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What changed in COFFEE HOLDING CO INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COFFEE HOLDING CO INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+64 added−77 removedSource: 10-K (2024-02-09) vs 10-K (2023-03-29)

Top changes in COFFEE HOLDING CO INC's 2023 10-K

64 paragraphs added · 77 removed · 47 edited across 3 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

12 edited+8 added−13 removed133 unchanged
Biggest changeIf our brand-building strategy is unsuccessful, these expenses may never be recovered, and we may be unable to increase awareness of our brands or protect the value of our brands. If we are unable to achieve these goals, our revenues and ability to implement our business strategy could be adversely affected.
Biggest changeWe believe that promoting and enhancing our brands is critical to our success. If our brand-building strategy is unsuccessful, these expenses may never be recovered, and we may be unable to increase awareness of our brands or protect the value of our brands.
Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill, indefinite lived intangible assets, or amortizable intangible assets were determined, negatively impacting our results of operations. 15 Our indebtedness may adversely affect our ability to obtain additional funds and may increase our vulnerability to economic or business downturns.
Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our indefinite lived intangible assets or amortizable intangible assets were determined, negatively impacting our results of operations. 15 Our indebtedness may adversely affect our ability to obtain additional funds and may increase our vulnerability to economic or business downturns.
Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, indefinite lived intangible assets, or amortizable intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows, and slower growth rates in our industry.
Factors that may be considered a change in circumstances indicating that the carrying value of our indefinite lived intangible assets or amortizable intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows, and slower growth rates in our industry.
In addition, we review our goodwill, indefinitely lived intangible assets, and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
In addition, we review our indefinitely lived intangible assets and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
No one customer accounted for greater than 10% of our net sales during our 2022 fiscal year. We generally do not enter long-term contracts with most of our customers. Accordingly, some of our customers can stop purchasing our products at any time without penalty and are free to purchase products from our competitors.
No one customer accounted for greater than 10% of our net sales during our 2023 fiscal year. We generally do not enter long-term contracts with most of our customers. Accordingly, some of our customers can stop purchasing our products at any time without penalty and are free to purchase products from our competitors.
If our goodwill, indefinitely lived intangible assets, or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings. GAAP requires us to test for goodwill and indefinite lived intangible asset impairment at least annually.
If our indefinitely lived intangible assets or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings. GAAP requires us to test indefinite lived intangible asset impairment at least annually.
The market price and trading volume of our common stock has been volatile over the past year and it may continue to be volatile. Over the past fiscal year, our common stock has traded as low as $2.14 and as high as $5.35 per share.
The market price and trading volume of our common stock has been volatile over the past year and it may continue to be volatile. Over the past fiscal year, our common stock has traded as low as $0.67 and as high as $2.78 per share.
We may experience supply delays and shortages due to a variety of macroeconomic factors, including disruptions on the global supply chain as a result of the ongoing COVID-19 pandemic.
We may experience supply delays and shortages due to a variety of macroeconomic factors, including disruptions on the global supply chain..
Our success in promoting and enhancing our brands will also depend on our ability to provide customers with high quality products and service. Although we take measures to ensure that we sell only fresh roasted coffee, we have no control over our roasted coffee products once they are purchased by our customers.
Although we take measures to ensure that we sell only fresh roasted coffee, we have no control over our roasted coffee products once they are purchased by our customers.
Because we rely on a single commodity, any decrease in demand for coffee would harm our business more than if we had more diversified product offerings and could materially adversely affect our revenues and operating results. 11 The COVID-19 pandemic has, and may continue to have, an adverse impact on our business, financial condition and results of operations.
Because we rely on a single commodity, any decrease in demand for coffee would harm our business more than if we had more diversified product offerings and could materially adversely affect our revenues and operating results. 11 Unfavorable global economic conditions and adverse developments with respect to financial institutions and associated liquidity risk could adversely affect our business, financial condition and stock price.
If we are unable to make payments on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our debt.
If we are unable to make payments on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our debt. Our credit facility contains covenants that place annual restrictions on our operations, including covenants relating to fixed charge coverage ratio, debt to tangible net worth and net worth.
From time to time, we utilize borrowings under our credit facility in connection with operations.
