What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-28 compared with 2022-09-14 · 110 added, 180 removed, 104 unchanged (74% of the section changed)

7 unchanged sentences

events, including, among other things:

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”).

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;

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

of green coffee;

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”).

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:

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.

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.

operating results are affected by a number of factors including:

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.

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.

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 (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.

sales are affected by the price of green coffee.

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and options contracts, and intend to continue to use these practices in a limited capacity going forward.

global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

in March 2020 and has negatively affected the U.S.

and global economies, disrupted global supply chains, resulted in significant travel

and transport restrictions, mandated closures and stay-at-home orders, and created significant disruption of the financial markets.

we are classified as an essential business and our factories continued to operate with little to no impact from the pandemic-related

date, we have experienced disruption to our supply chain or distribution network, including the supply of green coffee beans, though

it is possible that more significant disruptions could occur if the COVID-19 pandemic continues to impact markets around the world.

a food producer, we are an essential service and almost all of our employees continue to work within our production and distribution

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

and employment trends, disruptions to supply chains, including our ability to obtain products from global suppliers, higher operating

costs, the form and impact of economic stimulus and general overall economic instability, is uncertain at this time and could have a

material adverse effect on our business, results of operations, and financial condition.

Accounting Policies and Estimates

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

have been no changes to our critical accounting policies during the three months ended January 31, 2023.

Critical accounting policies

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and Results of Operations” as well as in our consolidated financial statements and footnotes thereto, each included in our annual

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

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

Net sales totaled $17,013,286 for the three months ended July 31, 2022, an increase of $3,378,973, or 24.8%, from $13,634,313

for the three months ended July 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 in the quarter.

Cost of sales for the three months ended July 31, 2022 was $13,867,710, or 81.5% of net sales, as compared to $10,708,461,

or 78.5% of net sales, for the three months July 31, 2021.

report on Form 10-K filed with the SEC on March 29, 2023 for the fiscal year ended October 31, 2022.

Months Ended January 31, 2023 Compared to the Three Months Ended January 31, 2022

Net sales totaled $18,326,114 for the three months ended January 31, 2023, an increase of $1,621,254, or 10%, from $16,704,860

for the three months ended January 31, 2022.

The increase in net sales was mostly due to organic growth with existing customers for our

private label and branded products, partially offset by lower selling prices to our green coffee customers due to a significant decline

in the green coffee market.

Cost of sales for the three months ended January 31, 2023 was $16,005,814, or 87% of net sales, as compared to $12,433,252,

or 74% of net sales, for the three months January 31, 2022.

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

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

to our customers, increased prices of green coffee and packaging materials.

Gross profit for the three months ended July 31, 2022 amounted to $3,145,576 or 18.5% of net sales, as compared to $2,925,852

or 21.5% of net sales, for the three months ended July 31, 2021.

and the higher costs of packaging of $904,390, freight of $156,190 and labor of $565,376.

Gross profit for the three months ended January 31, 2023 amounted to $2,320,300 or 13% of net sales, as compared to $4,271,608

or 25% of net sales, for the three months ended January 31, 2022.

The decrease in gross profits on a percentage basis was attributable

to the factors listed above.

Total operating expenses decreased by $333,223 to $2,906,094 for the three months ended July 31, 2022 from $3,239,317

for the three months ended July 31, 2021.

Selling and administrative expenses decreased by $326,684 and officers’ salaries decreased

Income (Expense).

Other expense for the three months ended July 31, 2022 was $60,452, an increase of $54,496 from $5,956 for

the three months ended July 31, 2021.

The increase in other expense was attributable to an increase in interest expense of $47,898 due

to our additional advances, an increase in our loss from our equity investments of $3,900 and a decrease in our interest income of $2,698,

during the three months ended July 31, 2022.

Our provision for income taxes for the three months ended July 31, 2022 totaled $46,649 compared to a benefit of $91,003

for the three months ended July 31, 2021.

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

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

(Loss) Income .

We had net income of $132,381 or $0.02 per share basic and diluted, for the three months ended July 31, 2022 compared

to a net loss of $127,051, or $(0.02) per share basic and diluted for the three months ended July 31, 2021.

The increase in net income

was due to the factors listed above.

Months Ended July 31, 2022 Compared to the Nine Months Ended July 31, 2021

Net sales totaled $50,216,316 for the nine months ended July 31, 2022, an increase of $3,979,608, or 8.6%, from $46,236,708

for the nine months ended July 31, 2021.

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

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

Cost of sales for the nine months ended July 31, 2022 was $40,806,381, or 81.3% of net sales, as compared to $35,061,947,

or 75.8% of net sales, for the nine months July 31, 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 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 nine months ended July 31, 2022 amounted to $9,409,935 or 18.7% of net sales, as compared to $11,174,761

or 24.2% of net sales, for the nine months ended July 31, 2021.

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 through April 30, 2022.

Total operating expenses increased by $112,492 to $9,980,192 for the nine months ended July 31, 2022 from $9,867,700

for the nine months ended July 31, 2021.

Selling and administrative expenses increased by $123,618 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 was offset by the increase in our freight costs and an increase of $415,096 in bad debt expense related to our Generations

Total operating expenses decreased by $599,553 to $3,121,325 for the three months ended January 31, 2023 from $3,720,878

for the three months ended January 31, 2022.

Selling and administrative expenses decreased by $628,303 and officers’ salaries increased

Operating expenses decreased primarily due to our Generations joint venture not generating expenses this quarter as compared

to January 31, 2022 when expenses were $800,393, partially offset by increase in various other categories.

Income (Expense).

Other expense for the nine months ended July 31, 2022 was $182,452, an increase of $130,002 from $52,450 for

the nine months ended July 31, 2021.

