COFFEE HOLDING CO INC
For the period ended Oct 31, 2024. Filed Jan 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Jan 31, 2025
JVA$4.86+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-10-31; filed 2024-02-09.
0001493152-24-005726
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-10-31; filed 2025-01-31.
0001493152-25-004500
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 38 previous paragraphs and 37 current paragraphs.
20 unchanged; 15 reworded; 2 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
See description of recent events of the Company in Item 1 – “Recent Developments”.
Current report
On June 27, 2024, we reached an agreement for a new loan modification agreement with Webster which (i) provided for a new loan maturity date of June 29, 2025, (ii) provided that the applicable margin requirement for any revolving loan outstanding under the A&R Loan Agreement to 2.25%, (iii) provided that the maximum facility amount shall be $10,000,000 and (iv) to adjusted certain definitions and terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement.
Removed paragraphs (3)
Previous report
On September 29, 2022, we entered into the Merger Agreement, Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into JVA, with JVA surviving as a direct, wholly-owned subsidiary of Pubco. As a result of the Merger, each issued and outstanding share of our common stock will be cancelled and converted for the right of the holder thereof to receive one Pubco Ordinary Share.
Previous report
We are subject to certain covenants with respect to our credit agreement and we were not in compliance with the net profit and non-borrower affiliate covenants as of October 31, 2022. We requested a waiver from the lender and the waiver was granted and received on March 15, 2023. The lender also extended the due date of the October 31, 2022 financial statements until April 15, 2023. On March 15, 2023, the A&R Loan Agreement was also modified to, among other things: (i) provide for a requirement for subordination agreements if necessary, (ii) change the terms of transactions with affiliates from a dollar limitation to allowable in the ordinary course of business, and (iii) establish a new covenant for a fixed charge coverage ratio. As of October 31, 2023, we were not in compliance with the terms of the credit agreement. The Company has not received a waiver from the lender. The lender has reserved its right to exercise its rights and remedies at any time at its sole discretion. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our audited consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. If we are unable to continue as a going concern, our shareholders would likely lose some or all their investment in our securities.
Previous report
We believe that if the Merger with Delta closes, the A&R Loan Agreement and A&R Loan Facility with Webster Bank will continue in the ordinary course.
Reworded paragraphs (15)
Previous wording
Our net sales are driven primarily by the success of our sales and marketing efforts and our ability to retain existing customers and attract new customers. For this reason, we have made, and will continue to evaluate, strategic decisions to invest in measures that are expected to increase net sales. These transactions include our acquisition of Premier Roasters, LLC, including equipment and a roasting facility in La Junta, Colorado, the addition of a west coast sales manager to increase sales of our private label and branded coffees to new customers and the transaction with OPTCO. On June 29, 2016, we purchased substantially all the assets, including equipment, inventory, customer lists and relationships of Coffee Kinetics, LLC., a Washington limited liability company. On February 24, 2017, we acquired 100% of the capital stock of Comfort Foods, Inc. (“CFI”), a Massachusetts based medium sized coffee roaster, manufacturing both branded and private label coffee for retail and foodservice customers. In April 2018, Generations Coffee Company, the entity formed as a result of our joint venture with Caruso’s Coffee, Inc., purchased substantially all the assets of Steep & Brew, Inc. As of the fiscal period ending January 31, 2022, we agreed with Generations to no longer move forward with this joint venture.
Current wording
Our net sales are driven primarily by the success of our sales and marketing efforts and our ability to retain existing customers and attract new customers. For this reason, we have made, and will continue to evaluate, strategic decisions to invest in measures that are expected to increase net sales. These transactions include our acquisition of Premier Roasters, LLC, including equipment and a roasting facility in La Junta, Colorado, the addition of a west coast sales manager to increase sales of our private label and branded coffees to new customers and the transaction with OPTCO. On June 29, 2016, we purchased substantially all the assets, including equipment, inventory, customer lists and relationships of Coffee Kinetics, LLC., a Washington limited liability company. On February 24, 2017, we acquired 100% of the capital stock of Comfort Foods, Inc. (“CFI”), a Massachusetts based medium sized coffee roaster, manufacturing both branded and private label coffee for retail and foodservice customers. On November 11, 2024, we acquired substantially all of the assets of Empire Coffee, a NY based long-running private-label roaster.
