What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-09 compared with 2023-03-29 · 135 added, 163 removed, 140 unchanged (68% of the section changed)

18 unchanged sentences

economic conditions and conditions which affect the market for coffee;

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;

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;

macro global economic environment;

23 unchanged sentences

roasting, blending, packaging and sale of our eight brands of coffee;

of our tabletop coffee roasting equipment.

and sales of our tabletop coffee roasting equipment.

operating results are affected by a number of factors including:

4 unchanged sentences

ability to manage inventory and fulfillment operations and maintain gross margins.

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 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

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.

(“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.

net sales are affected by the price of green coffee.

48 unchanged sentences

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.

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

As a result 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

5 unchanged sentences

estimates used in the preparation of our consolidated financial statements.

Company recognizes revenue in accordance with the five-step model as prescribed by the Financial Accounting Standards Board (“FASB”)

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 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.

recognize revenue in accordance with the five-step model as prescribed by the Financial Accounting Standards Board (“FASB”)

Accounting Codification (“ASC”) Topic 606 (“ASC 606”) in which we evaluate the transfer of promised goods or

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

which we expect to be entitled to receive in exchange for those goods or services.

To determine revenue recognition for the arrangements

that we determine are within the scope of ASC 606, we perform the following five steps:

(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.

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

3 unchanged sentences

Trademarks and tradenames

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

Goodwill impairment tests require

the comparison of the fair value and carrying value of reporting units.

We assess the potential impairment of goodwill and indefinite

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

We assess the potential impairment of indefinite

lived intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value

3 unchanged sentences

whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

the Company is a single reporting unit, the company used a hybrid approach to determine the fair market value of the Company, which included

an income approach to conduct the annual impairment assessment.

Goodwill and the indefinite lived intangible assets are tested annually

at the end of each fiscal year to determine whether they have been impaired.

Upon completion of each annual review, there can be no assurance

that a material charge will not be recorded.

Impairment testing is required more often than annually if an event or circumstance indicates

that an impairment or decline in value may have occurred.

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

we are a single reporting unit, we used a hybrid approach to determine our fair market value, which included an income approach to conduct

the annual impairment assessment.

Indefinite lived intangible assets are tested annually at the end of each fiscal year to determine

whether they have been impaired.

Upon completion of each annual review, there can be no assurance that a material charge will not be

Impairment testing is required more often than annually if an event or circumstance indicates that an impairment or decline

in value may have occurred.

OF OPERATIONS

Ended October 31, 2023 (Fiscal Year 2023) Compared to the Year Ended October 31, 2022 (Fiscal Year 2022)

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,

Net sales totaled $68,173,404 for the fiscal year ended October 31, 2023, an increase of $2,466,525, or 4%, from $65,706,879

for the fiscal year ended October 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.

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.

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 for the fiscal year ended October 31, 2023 was $57,214,382, or 84% of net sales, as compared to $54,692,933,

or 83% of net sales, for the fiscal year ended October 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.

For the fiscal year ended October 31, 2023, the net result

of our hedging activities resulted in a gain of approximately $189,000, and for the fiscal year ended October 31, 2022, the net result

of our hedging activities resulted in a loss of approximately $100,000.

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

green coffee, freight, salaries and packaging materials.

Gross profit for the fiscal year ended October 31, 2023 was $10,959,022, a decrease of $54,924 from $11,013,946 for the

fiscal year ended October 31, 2022.

Gross profit as a percentage of net sales decreased to 16% for the fiscal year ended October 31,

2023 from 17% for the fiscal year ended October 31, 2022.

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.

The decrease in gross profit percentage was attributable to higher raw material

Total operating expenses decreased by $4,862,129 to $12,290,717 for the fiscal year ended October 31, 2023 from $16,352,846

for the fiscal year ended October 31, 2022.

Selling and administrative expenses decreased $2,108,250, to $11,680,782 for the fiscal year

ended October 31, 2023 from $12,989,032 for the fiscal year ended October 31, 2022.

Goodwill and other intangible impairment during fiscal

year ended October 31, 2023 amounted to $0.

