What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-29 compared with 2022-01-31 · 140 added, 114 removed, 163 unchanged (61% of the section changed)

55 unchanged sentences

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

new customers.

For this reason, we have made, and will continue to evaluate, strategic decisions to invest in measures that are expected

to increase net sales.

These transactions include our acquisition of Premier Roasters, LLC, including equipment and a roasting facility

in La Junta, Colorado, the addition of a west coast sales manager to increase sales of our private label and branded coffees to new customers,

our joint venture with Caruso’s Coffee, Inc.

of Brecksville, Ohio, and the transaction with OPTCO.

On June 29, 2016, we purchased

substantially all the assets, including equipment, inventory, customer lists and relationships of Coffee Kinetics, LLC., a Washington

limited liability company.

On February 24, 2017, we acquired 100% of the capital stock of Comfort Foods, Inc.

Massachusetts based medium sized coffee roaster, manufacturing both branded and private label coffee for retail and foodservice customers.

In April 2018, Generations Coffee Company, the entity formed as a result of our joint venture with Caruso’s Coffee, Inc., purchased

substantially all the assets of Steep & Brew, Inc.

In October 2020, we entered into the Jordre Well Agreement to become a 49% owner

in The Jordre Well, a CBD beverage company.

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.

Our net sales are driven primarily

by the success of our sales and marketing efforts and our ability to retain existing customers and attract new customers.

For this reason,

we have made, and will continue to evaluate, strategic decisions to invest in measures that are expected to increase net sales.

transactions include our acquisition of Premier Roasters, LLC, including equipment and a roasting facility in La Junta, Colorado, the

addition of a west coast sales manager to increase sales of our private label and branded coffees to new customers and the transaction

On June 29, 2016, we purchased substantially all the assets, including equipment, inventory, customer lists and relationships

of Coffee Kinetics, LLC., a Washington limited liability company.

On February 24, 2017, we acquired 100% of the capital stock of Comfort

(“CFI”), a Massachusetts based medium sized coffee roaster, manufacturing both branded and private label coffee

for retail and foodservice customers.

In April 2018, Generations Coffee Company, the entity formed as a result of our joint venture with

Caruso’s Coffee, Inc., purchased substantially all the assets of Steep & Brew, Inc.

As of the fiscal period ending January 31,

2022, we agreed with Generations to no longer move forward with this joint venture.

October 2020, we entered into the Jordre Well Agreement to become a 49% owner in The Jordre Well, a CBD beverage company.

Under the terms

of the Jordre Well Agreement, The Jordre Well was to 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 of non-coffee CBD-infused beverages and products.

after further analysis, management has decided not to pursue commercialization or development of any beverages or products of this nature.

net sales are affected by the price of green coffee.

47 unchanged sentences

to use these practices in a limited capacity going forward.

September 29, 2022, we entered into the Merger Agreement, Upon the terms and subject to the conditions set forth in the Merger Agreement,

Merger Sub will merge with and into the Company, with the Company surviving as a direct, wholly-owned subsidiary of Pubco.

of the Merger, each issued and outstanding share of our common stock will be cancelled and converted for the right of the holder thereof

to receive one Pubco Ordinary Share.

Accounting Policies and Estimates

7 unchanged sentences

Accounting Codification (“ASC”) Topic 606 (“ASC 606”) in which the Company evaluates the transfer of promised

goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects

the consideration which the Company expects to be entitled to receive in exchange for those goods or services.

To determine revenue

recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following

(1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine

the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue

when (or as) the entity satisfies a performance obligation.

goodwill consists of the cost in excess of the fair market value of the acquired net assets of OPTCO, SONO, CFI and Steep & Brew,

through GCC, which has been integrated into a structure that does not provide the basis for separate reporting units.

Consequently,

we are a single reporting unit for goodwill impairment testing purposes.

We also have intangible assets consisting of our customer

lists and relationships and trademarks acquired from OPTCO and SONO.

At October 31, 2021 our balance sheet reflected goodwill and

intangible assets as set forth below:

list and relationships, net

and tradenames

goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the

consideration which the Company expects to be entitled to receive in exchange for those goods or services.

To determine revenue recognition

for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price,

(4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies

a performance obligation.

have intangible assets consisting of our customer lists and relationships and trademarks acquired from Comfort Foods, OPTCO and SONO.

At October 31, 2022 our balance sheet reflected intangible assets as set forth below:

October 31, 2022

Customer list and relationships, net

Trademarks and tradenames

and the trademarks which are deemed to have indefinite lives are subject to annual impairment tests.

