þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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11-2238111
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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3475 Victory Boulevard, Staten Island, New York
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10314
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(Address of principal executive offices)
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(Zip Code)
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Title of each class:
|
Name of each exchange on which registered:
|
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Common Stock, Par Value $0.001 Per Share
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Nasdaq Stock Market LLC
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Large accelerated filer
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o
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Non-accelerated filer
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o
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Accelerated filer
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o
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Smaller Reporting Company
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þ
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Page
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|||||
PART I
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|||||
ITEM 1.
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BUSINESS
|
3 | |||
ITEM 1A.
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RISK FACTORS
|
11 | |||
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
16 | |||
ITEM 2.
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PROPERTIES
|
16 | |||
ITEM 3.
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LEGAL PROCEEDINGS
|
16 | |||
ITEM 4.
|
REMOVED AND RESERVED
|
16 | |||
PART II
|
|||||
ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
17 | |||
ITEM 6.
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SELECTED FINANCIAL DATA
|
18 | |||
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|
19 | |||
ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
25 | |||
ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
26 | |||
ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
26 | |||
ITEM 9A.
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CONTROLS AND PROCEDURES
|
26 | |||
ITEM 9B.
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OTHER INFORMATION
|
26 | |||
PART III
|
|||||
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
27 | |||
ITEM 11.
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EXECUTIVE COMPENSATION
|
27 | |||
ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
27 | |||
ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
27 | |||
ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
|
27 | |||
PART IV
|
|||||
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
28 | |||
SIGNATURES
|
30 | ||||
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-1 |
●
|
Wholesale Green Coffee:
unroasted raw beans imported from around the world and sold to large and small roasters and coffee shop operators;
|
●
|
Private Label Coffee:
coffee roasted, blended, packaged and sold under the specifications and names of others, including supermarkets that want to have their own brand name on coffee to compete with national brands; and
|
●
|
Branded Coffee:
coffee roasted and blended to our own specifications and packaged and sold under our seven proprietary and licensed brand names in different segments of the market.
|
●
|
For over 15 years, we have been members of Coffee Kids, an international non-profit organization that helps to improve the quality of life of children and their families in coffee-growing communities in Mexico, Guatemala, Nicaragua and Costa Rica.
|
●
|
We are members of Grounds for Health, an organization that educates, screens, and arranges treatment for women who have cancer and live in the rural coffee growing communities of Mexico.
|
●
|
We are a licensed Fair Trade dealer of Fair Trade certified coffee. Fair Trade helps small coffee farmers to increase their incomes and improve the prospects of their communities and families. It guarantees farmers a minimum price of $1.25 per pound or ten cents above the current market price.
|
●
|
We are the administrative benefactors to a non-profit organization called Cup for Education. After discovering the lack of schools, teachers, and basic fundamental learning supplies in the poor coffee growing communities of Central and Latin America, “Cup” was established by our employee, Karen Gordon, to help build schools, sponsor teachers, and purchase basic supplies such as books, chalk and other necessities for a proper education.
|
●
|
Most recently, we were the national opening ceremony coffee sponsor of the 2010 Avon Walk For Breast Cancer in four (4) cities (Washington, D.C., Boston, MA, San Francisco, CA and New York, NY) across the United States. Coffee Holding was on site in all four cities serving their Entenmann’s specialty Arabica coffees to the participants who walk 39 miles over two days. The money raised did provide women and men with breast cancer screening, support and treatment regardless of their ability to pay.
|
High
|
Low
|
|||||||
2009
|
||||||||
1st Quarter
|
$
|
1.79
|
$
|
0.77
|
||||
2nd Quarter
|
$
|
4.91
|
$
|
0.56
|
||||
3rd Quarter
|
$
|
4.98
|
$
|
1.87
|
||||
4th Quarter
|
$
|
5.21
|
$
|
