What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-09-14 compared with 2023-06-15 · 130 added, 109 removed, 131 unchanged (65% of the section changed)

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Note on Forward-Looking Statements

of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,”

“Business,” “Risk Factors” and elsewhere in this annual report include forward-looking statements made pursuant

of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of “Operations” “Business,” “Risk Factors” and elsewhere in this annual report include forward-looking statements made pursuant

to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

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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;

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;

our dependency

on a single commodity could affect our revenues and profitability;

in expanding our market presence in new geographic regions;

the effectiveness

of our hedging policy may impact our profitability;

of our joint ventures;

in implementing our business strategy or introducing new products;

to attract and retain customers;

to obtain additional financing;

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

of competition from other coffee manufacturers and other beverage alternatives;

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;

our expectations

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

global economic environment;

to maintain and develop our brand recognition;

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”).

the volatility

of our common stock;

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

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

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;

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

to retain existing customers and attract new customers;

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.

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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Accounting Policies and Estimates

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

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

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

Net sales totaled $15,764,365 for the three months ended July 31, 2023, a decrease of $1,248,921, or 7.3%, from $17,013,286

for the three months ended July 31, 2022.

The decrease in net sales was due to a decrease in sales from our Generations/Steep N Brew

subsidiary and lower selling prices of green coffee to our wholesale green coffee customer base partially offset by an increase of sales

to our legacy customers.

Cost of sales for the three months ended July 31, 2023 was $13,315,602, or 84.5% of net sales, as compared to $13,867,710,

or 81.5% of net sales, for the three months July 31, 2022.

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

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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

partially offset by a small loss in our hedging operation compared to a gain in hedging in 2022.

Gross profit for the three months ended July 31, 2023 amounted to $2,448,763 or 15.5% of net sales, as compared to $3,145,576

or 18.5% of net sales, for the three months ended July 31, 2022.

The decrease 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.

Total operating expenses decreased by $54,084 to $2,852,010 for the three months ended July 31, 2023 from $2,906,094

for the three months ended July 31, 2022.

Selling and administrative expenses decreased by $49,757 and officers’ salaries decreased

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

July 2023 compared to the three months ended July 31, 2022, partially offset by increase in various other categories

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.

Other income for the three months ended July 31, 2023 was $251,116, an increase of $311,568 from other expense

of $60,452 for the three months ended July 31, 2022.

The increase in other income was attributable to an increase in other income of

$400,140 due to an insurance claim, partially offset by an increase in interest expense of $90,924.

Our benefit for income taxes for the three months ended July 31, 2023 totaled $40,250 compared to a provision of $46,649

for the three months ended July 31, 2022.

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

31, 2023 versus the income in the quarter ended July 31, 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.

We had a net loss of $111,881 or $(0.02) per share basic and diluted, for the three months ended July 31, 2023

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

Months Ended July 31, 2023 Compared to the Nine Months Ended July 31, 2022

Net sales totaled $49,411,183 for the nine months ended July 31, 2023, a decrease of $805,133, or 1.6%, from $50,216,316

for the nine months ended July 31, 2022.

The decrease in net sales was due to a decrease in sales from our Generations/Steep N Brew subsidiary

and lower selling prices of green coffee to our wholesale green coffee customer base partially offset by an increase of sales to our

legacy customers.

Cost of sales for the nine months ended July 31, 2023 was $41,810,204, or 84.6% of net sales, as compared to $40,806,381,

or 81.3% of net sales, for the nine months July 31, 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.

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.

Gross profit for the nine months ended July 31, 2023 amounted to $7,600,979 or 15.4% of net sales, as compared to $9,409,935

or 18.7% of net sales, for the nine months ended July 31, 2022.

The decrease in gross profits on a percentage basis was attributable

to the factors listed above.

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.

Total operating expenses decreased by $790,488 to $9,189,704 for the nine months ended July 31, 2023 from $9,980,192

for the nine months ended July 31, 2022.

Selling and administrative expenses decreased by $808,661 and officers’ salaries increased

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.

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

July 2023 compared to the nine months ended July 31, 2022, partially offset by increase in various other categories.

Income (Expense).

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.

Other income for the nine months ended July 31, 2023 was $229,401, an increase of $411,853 from other expense

of $182,452 for the nine months ended July 31, 2022.

The increase was attributable to an increase in other income of $634,181 due to

an insurance claim, a decrease in our loss from our equity investments of $28,844, partially offset by an increase in our interest expense

of $250,197 and a decrease in our interest income of $975, during the nine months ended July 31, 2023.

Our benefit for income taxes for the nine months ended July 31, 2023 totaled $355,500 compared to a benefit of $188,626

for the nine months ended July 31, 2022.

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

July 31, 2023 versus the income in the nine months ended July 31, 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.

We had a net loss of $1,003,824 or ($0.18) per share basic and diluted, for the nine months ended July 31, 2023

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

The decrease in net

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and Capital Resources

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

condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates

continuity of operations, realization of assets and liquidation of liabilities in the normal course of business.

Company prepared a forecast representing their business plans for fiscal 2024.

However, the Company has yet to achieve increased revenues

at higher margins and there is no assurance they will be successful.

The line of credit expires within 12 months and there have been

no discussions with the financial institution to extend the line of credit ($9 million at July 31, 2023).

Company’s ability to execute its operating plan through fiscal 2024 and beyond depends on its ability to renew or replace its line

The Company expects to renew the line of credit or, if necessary, seek alternative financing on similar terms.

no assurance that the Company will be able to renew the line of credit in a timely manner and or that any such renewal will contain commercially

acceptable terms.

Therefore, as of July 31, 2023, the Company has concluded there is substantial doubt about their ability to continue

as a going concern.

of July 31, 2023, we had working capital of $15,501,828, which represented a $9,760,396 decrease from our working capital of $25,262,224

as of October 31, 2022.

Our working capital decreased primarily due to decreases of $97,323 in cash and cash equivalents, $1,334,319

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.

in accounts receivable, $2,113,830 in inventories, $261,536 in due from broker and our line of credit of $9,020,000 being shown as current,partially

offset by an increase of $9,306 in prepaid expenses and other current assets, decreases of $991,411 in accounts payable and accrued expenses,

$876,148 in cash overdrafts, $1,038,057 in due to broker and $151,690 in lease liability – current portion.

As of July 31, 2023,

the outstanding balance on our line of credit was $9,020,000 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, we reached an agreement for a new loan modification agreement and credit facility which extended the maturity date to

June 29, 2022.

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.

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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.

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.

further explained in Note 5 to the condensed consolidated financial statements, we are subject to certain covenants with respect to our

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

We 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

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The outstanding balance on our lines of credit were $9,020,000 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

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

the nine months ended July 31, 2023, our operating activities provided net cash of $799,162 as compared to the nine months ended July

31, 2022 when operating activities used net cash of $2,820,251.

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

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

31, 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,

the nine months ended July 31, 2023, our investing activities used net cash of $721,696 as compared to the nine months ended July 31,

2022 when net cash used by investing activities was $1,357,066.

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.

decreased purchases of machinery and equipment during the nine months ended July 31, 2023.

the nine months ended July 31, 2023, our financing activities used net cash of $174,789 compared to net cash provided by financing activities

of $1,911,519 for the nine months ended July 31, 2022.

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

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 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 condensed 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