What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-12 compared with 2025-06-13 · 98 added, 114 removed, 145 unchanged (59% of the section changed)

110 unchanged sentences

Accounting Policies and Estimates

have been no changes to our critical accounting policies during the three and six months ended April 30, 2025.

have been no changes to our critical accounting policies during the three and nine months ended July 31, 2025.

Critical accounting policies

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our 2024 10-K.

Months Ended April 30, 2025 Compared to the Three Months Ended April 30, 2024

Net sales totaled $23,320,061 for the three months ended April 30, 2025, an increase of $4,324,148, or 23%, from $18,995,913

for the three months ended April 30, 2024.

The increase in net sales was due to increased sales of our private label and Cafe Caribe

and Cafe Supremo products brands to our wholesale and retail customers.

Cost of sales for the three months ended April 30, 2025 was $18,901,189, or 81.1% of net sales, as compared to $15,291,933,

or 80.5% of net sales, for the three months ended April 30, 2024, an increase of $3,609,256.

Cost of sales consists primarily of the

cost of green coffee and packaging materials.

The increase in cost of sales relates to the increase in net sales of our private label

and branded products to both wholesale and retail customers.

Gross profit for the three months ended April 30, 2025 amounted to $4,418,872 or 18.9% of net sales, as compared to $3,703,980

or 19.5% of net sales, for the three months ended April 30, 2024.

The increase in gross profits on a percentage and dollar basis was

attributable to the factors listed above.

Total operating expenses decreased by $240,373 to $3,530,257 for the three months ended April 30, 2025 from $3,770,630

for the three months ended April 30, 2024.

Selling and administrative expenses decreased by $342,595 and officers’ salaries increased

The decrease in selling and administrative expenses was due to lower payroll costs and professional fees.

Months Ended July 31, 2025 Compared to the Three Months Ended July 31, 2024

Net sales totaled $23,910,514 for the three months ended July 31, 2025, an increase of $5,097,352, or 27%, from $18,813,162

for the three months ended July 31, 2024.

The increase in net sales was due to increased sales of our private label, Cafe Caribe, Cafe

Supremo brands, and green coffee beans to our wholesale and retail customers.

Cost of sales for the three months ended July 31, 2025 was $20,997,777, or 87.8% of net sales, as compared to $14,887,098,

or 79.1% of net sales, for the three months ended July 31, 2024, an increase of $6,110,679.

Cost of sales consists primarily of the cost

of green coffee and packaging materials.

The increase in cost of sales was driven by higher tariffs on imported coffee as well as a net

trading loss of approximately $770,000 or 14 cents a share, related to coffee futures and options contracts, which are recorded in cost

of sales in accordance with our accounting policy for commodities held by broker (see Note 5).

In addition, the increase reflects higher

net sales of our private label, branded products, and green wholesale coffee across both wholesale and retail channels.

Gross profit for the three months ended July 31, 2025 amounted to $2,912,737 or 12.2% of net sales, as compared to $3,926,064

or 20.9% of net sales, for the three months ended July 31, 2024.

The decrease in gross profits on a percentage and dollar basis was attributable

to the factors listed above.

Total operating expenses increased by $801,687 to $4,007,888 for the three months ended July 31, 2025 from $3,206,201

for the three months ended July 31, 2024.

The increase in selling and administrative expenses was primarily due to the acquisition of

Empire Coffee Company.

Income (Expense).

Other income for the three months ended April 30, 2025 was $17,487, a decrease of $15,336 from other income

of $32,823 for the three months ended April 30, 2024.

The change was attributable to a decrease in interest expense of $55,701.

Our expense for income taxes for the three months ended April 30, 2025 totaled $227,073 compared to our benefit of $77,632

for the three months ended April 30, 2024.

Other expense for the three months ended July 31, 2025 was $92,683, a decrease of $258,865 from other income

of $166,182 for the three months ended July 31, 2024.

The change was mainly attributable to a decrease in gain on extinguishment of lease

Our expense for income taxes for the three months ended July 31, 2025 was $17,584 compared to our expense of $259,249

for the three months ended July 31, 2024.

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

April 30, 2025, versus the loss in the quarter ended April 30, 2024.

July 31, 2024, versus the loss in the quarter ended July 31, 2025.

Income (Loss).

We had net income of $644,055, or $0.11 per share basic and diluted, for the three months ended April 30, 2025,

compared to a net loss of $21,841, or $0.00 per share basic and diluted, for the three months ended April 30, 2024.

Months Ended April 30, 2025, Compared to the Six Months Ended April 30, 2024

Net sales totaled $44,625,346 for the six months ended April 30, 2025, an increase of $6,089,031, or 16%, from $38,536,315

for the six months ended April 30, 2024.

The increase in net sales was due to increased sales of our private label and Cafe Caribe and

Cafe Supremo products brands to our wholesale and retail customers.

