Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jul. 31, 2016 | Sep. 14, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | COFFEE HOLDING CO INC | |
Entity Central Index Key | 1,007,019 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,026,283 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
CURRENT ASSETS: | ||
Cash | $ 1,830,441 | $ 3,853,816 |
Accounts receivable, net of allowances of $144,000 for 2016 and 2015 | 15,819,019 | 10,968,237 |
Inventories | 12,737,022 | 13,862,818 |
Prepaid green coffee | 562,142 | 620,452 |
Prepaid expenses and other current assets | 518,909 | 256,202 |
Prepaid income taxes | 503,327 | 1,434,577 |
Due from broker | 107,731 | 0 |
Deferred income tax asset | 85,272 | 997,720 |
TOTAL CURRENT ASSETS | 32,163,863 | 31,993,822 |
Machinery and equipment, at cost, net of accumulated depreciation of $4,661,610 and $4,241,256 for 2016 and 2015, respectively | 2,126,239 | 1,845,000 |
Customer list and relationships, net of accumulated amortization of $46,875 and $41,250 for 2016 and 2015, respectively | 223,125 | 108,750 |
Trademarks | 180,000 | 180,000 |
Goodwill | 1,017,905 | 440,000 |
Equity method investments | 95,522 | 96,571 |
Deposits and other assets | 593,476 | 610,499 |
TOTAL ASSETS | 36,400,130 | 35,274,642 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 2,539,048 | 4,021,389 |
Line of credit | 7,258,375 | 5,554,121 |
Due to broker | 0 | 483,835 |
Income taxes payable | 925 | 0 |
TOTAL CURRENT LIABILITIES | 9,798,348 | 10,059,345 |
Deferred income tax liabilities | 70,672 | 92,370 |
Deferred rent payable | 228,927 | 222,055 |
Deferred compensation payable | 497,034 | 482,499 |
TOTAL LIABILITIES | 10,594,981 | 10,856,269 |
STOCKHOLDERS EQUITY: | ||
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; no shares issued and outstanding | 0 | 0 |
Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,494,680 and 6,456,316 shares issued; 6,026,283 and 6,162,207 shares outstanding at July 31, 2016 and October 31, 2015, respectively | 6,495 | 6,456 |
Additional paid-in capital | 16,104,074 | 15,904,109 |
Retained earnings | 11,691,828 | 9,665,940 |
Less: Treasury stock, 468,397 and 294,109 common shares, at cost at July 31, 2016 and October 31, 2015, respectively | (2,334,639) | (1,494,712) |
Total Coffee Holding Co., Inc. Stockholders Equity | 25,467,758 | 24,081,793 |
Noncontrolling interest | 337,391 | 336,580 |
TOTAL EQUITY | 25,805,149 | 24,418,373 |
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | $ 36,400,130 | $ 35,274,642 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
ASSETS: | ||
Allowances for doubtful accounts | $ 144,000 | $ 144,000 |
Accumulated Depreciation | 4,661,610 | 4,241,256 |
Customer list and relationships, accumulated amortization | $ 46,875 | $ 41,250 |
STOCKHOLDERS EQUITY: | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 30,000,000 | 30,000,000 |
Common stock shares issued | 6,494,680 | 6,456,316 |
Common stock shares outstanding | 6,026,283 | 6,162,207 |
Treasury Stock, Shares | 468,397 | 294,109 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | |
Consolidated Statements Of Income | ||||
NET SALES | $ 17,354,533 | $ 27,039,857 | $ 61,566,868 | $ 95,708,890 |
COST OF SALES (including $5.6 and $14.9 million of related party costs for the six months ended April 30, 2016 and 2015, respectively. Including $2.0 and $5.1 million for the three months ended April 30, 2016 and 2015, respectively.) | 14,203,343 | 24,991,366 | 52,455,081 | 92,816,224 |
GROSS PROFIT | 3,151,190 | 2,048,491 | 9,111,787 | 2,892,666 |
OPERATING EXPENSES: | ||||
Selling and administrative | 1,704,373 | 1,723,158 | 5,170,915 | 5,286,993 |
Officers' salaries | 163,850 | 163,850 | 491,550 | 489,435 |
TOTAL | 1,868,223 | 1,887,008 | 5,662,465 | 5,776,428 |
INCOME (LOSS) FROM OPERATIONS | 1,282,967 | 161,483 | 3,449,322 | (2,883,762) |
OTHER INCOME (EXPENSE): | ||||
Interest income | 9,890 | 13,074 | 30,889 | 26,302 |
Loss from equity method investments | (805) | (610) | (1,049) | (162) |
Interest expense | (42,671) | (35,156) | (116,144) | (153,768) |
TOTAL | (33,586) | (22,692) | (86,304) | (127,628) |
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY | 1,249,381 | 138,791 | 3,363,018 | (3,011,390) |
Provision (Benefit) for income taxes | 448,399 | 40 | 1,236,319 | (1,189,785) |
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY | 800,982 | 138,751 | 2,126,699 | (1,821,605) |
Less: Net (income) attributable to the non-controlling interest in subsidiary | (45,464) | 411 | (100,811) | (19,992) |
NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC. | $ 755,518 | $ 139,162 | $ 2,025,888 | $ (1,841,597) |
Basic and diluted earnings (loss) per share | $ 0.12 | $ 0.02 | $ 0.33 | $ (.30) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 6,056,420 | 6,215,894 | 6,117,610 | 6,215,894 |
CONSOLIDATED STATEMENTS OF INC5
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | |
Consolidated Statements Of Income | ||||
Related party costs | $ 1,900,000 | $ 3,000,000 | $ 7,400,000 | $ 17,900,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
OPERATING ACTIVITIES: | ||
Net income (loss) | $ 2,126,699 | $ (1,821,605) |
Adjustments to reconcile net income to net cash provided (used in) by operating activities: | ||
Depreciation and amortization | 425,977 | 408,436 |
Unrealized gain on commodities | (591,566) | (8,263) |
Loss on equity method investments | 1,049 | 162 |
Deferred rent | 6,872 | 9,311 |
Deferred income taxes | 890,750 | (1,149,500) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (4,766,640) | 3,424,104 |
Inventories | 1,432,701 | 2,765,836 |
Prepaid expenses and other current assets | (262,707) | (29,039) |
Prepaid green coffee | 58,310 | (547,756) |
Prepaid and refundable income taxes | 931,250 | (1,433,818) |
Deposits and other assets | 31,558 | 0 |
Accounts payable and accrued expenses | (1,554,385) | (3,093,085) |
Income taxes payable | 925 | (331,051) |
Net cash used in operating activities | (1,269,207) | (1,806,268) |
INVESTING ACTIVITIES: | ||
Cash paid for acquisition of business | (856,904) | 0 |
Purchases of machinery and equipment | (661,591) | (351,194) |
Net cash used in investing activities | (1,518,495) | (351,194) |
FINANCING ACTIVITIES: | ||
Advances under bank line of credit | 5,204,254 | 9,272,578 |
Principal payments under bank line of credit | (3,500,000) | (7,502,578) |
Purchase of treasury stock | (839,927) | 0 |
Payment of dividend | (100,000) | (80,000) |
Net cash provided by financing activities | 764,327 | 1,690,000 |
NET DECREASE IN CASH | (2,023,375) | (467,462) |
CASH, BEGINNING OF PERIOD | 3,853,816 | 3,782,639 |
CASH, END OF PERIOD | 1,830,441 | 3,315,177 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: | ||
Interest paid | 111,060 | 152,765 |
Income taxes paid | 26,582 | $ 1,647,668 |
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Fair value of assets acquired | 1,128,952 | |
Less: liabilities assumed | (72,045) | |
Net assets acquired: | 1,056,907 | |
Common stock, par value $.001 per share, 38,364 shares | 38 | |
Additional paidin capital | 199,965 | |
Noncash payment | 200,003 | |
Net cash paid | $ 856,904 |
1. BUSINESS ACTIVITIES
1. BUSINESS ACTIVITIES | 9 Months Ended |
Jul. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. BUSINESS ACTIVITIES | Coffee Holding Co., Inc. (the Company) conducts wholesale coffee operations, including manufacturing, roasting, packaging, marketing and distributing roasted and blended coffees for private labeled accounts and its own brands, and it sells green coffee. The Companys core product, coffee, can be summarized and divided into three product categories (product lines) as follows: Wholesale Green Coffee: Private Label Coffee: Branded Coffee: The Companys private label and branded coffee sales are primarily to customers that are located throughout the United States with limited sales in Canada and certain countries in Asia. Such customers include supermarkets, wholesalers, and individually-owned and multi-unit retailers. The Companys unprocessed green coffee, which includes over 90 specialty coffee offerings, is sold primarily to specialty gourmet roasters and to coffee shop operators in the United States with limited sales in Australia, Canada, England and China. The Companys wholesale green, private label, and branded coffee product categories generate revenues and cost of sales individually but incur selling, general and administrative expenses in the aggregate. There are no individual product managers and discrete financial information is not available for any of the product lines. The Companys product portfolio is used in one business and it operates and competes in one business activity and economic environment. In addition, the three product lines share customers, manufacturing resources, sales channels, and marketing support. Thus, the Company considers the three product lines to be one single reporting segment. |
2. BASIS OF PRESENTATION
2. BASIS OF PRESENTATION | 9 Months Ended |
Jul. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
2. BASIS OF PRESENTATION | The following (a) condensed consolidated balance sheet as of October 31, 2015, which has been derived from audited financial statements, and (b) the unaudited interim condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Companys latest shareholders annual report on Form 10-K filed with the SEC on January 26, 2016 for the fiscal year ended October 31, 2015 (Form 10-K). In the opinion of management, all adjustments (which include normal and recurring nature adjustments) necessary to present a fair statement of the Companys financial position as of July 31, 2016, and results of operations for the three and nine months ended July 31, 2016 and the cash flows for the nine months ended July 31, 2016 as applicable, have been made. The results of operations for the three and nine months ended July 31, 2016 are not necessarily indicative of the operating results for the full fiscal year or any future periods. The condensed consolidated financial statements include the accounts of the Company, the Companys subsidiaries, Organic Products Trading Company, LLC (OPTCO), Sonofresco LLC (SONO) and Generations Coffee Company, LLC (GCC), the entity formed as a result of the Companys joint venture with Carusos Coffee, Inc. The Company owns a 60% equity interest in GCC. All significant inter-company transactions and balances have been eliminated in consolidation. |
3. RECENTLY ISSUED ACCOUNTING P
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY | 9 Months Ended |
Jul. 31, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY | In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out (LIFO). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this guidance. The FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-01 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company is currently evaluating the impact of adopting this guidance. On March 17, 2016 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-08 that amends the guidance for Principle versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers (Topic 606), In May 2014 the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers - Deferral of the Effective Date Principal versus Agent Considerations Identifying Performance Obligations and Licensing Narrow-Scope Improvements and Practical Expedients, |
4. FORMATION OF SUBSIDIARY
4. FORMATION OF SUBSIDIARY | 9 Months Ended |
Jul. 31, 2016 | |
Formation Of Subsidiary | |
4. FORMATION OF SUBSIDIARY | On June 23, 2016, the Company formed a wholly-owned subsidiary named Sonofresco, LLC a Delaware limited liability company. Pursuant to the terms of an Agreement for Purchase and Sale of Assets dated June 23, 2016 (the SONO Agreement), by and among the Company, Coffee Kinetics LLC, a Washington limited liability company (the Seller), the members of the Seller and SONO (the Buyer), the Company, through its wholly-owned subsidiary SONO, purchased substantially all the assets, including equipment, inventory, customer list and relationships (the Assets) of the Seller. This was accounted for as a business combination. The Buyer purchased the Assets for a purchase price consisting of $856,904 in cash and 38,364 shares with a value of $200,003 of the Company's common stock issued on June 29, 2016, the date of closing. As part of the transaction, all of the employees of the Seller became employees of the Buyer. In addition, on June 29, 2016, the Company entered into a one-year advisory agreement (the Advisory Agreement), with one of the Sellers executives (the Executive), on an independent contractor basis, to ensure continuity of the business and to continue to operate the business located in Washington. The Advisory Agreement will automatically renew for an additional one year term upon the expiration of the first year term unless terminated by the Company. After completion of the first year term, the Advisory Agreement is subject to renewal by mutual agreement of the parties. Pursuant to the terms of the Advisory Agreement, the Executive is entitled to cash compensation of $50,000 per annum. If the Advisory Agreement is terminated prior to the end of the first year term, the Executive is entitled to receive an additional $50,000 termination fee. If the term of the Advisory Agreement is extended past the first year term, subject to certain exceptions, the Executive will be entitled to the $50,000 termination fee upon termination of the Advisory Agreement. The following table summarizes the assets purchased and liabilities assumed: Assets acquired: Accounts receivable $ 84,142 Inventory 306,905 Equipment 40,000 Customer list 120,000 Goodwill 577,905 Less: liabilities assumed (72,045 ) Net assets acquired: $ 1,056,907 Purchase of assets funded by: Cash paid $ 856,904 Common stock, par value $.001 per share, 38,364 shares 38 Additional paid-in capital 199,965 $ 1,056,907 The following pro forma results of operations for the three and nine months ended July 31, 2016 and 2015 have been prepared as though the acquisition of SONO 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 SONO 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: Nine Months Ended July 31, Three Months Ended July 31, 2016 2015 2016 2015 Pro forma sales $ 62,751,256 $ 96,910,164 $ 17,689,710 $ 27,456,352 Pro forma net income (loss) $ 2,103,684 $ (1,960,479 ) $ 775,650 $ 202,569 Pro forma basic and diluted earnings per share $ .34 $ (.32 ) $ .13 $ .03 The operations of SONO have been included in the Companys consolidated statement of operations since the date of the acquisition on June 29, 2016. The total revenue included for the period is $146,000. |
5. PREPAID GREEN COFFEE
5. PREPAID GREEN COFFEE | 9 Months Ended |
Jul. 31, 2016 | |
Notes to Financial Statements | |
5. PREPAID GREEN COFFEE | The balance represents advance payments made by OPTCO to several coffee growing cooperatives for the purchase of green coffee. Interest is charged to the cooperatives for these advances. Interest earned was $30,889 and $9,890 for the nine and three months ended July 31, 2016 and $26,302 and $13,074 for the nine and three months ended July 31, 2015. The prepaid coffee balance was $562,142 at July 31, 2016 and $620,452 at October 31, 2015. |
6. ACCOUNTS RECEIVABLE
6. ACCOUNTS RECEIVABLE | 9 Months Ended |
Jul. 31, 2016 | |
Notes to Financial Statements | |
6. ACCOUNTS RECEIVABLE | Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Past due balances over 60 days and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. 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. The allowances are summarized as follows: July 31, 2016 October 31, 2015 Allowance for doubtful accounts $ 65,000 $ 65,000 Reserve for other allowances 35,000 35,000 Reserve for sales discounts 44,000 44,000 Totals $ 144,000 $ 144,000 |
7. INVENTORIES
7. INVENTORIES | 9 Months Ended |
Jul. 31, 2016 | |
Inventory Disclosure [Abstract] | |
7. INVENTORIES | Inventories at July 31, 2016 and October 31, 2015 consisted of the following: July 31, 2016 October 31, 2015 Packed coffee $ 1,938,043 $ 1,441,451 Green coffee 10,086,200 11,730,006 Packaging supplies 712,779 691,361 Totals $ 12,737,022 $ 13,862,818 |
8. COMMODITIES HELD BY BROKER
8. COMMODITIES HELD BY BROKER | 9 Months Ended |
Jul. 31, 2016 | |
Notes to Financial Statements | |
8. COMMODITIES HELD BY BROKER | The Company has used, and intends to continue to use in a limited capacity, short term coffee futures and options contracts primarily for the purpose of partially hedging and minimizing the effects of changing green coffee prices and to reduce our cost of sales. The commodities held at broker represent the market value of the Companys trading account, which consists of options and future contracts for coffee held with a brokerage firm. The Company uses options and futures contracts, which are not designated or qualifying as hedging instruments, to partially hedge the effects of fluctuations in the price of green coffee beans. Options and futures contracts are recognized at fair value in the condensed consolidated financial statements with current recognition of gains and losses on such positions. The Company's accounting for options and futures contracts may increase earnings volatility in any particular period. The Company has open position contracts held by the broker, which are summarized as follows: July 31, 2016 October 31, 2015 Option Contracts 25,744 (134,613 ) Future Contracts 81,987 (349,222 ) Total Commodities 107,731 (483,835 ) The Company classifies its options and future contracts as trading securities and accordingly, unrealized holding gains and losses are included in earnings and not reflected as a net amount as a separate component of stockholders equity. At July 31, 2016, the Company held 16 futures contracts (generally with terms of three to four months) for the purchase of 600,000 pounds of green coffee at a weighted average price of $1.397 per pound. The fair market value of coffee applicable to such contracts was $1.462 per pound at that date. At July 31, 2016, the Company held 20 options covering an aggregate of 750,000 pounds of green coffee beans at $1.425 per pound. The fair market value of these options, which was obtained from observable market data of similar instruments was $42,375. At October 31, 2015, the Company held 38 futures contracts (generally with terms of three to four months) for the purchase of 1,425,000 pounds of green coffee at a weighted average price of $1.23 per pound. The fair market value of coffee applicable to such contracts was $1.21 per pound at that date. At October 31, 2015, the Company held 20 options covering an aggregate of 750,000 pounds of green coffee beans at $1.25 per pound. The fair market value of these options, which was obtained from observable market data of similar instruments was $42,750. The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows Three Months Ended July 31, 2016 2015 Gross realized gains $ 681,200 $ 293,439 Gross realized losses (23,379 ) (175,280 ) Unrealized gain (losses) (97,521 ) (481,433 ) Total $ 560,300 $ (363,274 ) Nine Months Ended July 31, 2016 2015 Gross realized gains $ 1,247,113 $ 991,706 Gross realized losses (924,507 ) (6,415,825 ) Unrealized gains 591,566 8,263 Total $ 914,172 $ (5,415,856 ) |
9. LINE OF CREDIT
9. LINE OF CREDIT | 9 Months Ended |
Jul. 31, 2016 | |
Debt Disclosure [Abstract] | |
9. LINE OF CREDIT | On March 10, 2015, the Company entered into a loan modification agreement (the Modification Agreement) with its lender Sterling National Bank (Sterling) which modified the terms of the financing agreement with Sterling previously entered into on February 17, 2009 (the Financing Agreement). Prior to the Modification Agreement, the Financing Agreement, as amended, provided for a credit facility in which the Company had a revolving line of credit for a maximum of $7,000,000 (the Loan Facility). On February 3, 2011, the Company amended the Financing Agreement to create a sublimit within the revolving line of credit in the form of a $300,000 term loan for the benefit of GCC. The Financing Agreement was set to expire on March 31, 2015. Pursuant to the Modification Agreement, the Financing Agreement was modified to, among other things, (i) extend the term of the Financing Agreement until February 28, 2017; (ii) increase the maximum amount of the Loan Facility from $7,000,000 to $9,000,000; (iii) reduce the interest rate on the average unpaid balance of the line of credit from an interest rate equal to a per annum reference rate of 3.75% to an interest rate per annum equal to the Wall Street Journal Prime Rate; and (iv) require the Company to pay, upon the occurrence of certain termination events, a prepayment premium of 0.50% of the maximum amount of the credit facility in effect as of the date of the termination event. Other than as described above, the Financing Agreement remains in full force and effect. Pursuant to the Modification Agreement, the Company is able to draw on the loan Facility up to an amount of 85% of eligible accounts receivable and 25% of eligible inventory consisting of green coffee beans and finished coffee not to exceed $1,000,000. The Loan Facility is secured by all tangible and intangible assets of the Company. The Loan Facility contains covenants that place annual restrictions on our operations, including covenants related to debt restrictions, capital expenditures, minimum deposit restrictions, tangible net worth, net profit, leverage, employee loan restrictions, distribution restrictions (common stock and preferred stock), dividend restrictions, and restrictive transactions. The Loan Facility also requires that the Company maintain a minimum working capital at all times. The Company was in compliance with all required financial covenants at July 31, 2016 and October 31, 2015. As of July 31, 2016 and October 31, 2015, the outstanding balance under the bank line of credit was $5,421,375 and $4,317,121, respectively. Also on March 10, 2015, the Company, as guarantor, and OPTCO (the Borrower), as borrower, entered into a new loan facility agreement with Sterling. The new loan facility is a revolving line of credit for a maximum of $3,000,000 (the New Loan Facility). The New Loan Facility terminates on February 28, 2017. The Borrower is able to draw on the New Loan Facility at an amount up to 85% of eligible accounts receivable, not to exceed 25% of all accounts of the Borrower. The New Loan Facility is payable monthly in arrears on the average unpaid balance of the line of credit at an interest rate per annum equal to the Wall Street Journal Prime Rate (currently 3.25%). The New Loan Facility is secured by all tangible and intangible assets of the Company. In connection with the New Loan Facility, the Company entered into a security agreement with Sterling and provided Sterling with a guarantee of the Borrowers obligations. |
10. INCOME TAXES
10. INCOME TAXES | 9 Months Ended |
Jul. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
10. INCOME TAXES | The Company accounts for The Company adopted FASB authoritative guidance for accounting for uncertainty in income taxes. As of July 31, 2016 and October 31, 2015, the Company did not have any unrecognized tax benefits or open tax positions. The Companys practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of July 31, 2016 and October 31, 2015, the Company had no accrued interest or penalties related to income taxes. The Company currently has no federal or state tax examinations in progress. The Company files a U.S. federal income tax return and California, Colorado, New Jersey, New York, Kansas, Oregon, Rhode Island, South Carolina, Rhode Island, Virginia, Connecticut, Michigan and Texas state tax returns. The Companys federal income tax return is no longer subject to examination by the federal taxing authority for the years before fiscal 2013. The Companys California, Colorado and New Jersey income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2009. The Companys Oregon and New York income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2010. |
11. EARNINGS PER SHARE
11. EARNINGS PER SHARE | 9 Months Ended |
Jul. 31, 2016 | |
Earnings Per Share [Abstract] | |
11. EARNINGS PER SHARE | The Company presents basic and diluted earnings per common share pursuant to the provisions included in the authoritative guidance issued by FASB, Earnings per Share, and certain other financial accounting pronouncements. Basic earnings per common share were computed by dividing net income by the sum of the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing the net income by the weighted-average number of common shares outstanding plus the dilutive effect of common shares issuable upon exercise of potential sources of dilution. The weighted average common shares outstanding used in the computation of basic and diluted earnings per share were 6,117,610 and 6,056,420 for the nine and three months ended July 31, 2016, respectively, and 6,215,894 for the nine and three months ended July 31, 2015. |
12. ECONOMIC DEPENDENCY
12. ECONOMIC DEPENDENCY | 9 Months Ended |
Jul. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
12. ECONOMIC DEPENDENCY | Approximately 33% of the Companys sales were derived from one customer during the nine months ended July 31, 2016. This customer also accounted for approximately $8,588,000 of the Companys accounts receivable balance at July 31, 2016. Approximately 57% of the Companys sales were derived from one customer during the nine months ended July 31, 2015. This customer also accounted for approximately $4,113,000 of the Companys accounts receivable balance at October 31, 2015. Concentration of credit risk with respect to other trade receivables is limited due to the short payment terms generally extended by the Company, by ongoing credit evaluations of customers, and by maintaining an allowance for doubtful accounts that management believes will adequately provide for credit losses. For the nine months ended July 31, 2016, approximately 51% of the Companys purchases were from four vendors. These vendors accounted for approximately $520,000 of the Companys accounts payable at July 31, 2016. For the nine months ended July 31, 2015, approximately 64% of the Companys purchases were from four vendors. These vendors accounted for approximately $2,961,000 of the Companys accounts payable at July 31, 2015. Management does not believe the loss of any one vendor would have a material adverse effect of the Companys operations due to the availability of many alternate suppliers. Approximately 23% of the Companys sales were derived from one customer during the three months ended July 31, 2016. Approximately 48% of the Companys sales were derived from one customer during the three months ended July 31, 2015. For the three months ended July 31, 2016, approximately 42% of the Companys purchases were from four vendors. For the three months ended July 31, 2015, approximately 60% of the Companys purchases were from four vendors. |
13. RELATED PARTY TRANSACTIONS
13. RELATED PARTY TRANSACTIONS | 9 Months Ended |
Jul. 31, 2016 | |
Related Party Transactions [Abstract] | |
13. RELATED PARTY TRANSACTIONS | The Company has engaged its 40% partner in GCC as an outside contractor (the Partner). Included in contract labor expense are expenses incurred from the Partner during the three and nine months ended July 31, 2016 of $135,957 and $363,808, respectively, for the processing of finished goods. An employee of one of the top four vendors is a director of the Company. Purchases from that vendor totaled approximately $7,441,000 and $1,885,000 for the nine and three months ended July 31, 2016, respectively, and $17,900,000 and $3,000,000 for the nine and three months ended July 31, 2015, respectively. The corresponding accounts payable balance to this vendor was approximately $303,000 and $586,000 at July 31, 2016 and October 31, 2015, respectively. In January 2005, the Company established the Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan. Currently, there is only one participant in the plan: Andrew Gordon, the Companys Chief Executive Officer. Within the plan guidelines, this employee is deferring a portion of his current salary and bonus. The assets are held in a separate trust. The deferred compensation payable represents the liability due to an officer of the Company. The assets are included in the Deposits and other assets in the accompanying balance sheets. The deferred compensation asset and liability at July 31, 2016 and October 31, 2015 were $497,034 and $482,499, respectively. |
14. STOCKHOLDERS' EQUITY
14. STOCKHOLDERS' EQUITY | 9 Months Ended |
Jul. 31, 2016 | |
Equity [Abstract] | |
14. STOCKHOLDERS' EQUITY | a. Treasury Stock b. Share Repurchase Program. |
15. SUBSEQUENT EVENTS
15. SUBSEQUENT EVENTS | 9 Months Ended |
Jul. 31, 2016 | |
Subsequent Events [Abstract] | |
15. SUBSEQUENT EVENTS | The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required further adjustment or disclosure in the condensed consolidated financial statements. |
4. FORMATION OF SUBSIDIARY (Tab
4. FORMATION OF SUBSIDIARY (Tables) | 9 Months Ended |
Jul. 31, 2016 | |
Formation Of Subsidiary Tables | |
Summary of assets purchased and liabilities assumed | The following table summarizes the assets purchased and liabilities assumed: Assets acquired: Accounts receivable $ 84,142 Inventory 306,905 Equipment 40,000 Customer list 120,000 Goodwill 577,905 Less: liabilities assumed (72,045 ) Net assets acquired: $ 1,056,907 Purchase of assets funded by: Cash paid $ 856,904 Common stock, par value $.001 per share, 38,364 shares 38 Additional paid-in capital 199,965 $ 1,056,907 |
Pro forma results of operations | Nine Months Ended July 31, Three Months Ended July 31, 2016 2015 2016 2015 Pro forma sales $ 62,751,256 $ 96,910,164 $ 17,689,710 $ 27,456,352 Pro forma net income (loss) $ 2,103,684 $ (1,960,479 ) $ 775,650 $ 202,569 Pro forma basic and diluted earnings per share $ .34 $ (.32 ) $ .13 $ .03 |
6. ACCOUNTS RECEIVABLE (Tables)
6. ACCOUNTS RECEIVABLE (Tables) | 9 Months Ended |
Jul. 31, 2016 | |
Accounts Receivable Tables | |
Schedule of Accounts Receivable | July 31, 2016 October 31, 2015 Allowance for doubtful accounts $ 65,000 $ 65,000 Reserve for other allowances 35,000 35,000 Reserve for sales discounts 44,000 44,000 Totals $ 144,000 $ 144,000 |
7. INVENTORIES (Tables)
7. INVENTORIES (Tables) | 9 Months Ended |
Jul. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | July 31, 2016 October 31, 2015 Packed coffee $ 1,938,043 $ 1,441,451 Green coffee 10,086,200 11,730,006 Packaging supplies 712,779 691,361 Totals $ 12,737,022 $ 13,862,818 |
8. COMMODITIES HELD BY BROKER (
8. COMMODITIES HELD BY BROKER (Tables) | 9 Months Ended |
Jul. 31, 2016 | |
Commodities Held By Broker Tables | |
Schedule of Commodities held by Broker | July 31, 2016 October 31, 2015 Option Contracts 25,744 (134,613 ) Future Contracts 81,987 (349,222 ) Total Commodities 107,731 (483,835 ) |
Schedule of realized and unrealized gains and losses | Three Months Ended July 31, 2016 2015 Gross realized gains $ 681,200 $ 293,439 Gross realized losses (23,379 ) (175,280 ) Unrealized gain (losses) (97,521 ) (481,433 ) Total $ 560,300 $ (363,274 ) Nine Months Ended July 31, 2016 2015 Gross realized gains $ 1,247,113 $ 991,706 Gross realized losses (924,507 ) (6,415,825 ) Unrealized gains 591,566 8,263 Total $ 914,172 $ (5,415,856 ) |
4. FORMATION OF SUBSIDIARY (Det
4. FORMATION OF SUBSIDIARY (Details) | 9 Months Ended |
Jul. 31, 2016USD ($) | |
Assets acquired: | |
Accounts receivable | $ 84,142 |
Inventory | 306,905 |
Equipment | 40,000 |
Customer list | 120,000 |
Goodwill | 577,905 |
Less: liabilities | (72,045) |
Net assets acquired | $ 1,056,907 |
4. FORMATION OF SUBSIDIARY (D27
4. FORMATION OF SUBSIDIARY (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | |
Formation Of Subsidiary Details 1 | ||||
Pro forma sales | $ 17,689,710 | $ 27,456,352 | $ 62,751,256 | $ 96,910,164 |
Pro forma net income (loss) | $ 775,650 | $ 202,569 | $ 2,103,684 | $ (1,960,479) |
Pro forma basic and diluted earnings per share | $ .13 | $ .03 | $ .34 | $ (.32) |
5. PREPAID GREEN COFFEE (Detail
5. PREPAID GREEN COFFEE (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | Oct. 31, 2015 | |
Prepaid Green Coffee Details Narrative | |||||
Interest income | $ 9,890 | $ 13,074 | $ 30,889 | $ 26,302 | |
Prepaid green coffee | $ 562,142 | $ 562,142 | $ 620,452 |
6. ACCOUNTS RECEIVABLE (Details
6. ACCOUNTS RECEIVABLE (Details) - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
Accounts Receivable Details | ||
Allowance for doubtful accounts | $ 65,000 | $ 65,000 |
Reserve for other allowances | 35,000 | 35,000 |
Reserve for sales discounts | 44,000 | 44,000 |
Totals | $ 144,000 | $ 144,000 |
7. INVENTORIES (Details)
7. INVENTORIES (Details) - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
Packaging supplies | $ 712,779 | $ 691,361 |
Totals | 12,737,022 | 13,862,818 |
Packed Coffee | ||
Inventory - Coffee | 1,938,043 | 1,441,451 |
Green Coffee | ||
Inventory - Coffee | $ 10,086,200 | $ 11,730,006 |
8. COMMODITIES HELD BY BROKER31
8. COMMODITIES HELD BY BROKER (Details) - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
Commodities Held By Broker Details | ||
Option Contracts | $ 25,744 | $ (134,613) |
Future Contracts | 81,987 | (349,222) |
Total Commodities | $ 107,731 | $ (438,835) |
8. COMMODITIES HELD BY BROKER32
8. COMMODITIES HELD BY BROKER (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | |
Commodities Held By Broker Details 1 | ||||
Gross realized gains | $ 681,200 | $ 293,439 | $ 1,247,113 | $ 991,706 |
Gross realized losses | (23,379) | (175,280) | (924,507) | (6,415,825) |
Unrealized gains (losses) | (97,521) | (481,433) | 591,566 | 8,263 |
Total | $ 560,300 | $ (363,274) | $ 914,172 | $ (5,415,856) |
9. LINE OF CREDIT (Details Narr
9. LINE OF CREDIT (Details Narrative) - USD ($) | Jul. 31, 2016 | Oct. 31, 2015 |
Line Of Credit Details Narrative | ||
Bank line of credit | $ 7,258,375 | $ 5,554,121 |
13. RELATED PARTY TRANSACTIONS
13. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2016 | Jul. 31, 2015 | Oct. 31, 2015 | |
Related Party Transactions Details Narrative | |||||
Purchases from top vendor | $ 1,885,000 | $ 3,000,000 | $ 7,441,000 | $ 17,900,000 | |
Top vendor accounts payable | 303,000 | 303,000 | $ 586,000 | ||
Deferred compensation asset and liability | $ 497,034 | $ 497,034 | $ 482,499 |