What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-03-17 compared with 2023-03-17 · 113 added, 108 removed, 171 unchanged (56% of the section changed)

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

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

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 July 2021, we and The Jordre Well commenced commercial sales of our first CBD-infused line extension for our flagship dark roast Latin

espresso brand, Café Caribe, as well as our first CBD-infused line extension for our gourmet coffee brand, Harmony Bay.

these efforts will allow us to expand our business.

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

sales are affected by the price of green coffee.

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employees 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 and nine months

ended July 31, 2021, 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.

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

April 30, 2021, 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,

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However, as sales

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

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

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 and nine months ended July 31, 2021.

have been no changes to our critical accounting policies during the three and six months ended April 30, 2021.

Critical accounting policies

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report on Form 10-K filed with the SEC on February 16, 2021 for the fiscal year ended October 31, 2020.

Months Ended July 31, 2021 Compared to the Three Months Ended July 31, 2020 (restated)

Net sales totaled $13,634,313 for the three months ended July 31, 2021, a decrease of $1,877,282, or 12.1%, from $15,511,595

for the three months ended July 31, 2020.

The decrease in net sales was due to multiple factors, including a 35% decline in cases shipped

from our largest production facility in Colorado, as sales to supermarket and wholesale accounts declined significantly during the quarter

due to the post Covid-19 demand along with an approximately $1,400,000 decline in sales from our Generations/Steep N Brew subsidiary.

Cost of sales for the three months ended July 31, 2021 was $10,708,461, or 78.5% of net sales, as compared to $11,685,068,

or 75.3% of net sales, for the three months July 31, 2020.

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

partially offset by higher packaging costs due to increases in materials, most notably steel for our cans.

Gross profit for the three months ended July 31, 2021 amounted to $2,925,852 or 21.5% of net sales, as compared to $3,826,527

or 24.7% of net sales, for the three months ended July 31, 2020.

The decrease in gross profit percentage was attributable to decreased

margins on our roasted and branded products due to higher packaging and green coffee costs as most of our wholesale and retail accounts

were still operating under the pricing structures in place prior to the rise in green coffee prices towards the end of the quarter which

was partially offset by higher selling prices at the end of the quarter to our green coffee customers.

Total operating expenses decreased by $12,918 to $3,239,317 for the three months ended July 31, 2021 from $3,252,235

for the three months ended July 31, 2020.

Selling and administrative expenses increased by $3,694 and officers’ salaries decreased

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

unnecessary variable costs were the primary reasons for this decrease.

These efforts were partially offset by the continued increase

in our freight costs as the cost of truckload and LTL (less than full truckloads) deliveries to our largest wholesale customers continued

to increase during the quarter.

Months Ended April 30, 2021 Compared to the Three Months Ended April 30, 2020 (restated)

sales totaled $14,468,558 for the three months ended April 30, 2021, a decrease of $2,877,293, or 16.6%, from $17,345,851

for the three months ended April 30, 2020.

The decrease in net sales was due to multiple factors, including a decline of $5.2 million

in sales of packed coffee.

During April 2021 we experienced a 50% decline, as compared to April 2020, in production at our largest operating

facility in Colorado.

This reduction was due to supermarkets no longer building their inventories as they did in April 2020 during COVID-19

Further, we experienced a loss of approximately $750,000 in revenue as we dropped Aldi, Inc.

(“Aldi”) as a customer

due to unacceptably low net margins.

The above losses were slightly offset by gains in sales to new private label accounts as well as

an increase in sales of our flagship Café Caribe brand.

Cost of sales for the three months ended April 30, 2021 was $10,699,090, or 74% of net sales, as compared to $12,839,425,

or 74% of net sales, for the three months April 30, 2020.

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 offset by higher packaging costs due to increases in materials, most notably steel for our cans.

Gross profit for the three months ended April 30, 2021 amounted to $3,769,468 or 26% of net sales, as compared to $4,506,426

or 26% of net sales, for the three months ended April 30, 2020.