Cost of sales for the six months ended April 30, 2025 was $34,474,548, or 77.3% of net sales, as compared to $31,352,036,

or 81.4% of net sales, for the six months ended April 30, 2024.

We had net loss of $1,205,413, or ($0.21) per share basic and diluted, for the three months ended July 31, 2025,

compared to a net income of $626,796, or $0.11 per share basic and diluted, for the three months ended July 31, 2024.

The decrease in

profitability was primarily due to higher cost of sales, which included the impact of tariffs on imported coffee and a net trading loss

on coffee-related futures and options contracts (see Note 5), as well as increased operating expenses.

Months Ended July 31, 2025, Compared to the Nine Months Ended July 31, 2024

Net sales totaled $68,535,860 for the nine months ended July 31, 2025, an increase of $11,186,383, or 20%, from $57,349,477

for the nine months ended July 31, 2024.

The increase in net sales compared to the prior period was primarily attributable to higher

sales of our private-label brands, Café Caribe and Café Supremo, as well as increased sales of green coffee beans to both

wholesale and retail customers.

Cost of sales for the nine months ended July 31, 2025, was $55,253,979, or 80.6% of net sales, as compared to $46,239,134,

or 80.6% of net sales, for the nine months ended July 31, 2024.

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

materials and realized and unrealized gains or losses on hedging activity.

This increase in gross margin was due to favorable green coffee

prices that were initiated during the six months ended April 30, 2025, for our roasted coffee customers and the cost of goods sold was

favorably impacted by improved inventory management, along with increased prices to both our wholesale and retail customers, reflecting

higher market conditions.

Additionally, net sales increased due to higher sales of our private label and branded products to both wholesale

and retail customers.

Gross profit for the six months ended April 30, 2025 amounted to $10,150,798 or 22.8% of net sales, as compared to $7,184,279

or 18.6% of net sales, for the six months ended April 30, 2024.

The increase in gross profits on a percentage basis was attributable

to the factors listed above.

Total operating expenses increased by $1,037,134 to $7,671,152 for the six months ended April 30, 2025 from $6,634,018

for the six months ended April 30, 2024.

Selling and administrative expenses increased by $896,956 and officers’ salaries increased

Operating expenses increased for the six months ended April 30, 2025 compared to the six months ended April 30, 2024 primarily

due to the acquisition of Second Empire adding approximately $1.3 to operating expenses for the six months ended.

The increase of $9,014,845 was primarily attributable to higher

sales volumes of our private label and branded products, as well as the impact of tariffs on imported coffee.

In addition, cost of sales

reflects the effect of our futures and options trading activity, which resulted in a net gain of approximately $687,000 for the nine-month

period ended July 31, 2025, that was recognized in cost of sales in accordance with our accounting policy for commodities held by broker

(see Note 5).

Gross profit for the nine months ended July 31, 2025 amounted to $13,281,881 or 19.4% of net sales, as compared to $11,110,343

or 19.4% of net sales, for the nine months ended July 31, 2024.

The increase in gross profit was primarily attributable to higher sales

volumes of our private-label and branded products, as well as green coffee beans, partially offset by the impact of tariffs on imported

Gross profit also reflects the effect of our coffee futures and options trading activity, which resulted in a net gain of approximately

$687,000 for the nine-month period ended July 31, 2025 that was recognized in cost of sales (see Note 5).

Total operating expenses increased by $2,057,167 to $11,897,386 for the nine months ended July 31, 2025, from $9,840,219

for the nine months ended July 31, 2024.

The year-over-year increase reflects the impact of the Second Empire Acquisition, which added

approximately $2.2 million to operating expenses during the nine-month period.

Income (Expense).

Other expense for the six months ended April 30, 2025 was $49,170, a decrease of $107,203 from $156,373 for

the six months ended April 30, 2024.

The decrease was attributable to a decrease in interest income of $34,390 and a decrease in our

interest expense of $141,564, during the six months ended April 30, 2024.

Our expense for income taxes for the six months ended April 30, 2025 totaled $633,165 compared to an expense of $64,705

for the six months ended April 30, 2024.

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

April 30, 2025 versus the income in the six months ended April 30, 2024.

Other expense for the nine months ended July 31, 2025 was $141,848, a decrease of $151,657 from other income

of $9,809 for the nine months ended July 31, 2024.

The decrease was mainly attributable to a decrease in gain on extinguishment of lease

of $210,538 and offset by decrease in our interest expense of $93,522, during the nine months ended July 31, 2024.

Our expense for income taxes for the nine months ended July 31, 2025 totaled $650,749 compared to an expense of $323,954

for the nine months ended July 31, 2024.

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

July 31, 2025 versus the income in the nine months ended July 31, 2024.

(Loss) Income.

We had net income of $1,797,311 or $0.31 per share basic and diluted, for the six months ended April 30, 2025

compared to net income of $329,183, or $0.06 per share basic and diluted for the six months ended April 30, 2024.

