Quarterly Report for Quarter Ending April 30, 2026 (Form 10-Q)

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

Cautionary Note on Forward-Looking Statements

Some of the matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Risk Factors" and elsewhere in this quarterly report include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements upon information available to management as of the date of this quarterly report 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;
	●	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").

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "predict," "potential," "continue," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate" and similar expressions (or the negative of such expressions). Any or all of our forward-looking statements in this quarterly report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances, that occur after the date of this quarterly report.

Overview

We are an integrated wholesale coffee roaster and dealer primarily in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. As a result, we believe that we are well-positioned to increase our profitability and endure potential coffee price volatility throughout varying cycles of the coffee market and economic conditions.

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 operating results are affected by a number of factors including:

	●	the level of marketing and pricing competition from existing or new competitors in the coffee industry;
	●	our ability to retain existing customers and attract new customers;

	●	our hedging policy;
	●	fluctuations in purchase prices and supply of green coffee and in the selling prices of our products; and
	●	our ability to manage inventory and fulfillment operations and maintain gross margins.

Our net sales are driven primarily by the success of our sales and marketing efforts and our ability to retain existing customers and attract new customers. For this reason, we have made, and will continue to evaluate, strategic decisions to invest in measures that are expected to increase net sales. These transactions include our acquisition of Premier Roasters, LLC, including equipment and a roasting facility in La Junta, Colorado, the addition of a west coast sales manager to increase sales of our private label and branded coffees to new customers and the transaction with OPTCO. On June 29, 2016, we purchased substantially all the assets, including equipment, inventory, customer lists and relationships of Coffee Kinetics, LLC., a Washington limited liability company. On February 24, 2017, we acquired 100% of the capital stock of Common Foods, Inc. ("CFI"), a Massachusetts based medium sized coffee roaster, manufacturing both branded and private label coffee for retail and foodservice customers. On November 11, 2024, we acquired substantially all of the assets of Empire Coffee Company, a New York-based long-running private-label roaster.

Our net sales are affected by the price of green coffee. We purchase our green coffee from dealers located primarily within the United States. The dealers supply us with coffee beans from many countries, including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. For example, in Brazil, which produces approximately 40% of the world's green coffee, the coffee crops are historically susceptible to frost in June and July and drought in September, October and November. However, because we purchase coffee from a number of countries and are able to freely substitute one country's coffee for another in our products, price fluctuations in one country generally have not had a material impact on the price we pay for coffee. Accordingly, price fluctuations in one country generally have not had a material effect on our results of operations, liquidity and capital resources. Historically, because we generally have been able to pass green coffee price increases through to customers, increased prices of green coffee generally result in increased net sales, irrespective of sales volume.

The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Historically, we have used, and intend to continue to use in a limited capacity, short-term coffee futures and options contracts primarily for the purpose of partially hedging the effects of changing green coffee prices, as further explained in Note 2 of the Notes to the condensed consolidated financial statements in this quarterly report. In addition, we acquired, and expect to continue to acquire, future contracts with longer terms, generally three to four months, primarily for the purpose of guaranteeing an adequate supply of green coffee. Realized and unrealized gains or losses on options and futures contracts are reflected in our cost of sales. Gains on options and futures contracts reduce our cost of sales and losses on options and futures contracts increase our cost of sales. The use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices. We believe that, in normal economic times, our hedging policies remain a vital element to our business model not only in controlling our cost of sales, but also giving us the flexibility to obtain the inventory necessary to continue to grow our sales while trying to minimize margin compression during a time of historically high coffee prices. However, no strategy can entirely eliminate pricing risks and we generally remain exposed to losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain exposed to supply risk in the event of non-performance by the counterparties to any of our futures contracts. Although we have had net gains on options and futures contracts in the past, we have incurred significant losses on options and futures contracts during some recent reporting periods. In these cases, our cost of sales has increased, resulting in a decrease in our profitability or increase our losses. Such losses have and could in the future, materially increase our cost of sales and materially decrease our profitability and adversely affect our stock price. See "Part II. Item 1A - Risk Factors - If our hedging policy is not effective, we may not be able to control our coffee costs, we may be forced to pay greater than market value for green coffee and our profitability may be reduced." Failure to properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If the hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedges result in losses, our cost of sales may increase, resulting in a decrease in profitability or increased losses. As previously announced, as a result of the volatile nature of the commodities markets, we have and are continuing to scale back our use of hedging and short-term trading of coffee futures and options contracts, and intend to continue to use these practices in a limited capacity going forward.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies during the three and six months ended April 30, 2026. Critical accounting policies and the significant estimates in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under "Critical Accounting Policies and Estimates" in "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in our consolidated financial statements and notes thereto, each in our 2025 10-K.

