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Item 7. Management’s Discussion and Analysis

2025-01-31 compared with 2024-02-09 · 55 added, 90 removed, 185 unchanged (44% of the section changed)

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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.

On November 11, 2024, we acquired substantially all of the assets of Empire

Coffee, a NY based long-running private-label roaster.

net sales are affected by the price of green coffee.

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purpose of partially hedging the effects of changing green coffee prices, as further explained in Note 2 of the Notes to the Consolidated

Financial Statements in this Report.

In addition, we acquired, and expect to continue to acquire, futures contracts with longer terms,

generally three to four months, primarily for the purpose of guaranteeing an adequate supply of green coffee.

Financial Statements in this Annual Report.

In addition, we acquired, and expect to continue to acquire, futures contracts with longer

terms, generally three to four months, primarily for the purpose of guaranteeing an adequate supply of green coffee.

Realized and unrealized

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to use these practices in a limited capacity going forward.

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

Merger Sub will merge with and into 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.

description of recent events of the Company in Item 1 – “Recent Developments”.

Accounting Policies and Estimates

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At October 31, 2024 our balance sheet reflected intangible assets as set forth below:

October 31, 2023

Customer list and relationships, net

Customer list and relationships,

Trademarks and tradenames

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For the fiscal year ended October 31, 2024, 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 gain of approximately $1.6 million, and for the fiscal year ended October 31, 2023, the net result

of our hedging activities resulted in a loss of approximately $189,000.

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,

The increase in the cost of sales was due to higher sales

volume, salaries and packaging materials offset by the hedging activities discussed above.

Gross profit for the fiscal year ended October 31, 2024 was $16,041,769 an increase of $5,082,747 from $10,959,022 for

the fiscal year ended October 31, 2023.

Gross profit as a percentage of net sales increased to 20% for the fiscal year ended October

31, 2024, from 16% for the fiscal year ended October 31, 2023.

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

The increase in gross profit percentage was attributable to higher sales

volume during the current year.

Total operating expenses increased by $787,494 to $13,078,211 for the fiscal year ended October 31, 2024, from $12,290,717

for the fiscal year ended October 31, 2023.

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

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.

Selling and administrative expenses increased from $11,680,782 for the year ended October

31, 2023, to $12,457,268 for the fiscal year ended October 31, 2024.

Officers’ salaries increased from $609,935 for

the fiscal year ended October 31, 2023 to $620,943 for the fiscal year ended October 31, 2024.

Operating expenses increased primarily

due to an increase in freight charges relating to our increase in sales.

Income (Expense).

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

Other income for the fiscal year ended October 31, 2024 was $104,341, a decrease of $123,558 from other income

of $227,899 for the fiscal year ended October 31, 2023.

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

The decrease in other income of $123,558 was attributable to other income in

the prior year of $634,181 due to an insurance claim and a $650,000 gain from the sale of an investment offset by a decrease of $322,961

of interest expense, decrease from a loss from equity method investments of $511,878, and an increase from the gain from an extinguishment

of a lease of $210,567 in the current year.

Before Provision For Income Taxes.

We had an income of $3,135,145 before income taxes for the fiscal year ended October 31, 2024

compared to a loss of $1,103,796 for the fiscal year ended October 31, 2023, resulting in a net change of $4,238,941 for the year ended

October 31, 2024.

Our expense for income taxes for the fiscal year ended October 31, 2024 totaled $849,885, compared to a benefit of $268,220

for the fiscal year ended October 31, 2023.

The change was attributable to the difference in the income for the year ended October 31,

2023 versus fiscal year ended October 31, 2022.

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.

The change was attributable to the difference in the income for the fiscal year ended October

31, 2024 versus the fiscal year ended October 31, 2023.

Income (Loss) .

We had net income of $2.2 million, or $0.39 of per share basic and diluted, for the fiscal year ended October

31, 2024 compared to a net loss of ($835,576), or ($0.15) per share basic and diluted, for the fiscal year ended October 31, 2023.

decrease in net loss was due to our results of operations as described above.

and Capital Resources

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

of October 31, 2024, we had working capital of $21,526,983, which represented a $2,926,721 increase from our working capital of $18,600,262

as of October 31, 2023.

Our working capital increase was primarily due to the outstanding balance on our line of credit of $0 as of October

31, 2024, compared to $9,620,000 as of October 31, 2023.

April 25, 2017 we and OPTCO (together with us, collectively referred to herein as the “Borrowers”) entered into an Amended

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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

June 27, 2024, we reached an agreement for a new loan modification agreement with Webster which (i) provided for a new loan maturity

date of June 29, 2025, (ii) provided that the applicable margin requirement for any revolving loan outstanding under the A&R Loan

Agreement to 2.25%, (iii) provided that the maximum facility amount shall be $10,000,000 and (iv) to adjusted certain definitions and

terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement.

the fiscal year ended October 31, 2024, our operating activities provided net cash of $5,431,211 as compared to the fiscal year ended

October 31, 2023 when operating activities used net cash of $652,083.

The increased cash flow from operations for the fiscal year ended

October 31, 2024 was primarily due to our increased net income.

the fiscal year ended October 31, 2024, our investing activities provided net cash of $2,843,069 as compared to the fiscal year ended

October 31, 2023 when net cash used by investing activities was $857,760.

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

The increase in our uses of cash in investing activities was

due to our proceeds from the sale of our investment during the fiscal year ended October 31, 2024.

the fiscal year ended October 31, 2024 our financing activities had net cash used of $9,627,234 compared to net cash provided by financing

activities of $423,781 for the fiscal year ended October 31, 2023.

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.

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

ended October 31, 2024 was primarily due to our pay down of our line of credit.

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

through October 31, 2025 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.

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

the ordinary course.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-K

Item 7. Management’s Discussion and Analysis