Previous wording
The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Historically, we have used, and intend to continue to use in a limited capacity, short-term coffee futures and options contracts primarily for the purpose of partially hedging the effects of changing green coffee prices, as further explained in Note 2 of the Notes to the Consolidated Financial Statements in this Report. In addition, we acquired, and expect to continue to acquire, futures contracts with longer terms, generally three to four months, primarily for the purpose of guaranteeing an adequate supply of green coffee. Realized and unrealized gains or losses on options and futures contracts are reflected in our cost of sales. Gains on options and futures contracts reduce our cost of sales and losses on options and futures contracts increase our cost of sales. The use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices. We believe that, in normal economic times, our hedging policies remain a vital element to our business model not only in controlling our cost of sales, but also giving us the flexibility to obtain the inventory necessary to continue to grow our sales while trying to minimize margin compression during a time of historically high coffee prices. However, no strategy can entirely eliminate pricing risks and we generally remain exposed to losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain exposed to supply risk in the event of non-performance by the counterparties to any of our futures contracts. Although we have had net gains on options and futures contracts in the past, we have incurred significant losses on options and futures contracts during some recent reporting periods. In these cases, our cost of sales has increased, resulting in a decrease in our profitability or increase our losses. Such losses have and could in the future materially increase our cost of sales and materially decrease our profitability and adversely affect our stock price. See “Item 1A – Risk Factors - If our hedging policy is not effective, we may not be able to control our coffee costs, we may be forced to pay greater than market value for green coffee and our profitability may be reduced.” Failure to properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If the hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedges result in losses, our cost of sales may increase, resulting in a decrease in profitability or increased losses. As previously announced, as a result of the volatile nature of the commodities markets, we have and are continuing to scale back our use of hedging and short-term trading of coffee futures and options contracts, and intend to continue to use these practices in a …
Excerpt shortened here; the source contains the full paragraph.
Current wording
The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Historically, we have used, and intend to continue to use in a limited capacity, short-term coffee futures and options contracts primarily for the purpose of partially hedging the effects of changing green coffee prices, as further explained in Note 2 of the Notes to the Consolidated Financial Statements in this Annual Report. In addition, we acquired, and expect to continue to acquire, futures contracts with longer terms, generally three to four months, primarily for the purpose of guaranteeing an adequate supply of green coffee. Realized and unrealized gains or losses on options and futures contracts are reflected in our cost of sales. Gains on options and futures contracts reduce our cost of sales and losses on options and futures contracts increase our cost of sales. The use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices. We believe that, in normal economic times, our hedging policies remain a vital element to our business model not only in controlling our cost of sales, but also giving us the flexibility to obtain the inventory necessary to continue to grow our sales while trying to minimize margin compression during a time of historically high coffee prices. However, no strategy can entirely eliminate pricing risks and we generally remain exposed to losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain exposed to supply risk in the event of non-performance by the counterparties to any of our futures contracts. Although we have had net gains on options and futures contracts in the past, we have incurred significant losses on options and futures contracts during some recent reporting periods. In these cases, our cost of sales has increased, resulting in a decrease in our profitability or increase our losses. Such losses have and could in the future materially increase our cost of sales and materially decrease our profitability and adversely affect our stock price. See “Item 1A – Risk Factors - If our hedging policy is not effective, we may not be able to control our coffee costs, we may be forced to pay greater than market value for green coffee and our profitability may be reduced.” Failure to properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If the hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedges result in losses, our cost of sales may increase, resulting in a decrease in profitability or increased losses. As previously announced, as a result of the volatile nature of the commodities markets, we have and are continuing to scale back our use of hedging and short-term trading of coffee futures and options contracts, and intend to continue to use these practice…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Net Sales. Net sales totaled $68,173,404 for the fiscal year ended October 31, 2023, an increase of $2,466,525, or 4%, from $65,706,879 for the fiscal year ended October 31, 2022. The increase in net sales was due to an increase of sales to our legacy customers along with incremental sales to several significant new customers during the second half of the year.
Current wording
Net Sales. Net sales totaled $78,562,298 for the fiscal year ended October 31, 2024, an increase of $10,388,894, or 15%, from $68,173,404 for the fiscal year ended October 31, 2023. The increase in net sales was due to an increase of sales to our legacy customers along with incremental sales to several significant new customers during the second half of the year.
Previous wording
Cost of Sales. Cost of sales for the fiscal year ended October 31, 2023 was $57,214,382, or 84% of net sales, as compared to $54,692,933, or 83% of net sales, for the fiscal year ended October 31, 2022. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. For the fiscal year ended October 31, 2023, the net result of our hedging activities resulted in a gain of approximately $189,000, and for the fiscal year ended October 31, 2022, the net result of our hedging activities resulted in a loss of approximately $100,000. The increase in cost of sales was due to increased prices of green coffee, freight, salaries and packaging materials.
