Callan JMB Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Callan JMB Inc.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements

Overview

Callan JMB is a vertically integrated logistics and fulfillment company which provides thermal management logistics solutions to the life sciences industry through a combination of proprietary packaging, information technology and specialized cold chain logistics knowhow. We provide a system that utilizes advanced predictive technology to revolutionize the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time-sensitive industries while ensuring environmental responsibility.

Strategy

Our strategy involves leveraging our core competitive strengths to develop and maintain ongoing relationships with a diversified group of customers while continuing to grow our service lines, ensuring that we can meet our customers’ changing needs. We strive to be recognized as the premier provider of logistics and fulfillment of a broad range of value-added services based upon the breadth of those services, quality, responsiveness, customer service, information technologies, safety, and cost effectiveness.

We view our solutions as disruptive to the “older technologies” of dry ice and liquid nitrogen, in that our solutions are comprehensive and combine our competencies in configurations that are customized to our client’s requirements. We provide comprehensive, reliable, economic alternatives to all existing logistics solutions and services utilized for frozen shipping in the life sciences industry (e.g., personalized medicine, cell therapies, stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, organs, bio-pharmaceuticals, infectious substances, and other commodities that require continuous exposure to cryogenic or frozen temperatures). As part of our services, we provide the ability to monitor, record and archive crucial information for each shipment that can be used for scientific and regulatory purposes.

Seasonality

Based on our industry and our historic trends, we expect our operations to vary seasonally. Typically, revenue will be highest in the third and fourth calendar quarters and lowest in the first and second calendar quarters. These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity. We also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.

Results of Operations

Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024

The following table provides certain selected financial information for the periods presented:

Revenue

Revenue for the three months ended March 31, 2025, was $1,449,377 as compared to $1,790,521 for the three months ended March 31, 2024, a decrease of $341,144. This decrease was due to the diminution in demand for our emergency preparedness services by certain states and local governments.

Cost of revenue

Cost of revenue for the three months ended March 31, 2025, was $833,437 as compared to $1,072,938 for the three months ended March 31, 2024, a decrease of $239,501. This decrease is primarily attributed to a decrease in revenue.

Operating Expenses

Selling, General and Administrative Expenses

Our selling, general and administrative costs include personnel costs, consulting and professional fees, and other overhead expenses. Selling, general and administrative expenses for the three months ended March 31, 2025, were $1,854,316, compared to $805,042 for the three months ended March 31, 2024, an increase of $1,049,274. The Company’s personnel costs increased by $100,795 for the three months ended March 31, 2025, compared to the same period in 2024 as a result of our change from a LLC to a corporation. That change required us to put our CEO on payroll for the first time and hire additional staff in anticipation of our IPO. The Company’s consulting and professional fees increased by $212,677 for the three months ended March 31, 2025, compared to the same period in 2024 as a result of hiring professionals to support our capital raising process for our initial public offering. The Company’s information technology support increased by $5,579 for the three months ended March 31, 2025, compared to the same period in 2024 as the result of the purchase of additional equipment and hosting software. The Company’s marketing and advertising increased by $189,707 for the three months ended March 31, 2025, compared to the same period in 2024 as a result of hiring a marketing firm that specializes in pharma-based businesses, and the hiring an investor relations firm for our IPO. Company’s other expenses decreased by $538,516 for the three months ended March 31, 2025, compared to the same period in 2024, increase in stock based compensation of $330,825, increase in employment agency fees of $100,000, increase in meals and travel of $28,283, increase in state and local taxes of $8,742, increase in director fees of $11,457, increase in other expenses of $74,048, and an increase in depreciation and amortization of $2,281, offset by decrease in reserves for credit losses of $17,120.

Other income (expense)

Other income (expense) for the three months ended March 31, 2025, was $2,146 and $326 for the three months ended March 31, 2024, respectively, an increase in other income of $1,820. This increased income was the result of an increase in interest income of $1,225, offset by decreases in interest expense of $3,045.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital to fund our operations and growth. To date, we have funded our liquidity requirements primarily through cash on hand, and cash flows from operations. As of March 31, 2025, we had $5,219,929 cash and cash equivalents.

20

Cash provided by (used in) operating activities

For the three months ended March 31, 2025, cash used in operating activities was $1,561,698 compared to cash provided by operating activities of $6,839 during the three months ended March 31, 2024, a decrease of $1,568,538. This decrease was primarily due to a decrease in net income of $1,159,457, decrease in provision for credit losses of $17,120, a decrease in accounts receivable of $12,749, a decrease in inventory of $49,776, a decrease in prepaid insurance/other current assets of $274,534, a decrease in accounts payable and accrued expenses of $326,661, a decrease in deferred revenue of $86,023, and offset by an increase in stock based compensation of $330,825, an increase in tax refund receivable of $6,377, an increase in right of use asset of $4,546, an increase in security deposits and other assets of $3,650, an increase in depreciation and amortization of $2,279, and an increase in corporate taxes payable of $10,106.

Cash provided by (used in) investing activities

For the three months ended March 31, 2025, cash used in investing activities was $15,000 compared to $44,656 for the three months ended March 31, 2024, a decrease of $29,656. The decrease is a result of less purchases of fixed assets during the three months ended March 31, 2025.

Cash provided by (used in) financing activities

During the three months ended March 31, 2025, cash provided by (used in) financing activities was $4.698,682 compared to ($3,420,286) during the three months ended March 31, 2024, an increase of $8,158,968. Our financing activities for the three months ended March 31, 2025 compared to March 31, 2024 included an increase in related party loans of $35,742, an increase in deferred offering costs of $25,000, an increase in partners distributions of $3,382,253 and an increase in notes payable of $35,960 and an increase in proceeds from IPO and overallotment, net of $4,680,013.

Off-Balance Sheet Arrangements

We have no off-balance sheet financing arrangements.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 is intended to enhance the decision usefulness of income tax disclosures and requires the disclosure of various disaggregated information, including an entity’s effective tax rate reconciliation as well as additional information on taxes paid. This ASU is effective on a prospective basis for annual periods beginning after December 15, 2024 with early adoption allowed. The Company is in the process of evaluating the effect of ASU 2023-09 on the financial statements.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our consolidated financial statements.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments require, among other things, that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 208. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all periods presented in the consolidated financial statements. The Company adopted ASU 2023-07 for the year ending December 31, 2024 and it did not have a material impact on its consolidated financial statements. See Note 5 Segments for new disclosures related to significant expenses, the CODM and other segment items.

Under SEC rules and regulations, because we are considered to be a “smaller reporting company,” we are not required to provide the information required by this item in this report.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2025, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level in that:

• We do not have written documentation for some of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation for some of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted does not represent a material weakness.
• We do not have complete segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and procedures and has concluded that the control deficiency that resulted does not represent a material weakness.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of any control system is subject to resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

(b) Changes in Internal Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Form 10-K for the year ended December 31, 2024, any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Form 10-K for the year ended December 31, 2024. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.