Callan JMB Inc(CJMB) - 2024 Q4 - Annual Report

Part I Business Callan JMB Inc. is a vertically integrated logistics company providing thermal management solutions for the life sciences industry with high customer concentration - Callan JMB provides vertically integrated thermal management logistics solutions for the life sciences industry, utilizing proprietary packaging, IT, and specialized cold chain expertise as a disruptive alternative to dry ice and liquid nitrogen[19] - The company's strategy includes cross-selling its broad range of services, expanding into new markets such as GLP-1 drug transport, and fostering innovation through its Ship2Q® and Sentry monitoring systems[22][23][24] - Key service offerings include emergency preparedness, specialty temperature-regulating reusable packaging, fulfillment services, and advanced monitoring through its Sentry technology[27][28][30] - The company has a high customer concentration, with its top three customers accounting for approximately 81.4% of revenue as of December 31, 2024[32] - The company operates in a growing logistics segment focused on temperature-sensitive shipping for markets like cell-based therapies, vaccines, and clinical trials[41][42][43] - As of the report date, the company has 26 employees, consisting of 10 full-time and 12 part-time or seasonal employees, supplemented by independent contractors[49] Risk Factors The company faces significant risks from its holding company structure, capital intensity, customer concentration, and identified material weaknesses in internal controls - The company has a holding company structure and depends on distributions from its operating subsidiaries to meet obligations[54] - A significant concentration of revenue exists, with three customers accounting for 81.4% of total revenue in 2024, and the loss of any of these customers could materially harm the business[68][69] - The business is capital intensive, and a failure to generate sufficient cash flow may require selling assets, incurring debt, or selling equity on unfavorable terms[56] - The company faces risks associated with its cold chain logistics, including product contamination or spoilage, which could lead to liability and reputational damage[62][64][65] - The management team has limited experience managing a publicly traded company, which could divert attention from day-to-day operations[75] - Material weaknesses and significant deficiencies in internal controls over financial reporting have been identified, including insufficient staff for segregation of duties[84][192] - The company is a "controlled company" as the CEO and CMO collectively control 70.6% of the voting power, qualifying it for exemptions from certain Nasdaq corporate governance requirements[87] - The company is subject to extensive regulation from agencies like the FDA, and failure to comply could result in significant penalties or operational shutdowns[95][96] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[136] Cybersecurity A security risk management program, overseen by the Board's Audit Committee, is in place to protect technology assets and information - The company has implemented a security risk management program to protect its computer systems and data, which includes regular risk assessments and employee training[137][139] - The Board of Directors oversees cybersecurity risk, delegating primary responsibility to the Audit Committee, with regular reports from management[140][141] Properties The company leases all its office and warehouse facilities, with an aggregate monthly rental expense of $34,798 - The company does not own any real property and leases all its office and warehouse facilities, with an aggregate current monthly rental expense of $34,798[143] Leased Properties | Address | Gross floor area (square feet) | Use of the property | | :--- | :--- | :--- | | 244 Flightline Drive, Spring Branch, Texas 78070 | 10,000 sq. ft. | Warehouse/Office | | 10130 SW North Dakota St., Tigard, Oregon 97223 | 4,800 sq. ft | Warehouse | | 1500 4 St., Unit 6, Blanco, Texas 78606 | 1,000 sq. ft. | Warehouse/Office | | 210 Kestral Drive, Spring Branch, Texas 78070 | 7,872 sq. ft. | Warehouse | | 16025 Farm to Market 32, Blanco, Texas 78606 | 6,500 sq. ft. | Warehouse | Legal Proceedings The company may be involved in ordinary course legal proceedings, with details referenced in the financial statement notes - The company may become involved in legal proceedings arising in the ordinary course of business, with details on current proceedings in Note 7 of the financial statements[145] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[146] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq as "CJMB", and it does not plan to pay dividends - The company's common stock trades on the Nasdaq Capital Market under the symbol "CJMB"[148] - As of March 28, 2025, there were 480 holders of record of the company's common stock[149] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, retaining earnings for business growth[150] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue decreased 50% to $6.6 million in 2024, resulting in a net loss of $2.3 million due to lower demand and increased operating expenses Comparison of Operations for Years Ended December 31 | Year ended December 31, | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,563,412 | $13,202,459 | $(6,639,047) | (50)% | | Gross Profit | $2,563,263 | $5,649,121 | $(3,085,858) | -55% | | Income (loss) from operations | $(2,274,814) | $2,202,063 | $(4,476,877) | -203% | | Net income (loss) | $(2,293,648) | $2,181,108 | $(4,474,756) | -205% | - Revenue decreased by 50% in 2024 due to the waning COVID-19 pandemic and a significant customer temporarily suspending orders[160] - Selling, general and administrative expenses increased by 40% ($1.39M) in 2024, driven by increased personnel costs, IPO consulting fees, and higher marketing expenses[162] Cash Flow Summary | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2024 | 2023 | Change | | Cash provided by (used in) operating activities | $540,353 | $6,995,646 | $(6,455,293) | | Cash provided by (used in) investing activities | $(46,167) | $(490,020) | $443,853 | | Cash provided by (used in) financing activities | $(3,551,861) | $(7,543,725) | $3,991,864 | - Cash and cash equivalents decreased from $5.2 million to $2.1 million from the end of 2023 to the end of 2024[164] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," this disclosure is not required - The company is not required to provide this information as it qualifies as a "smaller reporting company"[185] Financial Statements and Supplementary Data The company's financial statements and supplementary