The decrease in gross profit numerically was attributable

to decreased sales for the quarter ended April 30, 2021 as compared to the quarter ended April 30, 2020.

Total operating expenses decreased by $297,553 to $3,315,324 for the three months ended April 30, 2021 from $3,612,877

for the three months ended April 30, 2020.

Selling and administrative expenses decreased by $294,037 and officers’ salaries decreased

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

variable costs were the primary reasons for this decrease.

These efforts were partially offset by the increase in our freight costs as

the cost of truckload deliveries to our largest wholesale customers was up approximately 20% year over year.

Income (Expense).

Other expense for the three months ended July 31, 2021 was $5,956, a decrease of $40,627 from $46,583 for the

three months ended July 31, 2020.

The decrease in other expense was attributable to a decrease in interest expense of $40,081, an increase

in our loss from our equity investments of $1,907 and an increase in our interest income of $2,453, during the three months ended July

31, 2021 as compared to the three months ended July 31, 2020.

Our benefit for income taxes for the three months ended July 31, 2021 totaled $91,003 compared to a provision of $161,454

for the three months ended July 31, 2020.

Other expense for the three months ended April 30, 2021 was $17,637, a decrease of $31,816 from $49,453 for

the three months ended April 31, 2020.

The decrease in other expense was attributable to a decrease in interest expense of $32,886, a

decrease in our loss from our equity investments of $363 and a decrease in our interest income of $1,433, during the three months ended

April 30, 2021 as compared to the three months ended April 30, 2020.

Our provision for income taxes for the three months ended April 30, 2021 totaled $129,086 compared to a provision of $154,767

for the three months ended April 30, 2020.

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

July 31, 2021 versus the income in the quarter ended July 31, 2020.

We had a net loss of $127,051 or $0.02 per share basic and diluted, for the three months ended July 31, 2021 compared

to net income of $391,324, or $0.07 per share basic and diluted for the three months ended July 31, 2020.

This was driven primarily by

losses out of our Generations subsidiary of approximately $152,000 along with the non-cash cost of our stock option program of approximately

$189,768 for the quarter.

Months Ended July 31, 2021 Compared to the Nine Months Ended July 31, 2020 (restated)

Net sales totaled $46,236,708 for the nine months ended July 31, 2021, a decrease of $3,747,781, or 7.5%, from $49,984,489

for the nine months ended July 31, 2020.

The decrease in net sales was due to multiple factors, including an approximate $2,500,000 decrease

in sales from our Generations/Steep N Brew subsidiary, a decline in sales of green coffee during the first half of the year as many of

our customers remained closed or impaired by continued COVID-19 restrictions as well as a decline in sales to supermarkets on private

label products during the quarter.

Cost of sales for the nine months ended July 31, 2021 was $35,061,947, or 75.8% of net sales, as compared to $38,536,782,

or 77.1% of net sales, for the nine months July 31, 2020.

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

April 30, 2021 versus the income in the quarter ended April 30, 2020, as well as a true up to the provision that was recorded in the

three months ended April 30, 2020.

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

to net income of $498,518, or $0.09 per share basic and diluted for the three months ended April 30, 2020.

The decrease in net income

was due primarily to the reasons described above.

Months Ended April 30, 2021 Compared to the Six Months Ended April 30, 2020 (restated)

Net sales totaled $32,602,395 for the six months ended April 30, 2021, a decrease of $1,870,499, or 5.4%,

from $34,472,894 for the six months ended April 30, 2020.

The decrease in net sales was due to multiple factors, including the

continued loss of sales of packed coffee to our customers who have not fully re-opened due to COVID-19 restrictions.

During April 2021

we experienced a 50% decline, as compared to April 2020, in production at our largest operating facility in Colorado.

This reduction

was due to supermarkets no longer building their inventories as they did in April 2020 during COVID-19 shutdowns.

Further, we experienced

a loss of approximately $750,000 in revenue as we dropped Aldi as a customer due to unacceptably low net margins.

Cost of sales for the six months ended April 30, 2021 was $24,353,356, or 74.7% of net sales, as compared to $26,851,714,

or 77.9% of net sales, for the six months April 30, 2020.

