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Item 7. Management’s Discussion and Analysis

2026-01-28 compared with 2025-01-31 · 58 added, 80 removed, 160 unchanged (46% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note on Forward-Looking Statements

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We have based these forward-looking statements

upon information available to management as of the date of this Form 10-K and management’s expectations and projections about future

events, including, among other things:

upon information available to management as of the date of this Annual Report and management’s expectations and projections about

future events, including, among other things:

dependency on a single commodity could affect our revenues and profitability;

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impact of rapid or persistent fluctuations in the price of coffee beans;

● fluctuations

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”).

risks which we identify in future filings with the Securities and Exchange Commission (the

some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,”

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

and sales of our tabletop coffee roasting equipment.

and sales of our tabletop

coffee roasting equipment.

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;

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

ability to retain existing customers and attract new customers;

hedging policy;

● fluctuations

in purchase prices and supply of green coffee and in the selling prices of our products;

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to use these practices in a limited capacity going forward.

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

Accounting Policies and Estimates

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Generally Accepted Accounting Principles (“GAAP”).

Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to our consolidated

financial statements attached hereto.

We believe the following critical accounting policies involve the most significant judgements and

estimates used in the preparation of our consolidated financial statements.

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.

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

Customer list and relationships,

Trademarks and tradenames

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

may not be recoverable.

Upon completion of such review, if impairment is found to have occurred, a corresponding charge will be recorded.

The value assigned to the customer list and relationships is being amortized over a twenty-year period and a recoverability test is performed

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

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.

Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial

statements attached hereto.

We believe the following critical accounting policies involve the most significant judgements and estimates

used in the preparation of our consolidated financial statements.

is recognized when control of goods transfers to the customer at an amount that reflects the consideration the Company expects to receive.

Applying ASC 606 requires judgment in identifying performance obligations, determining the transaction price, and estimating variable

consideration such as rebates, discounts, and returns.

These estimates are based on historical experience, current contractual terms,

and expectations of future outcomes, and changes in these assumptions could impact the timing and amount of revenue recognized.

OF OPERATIONS

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of our hedging activities resulted in a gain of approximately $1.8 million, and for the fiscal year ended October 31, 2024, the net result

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

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 increase in gross profit percentage was attributable to higher sales

volume during the current year.

of our hedging activities resulted in a gain of approximately $1.6 million.

The increase in cost of sales was due to higher sales volume,

increased salaries, higher packaging material costs, and the impact of tariffs, partially offset by the hedging activities discussed

Gross profit for the fiscal year ended October 31, 2025 was $15,414,666, a decrease of $627,103 from $16,041,769

for the fiscal year ended October 31, 2024.

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

October 31, 2025, from 20% for the fiscal year ended October 31, 2024.

The decrease in gross profit percentage was

attributable to tariff costs in the current year.

Total operating expenses increased by $184,095 to $13,262,306 for the fiscal year ended October 31, 2025, from $13,078,211

for the fiscal year ended October 31, 2024.

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

Selling and administrative expenses decreased from $12,457,268 for the year ended October

31, 2024, to $12,418,640 for the fiscal year ended October 31, 2025.

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.

Overall operating expenses remained consistent year over year.

Income (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 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.

Other income (expense) for the fiscal year ended October 31, 2025 was $(231,232), a decrease of $335,573 from

other income of $104,341 for the fiscal year ended October 31, 2024.

The decrease in other income of $335,573 was attributable to the

gain recognized on the extinguishment of the lease in the prior year.

Before Provision For Income Taxes.

We had an income of $1,921,128 before income taxes for the fiscal year ended October 31, 2025

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

compared to income of $3,067,899 for the fiscal year ended October 31, 2024, resulting in a net change of $1,146,771 for the year ended

October 31, 2025.

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

The decrease was primarily attributable to increased costs associated with tariffs on imported goods, which negatively

impacted margins during the fiscal year ended October 31, 2025, as well as operating losses incurred by Second Empire following its acquisition

in November 2024.

Our expense for income taxes for the fiscal year ended October 31, 2025 totaled $517,689, compared to an expense of $849,885

for the fiscal year ended October 31, 2024.

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31, 2025 versus the fiscal year ended October 31, 2024.

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.

We had net income of $1,403,439, or $0.25 of per share basic and diluted, for the fiscal year ended October 31, 2025

compared to net income of $2,218,014, or $0.39 per share basic and diluted, for the fiscal year ended October 31, 2024.

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

and Capital Resources

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as of October 31, 2024.

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.

Our working capital increase was primarily due to the increase in inventories and accounts receivable.

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

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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 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

April 17, 2025, the Borrowers entered into the Eleventh Loan Modification Agreement with Webster which (i) amended the A&R Loan Agreement

to provide for a new loan maturity date of June 28, 2026 and (ii) provided limited consent for the Company to declare dividends to shareholders

for its fiscal year ending October 31, 2025.

the fiscal year ended October 31, 2025, our operating activities used net cash of $5,018,989 as compared to the fiscal year ended October

31, 2024 when operating activities provided net cash of $5,431,211.

The decrease primarily relates to increases to inventory and accounts

the fiscal year ended October 31, 2025, our investing activities used net cash of $1,710,162 as compared to the fiscal year ended October

31, 2024 when net cash provided by investing activities was $2,843,069.

The change is primarily attributable to capital expenditures

related to leasehold improvements at the Second Empire location, as well as equipment purchases and the acquisition of Second Empire.

the fiscal year ended October 31, 2025 our financing activities had net cash used of $6,050,000 compared to net cash used in financing

activities of $9,627,234 for the fiscal year ended October 31, 2024.

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.

The year-over-year change in cash flows from financing activities

was primarily attributable to activity on the Company’s 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, 2026 with cash provided by operating activities and the use of our credit facility.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

STATEMENTS AND SUPPLEMENTARY DATA

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

pages F-1 through F-22 following the Exhibit Index of this Annual Report on Form 10-K.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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