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:
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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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3 | ||||
ITEM 1.
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BUSINESS
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3 | |||
ITEM 1A.
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RISK FACTORS
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10 | |||
ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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16 | |||
ITEM 2.
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PROPERTIES
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16 | |||
ITEM 3.
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LEGAL PROCEEDINGS
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16 | |||
ITEM 4.
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MINE SAFETY DISCLOSURES
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16 | |||
PART II
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17 | ||||
ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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17 | |||
ITEM 6.
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SELECTED FINANCIAL DATA
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18 | |||
ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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19 | |||
ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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24 | |||
ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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24 | |||
ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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24 | |||
ITEM 9A.
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CONTROLS AND PROCEDURES
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24 | |||
ITEM 9B.
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OTHER INFORMATION
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25 | |||
PART III
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26 | ||||
ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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26 | |||
ITEM 11.
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EXECUTIVE COMPENSATION
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26 | |||
ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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26 | |||
ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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26 | |||
ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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26 | |||
PART IV
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27 | ||||
ITEM 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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27 | |||
SIGNATURES
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29 | ||||
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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F-1 |
●
|
Retail branded coffee;
|
●
|
Mainstream retail private label coffee;
|
●
|
Specialty retail coffees both private label and branded;
|
●
|
Wholesale specialty green and gourmet whole bean coffees;
|
●
|
Food service;
|
●
|
Instant coffees; and
|
●
|
Niche products.
|
● | trial-sized mini-brick coffee packages; |
● | specialty instant coffees; |
● | instant cappuccinos and hot chocolates; and |
● | tea line products. |
|
●
|
such acquisitions, licensing arrangements or other strategic alliances may divert our management’s attention from our existing operations;
|
|
●
|
we may not be able to successfully integrate any acquired coffee companies or new coffee brands into our existing business;
|
|
●
|
we may not be able to manage the contingent risks associated with the past operations of, and other unanticipated problems arising in, any acquired coffee company; and
|
|
●
|
we may not be able to control unanticipated costs associated with such acquisitions, licensing arrangements or strategic alliances.
|
●
|
general domestic and global economic conditions;
|
●
|
a portion of our cash flow from operations will be needed to pay debt service and will not be available to fund future operations;
|
●
|
we have increased vulnerability to adverse general economic and coffee industry conditions; and
|
●
|
we may be vulnerable to higher interest rates because interest expense on borrowings under our revolving line of credit is based on variable rates.
|
●
|
fluctuations in purchase prices and supply of green coffee;
|
●
|
fluctuations in the selling prices of our products;
|
●
|
the level of marketing and pricing competition from existing or new competitors in the coffee industry;
|
●
|
the success of our hedging strategy;
|
●
|
our ability to retain existing customers and attract new customers; and
|
●
|
our ability to manage inventory and fulfillment operations and maintain gross margins.
|
●
|
the election of a majority of our directors;
|
●
|
the amendment of our charter documents; and
|
●
|
the approval of mergers, sales of assets or other corporate transactions or matters submitted for stockholder approval.
|
●
|
provide that directors may only be removed upon a vote of at least eighty percent of the shares outstanding;
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●
|
establish advance notice requirements for nominating directors and proposing matters to be voted on by shareholders at shareholder meetings;
|
●
|
limit the right of our stockholders to call a special meeting of stockholders
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●
|
authorize our board of directors to issue preferred stock and to determine the rights and preferences of those shares, which would be senior to our common stock, without prior stockholder approval; and
|
●
|
require amendments to our articles of incorporation to be approved by the holders of at least eighty percent of our outstanding shares of common stock;
|
●
|
a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; and
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●
|
provide a prohibition on stockholder action by written consent, thereby only permitting stockholder action to be taken at an annual or special meeting of our stockholders.
|
High
|
Low
|
|||||||
2012
|
||||||||
1st Quarter
|
$
|
11.65
|
$
|
7.50
|
||||
2nd Quarter
|
$
|
14.93
|
$
|
7.65
|
||||
3rd Quarter
|
$
|
9.54
|
$
|
4.88
|
||||
4th Quarter
|
$
|
9.07
|
$
|
5.50
|
||||
2011
|
||||||||
1st Quarter
|
$
|
4.30
|
$
|
3.67
|
||||
2nd Quarter
|
$
|
8.14
|
$
|
3.90
|
||||
3rd Quarter
|
$
|
30.98
|
$
|
5.27
|
||||
4th Quarter
|
$
|
22.92
|
$
|
6.90
|
For the Years Ended October 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
(Dollars in thousands, except per share data)
|
||||||||||||||||||||
Income Statement Data:
|
||||||||||||||||||||
Net sales
|
$ | 173,656 | $ | 146,755 | $ | 83,492 | $ | 74,452 | $ | 71,186 | ||||||||||
Cost of sales
|
161,649 | 138,210 | 72,932 | 64,440 | 68,762 | |||||||||||||||
Gross profit
|
12,007 | 8,545 | 10,560 | 10,012 | 2,424 | |||||||||||||||
Operating expenses
|
7,607 | 7,345 | 6,545 | 6,389 | 6,363 | |||||||||||||||
Income (loss) from operations
|
4,400 | 1,200 | 4,015 | 3,623 | (3,939 | ) | ||||||||||||||
Other income (expense)
|
(345 | ) | (124 | ) | (143 | ) | 1,869 | (86 | ) | |||||||||||
Income (loss) before income taxes
|
4,055 | 1,076 | 3,872 | 5,492 | (4,025 | ) | ||||||||||||||
Provision (benefit) for income taxes
|
1,471 | 230 | 1,479 | 2,159 | (1,430 | ) | ||||||||||||||
Minority interest
|
(98 | ) | (34 | ) | (4 | ) | (42 | ) | (2 | ) | ||||||||||
Net income (loss)
|
$ | 2,486 | $ | 812 | $ | 2,389 | $ | 3,291 | $ | (2,597 | ) | |||||||||
Net income (loss) per share – Basic
|
$ | 0.39 | $ | 0.15 | $ | 0.44 | $ | 0.60 | $ | (0.47 | ) | |||||||||
Net income (loss) per share – Diluted
|
$ | 0.37 | $ | 0.14 | $ | 0.44 | $ | 0.60 | $ | (0.47 | ) | |||||||||
At October 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
(Dollars in thousands, except per shares data)
|
||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Total assets
|
$ | 38,248 | $ | 38,779 | $ | 23,921 | $ | 19,804 | $ | 21,002 | ||||||||||
Short-term debt
|
563 | 1,820 | 2,307 | 792 | 3,522 | |||||||||||||||
Long-term debt
|
– | – | – | – | – | |||||||||||||||
Total liabilities
|
14,448 | 16,789 | 9,707 | 8,625 | 13,151 | |||||||||||||||
Stockholders’ equity
|
23,800 | 21,990 | 13,482 | 11,133 | 7,847 | |||||||||||||||
Book value per share
|
$ | 3.73 | $ | 3.45 | $ | 2.46 | $ | 2.05 | $ | 1.44 |
At October 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
(Dollars in thousands, except per shares data)
|
||||||||||||||||||||
Per Common Share Data:
|
||||||||||||||||||||
Basic EPS
|
$
|
.39
|
$
|
.15
|
$
|
.44
|
$
|
.60
|
$
|
(.47)
|
||||||||||
Diluted EPS
|
$
|
.37
|
$
|
.14
|
$
|
.44
|
$
|
.60
|
$
|
(.47)
|
||||||||||
Cash dividends declared
|
$
|
774
|
$
|
694
|
$
|
333
|
$
|
–
|
$
|
1,544
|
●
|
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 retain key personnel;
|
●
|
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; 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.
|
October 31, 2012
|
||||
Customer list and relationships, net
|
$ | 131,250 | ||
Trademarks
|
180,000 | |||
Goodwill
|
440,000 | |||
$ | 751,250 |
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
|
ByLaws 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)) as amended by that First Amendment to Trademark License Agreement, dated January 4, 2013.
|
|
10.4
|
First Amendment to Trademark License Agreement, dated January 4, 2013, by and between Del Monte Corporation and Coffee Holding Co., Inc. Certain portions of Exhibit 10.4 are omitted based upon a request for confidential treatment. The omitted portions were filed separately with the SEC on a confidential basis. *
|
|
10.5
|
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)).
|
|
10.6
|
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)).
|
|
10.7
|
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)).
|
|
10.8
|
Contract of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and 4401 1st Ave LLC (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K filed on January 28, 2010 (File No. 001-32491)).
|
|
10.9
|
First Amendment to Loan and Security Agreement between Coffee Holding Co., Inc. and Sterling National Bank, dated July 23, 2010 (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed on January 31, 2011 (File No. 001-32491).
|
|
10.10
|
Placement Agency Agreement, dated as of September 27, 2011, by and among the Company, the selling stockholders named therein, Roth Capital Partners, LLC and Maxim Group, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)).
|
|
10.10
|
Subscription Agreement, dated as of September 27, 2011, by and between the Company, the selling stockholders named therein and each of the purchasers identified on the signature pages thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)).
|
|
11.1
|
Calculation of Earnings Per Share.
|
|
Consent of ParenteBeard LLC*
|
||
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 (principal executive officer and principal financial and accounting officer)
|
January 28, 2013
|
||
/s/ David Gordon
|
||||
David Gordon
|
Executive Vice President – Operations, Secretary and Director
|
January 28, 2013
|
||
/s/ Gerard DeCapua
|
||||
Gerard DeCapua
|
Director
|
January 28, 2013
|
||
/s/ Daniel Dwyer
|
||||
Daniel Dwyer
|
Director
|
January 28, 2013
|
||
/s/ Barry Knepper
|
||||
Barry Knepper
|
Director
|
January 28, 2013
|
||
/s/ John Rotelli
|
||||
John Rotelli
|
Director
|
January 28, 2013
|
||
/s/ Robert M. Williams
|
||||
Robert M. Williams
|
Director
|
January 28, 2013
|
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
|
ByLaws 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)) as amended by that First Amendment to Trademark License Agreement, dated January 4, 2013.
|
|
10.4
|
First Amendment to Trademark License Agreement, dated January 4, 2013, by and between Del Monte Corporation and Coffee Holding Co., Inc. Certain portions of Exhibit 10.4 are omitted based upon a request for confidential treatment. The omitted portions were filed separately with the SEC on a confidential basis. *
|
|
10.5
|
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)).
|
|
10.6
|
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)).
|
|
10.7
|
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)).
|
|
10.8
|
Contract of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and 4401 1st Ave LLC (incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K filed on January 28, 2010 (File No. 001-32491)).
|
|
10.9
|
First Amendment to Loan and Security Agreement between Coffee Holding Co., Inc. and Sterling National Bank, dated July 23, 2010 (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed on January 31, 2011 (File No. 001-32491).
|
Exhibit No.
|
Description
|
|
10.10
|
Placement Agency Agreement, dated as of September 27, 2011, by and among the Company, the selling stockholders named therein, Roth Capital Partners, LLC and Maxim Group, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)).
|
|
10.10
|
Subscription Agreement, dated as of September 27, 2011, by and between the Company, the selling stockholders named therein and each of the purchasers identified on the signature pages thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)).
|
|
11.1
|
Calculation of Earnings Per Share.
|
|
Consent of ParenteBeard LLC*
|
||
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.