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 partially offset by higher packaging costs due to increases in materials, most notably steel for our cans.

Gross profit for the six months ended April 30, 2021 amounted to $8,249,039 or 25.3% of net sales, as compared to $7,621,092

or 22.1% of net sales, for the six months ended April 30, 2020.

The increase in gross profit percentage was attributable to increased

margins on our roasted and branded products partially due to the movement of lower cost green coffee inventory built up in previous quarters,

partially offset by higher packaging costs due to increases in materials, most notably steel for our cans.

Gross profit for the nine months ended July 31, 2021 amounted to $11,174,761 or 24.2% of net sales, as compared to

$11,447,707 or 22.9% of net sales, for the nine months ended July 31, 2020.

The decrease in gross profit percentage was attributable

to decreased margins on our roasted and branded products due to higher packaging and green coffee costs as most of our wholesale and retail accounts were still operating under the pricing structures in place prior to the rise in green coffee prices towards the end of the quarter which was partially offset by higher selling prices at the end of the quarter to our green coffee customers.

Total operating expenses decreased by $672,466 to $9,867,700 for the nine months ended July 31, 2021 from $10,540,166

for the nine months ended July 31, 2020.

Selling and administrative expenses decreased by $635,313 and officers’ salaries decreased

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

Total operating expenses decreased by $659,416 to $6,628,514 for the six months ended April 30, 2021 from $7,287,930

for the six months ended April 30, 2020.

Selling and administrative expenses decreased by $638,875 and officers’ salaries

decreased by $20,541.

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

unnecessary variable costs were the primary reasons for this decrease.

These efforts were partially offset by the continued increase

in our freight costs as the cost of truckload and LTL (less than full truckloads) deliveries to our largest wholesale customers was up

approximately 20% year over year.

These efforts were partially offset by the increase in our freight

costs as the cost of truckload deliveries to our largest wholesale customers was up approximately 20% year over year.

Income (Expense).

Other expense for the nine months ended July 31, 2021 was $52,450, a decrease of $99,887 from $152,337 for

the nine months ended July 31, 2020.

The decrease in other expense was attributable to a decrease in interest expense of $102,032 and

an increase in our interest income of $685, partially offset by an increase in our loss from our equity investments of $2,830, during

the nine months ended July 31, 2021 as compared to the nine months ended July 31, 2020.

Our provision for income taxes for the nine months ended July 31, 2021 totaled $419,326 compared to a provision of $250,804

for the nine months ended July 31, 2020.

The change was primarily attributable to the difference in the income for the nine months ended

July 31, 2021 versus the income in the nine months ended July 31, 2020.

We had net income of $907,305 or $0.16 per share basic and diluted, for the nine months ended July 31, 2021 compared

to net income of $289,994, or $0.05 per share basic and diluted for the nine months ended July 31, 2020.

Other expense for the six months ended April 30, 2021 was $46,493, a decrease of $59,261 from $105,754 for

the six months ended April 30, 2020.

The decrease in other expense was attributable to a decrease in interest expense of $61,952, partially

offset by an increase in our loss from our equity investments of $924 and a decrease in our interest income of $1,767, during the six

months ended April 30, 2021 as compared to the six months ended April 30, 2020.

Our provision for income taxes for the six months ended April 30, 2021 totaled $510,329 compared to a provision of $89,351

for the six months ended April 30, 2020.

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

April 30, 2021 versus the income in the six months ended April 30, 2020.

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

to net loss of $101,330, or $0.02 per share basic and diluted for the six months ended April 30, 2020.