15 unchanged sentences

that an impairment or decline in value may have occurred.

the years ending October 31, 2021 and 2020, no impairment charges were recorded to the carrying value of goodwill and the reporting unit

has a fair value in excess of its carrying value by approximately 4% as of October 31, 2021.

For the year ended October 31, 2021 we recorded

impairment on two of our trademarks totaling $1,080,000 as the carrying amount of these trademarks exceeded the respective fair values

on the test date which were determined using a relief from royalty method.

the year ending October 31, 2022, an impairment charge of $2,488,785 was recorded as the market capitalization was substantially lower

than the carrying amount of the Company.

For the year ending October 31, 2022, we also took an $81,000 impairment charge for trademark,

and a $199,767 impairment charge for customer lists and non-compete.

For the year ended October 31, 2021, no impairment charges were

recorded to the carrying value of goodwill and the reporting unit has a fair value in excess of its carrying value by approximately 4%

as of October 31, 2021.

For the year ended October 31, 2021, we recorded impairment on two of our trademarks totaling $1,080,000 as the

carrying amount of these trademarks exceeded the respective fair values on the test date which were determined using a relief from royalty

Ended October 31, 2022 (Fiscal Year 2022) Compared to the Year Ended October 31, 2021 (Fiscal Year 2021)

Net sales totaled $63,922,402 for the fiscal year ended October 31, 2021, a decrease of $10,413,413, or 14%, from $74,335,815

totaled $65,706,879 for the fiscal year ended October 31, 2022, an increase of $1,784,477, or 3%, from $63,922,402 for the fiscal year

ended October 31, 2021.

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

to several significant new customers during the second half of the year.

Cost of Sales.

of sales for the fiscal year ended October 31, 2022 was $54,692,933, or 83% of net sales, as compared to $47,901,126, or 75% of net sales,

for the fiscal year ended October 31, 2021.

The decrease in net sales was due to the impacts of the COVID-19 pandemic which caused many

of our green coffee customers who service the restaurant and food service industry, as well as our customers in the food service space

to either close or suspend their business operations during the period resulting in lost revenues from that segment of our customer base.

Also, supermarket sales returned to more traditional levels in the second half of the fiscal year, as the stockpiling in the second quarter

of the year did not repeat for the remaining six months of the year.

Cost of sales for the fiscal year ended October 31, 2021 was $47,901,126, or 75% of net sales, as compared to $61,256,926,

or 82% of net sales, for the fiscal year ended October 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

and our hedging of green coffee costs, partially offset by higher packaging costs due to increases in materials, most notably steel for

Gross profit for the fiscal year ended October 31, 2021 was $16,021,276, an increase of $2,942,387 from $13,078,889 for

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

and unrealized gains or losses on hedging activity.

For the fiscal year ended October 31, 2022, the net result of our hedging activities

resulted in a loss of approximately $100,000, and for the fiscal year ended October 31, 2021, the net result of our hedging activities

resulted in a gain of approximately $1.8 million.

The increase in cost of sales was due to increased prices of green coffee, freight,

salaries and packaging materials and the balance of our losses from our Generations/Steep N Brew subsidiary, which included obsolete inventory

write-off of approximately $718,000.

Gross profit for the fiscal year ended October 31, 2022 was $11,013,946, a decrease of $5,007,330 from $16,021,276 for

the fiscal year ended October 31, 2021.

Gross profit as a percentage of net sales increased to 25% for the fiscal year ended October

Gross profit as a percentage of net sales decreased to 17% for the fiscal year ended October

31, 2022 from 25% for the fiscal year ended October 31, 2021.

The increase in gross profits was attributable to increased margins on

our roasted and branded products and green coffee sales in the last part of the year, partially due to the movement of lower cost green

coffee inventory built up in previous quarters, which was partially offset by higher packaging costs due to increases in materials.

Total operating expenses increased by $671,914 to $14,576,121 for the fiscal year ended October 31, 2021 from $13,904,207

for the fiscal year ended October 31, 2020.

Selling and administrative expenses increased $740,121, or 6%, to $13,963,328 for the fiscal

year ended October 31, 2021 from $13,223,207 for the fiscal year ended October 31, 2020.

The recording of $1,080,000 of trademark impairment

partially offset by our efforts to control costs through the elimination of redundancy in our operations was the primary reason for this

Officers’ salary decreased by $68,207 or 10% to $612,793 for the fiscal year ended October 31, 2021 from $681,000 for

the fiscal year ended October 31, 2020.