The increase in other expense was attributable to an increase in interest expense of $94,683 due

to additional advances on our line of credit, an increase in our loss from our equity investments of $35,785, partially offset by an

increase in our interest income of $466, during the nine months ended July 31, 2022 as compared to the nine months ended July 31, 2021.

Our benefit for income taxes for the nine months ended July 31, 2022 totaled $188,626 compared to a provision of $419,326

for the nine months ended July 31, 2021.

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

July 31, 2022 versus the income in the nine months ended July 31, 2021.

(Loss) Income .

We had net income of $45,148 or $0.01 per share basic and diluted, for the nine months ended July 31, 2022 compared

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

The decrease in net income was

due primarily to the reasons described above.

Other income for the three months ended January 31, 2023 was $101,672, an increase of $172,470 from other expense

$70,798 for the three months ended January 31, 2022.

The increase was attributable to an increase in other income of $234,041 due to

an insurance claim, an increase in interest income of $1,570, a decrease in our loss from our equity investments of $26,708, partially

offset by an increase in our interest expense of $89,849, during the three months ended January 31, 2023.

Our benefit for income taxes for the three months ended January 31, 2023 totaled $167,250 compared to a provision of $137,406

for the three months ended January 31, 2022.

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

January 31, 2023 versus the income in the quarter ended January 31, 2022.

We had a net loss of $532,103 or $0.09 per share basic and diluted, for the three months ended January 31, 2023 compared

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

The decrease in net income

was due primarily to the reasons described above.

and Capital Resources

of July 31, 2022, we had working capital of $24,543,495, which represented a $4,560,060 increase from our working capital of $19,983,435

as of October 31, 2021.

Our working capital increased primarily due to increases in inventory of $3,277,595, $165,419 in prepaid expenses

and other current assets, $577,043 in prepaid and refundable taxes, decreases of $175,173 in accounts payable and accrued expenses, decrease

of $3,800,850 in our line of credit current portion, decreases of $269,074 in due to broker, decrease of $217,944 in lease liabilities

– current portion, and $414,949 in income taxes payable, partially offset by decreases of $2,265,798 in cash, $1,764,874 in accounts

receivable, $307,315 in due from broker.

As of July 31, 2022, the outstanding balance on our line of credit was $6,114,000 compared to

of January 31, 2023, we had working capital of $24,565,286, which represented a $696,938 decrease from our working capital of $25,262,224

as of October 31, 2022.

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 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 things.

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

The terms of the new

agreement among other things:

(i) provides for a new maturity date of March 31, 2022 and (ii) decreases the interest rate per annum to

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

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

Our working capital decreased primarily due to decreases of $915,609 in accounts receivable, $2,555,433 in inventories,

$119,038 in due from broker, $111,636 in prepaid expenses and other current assets, increases of $535,039 in accounts payable and accrued

expenses, partially offset by increases of $1,738,755 in cash, decreases of $876,148 in cash overdrafts, $891,059 in due to broker, $33,855

in lease liability – current portion.

As of January 31, 2023, the outstanding balance on our line of credit was $8,328,782 compared

to $8,314,000 as of October 31, 2022.

April 25, 2017 the Company and OPTCO (together with the Company, collectively referred to herein as 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 was later acquired by Webster Financial

(“Webster”), 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 Company, as guarantor, OPTCO and

Sterling, dated March 10, 2015 (the “OPTCO Financing Agreement”), amongst other things.

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.

The facility was then approved for a two-year extension.

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.

further explained in Note 5 to the unaudited financial statements, the Company is subject to certain covenants with respect to its line

of credit agreement.

The Company was not in compliance with the net profit and non-borrower affiliate 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.

On March 15, 2023, the A&R Loan Agreement was also modified

to, among other things:

(i) provide for a requirement for subordination agreements if necessary, (ii) change the terms of transactions

with affiliates from a dollar limitation to allowable in the ordinary course of business, and (iii) establish a new covenant for a fixed

charge coverage ratio.

of the A&R Loan Facility and A&R Loan Agreement contains 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 July 31, 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.

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, 2022, our operating activities used net cash of $2,820,251 as compared to the nine months ended July 31,

2021 when operating activities provided net cash of $4,428,138.

The decreased cash flow from operations for the nine months ended July

31, 2022 was primarily due to our net loss, and the increase in our inventory.

the nine months ended July 31, 2022, our investing activities used net cash of $1,357,066 as compared to the nine months ended July 31,

The outstanding balance on the Company’s lines of credit were

$8,328,782 and $8,314,000 as of January 31, 2023 and October 31, 2022, respectively.

the three months ended January 31, 2023, our operating activities provided net cash of $1,927,364 as compared to the three months ended

January 31, 2022 when operating activities used net cash of $1,233,464.

The increased cash flow from operations for the three months

ended January 31, 2023 was primarily due to our inventory position.

the three months ended January 31, 2023, our investing activities used net cash of $202,018 as compared to the three months ended January

31, 2022 when net cash used by investing activities was $44,729.

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

increased purchases of machinery and equipment during the nine months ended July 31, 2022.

the nine months ended July 31, 2022, our financing activities provided net cash of $1,911,519 compared to net cash used by financing

activities of $1,300,605 for the nine months ended July 31, 2021.

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

ended July 31, 2022 was due to our increased advances on our credit line.

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

our increased purchases of machinery and equipment during the three months ended January 31, 2023.

the three months ended January 31, 2023, our financing activities provided net cash of $13,409 compared to net cash provided by financing

activities of $1,598,693 for the three months ended January 31, 2022.

The change in cash flow from financing activities for the three

months ended January 31, 2023 was due to our credit line activity.

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 of these consolidated financial statements were available to be issued, with cash

through at least the next twelve months from the date these consolidated financial statements are 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