3.55
|
||||
2010
|
||||||||
1st Quarter
|
$
|
$4.83
|
$
|
$3.85
|
||||
2nd Quarter
|
$
|
$5.17
|
$
|
$3.80
|
||||
3rd Quarter
|
$
|
$4.12
|
$
|
$3.71
|
||||
4th Quarter
|
$
|
$4.85
|
$
|
$3.89
|
For the Years Ended October 31,
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
(Dollars in thousands, except per share data)
|
||||||||||||||||||||
Income Statement Data:
|
||||||||||||||||||||
Net sales
|
$
|
83,492
|
$
|
74,452
|
$
|
71,186
|
$
|
57,365
|
$
|
51,171
|
||||||||||
Cost of sales
|
72,932
|
64,440
|
68,762
|
49,071
|
43,576
|
|||||||||||||||
Gross profit
|
10,560
|
10,012
|
2,424
|
8,294
|
7,595
|
|||||||||||||||
Operating expenses
|
6,545
|
6,389
|
6,363
|
6,842
|
6,231
|
|||||||||||||||
Income (loss) from operations
|
4,015
|
3,623
|
(3,939
|
)
|
1,452
|
1,364
|
||||||||||||||
Other income (expense)
|
(143
|
)
|
1,869
|
(86
|
)
|
(90
|
)
|
(68
|
)
|
|||||||||||
Income (loss) before income taxes
|
3,872
|
5,492
|
(4,025
|
)
|
1,362
|
1,296
|
||||||||||||||
Provision (benefit) for income taxes
|
1,479
|
2,159
|
(1,430
|
)
|
418
|
602
|
||||||||||||||
Non controlling interest
|
(4
|
)
|
(42
|
)
|
(2
|
)
|
(7
|
)
|
(6
|
|||||||||||
Net income (loss)
|
$
|
2,389
|
$
|
3,291
|
$
|
(2,597
|
)
|
$
|
937
|
$
|
700
|
|||||||||
Net income (loss) per share – Basic and diluted
|
$
|
0.44
|
$
|
0.60
|
$
|
(0.47
|
)
|
$
|
0.17
|
$
|
0.13
|
At October 31,
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
(Dollars in thousands, except per shares data)
|
||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Total assets
|
$
|
24,193
|
$
|
19,804
|
$
|
21,002
|
$
|
20,397
|
$
|
18,982
|
||||||||||
Short-term debt
|
2,307
|
792
|
3,522
|
897
|
2,543
|
|||||||||||||||
Long-term debt
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||
Total liabilities
|
10,662
|
8,625
|
13,151
|
8,194
|
7,640
|
|||||||||||||||
Stockholders’ equity
|
13,482
|
11,133
|
7,847
|
12,202
|
11,342
|
|||||||||||||||
Book value per share
|
$
|
2.46
|
$
|
2.05
|
$
|
1.44
|
$
|
2.05
|
$
|
2.05
|
At October 31,
|
||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||
(Dollars in thousands, except per shares data)
|
||||||||||||||||||
Per Common Share Data:
|
||||||||||||||||||
Basic EPS
|
$
|
.44
|
$
|
.60
|
$
|
(.47
|
) |
$
|
.17
|
$
|
.13
|
|||||||
Diluted EPS
|
$
|
.44
|
$
|
.60
|
$
|
(.47
|
) |
$
|
.17
|
$
|
.13
|
|||||||
Cash dividends declared
|
$
|
333,978
|
$
|
-
|
$
|
1,544,568
|
$
|
-
|
$
|
-
|
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 seven brands of coffee.
|
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;
|
●
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.
|
●
|
We recognize revenue in accordance with the relevant authoritative guidance. Revenue is recognized at the point title and risk of ownership transfers to its customers which is upon the shippers taking possession of the goods because i) title passes in accordance with the terms of the purchase orders and with its agreements with its customers, ii) any risk of loss is covered by the customers’ insurance, iii) there is persuasive evidence of a sales arrangement, iv) the sales price is determinable and v) collection of the resulting receivable is reasonably assured. Thus, revenue is recognized at the point of shipment.
|
●
|
Our allowance for doubtful accounts is maintained to provide for losses arising from customers’ inability to make required payments. If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. For example, every additional one percent of our accounts receivable that becomes uncollectible, would decrease our operating income by
approximately $89,000 for the year ended October 31, 2010. The reserve for sales discounts represents the estimated discount that customers will take upon payment. The reserve for other allowances represents the estimated amount of returns, slotting fees and volume based discounts estimated to be incurred by the Company from its customers.
|
●
|
Inventories are stated at lower of cost (determined on a first-in, first-out basis) or market. Based on our assumptions about future demand and market conditions, inventories are subject to be written-down to market value. If our assumptions about future demand change and/or actual market conditions are less favorable than those projected, additional write-downs of inventories may be required. Each additional one percent of potential inventory writedown would have decreased operating income by approximately $82,000 for the year ended October 31, 2010.
|
●
|
We account for income taxes in accordance with the relevant authoritative guidance. Deferred tax assets and liabilities are computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized. Accordingly, our net deferred tax asset as of October 31, 2010 of $38,000 may
require a valuation allowance if we do not generate taxable income.
|
●
|
Our goodwill consists of the cost in excess of the fair market value of the acquired net assets of OPTCO. This company has been integrated into a structure which does not provide the basis for separate reporting units. Consequently, the Company is a single reporting unit for goodwill impairment testing purposes. We also have intangible assets consisting of customer list and relationships and trademarks acquired from OPTCO. At October 31, 2010 our balance sheet reflected goodwill and intangible assets as set forth below:
|
October 31, 2010
|
||||
Customer list and relationships, net
|
$ | 146,250 | ||
Trademarks
|
180,000 | |||
Goodwill
|
440,000 | |||
$ | 766,250 | |||
Exhibit No.