Each of our Chief Executive Officer, Andrew Gordon, and our Vice President-Operations, David

Gordon, reduced their compensation during this period due to the uncertainty of the results due to the impacts of the COVID-19 pandemic.

The decrease in gross profit percentage was attributable to higher raw

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

Operating Expenses.

Total operating expenses increased by $1,776,725 to $16,352,846 for the fiscal year ended October 31, 2022 from $14,576,121 for the fiscal

year ended October 31, 2021.

Selling and administrative expenses increased $105,704, to $12,989,032 for the fiscal year ended October

31, 2022 from $12,883,328 for the fiscal year ended October 31, 2021.

The recording of $2,769,552 of goodwill and other intangible impairment

during fiscal year ended October 31, 2022 increased by $1,689,552 as compared to $1,080,000 of trademark impairment during the fiscal

year ended October 31, 2021.

We also had increases in professional fees due to the Delta deal.

Officers’ salary decreased by $18,531

or 3% to $594,262 for the fiscal year ended October 31, 2022 from $612,793 for the fiscal year ended October 31, 2021.

Income (Expense).

Other expense for the fiscal year ended October 31, 2021 was $237,298, an increase of $684,859 from other income

Other expense for the fiscal year ended October 31, 2022 was $258,750, an increase of $21,452 from other expense

of $237,298 for the fiscal year ended October 31, 2021.

The increase in other expense was attributable to our recognition of the forgiveness

of the Paycheck Protection Program government loan of $634,400 in fiscal year ended October 31, 2020 and an increase in loss from equity

investment of $154,144, partially offset by an increase in interest income of $4,304 and a decrease in our interest expense of $99,381,

The increase in other expense was attributable to an increase in interest expense

of $139,248, partially offset by an increase in interest income of $6,436 and a decrease in our loss from equity investment of $111,360,

during the fiscal year ended October 31, 2022.

(Loss) Before Provision For Income Taxes And Non-Controlling Interest In Subsidiary.

We had income of $1,207,857 before income

taxes and non-controlling interest in subsidiary for the fiscal year ended October 31, 2021 compared to a loss of $377,757 for the fiscal

year ended October 31, 2020, resulting in a net change of $1,585,614 for the year ended October 31, 2021.

Our provision for income taxes for the fiscal year ended October 31, 2021 totaled $340,180 compared to a benefit of $41,713

We had a loss of $5,597,650 before income

taxes and non-controlling interest in subsidiary for the fiscal year ended October 31, 2022 compared to income of $1,207,857 for the

fiscal year ended October 31, 2021, resulting in a net change of $6,805,507 for the year ended October 31, 2022.

Our benefit for income taxes for the fiscal year ended October 31, 2022 totaled $995,793 compared to a provision of $340,180

for the fiscal year ended October 31, 2021.

2 unchanged sentences

Income (Loss) .

We had a net income of $1,255,354 or $0.22 per share basic and diluted, for the fiscal year ended October 31,

2021 compared to a net loss of ($94,301), or ($0.02) per share basic and diluted for the fiscal year ended October 31, 2020.

in net income was due to our results as described above.

We had a net loss of $3,744,785 or $0.66 per share basic and diluted, for the fiscal year ended October 31, 2022

compared to net income of $1,255,354, or $0.22 per share basic and diluted for the fiscal year ended October 31, 2021.

The decrease in

net income was due to our results as described above.

and Capital Resources

of October 31, 2021, we had working capital of $19,983,435, which represented a $4,056,103 decrease from our working capital of $24,039,538

as of October 31, 2020.

Our working capital decreased primarily due to decreases of $1,141,127 in inventory and $69,353 in prepaid and

refundable taxes, increases of $2,011,542 in accounts payable and accrued expenses, $3,799,975 in our short term borrowings, $411,078

in income taxes payable, partially offset by increases of $821,155 in cash, $1,891,073 in accounts receivable, $469,004 in due from broker,

$51,978 in prepaid expenses and other current assets and a decrease of $143,763 in lease liability – current portion.

As of October

31, 2021, the outstanding balance on our line of credit was $3,800,850 compared to $3,796,822 as of October 31, 2020.

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

As of October 31, 2022, we had working capital of $25,262,224, which represented

a $1,477,939 increase from our working capital of $23,784,285 as of October 31, 2021.