|
PAGE
|
||||
FINANCIAL STATEMENTS:
|
||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2 | |||
CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 2012 AND 2011
|
F-3 | |||
CONSOLIDATED STATEMENTS OF INCOME - YEARS ENDED OCTOBER 31, 2012 AND 2011
|
F-4 | |||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - YEARS ENDED OCTOBER 31, 2012 AND 2011
|
F-5 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED OCTOBER 31, 2012 AND 2011
|
F-6 | |||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-7 |
2012
|
2011
|
|||||||
NET SALES
|
$ | 173,656,215 | $ | 146,755,165 | ||||
COST OF SALES
(which include purchases of approximately $31.9 million and $25.3 million in fiscal years 2012 and 2011, respectively, from a related party)
|
161,649,282 | 138,210,277 | ||||||
GROSS PROFIT
|
12,006,933 | 8,544,888 | ||||||
OPERATING EXPENSES:
|
||||||||
Selling and administrative
|
6,900,199 | 6,715,753 | ||||||
Officers’ salaries
|
707,070 | 629,399 | ||||||
TOTAL
|
7,607,269 | 7,345,152 | ||||||
INCOME FROM OPERATIONS
|
4,399,664 | 1,199,736 | ||||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest income
|
32,967 | 150,442 | ||||||
Other income and losses
|
(14,690 | ) | 14,848 | |||||
Loss from equity method investments
|
(168,069 | ) | - | |||||
Interest expense
|
(195,093 | ) | (289,521 | ) | ||||
TOTAL
|
(344,885 | ) | (124,231 | ) | ||||
INCOME BEFORE PROVISION FOR INCOME TAXES AND
|
||||||||
NONCONTROLLING INTEREST IN SUBSIDIARY
|
4,054,779 | 1,075,505 | ||||||
Provision for income taxes
|
1,470,381 | 229,522 | ||||||
NET INCOME BEFORE NONCONTROLLING INTEREST IN SUBSIDIARY
|
2,584,398 | 845,983 | ||||||
Less: Net income attributable to the noncontrolling interest in subsidiary
|
(98,721 | ) | (34,053 | ) | ||||
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC.
|
$ | 2,485,677 | $ | 811,930 | ||||
Basic earnings per share
|
$ | .39 | $ | .15 | ||||
Diluted earnings per share
|
$ | .37 | $ | .14 | ||||
Dividends declared per share
|
$ | .12 | $ | .12 | ||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
6,372,309 | 5,563,802 | ||||||
Diluted
|
6,639,309 | 5,835,802 |
Common Stock
$.001 Par Value
|
Treasury Stock
|
Additional | ||||||||||||||||||||||||||||||||||
Number of
|
Number of
|
Paid - in | Retained | Contingent | Non- Controlling | |||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Earnings
|
Consideration
|
Interest
|
Total
|
|||||||||||||||||||||||||||
Balance,10/31/010
|
5,490,823 | $ | 5,580 | 89,007 | $ | (295,261 | ) | $ | 7,581,973 | $ | 6,151,054 | $ | 39,000 | $ | 49,171 | $ | 13,531,517 | |||||||||||||||||||
Stock issued
|
890,000 | 890 | - | - | 8, 330,900 | - | 8,331,790 | |||||||||||||||||||||||||||||
OPTCO
|
5,000 | (5,000 | ) | 23,128 | (3,628 | ) | (19,500 | ) | - | |||||||||||||||||||||||||||
Shares cancelled
|
(13,514 | ) | (14 | ) | (24,636 | ) | (24,650 | ) | ||||||||||||||||||||||||||||
Dividend
|
(694,658 | ) | (694,658 | ) | ||||||||||||||||||||||||||||||||
Net income
|
811,930 | 811,930 | ||||||||||||||||||||||||||||||||||
Non-Controlling
|
||||||||||||||||||||||||||||||||||||
Interest
|
- | - | - | - | - | - | - | 34,053 | 34,053 | |||||||||||||||||||||||||||
Balance, 10/31/11
|