RESULTS OF OPERATIONS

Three Months Ended April 30, 2026 Compared to the Three Ended April 30, 2025

Net Sales. Net sales totaled $22,126,156 for the three months ended April 30, 2026, a decrease of 1,193,905, or 5.1%, from $23,320,061 for the three months ended April 30, 2025. The decrease in net sales was primarily attributable to the rapid decline in green coffee prices that began in late January and continued throughout the quarter. In response to these market conditions, the Company reduced prices and increased promotional activity for its wholesale roasted coffee customers. In addition, the Company charged lower prices to its wholesale green coffee customers due to the decline in prevailing coffee market prices during the quarter.

Cost of Sales. Cost of sales for the three months ended April 30, 2026, was $18,639,088, or 84.2% of net sales, as compared to $19,589,889, or 84.0% of net sales, for the three ended April 30, 2025. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. While cost of sales decreased due to lower sales volume, cost of sales as a percentage of net sales increased slightly, primarily due to higher product and packaging costs during the current quarter.

Gross Profit. Gross profit for the three months ended April 30, 2026, was $3,487,068, a decrease of $243,104 from $3,730,172 for the three months ended April 30, 2025. Gross profit as a percentage of net sales was 15.8% for the three months ended April 30, 2026, compared to 16.0% for the three months ended April 30, 2025. The decrease in gross profit was primarily attributable to the lower sales volumes and pricing pressures discussed above.

Operating Expenses. Total operating expenses increased by $303,015 to $3,144,572 for the three months ended April 30, 2026, from $2,841,557 for the three months ended April 30, 2025. Selling and administrative expenses increased from $2,598,283 for the three months ended April 30, 2025, to $2,943,955 for the three months ended April 30, 2026. Operating expenses increased slightly compared to the prior-year period but remained generally consistent with historical levels.

Other Income (Expense). Other expense for the three months ended April 30, 2026 was $39,619, an increase of $22,132 from other income of $17,487 for the three months ended April 30, 2025. The increase in expense was primarily attributable to higher interest expense related to increased borrowings outstanding under the Company's line of credit during the current periods.

Income Before Provision For Income Taxes. We had income of $302,877 before income taxes for the three months ended April 30, 2026, compared to income of $871,128 for the three months ended April 30, 2025, resulting in a net change of $568,251 for the three months ended April 30, 2026. The decrease was primarily attributable to the market conditions described above.

Income Taxes. Our expense for income taxes for the three months ended April 30, 2026 totaled $40,388, compared to an expense of $227,073 for the three months ended April 30, 2025. The change was attributable to the difference in the income for the three months ended April 30, 2026 versus the three months ended April 30, 2025.

Net Income. We had net income of $262,489 or $0.05 per share basic and diluted, for the three months ended April 30, 2026, compared to net income of $644,055, or $0.11 per share basic and diluted, for the three months ended April 30, 2025. The change in net income was due to our results of operations as described above.

Six Months Ended April 30, 2026 Compared to the Six Ended April 30, 2025

Net Sales. Net sales totaled $47,691,996 for the six months ended April 30, 2026, an increase of $3,066,650, or 6.9%, from $44,625,346 for the six months ended April 30, 2025. The increase in net sales was driven by higher sales to legacy customers, incremental sales to new customers, and a full six months of Second Empire customer sales in the current periods, partially offset by the loss of Comfort Foods customer sales.