From time to time, we utilize borrowings under our credit facility in connection with operations. The line is coming due at June 30, 2024. There is no assurance that it will be renewed.
Removed
The World Health Organization declared the novel coronavirus (COVID-19), first identified in Wuhan, China, a pandemic in March 2020. Our business, financial condition and results of operations have been and are expected to continue to be adversely affected by the COVID-19 pandemic.
Added
The Company as of October 31, 2023 has failed to comply with one of these covenants and resulted in an event of default under the loan agreement. The lender has various defenses that it can apply against the Company, which includes up to and calling the line of credit.
Removed
The COVID-19 pandemic has affected nearly all regions of the world, and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdown or shutdown in affected areas. This has and could continue to negatively affect the global economy, including reduced consumer spending and disruption of global supply chains.
Added
There is no guarantee that the lender will not issue a waiver or not call the line of credit. There is substantial doubt about our ability to continue as a going concern. The Company’s line of credit is maturing on June 30, 2024 and in addition there are certain financial covenants that the Company are in violation with the lender.
Removed
We cannot predict the degree to which our business, financial condition and results of operations will be affected by the COVID-19 pandemic, but the effects could be material.
Added
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.
Removed
In addition to the factors above, the COVID-19 pandemic has subjected our business to additional risk, including, but not limited to: ● Disruption to our green coffee supplier partners and vendors, including through the effects of facility closures, reductions in operating hours, labor shortages, and changes in operating procedures; ● Disruption to our own distribution and general office facilities and operations, including through the effects of facility closures, reductions in operating hours, labor shortages, and changes in operating procedures, including for additional cleaning and disinfection procedures; ● Closure or reduced operations of cafes, restaurants and food service stores and reductions in consumer traffic, which may adversely affect our Private Label Coffee and Branded Coffee channels; ● Lower performance of customers in our wholesale channel, which may result in reduction or cancellation of future orders; ● Reductions in consumer spending due to macroeconomic conditions caused by the COVID-19 pandemic, including decreased disposable income and increased unemployment, which may result in decreased sales in all of our channels.
Added
The uncertainties surrounding the ability to receive a waiver and extending its line of credit when it becomes due raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they become due within twelve months from the date the consolidated financial statements were issued.
Removed
At this time, we cannot assess the ultimate economic impact of the COVID-19 pandemic on our business, operations or financial performance, which will be determined by, among other things, the duration, severity and magnitude of such circumstances and governmental responses and requirements relating to the pandemic, nor can we predict the long-term effects of governmental and public responses to changing conditions.
Added
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.
Removed
The extent to which the COVID-19 pandemic will impact our operations, liquidity or financial results in subsequent periods is uncertain, but such impact could be material.
Added
If we are unable to continue as a going concern, our shareholders would likely lose some or all of their investment in our securities. There can be no assurance that we will be able to extend our line of credit or complete any financing transaction in a timely manner or on acceptable terms or otherwise.
Removed
If the COVID-19 pandemic becomes prolonged, and/or more severe, it could exacerbate the negative impacts on our business and results of operations and may also heighten many of the other risks described in this section entitled “Risk Factors.” Unfavorable global economic conditions and adverse developments with respect to financial institutions and associated liquidity risk could adversely affect our business, financial condition and stock price.
Added
If we are not successful to extend our line of credit or to raise additional cash, we may be forced to suspend or curtail planned programs, or cease operations altogether. If we fail to promote, enhance and maintain our brands, the value of our brands could decrease and our revenues and profitability could be adversely affected.
Removed
More recently, the closures of Silicon Valley Bank, or SVB, and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation, or FDIC created bank-specific and broader financial institution liquidity risk and concerns.
Added
If we are unable to achieve these goals, our revenues and ability to implement our business strategy could be adversely affected. Our success in promoting and enhancing our brands will also depend on our ability to provide customers with high quality products and service.
Removed
Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty.
Removed
Our credit facility contains covenants that place annual restrictions on our operations, including covenants relating to debt restrictions, capital expenditures, minimum deposit restrictions, tangible net worth, net profit, leverage, employee loan restrictions, distribution restrictions (common stock and preferred stock), dividend restrictions and restrictions on intercompany transactions.