A decrease of $2,769,552 as compared to fiscal year ended October 31, 2022.

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.

decreased primarily due to the termination of our Generations joint venture and no operating expenses for this joint venture for the

year ended October 31, 2023 compared to the year ended October 31, 2022, partially offset by increase in various other categories.

Income (Expense).

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

Other income for the fiscal year ended October 31, 2023 was $227,899, an increase of $485,649 from other expense

of $258,750 for the fiscal year ended October 31, 2022.

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 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

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

of $634,181 due to an insurance claim and a $650,000 gain from the sale of an investment, an increase in interest income of $4,853, partially

offset by an increase in interest expense of $338,308 and an increase in our loss from equity investments of $464,077.

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

We had a loss of $1,103,796 before income taxes and

non-controlling interest in subsidiary for the fiscal year ended October 31, 2023 compared to a loss of $5,597,650 for the fiscal year

ended October 31, 2022, resulting in a net change of $4,493,854 for the year ended October 31, 2023.

Our benefit for income taxes for the fiscal year ended October 31, 2023 totaled $268,220 compared to a benefit of $995,793

for the fiscal year ended October 31, 2022.

1 unchanged sentence

2023 versus fiscal year ended October 31, 2022.

Income (Loss) .

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.

We had a net loss of $835,576 or $0.15 per share basic and diluted, for the fiscal year ended October 31, 2023 compared

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

The decrease in net loss

was due to our results as described above.

and Capital Resources

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”, 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.

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 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

restrictions, tangible net worth, net profit, leverage, employee loan restrictions, dividend and repurchase restrictions (common stock

and preferred stock), and restrictions on intercompany transactions.

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.

of October 31, 2023, we had working capital of $18,600,262, which represented a $6,661,962 decrease from our working capital of $25,262,224

as of October 31, 2022.

Our working capital decrease was primarily due to decreases of $265,675 in inventory, $500,279 in prepaid and

refundable taxes, $473,132 in due from broker, $18,374 in prepaid expenses and other current assets, increases of $1,391,578 in accounts

payable and accrued expenses, $34,891 in lease liability – current portion and the inclusion of our line of credit of $9,620,000,

partially offset by increases of $218,104 in cash, $3,316,559 in accounts receivable and decreases of $876,148 in cash overdraft and

$1,231,156 in due to broker As of October 31, 2023, the outstanding balance on our line of credit was $9,620,000 compared to $8,314,000

as of October 31, 2022.

April 25, 2017 we and OPTCO (together with us, 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 Corp.

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 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, 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 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

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

are subject to certain covenants with respect to our 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.

As of October 31, 2023, we

were not in compliance with the terms of the credit agreement.

The Company has not received a waiver from the lender.

The lender has reserved

its right to exercise its rights and remedies at any time at its sole discretion.

These conditions raise substantial doubt about the Company’s

ability to continue as a going concern.

Our audited consolidated financial statements do not include any adjustments for the recovery

and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue

as a going concern.

If we are unable to continue as a going concern, our shareholders would likely lose some or all their investment in

our securities.

the fiscal year ended October 31, 2023, our operating activities provided net cash of $652,083 as compared to the fiscal year ended October

31, 2022 when operating activities used net cash of $5,437,508.

The increased cash flow from operations for the fiscal year ended October

31, 2023 was primarily due to our lower net loss.

the fiscal year ended October 31, 2023, our investing activities used net cash of $857,760 as compared to the fiscal year ended

October 31, 2022 when net cash used by investing activities was $1,059,205.

The decrease in our uses of cash in investing activities

was due to our decreased outlays for purchases of machinery and equipment during the fiscal

year ended October 31, 2023.

the fiscal year ended October 31, 2023 our financing activities provided net cash of $423,781 compared to net cash provided in financing

activities of $5,316,311 for the fiscal year ended October 31, 2022.

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.

The change in cash flow from financing activities for the fiscal

year ended October 31, 2023 was due to our decreased advances from 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.

We are in the process of renewing

our credit facility.

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

5 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