|
Description
|
|
2.1
|
Agreement and Plan of Merger, dated October 31, 1997, by and among Transpacific International Group Corp. and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 2 to Post-Effective Amendment No. 1 to the Company’s Registration Statement on Form SB-2 filed on November 10, 1997 (File No. 333-00588-NY)).
|
|
2.2
|
Asset Purchase Agreement, dated February 4, 2004, by and between Coffee Holding Co., Inc. and Premier Roasters LLC (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 20, 2004 (File No. 333-00588-NY)).
|
|
3.1
|
Amended and Restated Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A the “2005 Registration Statement” filed on May 2, 2005 (File No. 001-32491)).
|
|
3.2
|
By-Laws of the Company (incorporated herein by reference to Exhibit 3.2 to the 2005 Registration Statement (File No. 001-32491)).
|
|
4.1
|
Form of Stock Certificate of the Company (incorporated herein by reference to the Company’s Registration Statement on Form SB-2 filed on June 24, 2004 (Registration No. 333-116838)).
|
|
10.1
|
Loan and Security Agreement, dated February 17, 2009, by and between Sterling National Bank and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K filed on February 23, 2009 (File No. 001-32491)).
|
|
10.2
|
Lease, dated February 4, 2004, by and between Coffee Holding Co., Inc. and the City of La Junta, Colorado (incorporated herein by reference to Exhibit 10.12 to Amendment No. 1 to the Company’s Registration Statement on Form SB-2/A filed on August 12, 2004 (Registration No. 333-116838)).
|
|
10.3
|
Trademark License Agreement, dated February 4, 2004, between Del Monte Corporation and Coffee Holding Co, Inc. (incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-QSB/A for the quarter ended April 30, 2004 filed on August 26, 2004 (File No. 333-00588-NY)).
|
|
10.4
|
Amended and Restated Employment Agreement, dated April 11, 2008, by and between Coffee Holding Co., Inc. and Andrew Gordon (incorporated herein by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K filed on April 16, 2008 (File No. 001-32491)).
|
|
10.5
|
Amended and Restated Employment Agreement, dated April 11, 2008, by and between Coffee Holding Co., Inc. and David Gordon (incorporated herein by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed on April 16, 2008 (File No. 001-32491)).
|
|
10.6
|
Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan (incorporated herein by reference to the Company’s Quarterly Report on Form 10-QSB filed on June 14, 2005 (File No. 001-32491)).
|
|
10.7
|
Contract of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and 4401 1st Ave LLC.
|
|
10.8
|
License Agreement with Entenmann’s Products, Inc., dated April 1, 2007.
|
|
10.9
|
Amendment No. 1 to the License Agreement with Entenmann’s Products, Inc., dated August 7, 2007.
|
|
10.10
|
First Amendment to Loan and Security Agreement between Coffee Holding Co., Inc. and Sterling National Bank, dated July 23, 2010.
|
|
11.1
|
Calculation of Earnings Per Share.
|
|
31.1
|
Principal Executive Officer and Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Principal Executive Officer and Principal Financial Officer’s Certification furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
COFFEE HOLDING CO., INC.
|
|||
By:
|
/s/ Andrew Gordon
|
||
Andrew Gordon
|
|||
President, Chief Executive Officer
|
Name
|
Title
|
Date
|
||
/s/ Andrew Gordon
|
||||
Andrew Gordon
|
President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director
|
January 31, 2011
|
||
(principal executive officer and principal financial and accounting officer) | ||||
/s/ David Gordon
|
||||
David Gordon
|
Executive Vice President – Operations, Secretary and Director
|
January 31, 2011
|
||
/s/ Gerard DeCapua
|
||||
Gerard DeCapua
|
Director
|
January 31, 2011
|
||
/s/ Daniel Dwyer
|
||||
Daniel Dwyer
|
Director
|
January 31, 2011
|
||
/s/ Barry Knepper
|
||||
Barry Knepper
|
Director
|
January 31, 2011
|
||
/s/ John Rotelli
|
||||
John Rotelli
|
Director
|
January 31, 2011
|
||
/s/ Robert M. Williams
|
||||
Robert M. Williams
|
Director
|
January 31, 2011
|
Exhibit No.
|
Description
|
|
10.8
|
License Agreement with Entenmann’s Products, Inc., dated April 1, 2007.
|
|
10.9
|
Amendment No. 1 to the License Agreement with Entenmann’s Products, Inc., dated August 7, 2007.
|
|
10.10
|
First Amendment to Loan and Security Agreement between Coffee Holding Co., Inc. and Sterling National Bank, dated July 23, 2010.
|
|
11.1
|
Calculation of Earnings per Share.