Removed
The credit facility also requires that we maintain a minimum working capital at all times. There can be no assurance that we will be in compliance with all covenants in the future or that we will be able to modify the terms of the credit facility should that become necessary.
Removed
Failure to comply with any of these covenants and restrictions would result in an event of default under the loan agreement. If we fail to promote, enhance and maintain our brands, the value of our brands could decrease and our revenues and profitability could be adversely affected. We believe that promoting and enhancing our brands is critical to our success.
Removed
The ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers and the related transportation of their goods to the United States that are parts of our global supply chain.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+0 added−0 removed1 unchanged
Biggest changeAs of March 15, 2023, we had 167 holders of record.
Biggest changeAs of January, 15 2024, we had 170 holders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

34 edited+9 added−17 removed30 unchanged
Biggest changeWe 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: ● our dependency on a single commodity could affect our revenues and profitability; ● our success in expanding our market presence in new geographic regions; ● the effectiveness of our hedging policy may impact our profitability; ● the success of our joint ventures; ● our success in implementing our business strategy or introducing new products; ● our ability to attract and retain customers; ● our ability to obtain additional financing; ● our ability to comply with the restrictive covenants we are subject to under our current financing; ● the effects of competition from other coffee manufacturers and other beverage alternatives; ● the impact 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, 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; ● our 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; ● the macro global economic environment; ● our ability to maintain and develop our brand recognition; ● the impact of rapid or persistent fluctuations in the price of coffee beans; ● fluctuations in the supply of coffee beans; ● the volatility of our common stock; and ● other risks which we identify in future filings with the Securities and Exchange Commission (the “SEC”).
Biggest changeWe 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: ● our dependency on a single commodity could affect our revenues and profitability; ● our success in expanding our market presence in new geographic regions; ● the effectiveness of our hedging policy may impact our profitability; ● the success of our joint ventures; ● our success in implementing our business strategy or introducing new products; ● our ability to attract and retain customers; ● our ability to obtain additional financing; ● our ability to comply with the restrictive covenants we are subject to under our current financing; ● the effects of competition from other coffee manufacturers and other beverage alternatives; ● the impact to the operations of our Colorado facility; ● general economic conditions and conditions which affect the market for coffee; ● the macro global economic environment; ● our ability to maintain and develop our brand recognition; ● the impact of rapid or persistent fluctuations in the price of coffee beans; ● fluctuations in the supply of coffee beans; ● the volatility of our common stock; and ● other risks which we identify in future filings with the Securities and Exchange Commission (the “SEC”).
Our operations have primarily focused on the following areas of the coffee industry: ● the sale of wholesale specialty green coffee; ● the roasting, blending, packaging and sale of private label coffee; ● the roasting, blending, packaging and sale of our eight brands of coffee; and sales of our tabletop coffee roasting equipment.
Our operations have primarily focused on the following areas of the coffee industry: ● the sale of wholesale specialty green coffee; ● the roasting, blending, packaging and sale of private label coffee; and ● the roasting, blending, packaging and sale of our eight brands of coffee; and sales of our tabletop coffee roasting equipment.
We expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness, through October 31, 2023 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 expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness, through October 31, 2024 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.
Recent Events On 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.
Recent Events On 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.
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: (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.
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.
Because 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.
Because 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.
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 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.
On 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. All other terms of the A&R Loan Agreement and A&R Loan Facility remained the same.
On 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. On June 28, 2022, we reached an agreement for a new loan modification agreement and credit facility with Webster.
The 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.
We 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.
Our benefit for income taxes for the fiscal year ended October 31, 2022 totaled $995,793 compared to a provision of $340,180 for the fiscal year ended October 31, 2021. The change was attributable to the difference in the income for the year ended October 31, 2022 versus fiscal year ended October 31, 2021. Net Income (Loss) .
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. The change was attributable to the difference in the income for the year ended October 31, 2023 versus fiscal year ended October 31, 2022. Net Loss .
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.
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.
At October 31, 2022 our balance sheet reflected intangible assets as set forth below: October 31, 2022 Customer list and relationships, net $ 215,250 Trademarks and tradenames 327,000 $ 542,250 Goodwill and the trademarks which are deemed to have indefinite lives are subject to annual impairment tests.