Cost of Sales. Cost of sales for the six months ended April 30, 2026, was $38,079,991, or 79.8% of net sales, as compared to $36,009,105, or 80.69% of net sales, for the six months ended April 30, 2025. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. For the six months ended April 30, 2026, the net result of our hedging activities resulted in a gain of approximately 161,048, compared to the six months ended April 30, 2025, in which the net result of our hedging activities resulted in a gain of approximately 1,456,722. The increase in cost of sales was primarily attributable to higher sales volume during the current period and lower gains from hedging activities compared to the prior-year period. Despite the increase in cost of sales dollars, cost of sales as a percentage of net sales decreased compared to the prior-year period.

Gross Profit. Gross profit for the six months ended April 30, 2026, was $9,612,005, an increase of $995,764 from $8,616,241 for the six months ended April 30, 2025. Gross profit as a percentage of net sales was 20.2% for the six months ended April 30, 2026, compared to 19.3% for the six months ended April 30, 2025. The change in gross profit was due to our results of net sales and cost of sales as described above.

Operating Expenses. Total operating expenses increased by $756,172 to $6,892,767 for the six months ended April 30, 2026, from $6,136,595 for the six months ended April 30, 2025. Selling and administrative expenses increased from $5,682,024 for the six months ended April 30, 2025, to $6,483,162 for the six months ended April 30, 2026. Operating expenses increased modestly compared to the prior-year period, while continuing to benefit from improved operating efficiencies and lower administrative costs.

Other Income (Expense). Other expense for the six months ended April 30, 2026 was $105,350, an increase of $56,181 from other income of $49,170 for the six months ended April 30, 2025. The increase in expense was primarily attributable to higher interest expense related to increased borrowings outstanding under the Company's line of credit during the current periods.

Income Before Provision For Income Taxes. We had income of $2,613,887 before income taxes for the six months ended April 30, 2026, compared to income of $2,430,476 for the six months ended April 30, 2025, resulting in a net change of $183,411 for the six months ended April 30, 2026. The change was due to the conditions described above.

Income Taxes. Our expense for income taxes for the six months ended April 30, 2026 totaled $703,078, compared to an expense of $633,165 for the six months ended April 30, 2025. The change was attributable to the difference in the income for the six months ended April 30, 2026 versus the six months ended April 30, 2025.

Net Income. We had net income of $1,910,809 or $0.33 per share basic and diluted, for the six months ended April 30, 2026, compared to net income of $1,797,311, or $0.31 per share basic and diluted, for the six months ended April 30, 2025. The change in net income was due to our results of operations as described above.

Liquidity and Capital Resources

As of April 30, 2026, we had working capital of $23,193,100, which represented a $559,808 increase from our working capital of $22,633,292 at October 31, 2025. Our working capital remained relatively consistent during the periods.

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. ("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.

On 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 be 2.25%, (iii) provided that the maximum facility amount shall be $10,000,000 and (iv) adjusted certain definitions and terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement.

On 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.

On March 4, 2026, the Borrowers entered into a Twelfth Loan Modification Agreement with Webster, which amended the A&R Loan Agreement to extend the maturity date to December 28, 2026. All other terms of the Loan Agreement remain unchanged and in full force and effect.

Each of the A&R Loan Facility and A&R Loan Agreement contains 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. The outstanding balance on the Company's line of credit was $2,650,000 and $6,050,000 as of April 30, 2026, and October 31, 2025, respectively.

For the six months ended April 30, 2026, our operating activities provided net cash of $6,648,313, as compared to the six months ended April 30, 2025, when operating activities used net cash of $1,555,954, respectively. The increase primarily relates to decreases to inventory and accounts receivable offset by a decrease in accounts payable and accrued expenses.

For the six months ended April 30, 2026, our investing activities used net cash of $1,159,598, as compared to the six months ended April 30, 2025, when net cash used in investing activities was $992,907. The change is primarily attributable to capital expenditures related to leasehold improvements at the Second Empire location, as well as the purchase of an investment during the current six-month period.

For the six months ended April 30, 2026, our financing activities had net cash used of $3,867,813, compared to net cash provided by financing activities of $3,000,000, for the six months ended April 30, 2025. The year-over-year change in cash flows from financing activities was primarily attributable to activity on the Company's line of credit.

We 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.