What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-06-15 compared with 2023-04-28 · 99 added, 73 removed, 141 unchanged (55% of the section changed)

105 unchanged sentences

Accounting Policies and Estimates

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

have been no changes to our critical accounting policies during the three and six months ended April 30, 2023.

Critical accounting policies

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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.

Months Ended April 30, 2023 Compared to the Three Months Ended April 30, 2022

Net sales totaled $15,320,703 for the three months ended April 30, 2023, a decrease of $1,177,466, or 7.1%, from $16,498,169

for the three months ended April 30, 2022.

The decrease 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, 2023 was $12,488,522, or 81.5% of net sales, as compared to $14,505,415,

or 87.9% of net sales, for the three months April 30, 2022.

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.

Gross profit for the three months ended April 30, 2023 amounted to $2,832,181 or 18.5% of net sales, as compared to $1,992,754

or 12.1% of net sales, for the three months ended April 30, 2022.

The increase in gross profits on a percentage basis was attributable

to the factors listed above.

Total operating expenses decreased by $149,588 to $3,216,635 for the three months ended April 30, 2023 from $3,366,223

for the three months ended April 30, 2022.

Selling and administrative expenses decreased by $143,338 and officers’ salaries decreased

Income (Expense).

Other expense for the three months ended April 30, 2023 was $123,386, an increase of $72,184 from $51,202 for

the three months ended April 30, 2022.

The increase in other expense was attributable to an increase in interest expense of $69,423,

an increase in our loss from our equity investments of $211 and a decrease in our interest income of $2,550, during the three months

ended April 30, 2023.

Our benefit for income taxes for the three months ended April 30, 2023 totaled $148,000 compared to a benefit of $385,681

for the three months ended April 30, 2022.

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

April 30, 2023 versus the income in the quarter ended April 30, 2022.

(Loss) Income .

We had a net loss of $359,840 or $(0.06) per share basic and diluted, for the three months ended April 30, 2023

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

Months Ended April 30, 2023 Compared to the Six Months Ended April 30, 2022

Net sales totaled $33,646,818 for the six months ended April 30, 2023, an increase of $443,789, or 1.3%, from $33,203,029

for the six months ended April 30, 2022.

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, 2023 was $28,494,333, or 84.7% of net sales, as compared to $26,938,669,

or 81.1% of net sales, for the six months April 30, 2022.

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 our increased sales

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.

and the higher costs of packaging.

Gross profit for the six months ended April 30, 2023 amounted to $5,152,485 or 15.3% of net sales, as compared to $6,264,360

or 18.9% of net sales, for the six months ended April 30, 2022.

The decrease in gross profits on a percentage basis was attributable

to the factors listed above.

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.

Total operating expenses decreased by $749,136 to $6,337,963 for the six months ended April 30, 2023 from $7,087,099

for the six months ended April 30, 2022.

Selling and administrative expenses decreased by $771,636 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.

Operating expenses decreased primarily due to our Generations joint venture not generating expenses for the six months ended

April 2023 compared to the six months ended April 30, 2022, partially offset by increase in various other categories.

Income (Expense).

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.

Other expense for the six months ended April 30, 2023 was $21,715, a decrease of $100,285 from $122,000 for

the six months ended April 30, 2022.

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

a decrease in our loss from our equity investments of $26,498, partially offset by an increase in our interest expense of $159,273 and

a decrease in our interest income of $981, during the six months ended April 30, 2023.

Our benefit for income taxes for the six months ended April 30, 2023 totaled $315,250 compared to a benefit of $248,275

for the six months ended April 30, 2022.

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

April 30, 2023 versus the income in the six months ended April 30, 2022.

(Loss) Income .

We had a net loss of $891,433 or ($0.16) per share basic and diluted, for the six months ended April 30, 2023

compared to a net loss of $87,233, or ($0.02) per share basic and diluted for the six months ended April 30, 2022.

The decrease in net

income was due primarily to the reasons described above.

and Capital Resources

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

of April 30, 2023, we had working capital of $23,049,651, which represented a $2,212,573 decrease from our working capital of $25,262,224

as of October 31, 2022.

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.

Our working capital decreased primarily due to decreases of $1,047,861 in cash and cash equivalents, $1,212,055

in accounts receivable, $3,428,917 in inventories, $45,696 in due from broker and $150,120 in prepaid expenses and other current assets,

partially offset by decreases of $1,730,244 in accounts payable and accrued expenses, $876,148 in cash overdrafts, $982,172 in due to

broker and $83,512 in lease liability – current portion.

As of April 30, 2023, the outstanding balance on our line of credit was

$7,520,000 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

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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.

March 17, 2022, we 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, we reached an agreement for a new loan modification agreement and credit facility with Webster.

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 3.50%).

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

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.

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

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

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and preferred stock), and restrictions on intercompany transactions.

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

The outstanding balance on our lines of credit were $7,520,000 and

$8,314,000 as of April 30, 2023 and October 31, 2022, respectively.

the six months ended April 30, 2023, our operating activities provided net cash of $1,234,180 as compared to the six months ended April

30, 2022 when operating activities used net cash of $1,496,738.

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

30, 2023 was primarily due to our inventory position.

the six months ended April 30, 2023, our investing activities used net cash of $609,131 as compared to the six months ended April 30,

2022 when net cash used by investing activities was $871,919.

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.

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

decreased purchases of machinery and equipment during the six months ended April 30, 2023.

the six months ended April 30, 2023, our financing activities used net cash of $1,672,910 compared to net cash provided by financing

activities of $1,697,519 for the six months ended April 30, 2022.

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

ended April 30, 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 these consolidated financial statements are issued, 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.

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.

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

Item 2. Management’s Discussion and Analysis