We incurred a net loss of $6.7 million and $4 million for the years ended January 31, 2014 and 2013, respectively, an increase of $2.7 million or 67% from the prior year.
The principal reason for the increase in net loss was a $2 million increase in total other expenses, mainly due to the extinguishment of certain liabilities in connection with our 2013 Ironridge Transactions and a $1 million increase in total operating expenses, offset by a $0.3 million increase in gross profit.
Ironridge was a very good financing partner and had provided financing when we needed it last year, which fueled our significant growth; however, we have no intentions, nor do we anticipate doing another transaction in the same format as we did with Ironridge in the foreseeable future.
We believe we’ve built the company well enough to get a direct financing into the company similar to what we did with Mother Parkers. We also expect to incur much smaller losses in Fiscal 2015 assuming we are able to continue implementing our business plan as described above.
As with the launch of any new brand, Marley Coffee has seen fluctuations in sales from quarter-to-quarter as we grow. Our distribution grew from 1,000 authorized stores to 10,000 last year. Without this critical expansion of retail coverage, we would not have the opportunities facing us today.
The tremendous leap in the number of storefronts carrying Marley Coffee required considerable pipeline fill for both retail and distributor systems, enabling us to post what we believe were phenomenal Fiscal 2014 Q2 and Q3 numbers.
With the pipeline fill complete, our revenues are now primarily based on a sustainable growth model driven by increases in product velocity. This is the natural evolution of all grocery retail companies and we are prepared for the challenge. This is also one of the main reasons for our quarter over quarter dip in revenues for fiscal Q4 Fiscal 2014.
Our Fiscal 2014 Q4 numbers also reflect an aggregate of adjustments made throughout the year for manufacturer allowances and discounts/promotions.
On May 7, 2014, the company filed a current report on Form 8-K with the Securities and Exchange Commission (and also filed a press release) to disclose the preliminary “Results of Operations and Financial Condition” of the company.
Such numbers were unaudited. In it, we showed revenues of approximately $6.4 million for Fiscal 2014; however in the audited financial statements included in our final Form 10-K for the year ended January 31, 2014, we show actual revenues of $6 million for that period.
The differences were due to various accounting and auditing adjustments, including certain significant customer orders which were moved to the first quarter of Fiscal 2015 and will be recognized at that time.
Changes to the company’s revenue accounting based on recently adopted GAAP standards (as described in greater detail in Note 16 to the company’s audited financial statements as filed in its January 31, 2014 Form 10-K Annual Report), resulted in two orders totaling approximately $450,000 that were “in transit” to customers as of January 31, 2014, being recognized, in the first fiscal quarter of 2015, instead of during the fourth fiscal quarter of 2014, as originally set forth in the May 7, 2014, Form 8-K.
We anticipate that moving forward the net effect of the adoption of this accounting standard will have minimal impact on our financial results.
One of our main concerns for Fiscal 2015 is a shortage in Jamaican Blue Mountain (JBM) beans and products. Hurricane Sandy and coffee leaf rust has impacted the production output of JBM by about 40 percent for 2014. Jamaica and the industry expect a slow recovery in 2015 and to be back in full production by 2016.
The company is diligently working to secure more JBM as the market we created for it continues to expand. Limited JBM supply hampered our growth in Q4 of Fiscal 2014 and Q1 of Fiscal 2015.
Our retail partners understand the supply issues and we believe that we will be in a far better position coming into Q2 of Fiscal 2015 with respect to JBM availability.
We’ve established our strategy for the coming year and we believe that we have the tools and the infrastructure to get there. The bottom line for investors is that we expect to see more brand awareness campaigns and revenue growth in 2014. It’ll be a bumpy line up, but the line will go up!