data are included following the report's signature page - The required financial statements and supplementary data are set forth following the signature page of the 10-K[186] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None[189] Controls and Procedures Management has identified material weaknesses in internal controls and does not yet have effective disclosure controls - Management has identified material weaknesses and significant deficiencies in internal controls[192] - Specific weaknesses include insufficient staff for optimal segregation of duties and reliance on a third-party accounting firm for GAAP compliance[192] - As an emerging growth company, the company is not currently required to provide a formal management report or an independent auditor's attestation on internal control effectiveness[194] Other Information The company reports no other information for this item - None[195] Part III Directors, Executive Officers, and Corporate Governance The management team is led by CEO Wayne Williams, and the board includes three independent directors and has established key committees - The executive team includes Wayne Williams (CEO, President, Chairman), Eric L. Kash (EVP, Director), Jeffrey Appleman (CFO), and Dr. David J. Croyle (CMO)[200] - A family relationship exists between CEO Wayne Williams and CMO Dr. David J. Croyle, who are brothers-in-law[213] - The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each composed of independent directors[223][224][226] - Independent directors receive a cash fee of $6,250 per fiscal quarter and an award of 6,250 shares of common stock each fiscal quarter[235] - The company has adopted a Code of Ethics applicable to all employees, which is available on its website[244] Executive Compensation Executive compensation includes guaranteed payments, remuneration, and significant LLC distributions, with a new equity incentive plan established in 2024 Summary Compensation Table | Name and Principal Position | Year | Guaranteed Payments | Remuneration | LLC Distributions | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Wayne Williams, CEO | 2024 | $25,000 | $453,085 | $2,496,191 | $2,974,276 | | | 2023 | $300,000 | - | $5,596,896 | $5,896,896 | | David J. Croyle, M.D., CMO | 2024 | - | - | $832,063 | $832,063 | | | 2023 | - | - | $1,800,000 | $1,800,000 | | Eric Kash, EVP | 2024 | - | $102,885 | - | $102,885 | | Jeffrey Appleman, CFO | 2024 | - | $171,739 | - | $171,739 | - CEO Wayne Williams' employment agreement includes a $500,000 annual base salary, a potential 40% incentive bonus, and 200,000 stock options[249][250][251] - Employment agreements for the EVP, CFO, and CMO include tiered base salaries, potential 30% incentive bonuses, and stock option grants[259][260][266] - The company adopted the 2024 Equity Incentive Plan, initially authorizing 1,500,000 shares of common stock for various equity awards[281] Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Executive officers and directors beneficially own 68.5% of common stock, with CEO Wayne Williams holding a controlling 50.7% stake Beneficial Ownership as of March 28, 2025 | Name | Amount and Nature of Beneficial Ownership | Percent of Class | | :--- | :--- | :--- | | Directors and Executive Officers | | | | Wayne Williams | 2,338,125 | 50.7% | | David Croyle, M.D. | 822,375 | 17.8% | | Eric Kash | 37,500 | * | | Jeffrey Appleman | 27,500 | * | | All Executive Officers & Directors as a Group | 3,225,500 | 68.5% | *Represents beneficial ownership of less than 1%. - CEO Wayne Williams' ownership of 50.7% gives him control over matters submitted to stockholders, including the election of directors and potential mergers[307] Certain Relationships and Related Transactions, and Director Independence The company engages in related-party transactions, primarily leases with entities controlled by its CEO and CMO - The company leases its headquarters and other warehouse space from Warehouse Asset Management, an entity majority-owned by Messrs. Williams and Croyle, for $15,425 per month[312] - The company has lease agreements and has received/paid funds on behalf of Outlaw Run Ranch ("ORR") and Cold Chain Delivery Systems, both related parties[310][311] - In October 2024, the board adopted a written policy requiring the Audit Committee to review and approve all material related-party transactions[317] - The Board has determined that directors Mark Meller, Liberty Duke, and Gerald Dial are independent under Nasdaq rules[318] Principal Accounting Fees and Services The company incurred $200,000 in audit and audit-related fees from its independent accounting firm in fiscal 2024 Accounting Fees | | Fiscal Year Ended December 31, 2024 | | :--- | :--- | | Audit Fees | $160,000 | | Audit-Related Fees | $40,000 | | Total | $200,000 | - The company's policy is to pre-approve all audit and permissible non-audit services performed by its independent accountants[320] Part IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the Form 10-K - This section lists the financial statements, notes that financial statement schedules have been omitted, and provides a list of exhibits filed with the report[321][322][324] Form 10-K Summary No summary is provided for this item - None[328] Financial Statements Report of Independent Registered Public Accounting Firm The independent auditor issued an unqualified opinion on the 2024 and 2023 consolidated financial statements - The auditor issued an unqualified opinion, stating the financial statements are presented fairly in all material respects in conformity with U.S. GAAP[338] - The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)[340] Notes to Consolidated Financial Statements The notes detail the company's corporate reorganization, significant customer concentration, and the completion of its IPO in February 2025 - The company reorganized from a Texas LLC to a Nevada corporation on February 14, 2024[356][357] - The company has significant customer and vendor concentration; in 2024, one customer accounted for 51% of revenue, and one vendor accounted for 60% of accounts payable[373] - As of December 31, 2024, the company had total operating lease liabilities of $907,450, primarily for warehouse space[404][405] - In February 2025, the company settled a legal dispute with a vendor for $240,800, which was accrued for as of December 31, 2024[409][431] - As of December 31, 2024, the company has federal net operating loss (NOL) carryforwards of $2,354,213, with a full valuation allowance provided against the related deferred tax assets[418][419] - Subsequent to year-end, in February 2025, the company completed its IPO, raising net proceeds of approximately $4.7 million[428]