Our working capital increased primarily due to increases

of $3,290,348 in inventory, $790,203 in prepaid and refundable taxes, $93,892 in due from broker, decreases of $1,232,776 in accounts

payable and accrued expenses, $416,449 in income taxes payable and $119,666 in lease liability – current portion, partially offset

by decreases of $1,056,550 in cash, $1,483,505 in accounts receivable, $110,098 in prepaid expenses and other current assets and an increase

of $815,242 in due to broker and an increase in cash overdraft of $876,148.

As of October 31, 2022, the outstanding balance on our line

of credit was $8,314,000 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

(the “A&R Loan Agreement”) and Amended and Restated Loan Facility (the “A&R Loan Facility”) with Sterling

National Bank (“Sterling”), which consolidated (i) the financing 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.

National Bank (“Sterling”, now Webster Bank, “Webster Bank”)), 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”), amongst other

March 13, 2020, we reached an agreement for a new loan modification agreement and credit facility with Sterling.

3 unchanged sentences

LIBOR plus 1.75% (with such interest rate not to be lower than 3.50%).

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

On June 28, 2022, we reached an agreement for a new loan modification

agreement and credit facility with Webster Bank.

The terms of the new agreement, among other things:

(i) provided for a new maturity

date of June 30, 2024, and (ii) changed the interest rate per annum to SOFR plus 1.75% (with such interest rate not to be lower than

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

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

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

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

1 unchanged sentence

and preferred stock), and restrictions on intercompany transactions.

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

and October 31, 2020.

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

Other than as amended

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 fiscal year ended October 31, 2021, our operating activities provided net cash of $4,709,519 as compared to the fiscal year ended

October 31, 2020 when operating activities provided net cash of $4,385,757.

The increased cash flow from operations for the fiscal year

ended October 31, 2021 was primarily due to our inventories usage and our accounts receivable and accounts payable activity during the

year ended October 31, 2021.

March 17, 2022, the Company reached an agreement for a new loan modification 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 remained the same.

June 28, 2022, the Company reached an agreement for a new loan modification agreement and credit facility with Webster Bank.

of the new agreement, among other things:

(i) provided for a new maturity date of June 30, 2024, and (ii) changed the interest rate per

annum to SOFR plus 1.75% (with such interest rate not to be lower than 3.50%).

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

Loan Facility remained the same.

Company was not in compliance with the net profit and non-affiliate borrower covenants as of October 31, 2022.

The Company requested

a waiver from the Lender and the waiver was granted and received on March 15, 2023.

The Lender also extended the due date of the October

31, 2022 financial statements until April 15, 2023.

The loan agreement was also modified on March 15, 2023.

The amendment, among other

(i) requires for subordination agreements to be executed with the Lender prior to the issuance of any subordinate debt of the

Company, if necessary, (ii) allows for transactions with Affiliates (as defined in the Loan Agreement) in the ordinary course of business,

(iii) establishes a new debt to tangible net worth ratio covenant, and (iv) establishes a fixed charge coverage ratio covenant.

For the fiscal year ended October

31, 2022, our operating activities used net cash of $5,437,508 as compared to the fiscal year ended October 31, 2021 when operating activities

provided net cash of $4,709,519.

The decreased cash flow from operations for the fiscal year ended October 31, 2022 was primarily due

to our net loss, and the increase in our inventory.

the fiscal year ended October 31, 2022, our investing activities used net cash of $1,059,205 as compared to the fiscal year ended October

31, 2021 when net cash used by investing activities was $3,887,317.

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

our increased outlays for purchases of machinery and equipment and our other investment during the fiscal year ended October 31, 2021.

the fiscal year ended October 31, 2021, our financing activities used net cash of $1,047 compared to net cash used in financing activities

of $3,375,358 for the fiscal year ended October 31, 2020.

The change in cash flow from financing activities for the fiscal year ended

October 31, 2021 was due to our decreased principal reductions on our line of credit.

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

to our decreased outlays for purchases of machinery and equipment and our other investment during the fiscal year ended October 31, 2022.

the fiscal year ended October 31, 2022, our financing activities provided net cash of $5,316,311 compared to net cash used in financing

activities of $1,047 for the fiscal year ended October 31, 2021.

The change in cash flow from financing activities for the fiscal year

ended October 31, 2022 was due to our decreased principal reductions on our line of credit.

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

2 unchanged sentences

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

believe that if the Merger with Delta closes, the A&R Loan Agreement and A&R Loan Facility with Webster Bank will continue in

the ordinary course.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

3 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis