COFFEE HOLDING CO INC

Previous wording

Some of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this quarterly report include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements upon information available to management as of the date of this Form 10-Q and management’s expectations and projections about future events, including, among other things:

Current wording

Some of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” “Business,” “Risk Factors” and elsewhere in this quarterly report include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements upon information available to management as of the date of this quarterly report and management’s expectations and projections about future events, including, among other things:

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 acquire and invest in measures that are expected to increase net sales.

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 Company, a New York-based long-running private-label roaster.

Previous wording

Our sales are affected by the price of green coffee. We purchase our green coffee from dealers located primarily within the United States. The dealers supply us with coffee beans from many countries, including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. For example, in Brazil, which produces approximately 40% of the world’s green coffee, the coffee crops are historically susceptible to frost in June and July and drought in September, October and November. However, because we purchase coffee from a number of countries and are able to freely substitute one country’s coffee for another in our products, price fluctuations in one country generally have not had a material impact on the price we pay for coffee. Accordingly, price fluctuations in one country generally have not had a material effect on our results of operations, liquidity and capital resources. Historically, because we generally have been able to pass green coffee price increases through to customers, increased prices of green coffee generally result in increased net sales, irrespective of sales volume.

Current wording

Our net sales are affected by the price of green coffee. We purchase our green coffee from dealers located primarily within the United States. The dealers supply us with coffee beans from many countries, including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. The supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. For example, in Brazil, which produces approximately 40% of the world’s green coffee, the coffee crops are historically susceptible to frost in June and July and drought in September, October and November. However, because we purchase coffee from a number of countries and are able to freely substitute one country’s coffee for another in our products, price fluctuations in one country generally have not had a material impact on the price we pay for coffee. Accordingly, price fluctuations in one country generally have not had a material effect on our results of operations, liquidity and capital resources. Historically, because we generally have been able to pass green coffee price increases through to customers, increased prices of green coffee generally result in increased net sales, irrespective of sales volume.

Previous wording

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. 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 limited capacity going forward.

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 condensed consolidated financial statements in this quarterly 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 “Part II. 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…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

There have been no changes to our critical accounting policies during the three and nine months ended July 31, 2025. Critical accounting policies and the significant estimates in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies and Estimates” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our consolidated financial statements and notes thereto, each in our 2024 10-K.

Current wording

There have been no changes to our critical accounting policies during the three months ended January 31, 2026. Critical accounting policies and the significant estimates in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies and Estimates” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our consolidated financial statements and notes thereto, each in our 2025 10-K.

Previous wording

***Cost of Sales.***Cost of sales for the nine months ended July 31, 2025, was $55,253,979, or 80.6% of net sales, as compared to $46,239,134, or 80.6% of net sales, for the nine months ended July 31, 2024. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. The increase of $9,014,845 was primarily attributable to higher sales volumes of our private label and branded products, as well as the impact of tariffs on imported coffee. In addition, cost of sales reflects the effect of our futures and options trading activity, which resulted in a net gain of approximately $687,000 for the nine-month period ended July 31, 2025, that was recognized in cost of sales in accordance with our accounting policy for commodities held by broker (see Note 5).

Current wording

Cost of Sales. Cost of sales for the three months ended January 31, 2026, was $18,536,823, or 73% of net sales, as compared to $15,573,359, or 73% of net sales, for the three months ended January 31, 2025. 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 three months ended January 31, 2026, the net result of our hedging activities resulted in a gain of approximately $376,338, compared to the three months ended January 31, 2025, in which the net result of our hedging activities resulted in a gain of approximately $1.7 million. The increase in cost of sales was due to higher sales volume, increased salaries, and higher packaging material costs.

Previous wording

***Income Taxes.***Our expense for income taxes for the nine months ended July 31, 2025 totaled $650,749 compared to an expense of $323,954 for the nine months ended July 31, 2024. The change was primarily attributable to the difference in the income for the nine months ended July 31, 2025 versus the income in the nine months ended July 31, 2024.

Current wording

Income Taxes. Our expense for income taxes for the three months ended January 31, 2026 totaled $662,690, compared to an expense of $406,092 for the three months ended January 31, 2025. The change was attributable to the difference in the income for the three months ended January 31, 2026 versus the three months ended January 31, 2025.

Previous wording

***Net (Loss) Income.***We had net income of $591,898 or $0.10 per share basic and diluted, for the nine months ended July 31, 2025 compared to net income of $955,979, or $0.17 per share basic and diluted for the nine months ended July 31, 2024. The decrease in net income was primarily due to higher operating expenses associated with the Second Empire Acquisition, the impact of tariffs on imported coffee, and unrealized trading losses during the third quarter (see Note 5).

Current wording

Net Income. We had net income of $1,648,320 or $0.29 per share basic and diluted, for the three months ended January 31, 2026 compared to net income of $1,153,256, or $0.20 per share basic and diluted, for the three months ended January 31, 2025. The change in net income was due to our results of operations as described above.

Previous wording

Liquidity, Capital Resources and Going Concern

Current wording

Liquidity and Capital Resources and Going Concern

Previous wording

On June 27, 2024, the Borrowers entered into the Tenth Loan Modification Agreement with Webster which amended the A&R Loan Agreement to, among other things: (i) provide for a new loan maturity date of June 29, 2025, (ii) provide that the applicable margin requirement for any revolving loan outstanding under the A&R Loan Agreement to 2.25%, (iii) provide that the maximum facility amount shall be $10,000,000 and (iv) to adjust certain definitions and terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement.

Current wording

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 be 2.25%, (iii) provided that the maximum facility amount shall be $10,000,000 and (iv) adjusted certain definitions and terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement.

Previous wording

Each of the A&R Loan Facility and A&R Loan Agreement contains covenants, subject to certain exceptions, that place annual restrictions on the Borrowers’ operations, including covenants relating to debt restrictions, capital expenditures, indebtedness, minimum deposit restrictions, tangible net worth, net profit, leverage, employee loan restrictions, dividend and repurchase restrictions (common stock and preferred stock), and restrictions on intercompany transactions. The outstanding balance on our line of credit was $6,250,000 and $0 as of July 31, 2025 and October 31, 2024, respectively.

Current wording

Each of the A&R Loan Facility and A&R Loan Agreement contains covenants, subject to certain exceptions, that place annual restrictions on the Borrowers’ operations, including covenants relating to debt restrictions, capital expenditures, indebtedness, minimum deposit restrictions, tangible net worth, net profit, leverage, employee loan restrictions, dividend and repurchase restrictions (common stock and preferred stock), and restrictions on intercompany transactions. The outstanding balance on the Company’s line of credit was $2,650,000 and $6,050,000 as of January 31, 2026, and October 31, 2025, respectively.

Previous wording

For the nine months ended July 31, 2025, financing activities provided net cash of $6,250,000, compared to net cash used of $7,724,374 in the nine months ended July 31, 2024. The change was primarily due to increased borrowings under our line of credit in the current year.

Current wording

For the three months ended January 31, 2026, our financing activities had net cash used of $3,400,000 compared to net cash provided by financing activities of $2,200,000 for the three months ended January 31, 2025. The year-over-year change in cash flows from financing activities was primarily attributable to activity on the Company’s line of credit.

Previous wording

We expect to fund our operations, including working capital needs, capital expenditures, and required debt service, for at least the next twelve months from the date these condensed consolidated financial statements are issued, through a combination of cash provided by operating activities and availability under 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.

Current wording

We expect to fund our operations, including paying our liabilities, funding capital expenditures and making required payments on our indebtedness, through at least the next twelve months from the date these condensed consolidated financial statements are issued, 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.