Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Apr. 30, 2017 | Jun. 12, 2017 | |
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 | Apr. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,859,918 | |
Entity Trading Symbol | JVA | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
CURRENT ASSETS: | ||
Cash | $ 3,466,636 | $ 3,227,981 |
Accounts receivable, net of allowances of $144,000 for 2017 and 2016 | 11,077,854 | 13,517,892 |
Inventories | 15,800,255 | 14,276,290 |
Prepaid green coffee | 389,821 | 435,577 |
Prepaid expenses and other current assets | 473,833 | 535,456 |
Prepaid and refundable income taxes | 118,821 | 481,977 |
Due from broker | 134,722 | |
Deferred income tax asset | 463,223 | 81,545 |
TOTAL CURRENT ASSETS | 31,790,443 | 32,691,440 |
Machinery and equipment, at cost, net of accumulated depreciation of $5,184,520 and $4,819,828 for 2017 and 2016, respectively | 2,519,914 | 2,269,863 |
Customer list and relationships, net of accumulated amortization of $57,000 and $50,250 for the periods ended April 30, 2017 and 2016, respectively | 383,000 | 219,750 |
Trademarks | 180,000 | 180,000 |
Goodwill | 2,377,407 | 1,017,905 |
Equity method investments | 95,850 | 95,598 |
Deposits and other assets | 582,932 | 549,337 |
TOTAL ASSETS | 37,929,546 | 37,023,893 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 3,390,835 | 4,062,573 |
Line of credit | 7,393,575 | 6,958,375 |
Due to broker | 600,609 | |
Income taxes payable | 26,561 | 1,050 |
TOTAL CURRENT LIABILITIES | 11,411,580 | 11,021,998 |
Deferred income tax liabilities | 209,071 | 167,470 |
Deferred rent payable | 235,798 | 231,216 |
Deferred compensation payable | 500,868 | 489,668 |
TOTAL LIABILITIES | 12,357,317 | 11,910,352 |
Common stock subject to possible redemption, at $200,004; 38,364 shares issued and outstanding at redemption value as of April 30, 2017 and October 31, 2016 | 200,004 | 200,004 |
Coffee Holding Co., Inc. stockholders' equity: | ||
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; no shares issued and outstanding | ||
Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,494,680 shares issued; 5,821,554 and 5,824,938 shares outstanding as of April 30 2017 and October 31, 2016, respectively | 6,456 | 6,456 |
Additional paid-in capital | 15,904,109 | 15,904,109 |
Retained earnings | 12,255,747 | 11,878,228 |
Less: Treasury stock, 634,762 and 631,378 common shares, at cost as of April 30, 2017 and October 31, 2016, respectively | (3,265,419) | (3,249,590) |
Total Coffee Holding Co., Inc. Stockholders' Equity | 24,900,893 | 24,539,203 |
Noncontrolling interest | 471,332 | 374,334 |
TOTAL EQUITY | 25,372,225 | 24,913,537 |
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY | $ 37,929,546 | $ 37,023,893 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowances for doubtful accounts | $ 144,000 | $ 144,000 |
Accumulated Depreciation | 5,184,520 | 4,819,828 |
Customer list and relationships, accumulated amortization | 57,000 | 50,250 |
Common stock, redemption amount | $ 200,004 | $ 200,004 |
Common stock, redemption shares issued | 38,364 | 38,364 |
Common stock, redemption shares outstanding | 38,364 | 38,364 |
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | ||
Preferred stock shares outstanding | ||
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 | 6,494,680 |
Common stock shares outstanding | 5,821,554 | 5,824,938 |
Treasury Stock, Shares | 634,762 | 631,378 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Income Statement [Abstract] | ||||
NET SALES | $ 17,787,103 | $ 21,406,939 | $ 37,419,469 | $ 44,212,334 |
COST OF SALES (including $2.2 and $5.6 million of related party costs for the six months ended April 30, 2017 and 2016, respectively. Including $1.4 and $2.0 million for the three months ended April 30, 2017 and 2016, respectively.) | 15,144,534 | 18,097,486 | 31,645,614 | 38,251,840 |
GROSS PROFIT (LOSS) | 2,642,569 | 3,309,453 | 5,773,855 | 5,960,494 |
OPERATING EXPENSES: | ||||
Selling and administrative | 2,365,395 | 1,789,489 | 4,715,679 | 3,466,440 |
Officers' salaries | 179,250 | 163,850 | 347,840 | 327,700 |
TOTAL | 2,544,645 | 1,953,339 | 5,063,519 | 3,794,140 |
