What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-06-14 compared with 2022-03-17 · 152 added, 101 removed, 136 unchanged (65% of the section changed)

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events, including, among other things:

dependency on a single commodity could affect our revenues and profitability;

success in expanding our market presence in new geographic regions;

effectiveness of our hedging policy may impact our profitability;

success of our joint ventures;

success in implementing our business strategy or introducing new products;

ability to attract and retain customers;

ability to obtain additional financing;

ability to comply with the restrictive covenants we are subject to under our current financing;

effects of competition from other coffee manufacturers and other beverage alternatives;

impact to the operations of our Colorado facility;

economic conditions and conditions which affect the market for coffee;

potential adverse impact of the COVID-19 pandemic on our operations and results, including as a result of the loss of adequate labor,

any prolonged closures, or series of temporary closures, of our supply chain, or changes in consumer behaviors, when stay-at-home

restriction orders are lifted and/or as a result of the COVID-19 pandemic’s impact on financial markets and economic conditions;

expectations regarding, and the stability of, our supply chain, including potential shortages or interruptions in the supply or delivery

of green coffee, as a result of COVID-19 or otherwise;

macro global economic environment;

ability to maintain and develop our brand recognition;

impact of rapid or persistent fluctuations in the price of coffee beans;

in the supply of coffee beans;

volatility of our common stock;

risks which we identify in future filings with the Securities and Exchange Commission (the “SEC”).

our dependency on a single

commodity could affect our revenues and profitability;

our success in expanding

our market presence in new geographic regions;

the effectiveness of our

hedging policy may impact our profitability;

the success of our joint

our success in implementing

our business strategy or introducing new products;

our ability to attract

and retain customers;

our ability to obtain additional

our ability to comply with

the restrictive covenants we are subject to under our current financing;

the effects of competition

from other coffee manufacturers and other beverage alternatives;

the impact to the operations

of our Colorado facility;

general economic conditions

and conditions which affect the market for coffee;

the potential adverse impact

of the COVID-19 pandemic on our operations and results, including as a result of the loss of adequate labor, any prolonged closures,

or series of temporary closures, of our supply chain, or changes in consumer behaviors, when stay-at-home restriction orders are

lifted and/or as a result of the COVID-19 pandemic’s impact on financial markets and economic conditions;

our expectations regarding,

and the stability of, our supply chain, including potential shortages or interruptions in the supply or delivery of green coffee,

as a result of COVID-19 or otherwise;

the macro global economic

our ability to maintain

and develop our brand recognition;

the impact of rapid or

persistent fluctuations in the price of coffee beans;

fluctuations in the supply

of coffee beans;

the volatility of our common

other risks which we identify

in future filings with the Securities and Exchange Commission (the “SEC”).

some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,”

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operations have primarily focused on the following areas of the coffee industry:

sale of wholesale specialty green coffee;

roasting, blending, packaging and sale of private label coffee;

roasting, blending, packaging and sale of our eight brands of coffee;

of our tabletop coffee roasting equipment.

the sale of wholesale specialty

green coffee;

the roasting, blending,

packaging and sale of private label coffee;

the roasting, blending,

packaging and sale of our eight brands of coffee;

sales of our tabletop coffee

roasting equipment.

operating results are affected by a number of factors including:

level of marketing and pricing competition from existing or new competitors in the coffee industry;

ability to retain existing customers and attract new customers;

hedging policy;

in purchase prices and supply of green coffee and in the selling prices of our products;

ability to manage inventory and fulfillment operations and maintain gross margins.

the level of marketing

and pricing competition from existing or new competitors in the coffee industry;

our ability to retain existing

customers and attract new customers;

our hedging policy;

fluctuations in purchase

prices and supply of green coffee and in the selling prices of our products;

our ability to manage inventory

and fulfillment operations and maintain gross margins.

net sales are driven primarily by the success of our sales and marketing efforts and our ability to retain existing customers and attract

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are expected to increase net sales.

In addition to our acquisitions, in October 2020, we entered into an agreement to become a 49% owner

in The Jordre Well, a CBD beverage company (“The Jordre Well”).

Under the terms of the agreement with The Jordre Well, The

Jordre Well will assist us in the development and commercialization of CBD-infused line extensions for the existing coffee brands within

our portfolio, as well as launch new brands that are intended to serve consumer demand for non-coffee CBD-infused beverages and products.

In addition to our acquisitions, in October 2020, we entered into an agreement (the “Jordre

Well Agreement”) to become a 49% owner in The Jordre Well, a CBD beverage company (“The Jordre Well”).