Current wording
Cost of Sales. Cost of sales for the fiscal year ended October 31, 2024 was $62,520,529, or 80% of net sales, as compared to $57,214,382, or 84% of net sales, for the fiscal year ended October 31, 2023. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. For the fiscal year ended October 31, 2024, the net result of our hedging activities resulted in a gain of approximately $1.6 million, and for the fiscal year ended October 31, 2023, the net result of our hedging activities resulted in a loss of approximately $189,000. The increase in the cost of sales was due to higher sales volume, salaries and packaging materials offset by the hedging activities discussed above.
Previous wording
Gross Profit. Gross profit for the fiscal year ended October 31, 2023 was $10,959,022, a decrease of $54,924 from $11,013,946 for the fiscal year ended October 31, 2022. Gross profit as a percentage of net sales decreased to 16% for the fiscal year ended October 31, 2023 from 17% for the fiscal year ended October 31, 2022. The decrease in gross profit percentage was attributable to higher raw material costs.
Current wording
Gross Profit. Gross profit for the fiscal year ended October 31, 2024 was $16,041,769 an increase of $5,082,747 from $10,959,022 for the fiscal year ended October 31, 2023. Gross profit as a percentage of net sales increased to 20% for the fiscal year ended October 31, 2024, from 16% for the fiscal year ended October 31, 2023. The increase in gross profit percentage was attributable to higher sales volume during the current year.
Previous wording
Operating Expenses. Total operating expenses decreased by $4,862,129 to $12,290,717 for the fiscal year ended October 31, 2023 from $16,352,846 for the fiscal year ended October 31, 2022. Selling and administrative expenses decreased $2,108,250, to $11,680,782 for the fiscal year ended October 31, 2023 from $12,989,032 for the fiscal year ended October 31, 2022. Goodwill and other intangible impairment during fiscal year ended October 31, 2023 amounted to $0. A decrease of $2,769,552 as compared to fiscal year ended October 31, 2022. Operating expenses decreased primarily due to the termination of our Generations joint venture and no operating expenses for this joint venture for the year ended October 31, 2023 compared to the year ended October 31, 2022, partially offset by increase in various other categories.
Current wording
Operating Expenses. Total operating expenses increased by $787,494 to $13,078,211 for the fiscal year ended October 31, 2024, from $12,290,717 for the fiscal year ended October 31, 2023. Selling and administrative expenses increased from $11,680,782 for the year ended October 31, 2023, to $12,457,268 for the fiscal year ended October 31, 2024. Officers’ salaries increased from $609,935 for the fiscal year ended October 31, 2023 to $620,943 for the fiscal year ended October 31, 2024. Operating expenses increased primarily due to an increase in freight charges relating to our increase in sales.
Previous wording
Other Income (Expense). Other income for the fiscal year ended October 31, 2023 was $227,899, an increase of $485,649 from other expense of $258,750 for the fiscal year ended October 31, 2022. The increase in other income was attributable to an increase in other income of $634,181 due to an insurance claim and a $650,000 gain from the sale of an investment, an increase in interest income of $4,853, partially offset by an increase in interest expense of $338,308 and an increase in our loss from equity investments of $464,077.
Current wording
Other Income (Expense). Other income for the fiscal year ended October 31, 2024 was $104,341, a decrease of $123,558 from other income of $227,899 for the fiscal year ended October 31, 2023. The decrease in other income of $123,558 was attributable to other income in the prior year of $634,181 due to an insurance claim and a $650,000 gain from the sale of an investment offset by a decrease of $322,961 of interest expense, decrease from a loss from equity method investments of $511,878, and an increase from the gain from an extinguishment of a lease of $210,567 in the current year.
Previous wording
Loss Before Provision For Income Taxes And Non-Controlling Interest In Subsidiary. We had a loss of $1,103,796 before income taxes and non-controlling interest in subsidiary for the fiscal year ended October 31, 2023 compared to a loss of $5,597,650 for the fiscal year ended October 31, 2022, resulting in a net change of $4,493,854 for the year ended October 31, 2023.
Current wording
Income Before Provision For Income Taxes. We had an income of $3,135,145 before income taxes for the fiscal year ended October 31, 2024 compared to a loss of $1,103,796 for the fiscal year ended October 31, 2023, resulting in a net change of $4,238,941 for the year ended October 31, 2024.
Previous wording
Income Taxes. Our benefit for income taxes for the fiscal year ended October 31, 2023 totaled $268,220 compared to a benefit of $995,793 for the fiscal year ended October 31, 2022. The change was attributable to the difference in the income for the year ended October 31, 2023 versus fiscal year ended October 31, 2022.
Current wording
Income Taxes. Our expense for income taxes for the fiscal year ended October 31, 2024 totaled $849,885, compared to a benefit of $268,220 for the fiscal year ended October 31, 2023. The change was attributable to the difference in the income for the fiscal year ended October 31, 2024 versus the fiscal year ended October 31, 2023.
Previous wording
Net Loss. We had a net loss of $835,576 or $0.15 per share basic and diluted, for the fiscal year ended October 31, 2023 compared to a net loss of $3,744,785, or $0.66 per share basic and diluted for the fiscal year ended October 31, 2022. The decrease in net loss was due to our results as described above.
Current wording
Net Income (Loss). We had net income of $2.2 million, or $0.39 of per share basic and diluted, for the fiscal year ended October 31, 2024 compared to a net loss of ($835,576), or ($0.15) per share basic and diluted, for the fiscal year ended October 31, 2023. The decrease in net loss was due to our results of operations as described above.
Previous wording
As of October 31, 2023, we had working capital of $18,600,262, which represented a $6,661,962 decrease from our working capital of $25,262,224 as of October 31, 2022. Our working capital decrease was primarily due to decreases of $265,675 in inventory, $500,279 in prepaid and refundable taxes, $473,132 in due from broker, $18,374 in prepaid expenses and other current assets, increases of $1,391,578 in accounts payable and accrued expenses, $34,891 in lease liability – current portion and the inclusion of our line of credit of $9,620,000, partially offset by increases of $218,104 in cash, $3,316,559 in accounts receivable and decreases of $876,148 in cash overdraft and $1,231,156 in due to broker As of October 31, 2023, the outstanding balance on our line of credit was $9,620,000 compared to $8,314,000 as of October 31, 2022.
Current wording
As of October 31, 2024, we had working capital of $21,526,983, which represented a $2,926,721 increase from our working capital of $18,600,262 as of October 31, 2023. Our working capital increase was primarily due to the outstanding balance on our line of credit of $0 as of October 31, 2024, compared to $9,620,000 as of October 31, 2023.
Previous wording
For the fiscal year ended October 31, 2023, our operating activities provided net cash of $652,083 as compared to the fiscal year ended October 31, 2022 when operating activities used net cash of $5,437,508. The increased cash flow from operations for the fiscal year ended October 31, 2023 was primarily due to our lower net loss.
Current wording
For the fiscal year ended October 31, 2024, our operating activities provided net cash of $5,431,211 as compared to the fiscal year ended October 31, 2023 when operating activities used net cash of $652,083. The increased cash flow from operations for the fiscal year ended October 31, 2024 was primarily due to our increased net income.
Previous wording
For the fiscal year ended October 31, 2023, our investing activities used net cash of $857,760 as compared to the fiscal year ended October 31, 2022 when net cash used by investing activities was $1,059,205. The decrease in our uses of cash in investing activities was due to our decreased outlays for purchases of machinery and equipment during the fiscal year ended October 31, 2023.
Current wording
For the fiscal year ended October 31, 2024, our investing activities provided net cash of $2,843,069 as compared to the fiscal year ended October 31, 2023 when net cash used by investing activities was $857,760. The increase in our uses of cash in investing activities was due to our proceeds from the sale of our investment during the fiscal year ended October 31, 2024.
Previous wording
For the fiscal year ended October 31, 2023 our financing activities provided net cash of $423,781 compared to net cash provided in financing activities of $5,316,311 for the fiscal year ended October 31, 2022. The change in cash flow from financing activities for the fiscal year ended October 31, 2023 was due to our decreased advances from our line of credit.
Current wording
For the fiscal year ended October 31, 2024 our financing activities had net cash used of $9,627,234 compared to net cash provided by financing activities of $423,781 for the fiscal year ended October 31, 2023. The change in cash flow from financing activities for the fiscal year ended October 31, 2024 was primarily due to our pay down of our line of credit.
Previous wording
We expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness, through October 31, 2024 with cash provided by operating activities and the use of our credit facility. In addition, an increase in eligible accounts receivable and inventory would permit us to make additional borrowings under our line of credit. We are in the process of renewing our credit facility.
Current wording
We expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness, through October 31, 2025 with cash provided by operating activities and the use of our credit facility.