INCOME (LOSS) FROM OPERATIONS | 97,924 | 1,356,114 | 710,336 | 2,166,354 |
OTHER INCOME (EXPENSE) | ||||
Interest income | 10,958 | 10,988 | 23,389 | 21,000 |
Gain (loss) from equity method investment | (1,067) | 212 | 252 | (244) |
Interest expense | (66,495) | (33,670) | (124,239) | (73,473) |
TOTAL | (56,604) | (22,470) | (100,598) | (52,717) |
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY | 41,320 | 1,333,644 | 609,738 | 2,113,637 |
Provision (benefit) for income taxes | (35,893) | 485,356 | 135,220 | 787,920 |
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY | 77,213 | 848,288 | 474,518 | 1,325,717 |
Less: Net (income) attributable to the non-controlling interest | (75,476) | (17,487) | (96,999) | (55,347) |
NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC. | $ 1,737 | $ 830,801 | $ 377,519 | $ 1,270,370 |
Basic and diluted earnings (loss) per share | $ 0 | $ 0.14 | $ 0.06 | $ 0.21 |
Weighted average common shares outstanding: Basic and diluted | 5,862,123 | 6,133,557 | 5,862,722 | 6,148,039 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Income (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Income Statement [Abstract] | ||||
Related party costs | $ 1,400,000 | $ 2,000,000 | $ 2,200,000 | $ 5,600,000 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Apr. 30, 2017 | Apr. 30, 2016 | |
OPERATING ACTIVITIES: | ||
Net income | $ 474,518 | $ 1,325,717 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 372,962 | 278,987 |
Unrealized (gain) loss on commodities | 735,331 | (689,088) |
(Gain) loss on equity method investments | (252) | 244 |
Deferred rent | 4,582 | 4,581 |
Deferred income taxes | (340,077) | 872,750 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 3,024,956 | (349,772) |
Inventories | (407,059) | 1,529,369 |
Prepaid expenses and other current assets | 94,304 | (17,193) |
Prepaid green coffee | 45,756 | 276,013 |
Prepaid and refundable income taxes | 363,156 | 502,850 |
Accounts payable and accrued expenses | (1,298,619) | (749,970) |
Deposits and other assets | 4,156 | 15,833 |
Income taxes payable | 25,511 | 500 |
Net cash provided by operating activities | 3,099,225 | 3,000,821 |
INVESTING ACTIVITIES: | ||
Cash paid for investment in subsidiary, net of cash acquired | (2,893,275) | |
Purchases of machinery and equipment | (386,666) | (270,221) |
Net cash used in investing activities | (3,279,941) | (270,221) |
FINANCING ACTIVITIES: | ||
Advances under bank line of credit | 3,900,200 | 600,000 |
Payment of dividend | (100,000) | |
Purchase of treasury stock | (15,829) | (386,319) |
Principal payments under bank line of credit | (3,465,000) | (3,500,000) |
Net cash provided by (used in) financing activities | 419,371 | (3,386,319) |
NET (DECREASE) INCREASE IN CASH | 238,655 | (655,719) |
CASH, BEGINNING OF PERIOD | 3,227,981 | 3,853,816 |
CASH, END OF PERIOD | 3,466,636 | 3,198,097 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: | ||
Interest paid | 121,000 | 81,276 |
Income taxes paid | $ 74,826 | 25,008 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Accounts receivable | 584,918 | |
Inventory | 1,116,906 | |
Equipment | 229,597 | |
Prepaid expenses | 32,681 | |
Customer lists | 170,000 | |
Goodwill | 1,359,502 | |
Other asset | 26,551 | |
Less: liabilities | 626,880 | |
Net cash paid | $ 2,893,275 |
Business Activities
Business Activities | 6 Months Ended |
Apr. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Activities | NOTE 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 Company also manufactures and sells coffee roasters. The Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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. |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Apr. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | NOTE 2 - BASIS OF PRESENTATION: The following (a) condensed consolidated balance sheet as of October 31, 2016, 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 Company’s latest shareholders’ annual report on Form 10-K filed with the SEC on January 27, 2017 for the fiscal year ended October 31, 2016 (“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 Company’s financial position as of April 30, 2017, and results of operations for the three and six months ended April 30, 2017 and the cash flows for the six months ended April 30, 2017 as applicable, have been made. The results of operations for the three and six months ended April 30, 2017 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 Company’s subsidiaries, Organic Products Trading Company, LLC (“OPTCO”), Sonofresco, LLC (“SONO”), Comfort Foods, Inc (“CFI”) and Generations Coffee Company, LLC (“GCC”), the entity formed as a result of the Company’s joint venture with Caruso’s Coffee, Inc. The Company owns a 60% equity interest in GCC. All significant inter-company transactions and balances have been eliminated in consolidation. |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements Affecting the Company | 6 Months Ended |
Apr. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Pronouncements Affecting the Company | NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY: The FASB has issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, not-for-profit organizations, and employee benefit plans, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. 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 FASB issued 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, |
Purchase of Business
Purchase of Business | 6 Months Ended |
Apr. 30, 2017 | |
Business Combinations [Abstract] | |
Purchase of Business | NOTE 4 - PURCHASE OF BUSINESS: Pursuant to the terms of a Stock Purchase Agreement dated February 23, 2017, by and among the Company, Comfort Foods, Inc., a Massachusetts corporation (“CFI”), Stephen J. Beattie (the “Trustee”), as trustee of the Stephen J. Beattie Revocable Trust of 2013 (the “Trust”) and Victor Janovich (together, with the Trustee on behalf of the Trust, the “Sellers”), the Company, acquired all of the outstanding capital stock of CFI. The transaction was accounted for as a business combination and was not a significant acquisition for the Company. The purpose of the transaction was to expand the Company's presence in the northeast. The Company purchased the shares of capital stock for a purchase price of $2,300,000 in cash, subject to the holdback of $25,000 for a six month period following the consummation of the transaction to secure the Sellers’ indemnification obligations. In addition, immediately following consummation of the transaction, the Company also paid all of the existing bank debt of CFI, totaling approximately $605,173. The initial accounting for the business combination is not yet complete, and the Company is still performing procedures to determine the appropriate accounting. As part of the transaction, the employees of CFI remained employees of CFI, with the exception of Stephen Beattie, CFI’s then Chief Executive Officer. Mr. Beattie entered into an advisory agreement (the “Advisory Agreement”) with CFI, dated as of February 23, 2017, pursuant to which Mr. Beattie agreed to provide services to CFI on an independent contractor basis, to ensure continuity of the business and its operations in Massachusetts. The initial term of the Advisory Agreement commenced on April 1, 2017 and expires on December 31, 2017, unless terminated earlier in accordance with the terms and conditions of the Advisory Agreement. The Advisory Agreement may be renewed by mutual agreement of the parties for additional one year terms upon the expiration of the first term or any renewal term. Pursuant to the terms of the Advisory Agreement, Mr. Beattie is entitled to cash compensation of $5,000 per month. The following table summarizes the assets purchased and liabilities assumed: Assets acquired: Cash $ 11,898 Accounts receivable 584,918 Inventory 1,116,906 Prepaid expenses 32,681 Equipment 229,597 Customer List 170,000 Goodwill 1,359,502 Security deposit 26,551 Less: liabilities assumed (626,880 ) Net assets acquired: $ 2,905,173 Purchase of assets funded by: Cash paid $ 2,905,173 The operations of CFI have been included in the Company's consolidated statement of operations since the date of the acquisition on February 23, 2017. The total revenue included for the period is $732,660. |
Prepaid Green Coffee
Prepaid Green Coffee | 6 Months Ended |
Apr. 30, 2017 | |
Prepaid Green Coffee | |
Prepaid Green Coffee | NOTE 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 $23,389 and $21,000 for the six months ended April 30, 2017 and 2016, respectively. The prepaid coffee balance was $389,821 at April 30, 2017 and $435,577 at October 31, 2016. |
Accounts Receivable
Accounts Receivable | 6 Months Ended |
Apr. 30, 2017 | |
Receivables [Abstract] | |
Accounts Receivable | NOTE 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 Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s 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: April 30, 2017 October 31, 2016 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 |
Inventories
Inventories | 6 Months Ended |
Apr. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 7 - INVENTORIES: Inventories at April 30, 2017 and October 31, 2016 consisted of the following: April 30, 2017 October 31, 2016 Packed coffee $ 2,892,963 $ 1,804,633 Green coffee 11,124,172 11,434,024 Roasters and parts 204,036 210,007 Packaging supplies 1,579,084 827,626 Totals $ 15,800,255 $ 14,276,290 |
Commodities Held by Broker
Commodities Held by Broker | 6 Months Ended |
Apr. 30, 2017 | |
Commodities Held By Broker - Schedule Of Realized And Unrealized Gains And Losses Details | |
Commodities Held by Broker | NOTE 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 Company’s 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: April 30, 2017 October 31, 2016 Option Contracts $ (178,650 ) $ (83,753 ) Future Contracts (421,959 ) 218,475 Total Commodities $ (600,609 ) $ 134,722 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 April 30, 2017, the Company held 75 futures contracts (generally with terms of three to four months) for the purchase of 2,812,500 pounds of green coffee at a weighted average price of $1.43 per pound. The fair market value of coffee applicable to such contracts was $1.33 per pound at that date. 2017, the Company held 20 option contracts for the purchase of 750,000 pounds of green coffee. The fair market value of these options was $26,700 at April 30, 2017. At October 31, 2016, the Company held 22 futures contracts (generally with terms of three to four months) for the purchase of 825,000 pounds of green coffee at a weighted average price of $1.45 per pound. The fair market value of coffee applicable to such contracts was $1.64 per pound at that date. At October 31, 2016, the Company did not have any options. The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows: Three Months Ended April 30, 2017 2016 Gross realized gains $ 322,389 $ 445,314 Gross realized losses (40,883 ) (368,745 ) Unrealized (loss) gain (774,280 ) 687,536 Total $ (492,774 ) $ 764,105 Six Months Ended April 30, 2017 2016 Gross realized gains $ 727,648 $ 565,912 Gross realized losses (500,901 ) (901,128 ) Unrealized (loss) gain (735,331 ) 689,088 Total $ (508,584 ) $ 353,872 |
Line of Credit
Line of Credit | 6 Months Ended |
Apr. 30, 2017 | |
Debt Disclosure [Abstract] | |
Line of Credit | NOTE 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 “Original Financing Agreement”). Prior to the Modification Agreement, the Original 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 “Company Loan Facility”). On February 3, 2011, the Company amended the Original 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 Original Financing Agreement was set to expire on March 31, 2015. Pursuant to the Modification Agreement, the Original Financing Agreement was modified to, among other things, (i) extend the term of the Original Financing Agreement until February 28, 2017; (ii) increase the maximum amount of the Company 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. The line was extended through March 31, 2017 and again through April 30, 2017. Also on March 10, 2015, the Company, as guarantor, and OPTCO, as borrower, entered into a new loan facility agreement with Sterling. The OPTCO loan facility is a revolving line of credit for a maximum of $3,000,000 (the “OPTCO Financing Agreement”). The OPTCO Financing Agreement was set to expire on February 28, 2017 but was extended through March 31, 2017 and again through April 30, 2017. On April 25, 2017 the Company and OPTCO (together with the Company, collectively referred to herein as the “Borrowers”) entered into an Amended and Restated Loan and Security Agreement (the “A&R Loan Agreement”) with Sterling, which consolidated the Company Financing Agreement and the OPTCO Financing Agreement. Pursuant to the A&R Loan Agreement, the terms of each of the Company Financing Agreement and the OPTCO Financing Agreement were amended and restated to, among other things: (i) provide for a new Maturity Date of February 28, 2018; (ii) consolidate the principal amounts of the Company Financing Agreement and the OPTCO Financing Agreement to provide for a maximum principal amount limit of $12,000,000 for the Borrowers, collectively, provided that Also on April 25, 2017, SONO and CFT (collectively referred to herein as the “Guarantors”), entered into a Guaranty Agreement (the “Guaranty Agreement”) in connection with the Loan Agreement. The Guaranty Agreement was provided as an inducement to Sterling to extend credit to Borrowers in exchange for the Guarantors’ unconditional guarantee of the payment and performance obligations of the Borrowers under the Loan Agreement, as further defined in the Guaranty Agreement. Each of the Company 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 Loan Facility also requires that we maintain a minimum working capital at all times, and the A&R Loan Agreement requires that the Borrowers, on a consolidated basis, maintain a minimum working capital at all times and achieve a minimum net profit amount as of fiscal year end during the term of the A&R Loan Agreement. The Company and OPTCO, as applicable were in compliance with all required financial covenants at April 30, 2017 and October 31, 2016. Each of the Company Loan Facility and the A&R Loan Agreement is secured by all tangible and intangible assets of the Company. Other than as amended and restated by the A&R Loan Agreement, the Company Financing Agreement and the OPTCO Financing Agreement remains in full force and effect. As of April 30, 2017 and October 31, 2016, the outstanding balance under the bank line of credit was $5,598,575 and $5,121,375, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Apr. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 10 - INCOME TAXES: The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or benefit is the tax incurred for the period plus or minus the change during the period in deferred tax assets and liabilities. The Company adopted FASB authoritative guidance for accounting for uncertainty in income taxes. As of April 30, 2017 and October 31, 2016, the Company did not have any unrecognized tax benefits or open tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of April 30, 2017 and October 31, 2016, 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 Company’s federal income tax return is no longer subject to examination by the federal taxing authority for the years before fiscal 2013. The Company’s California, Colorado and New Jersey income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2010. The Company’s Oregon and New York income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2011. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Apr. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | NOTE 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 5,862,722 and 5,862,123 for the six and three months ended April 30, 2017, respectively and 6,148,039 and 6,133,557 for the six and three months April 30, 2016, respectively. |
Economic Dependency
Economic Dependency | 6 Months Ended |
Apr. 30, 2017 | |
Risks and Uncertainties [Abstract] | |
Economic Dependency | NOTE 12 - ECONOMIC DEPENDENCY: Approximately 26% of the Company’s sales were derived from four customers during the six months ended April 30, 2017. These customers also accounted for approximately $3,909,000 of the Company’s accounts receivable balance at April 30, 2017. Approximately 37% of the Company’s sales were derived from one customer during the six months ended April 30, 2016. This customer also accounted for approximately $5,118,000 of the Company’s accounts receivable balance at April 30, 2016. 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 six months ended April 30, 2017, approximately 24% of the Company’s purchases were from four vendors. These vendors accounted for approximately $331,000 of the Company’s accounts payable at April 30, 2017. For the six months ended April 30, 2016, approximately 56% of the Company’s purchases were from four vendors. These vendors accounted for approximately $1,422,000 of the Company’s accounts payable at April 30, 2016. Management does not believe the loss of any one vendor would have a material adverse effect of the Company’s operations due to the availability of many alternate suppliers. Approximately 24% of the Company’s sales were derived from four customers during the three months ended April 30, 2017. Approximately 37% of the Company’s sales were derived from one customer during the three months ended April 30, 2016. For the three months ended April 30, 2017, approximately 25% of the Company’s purchases were from four vendors. For the three months ended April 30, 2016, approximately 59% of the Company’s purchases were from four vendors. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Apr. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 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 six months ended April 30, 2017 of $127,988 and $239,050, 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 $2,200,000 and $1,400,000 for the six and three months ended April 30, 2017, respectively and $5,556,000 and $2,023,000 for the six and three months ended April 30, 2016, respectively. The corresponding accounts payable balance to this vendor was approximately $140,000 and $319,000 at April 30, 2017 and 2016, 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 Company’s 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 April 30, 2017 and October 31, 2016 were $500,868 and $489,668, respectively. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Apr. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 14 - STOCKHOLDERS’ EQUITY: a. Treasury Stock b. Share Repurchase Program. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Apr. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 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. |
Purchase of Business (Tables)
Purchase of Business (Tables) | 6 Months Ended |
Apr. 30, 2017 | |
Business Combinations [Abstract] | |
Summary of Assets Purchased and Liabilities assumed | The following table summarizes the assets purchased and liabilities assumed: Assets acquired: Cash $ 11,898 Accounts receivable 584,918 Inventory 1,116,906 Prepaid expenses 32,681 Equipment 229,597 Customer List 170,000 Goodwill 1,359,502 Security deposit 26,551 Less: liabilities assumed (626,880 ) Net assets acquired: $ 2,905,173 Purchase of assets funded by: Cash paid $ 2,905,173 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 6 Months Ended |
Apr. 30, 2017 | |
Receivables [Abstract] | |
Schedule of Accounts Receivable | The allowances are summarized as follows: April 30, 2017 October 31, 2016 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 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Apr. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories at April 30, 2017 and October 31, 2016 consisted of the following: April 30, 2017 October 31, 2016 Packed coffee $ 2,892,963 $ 1,804,633 Green coffee 11,124,172 11,434,024 Roasters and parts 204,036 210,007 Packaging supplies 1,579,084 827,626 Totals $ 15,800,255 $ 14,276,290 |
Commodities Held by Broker (Tab
Commodities Held by Broker (Tables) | 6 Months Ended |
Apr. 30, 2017 | |
Commodities Held By Broker - Schedule Of Realized And Unrealized Gains And Losses Details | |
Schedule of Commodities Held by Broker | The Company has open position contracts held by the broker, which are summarized as follows: April 30, 2017 October 31, 2016 Option Contracts $ (178,650 ) $ (83,753 ) Future Contracts (421,959 ) 218,475 Total Commodities $ (600,609 ) $ 134,722 |