|
|
31.1
|
Principal Executive Officer and Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Principal Executive Officer and Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
PAGE
|
||||
FINANCIAL STATEMENTS:
|
||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2 | |||
CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 2010 AND 2009
|
F-3 | |||
CONSOLIDATED STATEMENTS OF INCOME - YEARS ENDED OCTOBER 31, 2010 AND 2009
|
F-4 | |||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - YEARS ENDED OCTOBER 31, 2010 AND 2009
|
F-5 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED OCTOBER 31, 2010 AND 2009
|
F-6 | |||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-8 |
2010
|
2009
|
|||||||
- ASSETS -
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 1,672,921 | $ | 1,773,373 | ||||
Commodities held at broker
|
275,499 | 77,306 | ||||||
Accounts receivable, net of allowances of $197,078 for 2010 and $165,078 for 2009
|
8,852,372 | 10,174,221 | ||||||
Inventories
|
8,190,420 | 4,800,143 | ||||||
Prepaid green coffee
|
1,335,676 | - | ||||||
Prepaid expenses and other current assets
|
502,852 | 419,740 | ||||||
Prepaid and refundable income taxes
|
9,521 | 36,068 | ||||||
Deferred income tax asset
|
328,000 | 286,000 | ||||||
TOTAL CURRENT ASSETS
|
21,167,261 | 17,566,851 | ||||||
Machinery and equipment, at cost, net of accumulated depreciation of $5,147,593 and $4,681,558
for 2010 and 2009, respectively
|
1,560,940 | 1,648,214 | ||||||
Customer list and relationships, net of accumulated amortization of $3,750 for 2010
|
146,250 | - | ||||||
Trademarks
|
180,000 | - | ||||||
Goodwill
|
440,000 | - | ||||||
Deposits and other assets
|
699,029 | 588,573 | ||||||
TOTAL ASSETS
|
$ | 24,193,480 | $ | 19,803,638 |
- LIABILITIES AND STOCKHOLDERS’ EQUITY -
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable and accrued expenses
|
$ | 7,124,072 | $ | 6,655,916 | ||||
Line of credit
|
2,306,749 | 791,628 | ||||||
Income taxes payable
|
234,744 | 453,512 | ||||||
Contingent liability
|
41,000 | - | ||||||
Deferred income tax liabilities
|
73,300 | 121,000 | ||||||
TOTAL CURRENT LIABILITIES
|
9,779,865 | 8,022,056 | ||||||
Deferred income tax liabilities
|
216,700 | 14,500 | ||||||
Deferred rent payable
|
124,756 | 99,067 | ||||||
Deferred compensation payable
|
540,642 | 489,782 | ||||||
TOTAL LIABILITIES
|
10,661,963 | 8,625,405 | ||||||
STOCKHOLDERS’ EQUITY:
|
||||||||
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; none issued
|
- | - | ||||||
Common stock, par value $.001 per share; 30,000,000 shares authorized, 5,579,830 and 5,529,830 shares issued for 2010 and 2009,
respectively; 5,490,823 and 5,440,823 shares outstanding for 2010 and 2009, respectively
|
5,580 | 5,530 | ||||||
Additional paid-in capital
|
7,581,973 | 7,327,023 | ||||||
Contingent consideration
|
39 , 000 | - | ||||||
Retained earnings
|
6,151,054 | 4,095,671 | ||||||
Less: Treasury stock, 89,007 common shares, at cost for 2010 and 2009
|
(295,261 | ) | (295,261 | ) | ||||
Total Coffee Holding Co., Inc. and OPTCO Stockholders’ Equity
|
13,482,346 | 11,132,963 | ||||||
Noncontrolling interest
|
49,171 | 45,270 | ||||||
TOTAL EQUITY
|
13,531,517 | 11,178,233 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 24,193,480 | $ | 19,803,638 |
2010
|
2009
|
|||||||
NET SALES
|
$ | 83,491,967 | $ | 74,451,673 | ||||
COST OF SALES
(which include purchases of approximately $19.3 million and $16.7 million in fiscal years 2010 and 2009, respectively, from a related party)
|
72,931,626 | 64,439,494 | ||||||
GROSS PROFIT
|
10,560,341 | 10,012,179 | ||||||
OPERATING EXPENSES:
|
||||||||
Selling and administrative
|
5,809,397 | 5,625,651 | ||||||
Officers’ salaries
|
735,200 | 763,399 | ||||||
TOTAL
|
6,544,597 | 6,389,050 | ||||||
INCOME FROM OPERATIONS
|
4,015,744 | 3,623,129 | ||||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest income
|
94,355 | 9,191 | ||||||
Other income and gains
|
- | 5,700 | ||||||
Gain on sale of manufacturing facility
|
- | 2,107,501 | ||||||
Interest expense
|
(237,348 | ) | (253,092 | ) | ||||
TOTAL
|
(142,993 | ) | 1,869,300 | |||||
INCOME BEFORE PROVISION FOR INCOME TAXES AND
|
||||||||
NONCONTROLLING INTEREST IN SUBSIDIARIES
|
3,872,751 | 5,492,429 | ||||||
Provision for income taxes
|
1,479,489 | 2,159,319 | ||||||
NET INCOME BEFORE NONCONTROLLING INTEREST IN SUBSIDIARIES
|
2,393,262 | 3,333,110 | ||||||
Less: Net income attributable to the noncontrolling interest in subsidiaries
|
(3,901 | ) | (42,044 | ) | ||||
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC.