The increase in net income was

due primarily to the reasons described above.

due primarily to the reasons described above, as well as a true up to the provision that was recorded in the three months ended April

and Capital Resources

of July 31, 2021, we had working capital of $20,573,060, which represented a $3,466,478 decrease from our working capital of $24,039,538

of April 30, 2021, we had working capital of $21,447,364, which represented a $2,592,174 decrease from our working capital of $24,039,538

as of October 31, 2020, and total stockholders’ equity of $27,932,559 which increased by $1,413,893 from our total stockholders’

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$1,935,996 in inventories, $91,684 in prepaid and refundable income taxes, increases of $970,875 in accounts payable and accrued expenses,

increases in our line of credit - current portion of $2,500,000, increases of $288,294 in income taxes payable, partially offset

by increase of $1,636,300 in cash, $339,855 in prepaid expenses, decreases in lease liability - current portion of $77,287, note

payable - current portion of $875, and due to broker of $315,569.

As of July 31, 2021, the outstanding balance on our line of credit

was $2,500,000 compared to $3,796,822 as of October 31, 2020.

increases of $255,611 in income taxes payable, increase of $16,641 in lease liabilities – current portion, partially offset by

increase of $653,017 in cash, $173,177 in prepaid expenses, $559,408 in due to broker.

As of April 30, 2021, the outstanding balance on our line of credit was $2,500 compared to $3,796,822 as of October 31, 2020.

April 25, 2017, we and Organic Products Trading Company, LLC (“OPTCO”)(collectively, the “Borrowers”) entered

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(the “A&R Loan Facility”) with Sterling National Bank (“Sterling”), which consolidated (i) the financing

agreement between us and Sterling, dated February 17, 2009, as modified, (the “Company Financing Agreement”) and (ii) the

financing agreement between us, as guarantor, OPTCO and Sterling, dated March 10, 2015 (the “OPTCO Financing Agreement”),

agreement between the Company and Sterling, dated February 17, 2009, as modified, (the “Company Financing Agreement”) and

(ii) the financing agreement between us, as guarantor, OPTCO and Sterling, dated March 10, 2015 (the “OPTCO Financing Agreement”),

amongst other things.

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and preferred stock), and restrictions on intercompany transactions.

We were in compliance with all covenants as of July 31, 2021 and

We were in compliance with all covenants as of April 30, 2021 and

October 31, 2020.

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Other than as amended

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

the nine months ended July 31, 2021, our operating activities provided net cash of $4,428,138 as compared to the nine months ended July

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

the six months ended April 30, 2021, our operating activities provided net cash of $5,047,290 as compared to the six months ended April

30, 2020 when operating activities provided net cash of $2,438,729.

The increased cash flow from operations for the nine months ended

July 31, 2021 was primarily due to our inventory usage during the quarter and our net income.

the nine months ended July 31, 2021, our investing activities used net cash of $1,491,233 as compared to the nine months ended July 31,

The increased cash flow from operations for the three months ended

April 30, 2021 was primarily due to our inventory usage during the quarter and our net income.

the six months ended April 30, 2021, our investing activities used net cash of $597,444 as compared to the six months ended April 30,

2020 when net cash used by investing activities was $132,967.

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

increased purchases of building, machinery and equipment.

In June 2021, the Company purchased a facility in Colorado for $900,321 that

it was previously leasing.

the nine months ended July 31, 2021, our financing activities used net cash of $1,300,605 compared to net cash used by financing activities

of $2,739,728 for the nine months ended July 31, 2020.

The change in cash flow from financing activities for the nine months ended July

31, 2021 was due to our decreased principal payments on our credit line, partially offset by increased proceeds.

Company believes that, based on its current cash position, and its current projection of revenue, expenses, capital expenditures and

cash flows, it has sufficient resources to fund its operations for at least the next twelve months following the filing of this Report.

increased purchases of machinery and equipment during the six months ended April 30, 2021.

the six months ended April 30, 2021, our financing activities used net cash of $3,796,829 compared to net cash used by financing activities

of $2,060,862 for the six months ended April 30, 2020.

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

30, 2021 was due to our increased principal payments on our credit line.

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

through June 14, 2022 with cash provided by operating activities and the use of our credit facility.

In addition, an increase in eligible

accounts receivable and inventory would permit us to make additional borrowings under our line of credit.

Sheet Arrangements

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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/A

Item 2. Management’s Discussion and Analysis