Schedule of Realized and Unrealized Gains and Losses | The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows: Three Months Ended April 30, 2017 2016 Gross realized gains $ 322,389 $ 445,314 Gross realized losses (40,883 ) (368,745 ) Unrealized (loss) gain (774,280 ) 687,536 Total $ (492,774 ) $ 764,105 Six Months Ended April 30, 2017 2016 Gross realized gains $ 727,648 $ 565,912 Gross realized losses (500,901 ) (901,128 ) Unrealized (loss) gain (735,331 ) 689,088 Total $ (508,584 ) $ 353,872 |
Basis of Presentation (Details
Basis of Presentation (Details Narrative) | Apr. 30, 2017 |
Generations Coffee Company, LLC [Member] | |
Equity ownership interest percentage | 60.00% |
Purchase of Business (Details N
Purchase of Business (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Payment to acquire capital stock of subsidiary | $ 2,300,000 | |||
Amount holdback to secure the sellers indemnification obligations | 25,000 | |||
Cash compensation | $ 179,250 | $ 163,850 | 347,840 | $ 327,700 |
Total revenue | 732,660 | |||
Comfort Foods, Inc. [Member] | ||||
Payments for bank debt | 605,173 | |||
Cash compensation | $ 5,000 |
Purchase of Business - Summary
Purchase of Business - Summary of Assets Purchased and Liabilities assumed (Details) - USD ($) | 3 Months Ended | 6 Months Ended |
Apr. 30, 2017 | Apr. 30, 2016 | |
Cash | $ 11,898 | |
Accounts receivable | 584,918 | |
Inventory | 1,116,906 | |
Prepaid expenses | 32,681 | |
Equipment | 229,597 | |
Customer List | 170,000 | |
Goodwill | 1,359,502 | |
Security deposit | 26,551 | |
Less: liabilities assumed | (626,880) | |
Net assets acquired: | 2,905,173 | |
Cash paid | $ 2,893,275 | |
Comfort Foods, Inc. [Member] | ||
Cash paid | $ 2,905,173 |
Prepaid Green Coffee (Details N
Prepaid Green Coffee (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | Oct. 31, 2016 | |
Prepaid Green Coffee | |||||
Interest income | $ 10,958 | $ 10,988 | $ 23,389 | $ 21,000 | |
Prepaid green coffee | $ 389,821 | $ 389,821 | $ 435,577 |
Accounts Receivable - Schedule
Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
Receivables [Abstract] | ||
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 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
Roasters and parts | $ 204,036 | $ 210,007 |
Packaging supplies | 1,579,084 | 827,626 |
Totals | 15,800,255 | 14,276,290 |
Packed Coffee [Member] | ||
Inventory - Coffee | 2,892,963 | 1,804,633 |
Green Coffee [Member] | ||
Inventory - Coffee | $ 11,124,172 | $ 11,434,024 |
Commodities Held by Broker (Det
Commodities Held by Broker (Details Narrative) | 6 Months Ended | 12 Months Ended | ||
Apr. 30, 2017USD ($)Integer$ / shares | Apr. 30, 2017GBP (£) | Oct. 31, 2016GBP (£) | Oct. 31, 2016Integer$ / shares | |
Number of futures contracts | Integer | 75 | 22 | ||
Option Contracts [Member] | ||||
Number of futures contracts | Integer | 20 | |||
Purchase of futures contracts | $ | $ 750,000 | |||
Options fair market value | $ | $ 26,700 | |||
Pounds [Member] | ||||
Purchase of futures contracts | £ | £ 2,812,500 | £ 825,000 | ||
Futures contractes weighted average price | $ / shares | $ 1.43 | $ 1.45 | ||
Fair market value of futures contract | $ / shares | $ 1.33 | $ 1.64 | ||
Minimum [Member] | ||||
Futures contracts term | 3 months | 3 months | 3 months | |
Maximum [Member] | ||||
Futures contracts term | 4 months | 4 months | 4 months |
Commodities Held by Broker - Sc
Commodities Held by Broker - Schedule of Commodities Held by Broker (Details) - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
Commodities Held By Broker - Schedule Of Realized And Unrealized Gains And Losses Details | ||
Option Contracts | $ (178,650) | $ (83,753) |
Future Contracts | (421,959) | 218,475 |
Total Commodities | $ (600,609) | $ 134,722 |
Commodities Held by Broker - 34
Commodities Held by Broker - Schedule of Realized and Unrealized Gains and Losses (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Commodities Held By Broker - Schedule Of Realized And Unrealized Gains And Losses Details | ||||
Gross realized gains | $ 322,389 | $ 445,314 | $ 727,648 | $ 565,912 |
Gross realized losses | (40,883) | (368,745) | (500,901) | (901,128) |
Unrealized (loss) gain | (774,280) | 687,536 | (735,331) | 689,088 |
