. Overall, the increase in depreciation\nand amortization reflects the Company’s continued investment in infrastructure and operational capacity, which management believes\nis essential to supporting long-term growth and improved efficiency.\n\n \n\n**Other\nincome, net**\n\n** **\n\nOur\nother 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\n31, 2024.The increase was primarily due to the recognition of a bad debt write-off during the period, which increased other income compared\nto the prior year. This adjustment reflects the Company’s assessment of uncollectible amounts and the corresponding impact on non-operating\nincome.\n\n \n\n34\n\n \n\n \n\n**Interest\nexpenses**\n\n** **\n\nOur\ninterest decreased increased by $32,160, or 99%, to $489 in the year ended December 31, 2025 from $32,649 in the year ended December\n31, 2024. The decrease was primarily attributable to a reduction in bank service charges recorded within interest expense during the\ncurrent period. Lower fees and reduced banking-related costs contributed to the significant decline in interest expense year over year.\n\n \n\n**Interest\nincome**\n\n** **\n\nOur\ninterest 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\n31, 2024. The increase in our interest income was the result of higher interest paid on bank balances. The improvement in these rates\nhas led to higher earnings on interest bearing deposits and cash balances held at Sea Coast Bank. The increase in interest income reflects\nthe Company’s successful efforts to capitalized on improved banking terms and optimize its cash management practices. We continue\nto monitor interest rate trends and banking relationships to ensure sustained benefits from these favorable conditions.\n\n \n\n**Net\nincome**\n\n** **\n\nOur\nnet income decreased by $5,391,556, or 4,530%, to $(5,272,551) in the year ended December 31, 2025 from $119,005 in year ended December\n31, 2024. The decrease in net income was primarily driven by a significant increase in cost of revenues, which outpaced the growth in\nrevenue due to higher material costs and margin compression on projects completed during the year. Additionally, increased depreciation\nand amortization expense resulting from the expansion of the Company’s asset base—including new vehicles and the new corporate\nheadquarters—further contributed to the decline. Higher selling and marketing expenses, largely associated with initiatives to\nincrease recognition of the JFB stock symbol, also impacted profitability. Collectively, these factors led to a substantial reduction\nin net income despite the overall increase in revenue.\n\n \n\n**For\nthe Years Ended December 31, 2025 and 2024**\n\n** **\n\nThe\nfollowing table sets forth summary of our cash flows for the periods indicated:\n\n \n\n  \nYears\nEnded December 31, \n\n  \n2025  \n2024 \n\nNet cash provided by (used in)\noperating activities \n$(11,789,888) \n$3,481,850 \n\nNet cash used in investing activities \n (1,266,755) \n (817,534)\n\nNet cash provided by (used in) financing activities \n 35,568,844  \n (1,204,877)\n\nNet (decreased) increase in cash \n 22,512,201  \n 1,459,439 \n\nCash, beginning of the period \n 2,696,183  \n 1,236,744 \n\nCash, end of the period \n$25,208,384  \n$2,696,183 \n\n \n\n**Operating\nActivities**\n\n** **\n\nNet\ncash used in operating activities was ($11,789,888) in the year ended December 31, 2025, compared to cash provided in operating activities\nof approximately $3,481,850 in the year ended December 31, 2024. This is a 439% decrease primarily driven primarily by a significant\nrise in operational expenses associated with the Company’s initial IPO preparations and PIPE transaction activities during the\nyear. These costs included professional fees, legal and accounting services, regulatory readiness, and other transaction-related expenditures\nthat increased operating outflows. The concentration of these expenses in 2025 materially reduced cash generated from operations and\nwas the primary factor contributing to the overall decline in operating cash flow for the period.\n\n \n\n**Investing\nActivities**\n\n** **\n\nNet\ncash used in investing activities was $1,266,755 in the year ended December 31, 2025, compared to net cash used in investing activities\nof $817,534 in the year ended December 31, 2024. The increase was primarily driven by real estate investments the Company has made as\npart of its expanded development strategy. During 2025, the Company increased its deployment of capital into new real estate projects\nand investment opportunities, resulting in higher cash outflows compared to the prior year.\n\n \n\n35\n\n \n\n \n\n**Financing\nActivities**\n\n** **\n\nNet\ncash provided by financing activities was $35,568,844 in the year ended December 31, 2025, compared to net cash used by financing activities\nof $(1,204,877) in the year ended December 31, 2024. The increase in net cash used in financing activities is attributed to the PIPE\ntransaction completed on October 2, 2025.\n\n \n\n**Liquidity\nand Capital Resources**\n\n** **\n\n**Overview**\n\n** **\n\nThe\ngeneral objectives of our capital management strategy reside in the preservation of our capacity to continue operating, in providing\nbenefits to our stakeholders and in providing an adequate return on investment to our shareholders by selling our products at a price\ncommensurate with the level of operating risk assumed by us.\n\n \n\nWe\nthus determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis\ndepending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital\nrequirements.\n\n \n\n**Working\nCapital**\n\n \n\nAs\nof December 31, 2025, we had cash of approximately $25,208,384. Our current assets were approximately $37,300,878, including approximately\n$9,243,354 million in accounts receivable, approximately $2,630,561 contract assets, $218,579 in prepaid expenses, and our current liabilities\nwere approximately $2,198,866, including $978,103 accounts payable, $383,869 contract liabilities, which resulted in a positive working\ncapital of $35,102,014.\n\n \n\nOur\nprimary source of cash is currently generated from our business. In the coming years, we will be looking to other sources, such as raising\nadditional capital by issuing shares of stock, to meet our cash needs. While facing uncertainties regarding the size and timing of future\ncapital raises, we are reasonably confident that we can continue to meet operational needs solely by utilizing cash flows generated from\nour operating activities.\n\n \n\n**Off-balance\nSheet Commitments and Arrangements**\n\n** **\n\nThere\nwere no off-balance sheet arrangements for the years ended December 31, 2025 and 2024, that have, or that in the opinion of management\nare likely to have, a current or future material effect on our financial condition or results of operations.\n\n \n\n**Liquidity\nRisk**\n\n** **\n\nLiquidity\nrisk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing\nliquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time.\nWe achieve this by maintaining sufficient cash and banking facilities."}