Under the terms

of the Jordre Well Agreement, The Jordre Well will assist us in the development and commercialization of CBD-infused line extensions

for the existing coffee brands within our portfolio, as well as launch new brands that are intended to serve consumer demand for non-coffee

CBD-infused beverages and products.

We believe these efforts will allow us to expand our business.

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continue to work within our production and distribution facilities.

COVID-19 pandemic has had a material adverse impact on our condensed consolidated financial statements for the three months ended January

31, 2022, and it has resulted, and is expected to continue to result for at least the near and immediate term, in significant economic

disruptions and changes to consumer behaviors in the United States, which, has impacted and is expected to continue to negatively impact

our business.

Many of our customers who purchase green coffee from us for use in cafés, restaurants and food service operations,

were forced to temporarily suspend or close operations, adversely impacting our sales to customers in that segment.

However, as sales

to the café, restaurant and food service segment decreased in the quarter, sales to large wholesaler and retail customers increased,

as there was a shift in buying and consumption of coffee products to this segment.

continuing impact on our business, including the length and impact of stay-at-home orders and/or regional quarantines, labor shortages

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Accounting Policies and Estimates

have been no changes to our critical accounting policies during the three months ended January 31, 2022.

have been no changes to our critical accounting policies during the three and six months ended April 30, 2022.

Critical accounting policies

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report on Form 10-K filed with the SEC on January 31, 2022 for the fiscal year ended October 31, 2021.

Months Ended January 31, 2022 Compared to the Three Months Ended January 31, 2021

Net sales totaled $16,704,860 for the three months ended January 31, 2022, a decrease of $1,428,977, or 7.9%, from $18,133,837

for the three months ended January 31, 2021.

The decrease in net sales was due to an approximately $1,323,000 decline in sales from our

Generations/Steep N Brew subsidiary due to loss of customers.

Cost of sales for the three months ended January 31, 2022 was $12,433,252, or 74.4% of net sales, as compared to $13,654,169,

or 75.3% of net sales, for the three months January 31, 2021.

Months Ended April 30, 2022 Compared to the Three Months Ended April 30, 2021

Net sales totaled $16,498,169 for the three months ended April 30, 2022, an increase of $2,029,611, or 14.0%, from $14,468,558

for the three months ended April 30, 2021.

The increase in net sales was due to an increase of sales to our legacy customers partially

offset by a decrease in sales from our Generations/Steep N Brew subsidiary.

Cost of sales for the three months ended April 30, 2022 was $14,505,415, or 87.9% of net sales, as compared to $10,699,090,

or 74% of net sales, for the three months April 30, 2021.

Cost of sales consists primarily of the cost of green coffee and packaging

materials and realized and unrealized gains or losses on hedging activity.

The decrease in cost of sales was due to our decreased sales.

On a percentage basis cost of sales decreased by 0.9% due to our favorable green coffee position in our inventory partially offset by

higher costs of our packaging materials, specifically the cost of steel and the approximately $475,000 change in our open hedging positions.

Gross profit for the three months ended January 31, 2022 amounted to $4,271,608 or 25.6% of net sales, as compared to

$4,479,668 or 24.7% of net sales, for the three months ended January 31, 2021.

The increase in gross profits on a percentage basis was

attributable to the factors listed above.

Total operating expenses increased by $407,592 to $3,720,878 for the three months ended January 31, 2022 from $3,313,286

for the three months ended January 31, 2021.

The increase in cost of sales was due to our increased sales

to our legacy customers, increased prices of green coffee and packaging materials and our continued losses from our Generations/Steep

N Brew subsidiary, which included obsolete inventory write-off of approximately $718,000.

Gross profit for the three months ended April 30, 2022 amounted to $1,992,754 or 12.1% of net sales, as compared to $3,769,468

or 26.1% of net sales, for the three months ended April 30, 2021.

The decrease in gross profits on a percentage basis was attributable

to the factors listed above.

Total operating expenses increased by $50,899 to $3,366,223 for the three months ended April 30, 2022 from $3,315,324

for the three months ended April 30, 2021.

Selling and administrative expenses increased by $53,399 and officers’ salaries decreased

Operating expenses increased primarily due to increases of approximately $213,000 in professional fees, $55,000 in freight

costs and $139,000 in labor costs, partially offset by decreases in various other operating expense categories

Income (Expense).

Other expense for the three months ended January 31, 2022 was $70,798, an increase of $41,941 from $28,857

for the three months ended January 31, 2021.

Other expense for the three months ended April 30, 2022 was $51,202, an increase of $33,565 from $17,637 for

the three months ended April 30, 2021.