|
$ | 2,389,361 | $ | 3,291,066 | ||||
Basic and diluted earnings per share
|
$ | .44 | $ | .60 | ||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
5,463,837 | 5,441,462 | ||||||
Diluted
|
5,468,439 | 5,441,462 |
Additional Paid - in | Retained | Contingent | Non-Controlling | |||||||||||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Capital
|
Earnings
|
Consideration
|
Interest
|
Total
|
||||||||||||||||||||||||||||||
$.001 Par Value
|
||||||||||||||||||||||||||||||||||||
Number of
|
Number of
|
|||||||||||||||||||||||||||||||||||
ITEM 2.
|
Shares
|
Amount
|
Shares
|
Amount
|
|
|||||||||||||||||||||||||||||||
Balance, 10/31/08
|
5,445,516 | $ | 5,530 | 84,314 | $ | (289,735 | ) | 7,327,023 | $ | 804,605 | $ | 0 | $ | 0 | $ | 7,847,423 | ||||||||||||||||||||
Stock repurchase
|
(4,693 | ) | - | 4,693 | (5,526 | ) | - | - | - | - | (5,526 | ) | ||||||||||||||||||||||||
Net income
|
- | - | - | - | - | 3,291,066 | - | - | 3,291,066 | |||||||||||||||||||||||||||
Non-Controlling Interest
|
- | - | - | - | - | - | - | 45,270 | 45,270 | |||||||||||||||||||||||||||
Balance, 10/31/09
|
5,440,823 | $ | 5,530 | 89,007 | $ | (295,261 | ) | $ | 7,327,023 | $ | 4,095,671 | $ | - | $ | 45,270 | $ | 11,178,233 | |||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Stock issued
|
50,000 | 50 | - | - | 254,950 | - | 255,000 | |||||||||||||||||||||||||||||
OPTCO
|
- | - | - | - | - | - | 39,000 | - | 39,000 | |||||||||||||||||||||||||||
Dividend
|
- | - | - | - | - | (333,978 | ) | - | - | (333,978 | ) | |||||||||||||||||||||||||
Net income
|
- | - | - | - | - | 2,389,361 | - | - | 2,389,361 | |||||||||||||||||||||||||||
Non-Controlling Interest
|
- | - | - | - | - | - | - | 3,901 | 3,901 | |||||||||||||||||||||||||||
Balance, 10/31/10
|
5,490,823 | $ | 5,580 | 89,007 | $ | ( 295,261 | ) | $ | 7,581,973 | $ | 6,151,054 | $ | 39,000 | $ | 49,171 | $ | 13,531,517 |
2010
|
2009
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 2,393,262 | $ | 3,333,110 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
469,787 | 537,375 | ||||||
Gain on sale of manufacturing facility
|
- | (2,107,501 | ) | |||||
Unrealized gain on commodities
|
(198,193 | ) | (329,187 | ) | ||||
Other gains
|
- | (5,700 | ) | |||||
Bad debt expense
|
17,618 | 95,294 | ||||||
Deferred rent
|
25,689 | 29,108 | ||||||
Deferred income taxes
|
112,500 | 687,377 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
1,304,231 | (1,201,718 | ) | |||||
Inventories
|
(1,580,353 | ) | 246,411 | |||||
Prepaid expenses and other current assets
|
(83,112 | ) | (134,840 | ) | ||||
Prepaid green coffee
|
(1,335,676 | ) | - | |||||
Prepaid and refundable income taxes
|
26,547 | 989,867 | ||||||
Accounts payable and accrued expenses
|
468,156 | (2,464,207 | ) | |||||
Deposits and other assets
|
(59,596 | ) | 91,464 | |||||
Income taxes payable
|
(218,768 | ) | 453,512 | |||||
Net cash provided by operating activities
|
1,342,092 | 220,365 | ||||||
INVESTING ACTIVITIES:
|
||||||||
Purchase of assets of OPTCO – net cash paid
|
(2,259,924 | ) | - | |||||
Proceeds from the sale of equipment
|
- | 30,000 | ||||||
Proceeds from the sale of manufacturing facility
|
- | 2,906,473 | ||||||
Purchases of machinery and equipment
|
(363,763 | ) | (204,808 | ) | ||||
Net cash (used in) provided by investing activities
|
(2,623,687 | ) | 2,731,665 | |||||
FINANCING ACTIVITIES:
|
||||||||
Advances under bank line of credit
|
84,750,863 | 76,276,346 | ||||||
Principal payments under bank line of credit
|
(83,235,742 | ) | (75,484,718 | ) | ||||
Payoff of previous bank line of credit
|
- | (3,522,207 | ) | |||||
Payment of dividend
|
(333,978 | ) | - | |||||
Purchase of treasury stock
|
- | (5,526 | ) | |||||
Net cash provided by (used in) financing activities
|
1,181,143 | (2,736,105 | ) | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(100,452 | ) | 215,925 | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
1,773,373 | 1,557,448 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 1,672,921 | $ | 1,773,373 |
2010
|
2009
|
|||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
|
||||||||
Interest paid
|
$ | 241,371 | $ | 250,266 | ||||
Income taxes paid
|
$ | 1,585,757 | $ | 737,494 | ||||
Income taxes (refunded) | $ | - | $ | (703,123 | ) | |||
SUPPLEMENTAL DISCLOSURE INVESTING ACTIVITIES:
|
||||||||
On May 17, 2010, the Coffee Holding Co., Inc. acquired substantially all of the assets of OPTCO:
|
||||||||
Assets acquired:
|
||||||||
Inventory
|
$ | 1,809,924 | $ | - | ||||
Equipment
|
15,000 | - | ||||||
Customer list and relationships
|
150,000 | - | ||||||
Trademarks
|
180,000 | - | ||||||
Goodwill
|
440,000 | - | ||||||
Total assets acquired:
|
2,594,924 | - | ||||||
Purchase of assets funded by:
|
||||||||
Contingent liability
|
41,000 | - | ||||||
Contingent consideration
|
39,000 | - | ||||||
Common stock, par value $.001 per share, 50,000 shares
|
50 | - | ||||||
Additional paid-in capital
|
254,950 | - | ||||||
335,000 | - | |||||||
Net cash paid
|
$ | 2,259,924 | $ | - |
2010
|
2009
|
|||||||
Allowance for doubtful accounts
|
$ | 90,078 | $ | 105,078 | ||||
Reserve for other allowances
|
47,000 | - | ||||||
Reserve for sales discounts
|
60,000 | 60,000 | ||||||
Totals
|
$ | 197,078 | $ | 165,078 |
2010
|
2009
|
|||||||
Cash
|
$ | 1,344,109 | $ | 405,440 | ||||
Option contracts
|
(323,002 | ) | 65,812 | |||||
Future contracts
|
598,501 | 11,494 | ||||||
Total commodities
|
275,499 | 77,306 | ||||||
Totals
|
$ | 1,619,608 | $ | 482,746 |
Year Ended October 31,
|
||||||||
2010
|
2009
|
|||||||
Gross realized gains
|
$ | 1,550,330 | $ | 1,789,424 | ||||
Gross realized (losses)
|
(375,302 | ) | (269,702 | ) | ||||
Unrealized gains
|
198,193 | 329,187 | ||||||
Total
|
$ | 1,373,221 | $ | 1,848,909 |
2010
|
2009
|
|||||||
Net Income
|
$ | 2,389,361 | $ | 3,291,066 | ||||
BASIC EARNINGS:
|
||||||||
Weighted average number of common shares
|
||||||||
outstanding
|
5,463,837 | 5,441,462 | ||||||
Basic earnings per common share
|
$ | 0.44 | $ | 0.60 | ||||
DILUTED EARNINGS:
|
||||||||
Weighted average number of common shares
|
||||||||
outstanding
|
5,463,837 | 5,441,462 | ||||||
Contingent shares - common stock equivalents
|
4,602 | - | ||||||
Weighted average number of common shares
|
||||||||
outstanding - as adjusted
|
5,468,439 | 5,441,462 | ||||||
Diluted earnings per common share
|
$ | 0.44 | $ | 0.60 |
Purchase price – cash
|
$
|
2,259,924
|
||
Contingent liability
|
41,000
|
|||
Contingent consideration
|
39,000
|
|||
Common stock, par value $.001 per share, 50,000 shares
|
50
|
|||
Additional paid-in Capital
|
254,950
|
|||
Total purchase price
|
2,594,924
|
|||
Equipment
|
15,000
|
|||
Inventory
|
1,809,924
|
|||
Customer list and relationships
|
150,000
|
|||
Trademarks
|
180,000
|
|||
Goodwill
|
440,000
|
|||
Total asset acquired
|
$
|
2,594,924
|
Pro Forma Results of Operations (unaudited)
The following pro forma results of operations for the years ended October 31, 2010 and 2009 have been prepared as though the acquisition of OPTCO had occurred as of the beginning of the earliest period presented. This pro forma financial information is not indicative of the results of operations that the Company would have attained had the acquisition of OPTCO occurred at the beginning of the periods presented, nor is the pro forma financial information indicative of the results of operations that may occur in the future:
|
Year Ended October 31, | ||||||||
2010 |
2009
|
|||||||
Pro forma sales
|
$ | 90,418,058 | $ | 84,108,275 | ||||
Pro forma net income
|
$ | 2,671,822 | $ | 3,604,895 | ||||
Pro forma basic and diluted earnings per share
|
$ | .49 | $ | .66 |
2010
|
2009
|
|||||||
Packed coffee
|
$ | 1,566,678 | $ | 1,388,547 | ||||
Green coffee
|
5,952,225 | 2,484,518 | ||||||
Packaging supplies
|
671,517 | 927,078 | ||||||
Totals
|
$ | 8,190,420 | $ | 4,800,143 |
Estimated
Useful Life
|
2010
|
2009
|
|||||||
Improvements
|
15-30 years
|
$ | 161,298 | $ | 161,298 | ||||
Machinery and equipment
|
7 years
|
5,947,027 | 5,708,166 | ||||||
Furniture and fixtures
|
7 years
|
600,208 | 460,308 | ||||||
6,708,533 | 6,329,772 | ||||||||
Less, accumulated depreciation
|
5,147,593 | 4,681,558 | |||||||
$ | 1,560,940 | $ | 1,648,214 |
Sales price
|
$ | 3,000,000 | ||
Less: remaining depreciated cost and
|
||||
land of the Facility
|
(798,972 | ) | ||
Less: closing costs
|
(93,527 | ) | ||
Gain on sale of manufacturing facility
|
$ | 2,107,501 |
2010
|
2009
|
|||||||
Current
|
||||||||
Federal
|
$ | 1,179,132 | $ | 1,270,286 | ||||
State and local
|
187,857 | 201,656 | ||||||
1,366,989 | 1,471,942 | |||||||
Deferred
|
||||||||
Federal
|
100,000 | 420,877 | ||||||
State and local
|
12,500 | 266,500 | ||||||
112,500 | 687,377 | |||||||
Income tax expense
|
$ | 1,479,489 | $ | 2,159,319 | ||||
2010
|
2009
|
|||||||
Federal income tax statutory rate
|
$ | 1,313,237 | 34% | $ | 1,867,426 | 34% | ||
State income taxes
|
166,252 | 5% | 291,893 | 5% | ||||
Effective tax rate
|
$ | 1,479,489 | 39% | $ | 2,159,319 | 39% |
2010
|
2009
|
|||||||
Deferred tax assets:
|
||||||||
Accounts receivable
|
$ | 72,000 | $ | 69,000 | ||||
Deferred compensation
|
199,500 | 181,000 | ||||||
Inventory
|
56,500 | 36,000 | ||||||
Total current deferred tax asset
|
$ | 328,000 | $ | 286,000 | ||||
Deferred tax liabilities:
|
||||||||
Current deferred tax liability: | ||||||||
Unrealized gains | ||||||||
Non-current deferred tax liability:
|
$ | 73,300 | $ | 121,000 | ||||
Fixed assets
|
216,700 | 14,500 | ||||||
Total deferred tax liabilities
|
$ | 290,000 | $ | 135,500 |
October 31
,
|
||||
2011
|
$ | 252,836 | ||
2012
|
239,354 | |||
2013
|
227,155 | |||
2014
|
232,238 | |||
2015
|
237,523 | |||
Thereafter
|
2,168,851 | |||
$ | 3,357,957 |
a. | Warrants to Purchase Common Stock . The Company entered into an agreement with Maxim Group, LLC (“Maxim”) for Maxim to serve as the Company’s financial advisors and lead managing underwriter for a public offering of the Company’s common stock which concluded on June 16, 2005. Subsequently, Maxim and Joseph Stevens & Company, Inc. (“Joseph Stevens”) entered into an agreement pursuant to which Joseph Stevens agreed to act as managing underwriter and Maxim participated in the underwriting syndicate of the offering. The Company also sold to Joseph Stevens and Maxim for $100, warrants to purchase 70,000 shares of common stock at a price of $6.00 per share. The fair value of these warrants was credited to additional paid-in capital. The warrants were exercisable for a period of five (5) years and contained provisions for cashless exercise, anti-dilution and piggyback registration rights. The warrants expired May 6, 2009 and are no longer exercisable. | |
b. | Treasury Stock . The Company utilizes the cost method of accounting for treasury stock. The cost of reissued shares is determined under the last-in, first-out method. The Company did not purchase any shares during the year ended October 31, 2010. The Company purchased 4,693 shares for $5,526 during year ended October 31, 2009 | |
c. | Dividends . On October 25, 2010, the Company paid a cash dividend of $166,989 ($0.03 per share) to all stockholders of record as of October 1, 2010. On July 26, 2010, the Company paid a cash dividend of $166,989 ($0.03 per share) to all stockholders of record as of July 16, 2010. |
Fair Value Measurements as of October 31, 2010
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Commodities – Futures
|
$ | 598,501 | – | $ | 598,501 | – | ||||||||||
Commodities – Options
|
(323,002 | ) | – | (323,002 | ) | – | ||||||||||
Total Assets
|
$ | 275,499 | – | $ | 275,499 | – |
Fair Value Measurements as of October 31, 2009
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Commodities – Futures
|
$ | 11,494 | – | $ | 11,494 | – | ||||||||||
Commodities – Options
|
65,812 | – | 65,812 | – | ||||||||||||
Total Assets
|
$ | 77,306 | – | $ | 77,306 | – |
Agreed to and Accepted by: | ||
ENTENMANN’S PRODUCTS, INC. | COFFEE HOLDING COMPANY, INC. | |
By: /s/ | By: /s/ Andrew Gordon | |
Name: | Name: Andrew Gordon | |
Title: | Title: President & Chief Executive Officer | |
Date: | Date: |
If to Licensor | If to Licensee : |
Entenmann’s Products, Inc.
c/o Weston Foods, Inc.
255 Business Center Drive
Horsham, Pennsylvania 19044
Attention: General Counsel
|
COFFEE HOLDING COMPANY, INC.
4401 1st Avenue
Brooklyn, NY 11232
Attention: Mr. Andrew Gordon
|
with a copy to
:
The Joester Loria Group, LLC
860 Broadway, Third Floor,
New York, New York 10003
Attention: President
|
ENTENMANN’S PRODUCTS, INC. | COFFEE HOLDING COMPANY, INC. | |
By: /s/ | By: /s/ Andrew Gordon | |
Name: | Name:Andrew Gordon | |
Title: | Title: President & Chief Executive Officer | |
Date: | Date: |
D
UE
D
ATES
:
|
A
MOUNTS
:
|
R
EMARKS
:
|
|||
Due Upon Signing
|
$ | 75,000.00 |
Advance
|
||
Due on or before July 30, 2008
|
$ | 25,000.00 |
Guarantee
|
||
Due on or before January 30, 2009
|
$ | 50,000.00 |
Guarantee
|
||
Due on or before July 30, 2009
|
$ | 50,000.00 |
Guarantee
|
||
Due on or before January 30, 2010
|
$ | 50,000.00 |
Guarantee
|
||
Due on or before July 30, 2010
|
$ | 50,000.00 |
Guarantee
|
$2,000,000.00
|
Contract Year 1: 04/01/2007 - 12/31/2008
|
$2,000,000.00
|
Contract Year 2: 01/01/2009 - 12/31/2009
|
$2,000,000.00
|
Contract Year 3: 01/01/2010 - 12/31/2010
|
Licensee Name : | COFFEE HOLDING COMPANY, INC. | ||||||
Licensed
|
ENTENMANN’S
|
||||||
Intellectual
|
|||||||
Property
:
|
|||||||
Contract Ref.#:
|
17065
|
||||||
Date:
|
Customer Name
(Retailer)
|
Product
Description
|
Wholesale price
per Unit
|
FOB or other
price* per unit
|
Quantity Shipped
|
Discount Allowance
(if contractually
allowed)
Please specify
|
Returns
(if contractually
allowed)
|
Sales Total
(as defined in contract)
|
TOTAL SALES REVENUE | |||||||
ROYALTY RATE % | |||||||
Royalty reporting due each quarter even | x | ||||||
if sales are zero. | GROSS ROYALTIES $ | ||||||
LESS UNEARNED | |||||||
Send check and applicable statement to: | ADVANCE/GUARANTEES | ( ) | |||||
(IF APPLICABLE | |||||||
ROYALTY DUE | |||||||
The Joester Loria Group | |||||||
860 Broadway, 3 rd Floor | |||||||
New York, NY 10003 | |||||||
Years Ended October 31,
|
||||||||
2010
|
2009
|
|||||||
Net income (loss)
|
$
|
2,389,361
|
$
|
3,291,066
|
||||
BASIC EARNINGS (LOSS):
|
||||||||
Weighted average number of common shares outstanding
|
5,463,837
|
5,441,462
|
||||||
Basic earnings (loss) per common share
|
$
|
.44
|
$
|
.60
|
||||
DILUTED EARNINGS (LOSS):
|
||||||||
Weighted average number of common shares outstanding
|
5,463,837
|
5,441,462
|
||||||
Contingent shares – common stock equivalents
|
10,000
|
-
|
||||||
Weighted average number of common shares outstanding – as adjusted
|
5,468,439
|
5,441,462
|
||||||
Diluted earnings (loss) per common share
|
$
|
.44
|
$
|
.60
|
1.
|
I have reviewed this annual report on Form 10-K for the period ended October 31, 2010 of Coffee Holding Co., Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant internal control over financial reporting; and
|
5.
|
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: January 31, 2011
|
/s/ Andrew Gordon | ||
Andrew Gordon
|
|||
President, Chief Executive Officer and Chief Financial Officer
|
|||
(Principal Executive and Accounting Officer)
|
A)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
|
B)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.
|
Date: January 31, 2011
|
/s/ Andrew Gordon | ||
Andrew Gordon
|
|||
President, Chief Executive Officer and Chief Financial Officer
|
|||
(Principal Executive and Accounting Officer)
|