6,372,309 | $ | 6,456 | 84,007 | $ | (272,133 | ) | $ | 15,884,609 | $ | 6,268,326 | $ | 19,500 | $ | 83,224 | $ | 21,989,982 | |||||||||||||||||||
OPTCO
|
19,500 | (19,500 | ) | - | ||||||||||||||||||||||||||||||||
Dividend
|
(774,756 | ) | (774,756 | ) | ||||||||||||||||||||||||||||||||
Net income
|
2,485,677 | 2,485,677 | ||||||||||||||||||||||||||||||||||
Non-Controlling
|
||||||||||||||||||||||||||||||||||||
Interest
|
- | - | - | - | - | - | - | 98,721 | 98,721 | |||||||||||||||||||||||||||
Balance, 10/31/12
|
6,372,309 | $ | 6,456 | 84,007 | $ | (272,133 | ) | $ | 15,904,109 | $ | 7,979,247 | $ | $ | 181,945 | $ | 23,799,624 |
2012
|
2011
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 2,584,398 | $ | 845,983 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
447,404 | 433,199 | ||||||
Unrealized (gain) loss on commodities
|
(500,169 | ) | 2,143,057 | |||||
Loss on equity method investments
|
168,069 | - | ||||||
Stock cancellation
|
- | (24,650 | ) | |||||
Bad debt expense
|
- | 72,533 | ||||||
Deferred rent
|
19,747 | 22,165 | ||||||
Deferred income taxes
|
190,500 | (822,500 | ) | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
3,388,453 | (7,241,742 | ) | |||||
Inventories
|
2,172,274 | (5,285,435 | ) | |||||
Prepaid expenses and other current assets
|
(428,334 | ) | 227,173 | |||||
Prepaid green coffee
|
238,754 | 946,922 | ||||||
Prepaid and refundable income taxes
|
315,209 | (368,451 | ) | |||||
Accounts payable and accrued expenses
|
(610,307 | ) | 5,214,342 | |||||
Deposits and other assets
|
19,492 | 19,488 | ||||||
Income taxes payable
|
21,022 | (234,644 | ) | |||||
Net cash provided by (used in) operating activities
|
8,026,512 | (4,052,560 | ) | |||||
INVESTING ACTIVITIES:
|
||||||||
Purchases of equity method investments
|
(2,100,000 | ) | - | |||||
Purchases of machinery and equipment
|
(569,899 | ) | (526,518 | ) | ||||
Net cash used in investing activities
|
(2,669,899 | ) | (526,518 | ) | ||||
FINANCING ACTIVITIES:
|
||||||||
Advances under bank line of credit
|
134,801,724 | 128,456,096 | ||||||
Principal payments under bank line of credit
|
(136,059,333 | ) | (128,942,736 | ) | ||||
Proceeds from issuance of stock, net of offering costs
|
- | 8,331,790 | ||||||
Payment of dividend
|
(774,756 | ) | (694,658 | ) | ||||
Net cash (used in) provided by financing activities
|
(2,032,365 | ) | 7,150,492 | |||||
NET INCREASE IN CASH
|
3,324,248 | 2,571,414 | ||||||
CASH, BEGINNING OF PERIOD
|
4,244,335 | 1,672,921 | ||||||
CASH, END OF PERIOD
|
$ | 7,568,583 | $ | 4,244,335 |
2012
|
2011
|
|||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
|
||||||||
Interest paid
|
$ | 208,064 | $ | 289,866 | ||||
Income taxes paid
|
$ | 879,756 | $ | 1,041,731 |
2012
|
2011
|
|||||||
Allowance for doubtful accounts
|
$ | 126,674 | $ | 162,611 | ||||
Reserve for other allowances
|
47,000 | 47 ,000 | ||||||
Reserve for sales discounts
|
40,000 | 60,000 | ||||||
Totals
|
$ | 213,674 | $ | 269,611 |
2011
|
2011
|
|||||||
Option contracts
|
$ | 253,369 | $ | 129,750 | ||||
Future contracts
|
(1,620,758 | ) | (1,997,308 | ) | ||||
Commodities due to broker
|
$ | (1,367,389 | ) | $ | (1,867,558 | ) |
Year Ended October 31,
|
||||||||
2011
|
2011
|
|||||||