The increase in other expense was attributable to an increase in interest expense of $32,844,

an increase in our loss from our equity investments of $2,758, partially offset by an increase in our interest income of $2,037, during

the three months ended January 31, 2022.

Our provision for income taxes for the three months ended January 31, 2022 totaled $137,406 compared to a provision of

$381,243 for the three months ended January 31, 2021.

The change was primarily attributable to the difference in the income for the quarter

ended January 31, 2022 versus the income in the quarter ended January 31, 2021.

We had net income of $280,863 or $0.05 per share basic and diluted, for the three months ended January 31, 2022 compared

to net income of $677,312, or $0.12 per share basic and diluted for the three months ended January 31, 2021.

The decrease in net income

was due primarily to the reasons described above.

the three months ended April 30, 2022.

Our benefit for income taxes for the three months ended April 30, 2022 totaled $385,681 compared to a provision of $129,086

for the three months ended April 30, 2021.

The change was primarily attributable to the difference in the loss for the quarter ended

April 30, 2022 versus the income in the quarter ended April 30, 2021.

(Loss) Income .

We had a net loss of $368,096 or $(0.06) per share basic and diluted, for the three months ended April 30, 2022

compared to net income of $357,044, or $0.06 per share basic and diluted for the three months ended April 30, 2021.

The decrease in net

income was due primarily to the continued losses from our Generations/Steep N Brew subsidiary.

Months Ended April 30, 2022 Compared to the Six Months Ended April 30, 2021

Net sales totaled $33,203,029 for the six months ended April 30, 2022, an increase of $600,634, or 1.8%,

from $32,602,395 for the six months ended April 30, 2021.

The increase in net sales was due to an increase of sales to our legacy customers

partially offset by a decrease in sales from our Generations/Steep N Brew subsidiary.

Cost of sales for the six months ended April 30, 2022 was $26,938,669, or 81.1% of net sales, as compared

to $24,353,356, or 74.7% of net sales, for the six months April 30, 2021.

Cost of sales consists primarily of the cost of green coffee

and packaging materials and realized and unrealized gains or losses on hedging activity.

The increase in cost of sales was due to increased

prices of green coffee and packaging materials and our continued losses from our Generations/Steep N Brew subsidiary, which included

obsolete inventory write-off of approximately $718,000.

Gross profit for the six months ended April 30, 2022 amounted to $6,264,360 or 18.9% of net sales, as compared

to $8,249,039 or 25.3% of net sales, for the six months ended April 30, 2021.

The decrease in gross profit percentage was attributable

to higher raw material costs and the impact of continued losses from our Generations/Steep N Brew subsidiary.

Total operating expenses increased by $458,585 to $7,087,099 for the six months ended April 30, 2022

from $6,628,514 for the six months ended April 30, 2021.

Selling and administrative expenses increased by $463,173 and officers’

salaries decreased by $4,588.

Our efforts to control costs through the elimination of redundancy in our operations and the elimination

of certain unnecessary variable costs was offset by the increase in our freight costs as the cost of truckload deliveries to our largest

wholesale customers and an increase of $415,096 in bad debt expense related to our Generations subsidiary.

Income (Expense).

Other expense for the six months ended April 30, 2022 was $122,000, an increase of $75,507 from $46,493 for

the six months ended April 30, 2021.

The increase in other expense was attributable to an increase in interest expense of $46,786, an

increase in our loss from our equity investments of $31,885, partially offset by an increase in our interest income of $3,165,

during the six months ended April 30, 2022 as compared to the six months ended April 30, 2021.

Our benefit for income taxes for the six months ended April 30, 2022 totaled $248,275 compared to a provision of $510,329

for the six months ended April 30, 2021.

The change was primarily attributable to the difference in the loss for the six months ended

April 30, 2022 versus the income in the six months ended April 30, 2021.

(Loss) Income .

We had a net loss of $87,233 or ($0.02) per share basic and diluted, for the six months ended April 30,

2022 compared to net income of $1,034,355, or $0.18 per share basic and diluted for the six months ended April 30, 2021.

in net income was due primarily to the reasons described above.

and Capital Resources

of January 31, 2022, we had working capital of $20,216,164, which represented a $232,729 increase from our working capital of $19,983,435

of April 30, 2022, we had working capital of $18,543,499, which represented a $1,439,936 decrease from our working capital of $19,983,435

as of October 31, 2021.