Total | $ (492,774) | $ 764,105 | $ (508,584) | $ 353,872 |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) | Apr. 25, 2017 | Mar. 10, 2015 | Feb. 03, 2011 | Apr. 30, 2017 | Oct. 31, 2016 |
New Loan Facility [Member] | |||||
Line of credit maximum borrowing capacity | $ 3,000,000 | ||||
Line of credit extended date | Mar. 31, 2017 | ||||
Bank Line of Credit [Member] | |||||
Line of credit, maximum principal amount | $ 5,598,575 | $ 5,121,375 | |||
Loan Modification Agreement [Member] | |||||
Line of credit maximum borrowing capacity | $ 7,000,000 | ||||
Line of credit interest rate | 3.75% | ||||
Prepayment permium percentage | 0.50% | ||||
Line of credit extended date | Mar. 31, 2017 | ||||
Loan Modification Agreement [Member] | Minimum [Member] | |||||
Line of credit maximum borrowing capacity | $ 7,000,000 | ||||
Loan Modification Agreement [Member] | Maximum [Member] | |||||
Line of credit maximum borrowing capacity | $ 9,000,000 | ||||
Financing Agreement [Member] | |||||
Line of credit remaining borrowing capacity | $ 300,000 | ||||
Line of credit expire date | Mar. 31, 2015 | ||||
Amended and Restated Loan and Security Agreement [Member] | |||||
Line of credit, maximum principal amount | $ 12,000,000 | ||||
Amended and Restated Loan and Security Agreement [Member] | Borrowers [Member] | |||||
Line of credit expire date | Feb. 28, 2018 | ||||
Line of credit interest rate | 85.00% | ||||
Line of credit, maximum principal amount | $ 300,000 | ||||
Amended and Restated Loan and Security Agreement [Member] | Borrowers [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||||
Line of credit interest rate | 2.40% | ||||
Prepayment permium percentage | 1.00% | ||||
Maximum obligation amount | $ 1,000,000 | ||||
Amended and Restated Loan and Security Agreement [Member] | Borrowers [Member] | Accounts Receivable [Member] | |||||
Line of credit maximum borrowing capacity | 2,000,000 | ||||
Amended and Restated Loan and Security Agreement [Member] | Borrowers [Member] | Accounts Receivable [Member] | OPTCO [Member] | |||||
Line of credit maximum borrowing capacity | $ 1,500,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Apr. 30, 2017 | Oct. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Accrued interest or penalties |
Earnings Per Share (Details Nar
Earnings Per Share (Details Narrative) - shares | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Weighted average common shares outstanding: Basic and diluted | 5,862,123 | 6,133,557 | 5,862,722 | 6,148,039 |
Economic Dependency (Details Na
Economic Dependency (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | |
Four Customers [Member] | ||||
Accounts receivable | $ 3,909,000 | $ 3,909,000 | ||
Four Customers [Member] | Sales [Member] | ||||
Concentration risk percentage | 24.00% | 26.00% | ||
One Customers [Member] | ||||
Accounts receivable | $ 5,118,000 | $ 5,118,000 | ||
One Customers [Member] | Sales [Member] | ||||
Concentration risk percentage | 37.00% | 37.00% | ||
Four Vendors [Member] | ||||
Concentration risk percentage | 25.00% | 59.00% | 24.00% | 56.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Apr. 30, 2017 | Apr. 30, 2016 | Apr. 30, 2017 | Apr. 30, 2016 | Oct. 31, 2016 | |
Contract labor expense | $ 127,988 | $ 239,050 | |||
Purchases from related party vendor | 1,400,000 | $ 2,023,000 | 2,200,000 | $ 5,556,000 | |
Accounts payable from related party vendor | 140,000 | $ 319,000 | 140,000 | $ 319,000 | |
Deferred compensation liability | $ 500,868 | $ 500,868 | $ 489,668 | ||
Generations Coffee Company, LLC [Member] | |||||
Related party transaction percentage | 40.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | |||
Apr. 30, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | Sep. 29, 2015 | Jan. 24, 2014 | |
Number of treasury stock shares | 3,384 | 337,269 | |||
Number of treasury stock shares, value | $ 15,829 | $ 1,754,878 | |||
2014 Share Repurchase Program [Member] | |||||
Number of common stock repurchase | 156,415 | 1,000,000 | |||
Number of common stock repurchase value | $ 995,729 | ||||
2015 Share Repurchase Program [Member] | |||||
Number of common stock repurchase | 337,269 | 53,687 | 2,000,000 | ||
Number of common stock repurchase value | $ 1,754,878 | $ 226,850 |