At October 31, 2023 our balance sheet reflected intangible assets as set forth below: October 31, 2023 Customer list and relationships, net $ 184,750 Trademarks and tradenames 327,000 $ 511,750 The trademarks which are deemed to have indefinite lives are subject to annual impairment tests.
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.
We 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.
We are in the process of renewing our credit facility. We 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.
For the fiscal year ended October 31, 2022, our financing activities provided net cash of $5,316,311 compared to net cash used in financing activities of $1,047 for the fiscal year ended October 31, 2021.
For 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.
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.
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.
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. Income Taxes .
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. Income Taxes .
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.
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.
Net sales 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.
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. 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. Cost 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, for the fiscal year ended October 31, 2021.
Cost of Sales. 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.
The decrease in net income was due to our results as described above. 27 Liquidity 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.
The decrease in net loss was due to our results as described above. 27 Liquidity and Capital Resources As 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.
For 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 increased cash flow from operations for the fiscal year ended October 31, 2023 was primarily due to our lower net loss. For 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 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.
We 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.
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 lived intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
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.
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. Gross profit as a percentage of net sales decreased to 17% for the fiscal year ended October 31, 2022 from 25% for the fiscal year ended October 31, 2021.
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. Operating Expenses.
On 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 things.
(“Webster”), 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.
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.
Upon completion of each annual review, there can be no assurance that a material charge will not be recorded.
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. Other Income (Expense). Other expense for the fiscal year ended October 31, 2022 was $258,750, an increase of $21,452 from other expense of $237,298 for the fiscal year ended October 31, 2021.
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 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.
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.
However, after further analysis, management has decided not to pursue commercialization or development of any beverages or products of this nature. Our net sales are affected by the price of green coffee. We purchase our green coffee from dealers located primarily within the United States.
As of the fiscal period ending January 31, 2022, we agreed with Generations to no longer move forward with this joint venture. Our net sales are affected by the price of green coffee. We purchase our green coffee from dealers located primarily within the United States.
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.
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.
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.
The increase in cost of sales was due to increased prices of green coffee, freight, salaries and packaging materials. Gross Profit. 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.
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.
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.
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. Income (Loss) Before Provision For Income Taxes And Non-Controlling Interest In Subsidiary.
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.
Removed
As of the fiscal period ending January 31, 2022, we agreed with Generations to no longer move forward with this joint venture. In October 2020, we entered into the Jordre Well Agreement to become a 49% owner in The Jordre Well, a CBD beverage company.
Added
Impairment testing is required more often than annually if an event or circumstance indicates that an impairment or decline in value may have occurred. 26 RESULTS OF OPERATIONS Year Ended October 31, 2023 (Fiscal Year 2023) Compared to the Year Ended October 31, 2022 (Fiscal Year 2022) Net Sales.
Removed
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.
Added
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. Other Income (Expense).
Removed
For 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.
Added
Loss Before Provision For Income Taxes And Non-Controlling Interest In Subsidiary.
Removed
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.
Added
On 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.
Removed
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 method. 26 Year Ended October 31, 2022 (Fiscal Year 2022) Compared to the Year Ended October 31, 2021 (Fiscal Year 2021) Net Sales.
Added
The lender also extended the due date of the October 31, 2022 financial statements until April 15, 2023.
Removed
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. 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.
Added
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.
Removed
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.
Added
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.
Removed
On March 13, 2020, we reached an agreement for a new loan modification agreement and credit facility with Sterling.
Added
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.
Removed
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%).
Added
If we are unable to continue as a going concern, our shareholders would likely lose some or all their investment in our securities. 28 For 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.
Removed
On June 28, 2022, we reached an agreement for a new loan modification agreement and credit facility with Webster Bank.
Removed
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 remain the same.
Removed
Each 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 effect.
Removed
Each 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.
Removed
On June 28, 2022, the Company reached an agreement for a new loan modification agreement and credit facility with Webster Bank.
Removed
The loan agreement was also modified on March 15, 2023.
Removed
The amendment, among other things: (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. 28 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.
Removed
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.

Other JVA 10-K year-over-year comparisons