Gross realized gains
|
$ | 4,112,394 | $ | 2,504,248 | ||||
Gross realized (losses)
|
(4,779,697 | ) | (3,726,983 | ) | ||||
Unrealized gains (losses)
|
500,169 | (2,143,057 | ) | |||||
Total
|
$ | (167,134 | ) | $ | (3,365,792 | ) |
2012
|
2011
|
|||||||
Net Income
|
$ | 2,485,677 | $ | 811,930 | ||||
BASIC EARNINGS:
|
||||||||
Weighted average number of common shares
|
||||||||
outstanding
|
6,372,309 | 5,563,802 | ||||||
Basic earnings per common share
|
$ | 0.39 | $ | 0.15 | ||||
DILUTED EARNINGS:
|
||||||||
Weighted average number of common shares
|
||||||||
outstanding
|
6,372,309 | 5,563,802 | ||||||
Warrants
|
267,000 | 267,000 | ||||||
Contingent shares - common stock equivalents
|
5,000 | |||||||
Weighted average number of common shares
|
||||||||
outstanding - as adjusted
|
6,639,309 | 5,835,802 | ||||||
Diluted earnings per common share
|
$ | 0.37 | $ | 0.14 |
2012
|
2011
|
|||||||
Packed coffee
|
$ | 1,753,314 | $ | 1,514,189 | ||||
Green coffee
|
8,989,763 | 11,374,813 | ||||||
Packaging supplies
|
560,504 | 586,853 | ||||||
Totals
|
$ | 11,303,581 | $ | 13,475,855 |
Estimated
Useful Life
|
2012
|
2011
|
|||||||
Improvements
|
15-30 years
|
$ | 164,006 | $ | 161,298 | ||||
Machinery and equipment
|
7 years
|
3,767,500 | 3,348,163 | ||||||
Furniture and fixtures
|
7 years
|
491,716 | 343,864 | ||||||
4,423,222 | 3,853,325 | ||||||||
Less, accumulated depreciation
|
2,631,468 | 2,191,566 | |||||||
$ | 1,791,754 | $ | 1,661,759 |
2012
|
2011
|
|||||||
Current
|
||||||||
Federal
|
$ | 1,145,145 | $ | 1,036,645 | ||||
State and local
|
134,736 | 15,377 | ||||||
1,279,881 | 1,052,022 | |||||||
Deferred
|
||||||||
Federal
|
211,000 | (782,000 | ) | |||||
State and local
|
(20,500 | ) | (40,500 | ) | ||||
190,500 | (822,500 | ) | ||||||
Income tax expense
|
$ | 1,470,381 | $ | 229,522 |
2012
|
2011
|
|||||||
Tax at the federal statutory rate of 34%
|
$ | 1,378,625 | $ | 365,672 | ||||
Non controlling interest
|
(33,600 | ) | (11,600 | ) | ||||
Amortization
|
(14,900 | ) | (14,900 | ) | ||||
Section 199
|
(23,100 | ) | (40,000 | ) | ||||
Accrual adjustments
|
50,430 | – | ||||||
Other permanent differences
|
24,000 | (25,600 | ) | |||||
State and local tax, net of federal
|
88,926 | (44,050 | ) | |||||
Provision for income taxes
|
$ | 1,470,381 | $ | 229,522 | ||||
Effective income tax rate
|
36 | % | 21 | % |
2012
|
2011
|
|||||||
Current deferred tax assets:
|
||||||||
Accounts receivable
|
$ | 77,543 | $ | 91,400 | ||||
Unrealized loss
|
580,390 | 758,000 | ||||||
Inventory
|
44,722 | 47,000 | ||||||
Total current deferred tax asset
|
$ | 702,655 | $ | 896,400 | ||||
Non-current deferred tax assets:
|
||||||||
Deferred rent
|
60,484 | 50,600 | ||||||
Deferred compensation
|
191,861 | 190,500 | ||||||
Total non-current deferred tax asset
|
$ | 252,345 | $ | 241,100 | ||||
Total deferred tax asset
|
$ | 955,000 | $ | 1,137,500 | ||||
Non-current deferred tax liability:
|
||||||||
Fixed assets
|
285,000 | 277,000 | ||||||
Total deferred tax liabilities
|
$ | 285,000 | $ | 277,000 |
October 31
,
|
||||
2013
|
$ | 262,593 | ||
2014
|
268,276 | |||
2015
|
252,643 | |||
2016
|
243,021 | |||
2017
|
248,738 | |||
Thereafter
|
1,677,088 | |||
|
||||
$ | 2,952,359 |
a.
|
The Company concluded an offering to selected investors of 890,000 units, each of which consisted of one share of our common stock, par value $0.001 per share, and three-tenths (3/10
th
s) of a warrant, each to purchase one share of our common stock at an exercise price of $13.59 per share. The units were sold at a per unit price of $10.40. No units were issued, however, and investors received only shares of common stock and warrants. The common stock and the warrants were transferrable separately immediately upon issuance. The warrants are currently exercisable and will expire on April 1, 2017. The gross proceeds of the offering amounted to $9,256,000. The offering costs consisted of placement agent fee of $647,920, underwriter fee of $77,456, regulatory fee of $12,223 and legal and professional fees of $186,610, resulting in net proceeds received of $8,331,791.
The Warrants issued in the subscription agreement are linked to 267,000 shares of common stock with an exercise price of $13.59 per share. The Warrants became exercisable on April 1, 2012 and remain exercisable through April 1, 2017. The exercise price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Warrants may also be exercised on a cashless basis under a formula that explicitly limits the number of issuable common shares. Further, the exercisability of the Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.9% and 9.9% of the Company’s Common Stock.
The principal concepts underlying accounting for warrants provide a series of conditions, related to the potential for net cash settlement, which must be met in order to achieve equity classification. Management evaluated the terms and conditions of the Warrants and determined that i) the Warrants did not embody any of the conditions for liability classification under ASC 480 and ii) they were considered to be solely indexed to the Company’s own stock and met all the established criteria for equity classification set forth in ASC 815. Accordingly, the Warrants achieved equity classification at inception. The classification of the Warrants will be re-evaluated each reporting period.
|
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 years ended October 31, 2012 and 2011.
|
c.
|
Dividends
. On October 26, 2012, July 26, 2012, April 30, 2012, and January 26, 2012 the Company paid a cash dividend of $193,689 ($0.03 per share) to all stockholders of record as of October 16, 2012, July 16, 2012, April 17, 2012 and January 16, 2012.
|
Fair Value Measurements as of October 31, 2012
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Money market
|
$ | 334,221 | $ | 334,221 | – | – | ||||||||||
Equities
|
194,466 | 194,466 | – | – | ||||||||||||
Commodities – Options
|
253,369 | – | 253,369 | – | ||||||||||||
Total Assets
|
$ | 782,056 | $ | 528,687 | $ | 253,369 | – | |||||||||
Liabilities:
|
||||||||||||||||
Commodities – Futures
|
(1,620,758 | ) | – | (1,620,758 | ) | – | ||||||||||
Total Liabilities
|
$ | (1,620,758 | ) | – | $ | (1,620,758 | ) | – |
Fair Value Measurements as of October 31, 2011
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Money market
|
$ | 159,047 | $ | 159,047 | – | – | ||||||||||
Equities
|
379,660 | 379,660 | – | – | ||||||||||||
Commodities – Options
|
129,750 | – | 129,750 | – | ||||||||||||
Total Assets
|
$ | 668,457 | $ | 538,707 | $ | 129,750 | – |
Liabilities:
|
||||||||||||||||
Commodities – Futures
|
(1,997,308 | ) | – | (1,997,308 | ) | – | ||||||||||
Total Liabilities
|
$ | (1,997,308 | ) | – | $ | (1,997,308 | ) | – |