The increase in net

income was due primarily to the reasons described above.

We had net income of $591,898 or $0.10 per share basic and diluted, for the nine months ended July 31, 2025 compared

to net income of $955,979, or $0.17 per share basic and diluted for the nine months ended July 31, 2024.

The decrease in net income was

primarily due to higher operating expenses associated with the Second Empire Acquisition, the impact of tariffs on imported coffee, and

unrealized trading losses during the third quarter (see Note 5).

Capital Resources and Going Concern

of April 30, 2025, we had working capital of $25,831,578, which represented a $965,841 increase from our working capital of $21,526,983

as of October 31, 2024.

Our working capital increased primarily due to the $1,509,920 increase in inventory, a $1,221,965 increase in

due from broker, and a $779,055 increase in accounts receivable offset by a $3,000,000 increase on the line of credit.

April 25, 2017, we and one of our subsidiaries, Organic Products Trading Company, LLC (“OPTCO” and 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.

(“Webster”), which consolidated (i) the financing agreement between us

and Sterling, dated February 17, 2009, as modified, and (ii) the financing agreement between us, as guarantor, OPTCO and Sterling, dated

March 10, 2015, 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.

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, 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

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 further explained in Note 6 to the unaudited

condensed consolidated financial statements, we are required to maintain certain financial covenants with respect to our line of credit

We were not in compliance with these requirements as of October 31, 2023.

We have since received a waiver from the lender

on May 24, 2024 and are in compliance with all requirements.

of July 31, 2025, we had working capital of $20,979,529, a decrease of $547,454 compared to $21,526,983 as of October 31, 2024.

in working capital was primarily attributable to a $2,339,316 increase in accounts payable and accrued expenses, a $6,250,000 increase

in borrowings under our line of credit, and a $1,115,244 increase in due to broker.

The decrease was partially offset by a $5,979,428

increase in inventory, a $2,978,120 increase in due from broker, and a $717,207 increase in accounts receivable.

June 27, 2024, the Borrowers entered into the Tenth Loan Modification Agreement with Webster which amended the A&R Loan Agreement

12 unchanged sentences

The outstanding balance on our line of credit was $6,250,000 and

$0 as of April 30, 2025 and October 31, 2024, respectively.

the six months ended April 30, 2025, our operating activities used cash of $1,555,954 as compared to the six months ended April 30, 2024

when operating activities provided cash of $3,390,694.

The decrease in cash flow from operations was primarily due to the increase in

inventory from October 31, 2024 to April 30, 2025.

Non-cash charges, including depreciation and amortization, unrealized gain on commodities,

amortization of right-of-use assets, and deferred income taxes, resulted in cash used of $603,581 for the six months ended April 30,

2025 compared to non-cash charges provided of $24,165 for the six months ended April 30, 2024.

the six months ended April 30, 2025, our investing activities used cash of $992,907 as compared to the six months ended April 30, 2024

when net cash provided in investing activities was $2,925,927.

The decrease in our cash provided by investing activities was due to the

proceeds from the sale of an investment of $3,150,000 during the three months ended April 30, 2024.

the six months ended April 30, 2025, our financing activities provided net cash of $3,000,000 compared to net cash used in financing

activities of $6,622,909 for the six months ended April 30, 2024.

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

ended April 30, 2025 was primarily 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 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.

$0 as of July 31, 2025 and October 31, 2024, respectively.

the nine months ended July 31, 2025, operating activities used cash of $5,396,716, compared to cash provided by operating activities

of $5,209,235 for the nine months ended July 31, 2024.

The decrease in operating cash flow was primarily attributable to an increase

in inventory between October 31, 2024 and July 31, 2025.

The increase in inventory was primarily due to higher purchasing activity to

support our anticipated sales growth.

Non-cash charges, including depreciation and amortization, unrealized gains and losses on commodities,

amortization of right-of-use assets, and deferred income taxes, resulted in cash used of $1,102,564 in the nine months ended July 31,

2025, compared to cash used of $159,890 in the prior-year period.

the nine months ended July 31, 2025, investing activities used cash of $1,254,535, compared to cash provided of $2,879,320 in the nine

months ended July 31, 2024.

The year-over-year change primarily reflects proceeds of $3,150,000 from the sale of an investment in the

prior-year period, which did not recur in fiscal 2025.

the nine months ended July 31, 2025, financing activities provided net cash of $6,250,000, compared to net cash used of $7,724,374 in

the nine months ended July 31, 2024.

The change was primarily due to increased borrowings under our line of credit in the current year.

expect to fund our operations, including working capital needs, capital expenditures, and required debt service, for at least the next

twelve months from the date these condensed consolidated financial statements are issued, through a combination of cash provided by operating

activities and availability under 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

4 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-Q

Item 2. Management’s Discussion and Analysis