Our working capital increased primarily due to increases of $320,500 in cash, $854,374 in inventories, $107,069

in prepaid expenses and other current assets, decreases of $1,897,340 in accounts payable and accrued expenses, decreases of $76,852

in due to broker, decrease of $28,925 in lease liabilities – current portion, partially offset by decreases of $757,812 in accounts

receivable, $143,619 in due from broker, $3,750 in prepaid and refundable taxes, increase of $1,600,000 in line of credit increase in

dividend payable of $399,000 and $148,150 in income taxes payable.

As of January 31, 2022, the outstanding balance on our line of credit

was $5,400,850 compared to $3,800,850 as of October 31, 2021.

Our working capital decreased primarily due to decreases of $671,138 in cash, $1,964,031 in accounts receivable,

$111,286 in prepaid expenses and other current assets, $463,750 in due from broker and an increase in our line of credit of $2,099,150,

partially offset by increases in inventory of $10,662, $299,465 in prepaid and refundable taxes, decreases of $2,423,835 in accounts

payable and accrued expenses, decreases of $576,196 in due to broker, decrease of $149,026 in lease liabilities – current portion,

and $410,235 in income taxes payable.

As of April 30, 2022, the outstanding balance on our line of credit was $5,900,000 compared to

$3,800,850 as of October 31, 2021.

April 25, 2017, we and OPTCO (collectively, the “Borrowers”) entered into an Amended and Restated Loan and Security Agreement

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agreement and credit facility which extended the maturity date to June 29, 2022.

All other terms of the A&R Loan Agreement and A&R

Loan Facility remain the same.

of the A&R Loan Facility and A&R Loan Agreement contains covenants, subject to certain exceptions, that place annual restrictions

The facility has been approved for a two year extension

and the related documents are currently being prepared.

All other terms of the A&R Loan Agreement and A&R Loan Facility remain

of the A&R Loan Facility and A&R Loan Agreement contain covenants, subject to certain exceptions, that place annual restrictions

on the Borrowers’ operations, including covenants relating to debt restrictions, capital expenditures, indebtedness, minimum deposit

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and preferred stock), and restrictions on intercompany transactions.

We were in compliance with all covenants as of January 31, 2022 and October 31, 2021.

We were in compliance with all covenants as of April 30, 2022 and

October 31, 2021.

of the A&R Loan Facility and the A&R Loan Agreement is secured by all of our tangible and intangible assets.

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and restated by the A&R Loan Agreement, the Company Financing Agreement and the OPTCO Financing Agreement remains in full force and

to the terms of the Jordre Well Agreement, we issued to The Jordre Well 139,250 shares of our Common Stock on the effective date of the

Jordre Well Agreement and are obligated to issue an additional 139,250 shares of Common Stock once $500,000 in revenue is generated from

the joint venture.

the three months ended January 31, 2022, our operating activities used net cash of $1,233,464 as compared to the three months ended January

the six months ended April 30, 2022, our operating activities used net cash of $1,496,738 as compared to the six months ended April 30,

2021 when operating activities provided net cash of $5,047,290.

The decreased cash flow from operations for the three months ended

January 31, 2022 was primarily due to our paydown of our accounts payable and accrued expenses.

the three months ended January 31, 2022, our investing activities used net cash of $44,729 as compared to the three months ended January

The decreased cash flow from operations for the six months ended April

30, 2022 was primarily due to our net loss, and paydown of our accounts payable and accrued expenses and income taxes payable and our

accounts receivable and inventory write-offs.

the six months ended April 30, 2022, our investing activities used net cash of $871,919 as compared to the six months ended April 30,

2021 when net cash used by investing activities was $597,444.

The decrease in our uses of cash in investing activities was due to

our reduced purchases of machinery and equipment during the three months ended January 31, 2022.

the three months ended January 31, 2022, our financing activities provided net cash of $1,598,693 compared to net cash used by financing

activities of $2,845,336 for the three months ended January 31, 2021.

The change in cash flow from financing activities for the three

months ended January 31, 2022 was due to our credit line activity.

The increase in our uses of cash in investing activities was due to our

increased purchases of machinery and equipment during the six months ended April 30, 2022.

the six months ended April 30, 2022, our financing activities provided net cash of $1,697,519 compared to net cash used by financing

activities of $3,796,829 for the six months ended April 30, 2021.

The change in cash flow from financing activities for the six months

ended April 30, 2022 was due to our increased advances on our credit line.

expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness,

through at least the next twelve months from the date these consolidated financial statements were available to be issued, with cash

through at least the next twelve months from the date of these consolidated financial statements were available to be issued, with cash

provided by operating activities and the use of our credit facility.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis