Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jan. 31, 2018 | Mar. 07, 2018 | |
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 | Jan. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,742,894 | |
Entity Trading Symbol | JVA | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jan. 31, 2018 | Oct. 31, 2017 |
CURRENT ASSETS: | ||
Cash | $ 3,321,793 | $ 2,325,650 |
Accounts receivable, net of allowances of $144,000 for 2018 and 2017 | 14,638,583 | 13,441,802 |
Inventories | 15,077,317 | 16,310,572 |
Prepaid green coffee | 105,685 | 171,350 |
Prepaid expenses and other current assets | 502,541 | 593,825 |
Prepaid and refundable income taxes | 342,304 | 472,814 |
TOTAL CURRENT ASSETS | 33,988,223 | 33,316,013 |
Machinery and equipment, at cost, net of accumulated depreciation of $5,724,548 and $5,557,899 for 2018 and 2017, respectively | 2,418,141 | 2,439,338 |
Customer list and relationships, net of accumulated amortization of $79,875 and $72,250 for 2018 and 2017, respectively | 360,125 | 367,750 |
Trademarks | 820,000 | 820,000 |
Other intangible assets | 331,124 | 331,124 |
Goodwill | 1,548,969 | 1,794,265 |
Equity method investments | 89,828 | 94,643 |
Deferred income tax asset | 179,958 | 339,748 |
Deposits and other assets | 537,261 | 497,529 |
TOTAL ASSETS | 40,273,629 | 40,000,410 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 3,794,828 | 4,430,626 |
Line of credit | 9,407,627 | 8,407,527 |
Due to broker | 94,994 | 210,862 |
Income taxes payable | 2,636 | 1,346 |
TOTAL CURRENT LIABILITIES | 13,300,085 | 13,050,361 |
Deferred income tax liabilities | 297,344 | 629,680 |
Deferred rent payable | 240,820 | 240,379 |
Deferred compensation payable | 528,261 | 488,529 |
TOTAL LIABILITIES | 14,366,510 | 14,408,949 |
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; 5,742,894 and 5,805,935 shares outstanding as of January 31 2018 and October 31, 2017 | 5,743 | 6,494 |
Additional paid-in capital | 16,104,075 | 16,104,075 |
Retained earnings | 12,776,877 | 12,345,490 |
Less: Treasury stock, 751,786 and 688,745 common shares, at cost as of January 31, 2018 and October 31, 2017 | (3,768,687) | (3,504,510) |
Total Coffee Holding Co., Inc. Stockholders' Equity | 25,118,008 | 24,951,549 |
Noncontrolling interest | 789,111 | 639,912 |
TOTAL EQUITY | 25,907,119 | 25,591,461 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 40,273,629 | $ 40,000,410 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jan. 31, 2018 | Oct. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowances for doubtful accounts | $ 144,000 | $ 144,000 |
Accumulated depreciation | 5,724,548 | 5,557,899 |
Customer list and relationships, accumulated amortization | $ 79,875 | $ 72,250 |
Preferred stock, par value | $ 0.001 | $ 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 | 5,742,894 | 5,805,935 |
Treasury Stock, Shares | 751,786 | 688,745 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Income Statement [Abstract] | ||
NET SALES | $ 22,083,219 | $ 19,632,367 |
COST OF SALES (which include purchases of approximately $1.4 million and $.8 million for the three months ended January 31, 2018 and 2017, respectively, from a related party) | 18,287,657 | 16,500,776 |
GROSS PROFIT | 3,795,562 | 3,131,591 |
OPERATING EXPENSES: | ||
Selling and administrative | 2,736,686 | 2,350,591 |
Officers’ salaries | 170,250 | 168,590 |
TOTAL | 2,906,936 | 2,519,181 |
INCOME FROM OPERATIONS | 888,626 | 612,410 |
OTHER INCOME (EXPENSE): | ||
Interest income | 3,047 | 12,431 |
(Loss) gain from equity method investments | (4,815) | 1,319 |
Interest expense | (92,508) | (57,742) |
TOTAL | (94,276) | (43,992) |
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY | 794,350 | 568,418 |
Provision for income taxes | 213,764 | 171,113 |
NET INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY | 580,586 | 397,305 |
Less: net income attributable to the non-controlling interest in subsidiary | (149,199) | (21,523) |
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. | $ 431,387 | $ 375,782 |
Basic and diluted earnings per share | $ 0.07 | $ 0.06 |
Weighted average common shares outstanding: Basic and diluted | 5,765,335 | 5,862,302 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Income (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Income Statement [Abstract] | ||
Related party costs | $ 1,400,000 | $ 800,000 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
OPERATING ACTIVITIES: | ||
Net income | $ 580,586 | $ 397,305 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 174,274 | 180,090 |
Unrealized gain on commodities | (115,868) | (38,949) |
Loss (gain) on equity method investments | 4,815 | (1,319) |
Deferred rent | 441 | 2,292 |
Deferred income taxes | 72,750 | (35,925) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,196,781) | 2,315,292 |
Inventories | 1,233,255 | (207,234) |
Prepaid expenses and other current assets | 91,284 | 79,340 |
Prepaid green coffee | 65,665 | (71,406) |
Prepaid and refundable income taxes | 130,510 | 197,378 |
Accounts payable and accrued expenses | (635,798) | (760,039) |
Deposits and other assets | 5,099 | |
Income taxes payable | 1,290 | 1,222 |
Net cash provided by operating activities | 406,423 | 2,063,146 |
INVESTING ACTIVITIES: | ||
Purchases of machinery and equipment | (145,452) | (255,126) |
Net cash used in investing activities | (145,452) | (255,126) |
FINANCING ACTIVITIES: | ||
Advances under bank line of credit | 1,000,100 | 1,000,100 |
Purchase of treasury stock | (264,928) | |
Principal payments under bank line of credit | (3,200,000) | |
Net cash provided by (used in) financing activities | 735,172 | (2,199,900) |
NET INCREASE (DECREASE) IN CASH | 996,143 | (391,880) |
CASH, BEGINNING OF PERIOD | 2,325,650 | 3,227,981 |
CASH, END OF PERIOD | 3,321,793 | 2,836,101 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: | ||
Interest paid | 85,039 | 61,823 |
Income taxes paid | $ 9,214 | $ 3,846 |
Business Activities
Business Activities | 3 Months Ended |
Jan. 31, 2018 | |
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 | 3 Months Ended |
Jan. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | NOTE 2 - BASIS OF PRESENTATION: The following (a) condensed consolidated balance sheet as of October 31, 2017, 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 29, 2018 for the fiscal year ended October 31, 2017 (“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 January 31, 2018, and results of operations for the three months ended January 31, 2018 and the cash flows for the three months ended January 31, 2018 as applicable, have been made. The results of operations for the three months ended January 31, 2018 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 | 3 Months Ended |
Jan. 31, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Pronouncements Affecting the Company | NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY (cont’d): In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” which addresses narrow issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. Part I of this Update addresses the complexity of accounting for certain financial instruments with down round features. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this Update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. These amendments in Part I of this update are effective for annual and interim periods beginning after December 15, 2018, early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part I of this Update should be applied in either of the following ways: (1) Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective. (2) Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. The FASB has issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets. 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, notfor- 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 Company adopted ASU 2015-17, which did not have a material impact on its consolidated financial statements. 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 adopted ASU 2015-11, which did not have a material impact on its consolidated financial statements. |
Prepaid Green Coffee
Prepaid Green Coffee | 3 Months Ended |
Jan. 31, 2018 | |
Prepaid Green Coffee | |
Prepaid Green Coffee | NOTE 4 - 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 $2,318 and $12,431 for the three months ended January 31, 2018 and 2017, respectively. The prepaid coffee balance was $105,685 at January 31, 2018 and $171,350 at October 31, 2017. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Jan. 31, 2018 | |
Receivables [Abstract] | |
Accounts Receivable | NOTE 5 - 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: January 31, 2018 October 31, 2017 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 | 3 Months Ended |
Jan. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 6 - INVENTORIES: Inventories at January 31, 2018 and October 31, 2017 consisted of the following: January 31, 2018 October 31, 2017 Packed coffee $ 2,856,855 $ 2,242,714 Green coffee 10,195,549 12,317,394 Roasters and parts 294,654 286,515 Packaging supplies 1,730,259 1,463,949 Totals $ 15,077,317 $ 16,310,572 |
Commodities Held by Broker
Commodities Held by Broker | 3 Months Ended |
Jan. 31, 2018 | |
Commodities Held By Broker | |
Commodities Held by Broker | NOTE 7 - 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: January 31, 2018 October 31, 2017 Option Contracts $ (21,232) $ 166,945 Future Contracts (73,762) (377,807) Total Commodities $ (94,994) $ (210,862) 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 January 31, 2018, the Company held 40 futures contracts (generally with terms of three to four months) for the purchase of 1,500,000 pounds of green coffee at a weighted average price of $1.22 per pound. The fair market value of coffee applicable to such contracts was $1.21 per pound at that date. At January 31, 2018, the Company held 140 options covering an aggregate of 5,250,000 pounds of green coffee beans at $1.22 per pound. The fair market value of these options, which was obtained from observable market data of similar instruments was $105,000. At October 31, 2017, the Company held 145 futures contracts (generally with terms of three to four months) for the purchase of 5,437,500 pounds of green coffee at a weighted average price of $1.31 per pound. The fair market value of coffee applicable to such contracts was $1.25 per pound at that date. At October 31, 2017, 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 January 31, 2017 2017 Gross realized gains $ 130,946 $ 405,258 Gross realized losses (413,335 ) (460,018 ) Unrealized gain 115,868 38,949 Total $ (166,521 ) $ (15,811 ) |
Line of Credit
Line of Credit | 3 Months Ended |
Jan. 31, 2018 | |
Debt Disclosure [Abstract] | |
Line of Credit | NOTE 8 - LINE OF CREDIT: 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”) and Amended and Restated Loan Facility (the “A&R Loan Facility”) with Sterling National Bank (“Sterling”), which consolidated (i) the financing agreement between the Company and Sterling, dated February 17, 2009, as modified, (the “Company Financing Agreement”) and (ii) the financing agreement between Company, as guarantor, OPTCO and Sterling, dated March 10, 2015 (the “OPTCO Financing Agreement”), amongst other things. 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 CFI (collectively referred to herein as the “Guarantors”), entered into a Guaranty Agreement (the “Guaranty Agreement”) in connection with the A&R 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 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 A&R 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 January 31, 2018 and October 31, 2017. Each of the A&R 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 January 31, 2018 and October 31, 2017, the outstanding balance under the bank line of credit was $9,407,627 and $8,407,627, respectively. |
Income Taxes
Income Taxes | 3 Months Ended |
Jan. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 9 - 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. As of January 31, 2018 and October 31, 2017, 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 January 31, 2018 and October 31, 2017, 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, Connecticut, Idaho, Kansas, Massachusetts, Michigan, New Jersey, New York, New York City, Oregon, Rhode Island, South Carolina, Virginia, 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 2014. 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 2011. 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 2012. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will affect the Company’s fiscal year ending October 31, 2018, including, but not limited to, reducing the U.S. federal corporate tax rate. The Tax Act reduces the federal corporate tax rate to 21 percent in the fiscal year ending October 31, 2018. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending October 31, 2018, will have a blended corporate tax rate of approximately 23 percent, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year. The reduction of the corporate tax rate to 21% has caused the Company to reduce its deferred tax assets and liabilities. The effect of this discrete event had an immaterial effect on the basis condensed consolidated financial statements for the three months ended January 31, 2018. The changes included in the Tax Act are broad and complex. The final impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the company has utilized to calculate the transition impact. The Securities Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments within one year after enactment date of the Tax Act. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Jan. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | NOTE 10 - 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 5,765,335 and 5,862,302 for the three months ended January 31, 2018 and 2017, respectively. |
Economic Dependency
Economic Dependency | 3 Months Ended |
Jan. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Economic Dependency | NOTE 11 - ECONOMIC DEPENDENCY: Approximately 25% of the Company’s sales were derived from four customers during the three months ended January 31, 2018. These customers also accounted for approximately $7,710,000 of the Company’s accounts receivable balance at January 31, 2018. Approximately 28% of the Company’s sales were derived from four customer during the three months ended January 31, 2017. These customers also accounted for approximately $3,744,000 of the Company’s accounts receivable balance at January 31, 2017. 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 three months ended January 31, 2018, approximately 20% of the Company’s purchases were from four vendors. These vendors accounted for approximately $475,000 of the Company’s accounts payable at January 31, 2017. For the three months ended January 31, 2017, approximately 22% of the Company’s purchases were from four vendors. These vendors accounted for approximately $518,000 of the Company’s accounts payable at January 31, 2017. 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. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Jan. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 12 - 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 months ended January 31, 2018 and 2017 of $111,668 and $111,062, 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 $1,397,000 and $835,000 for the three months ended January 31, 2018 and 2017, respectively. The corresponding accounts payable balance to this vendor was approximately $291,000 and $0 at January 31, 2018 and 2017, 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: 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 January 31, 2018 and October 31, 2017 were $528,261 and $488,529, respectively. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Jan. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 13 - STOCKHOLDERS’ EQUITY: a. Treasury Stock b. Share Repurchase Program. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Jan. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 14 - 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. |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Jan. 31, 2018 | |
Receivables [Abstract] | |
Schedule of Accounts Receivable | The allowances are summarized as follows: January 31, 2018 October 31, 2017 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) | 3 Months Ended |
Jan. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories at January 31, 2018 and October 31, 2017 consisted of the following: January 31, 2018 October 31, 2017 Packed coffee $ 2,856,855 $ 2,242,714 Green coffee 10,195,549 12,317,394 Roasters and parts 294,654 286,515 Packaging supplies 1,730,259 1,463,949 Totals $ 15,077,317 $ 16,310,572 |
Commodities Held by Broker (Tab
Commodities Held by Broker (Tables) | 3 Months Ended |
Jan. 31, 2018 | |
Commodities Held By Broker | |
Schedule of Commodities Held by Broker | The Company has open position contracts held by the broker, which are summarized as follows: January 31, 2018 October 31, 2017 Option Contracts $ (21,232) $ 166,945 Future Contracts (73,762) (377,807) Total Commodities $ (94,994) $ (210,862) |
Schedule of Realized and Unrealized Gains and Losses on Contracts | The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows: Three Months Ended January 31, 2017 2017 Gross realized gains $ 130,946 $ 405,258 Gross realized losses (413,335 ) (460,018 ) Unrealized gain 115,868 38,949 Total $ (166,521 ) $ (15,811 ) |
Basis of Presentation (Details
Basis of Presentation (Details Narrative) | Jan. 31, 2018 |
Generations Coffee Company, LLC [Member] | |
Equity ownership interest percentage | 60.00% |
Prepaid Green Coffee (Details N
Prepaid Green Coffee (Details Narrative) - USD ($) | 3 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Oct. 31, 2017 | |
Prepaid Green Coffee | |||
Interest income | $ 3,047 | $ 12,431 | |
Prepaid green coffee | $ 105,685 | $ 171,350 |
Accounts Receivable - Schedule
Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) | Jan. 31, 2018 | Oct. 31, 2017 |
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 ($) | Jan. 31, 2018 | Oct. 31, 2017 |
Roasters and parts | $ 294,654 | $ 286,515 |
Packaging supplies | 1,730,259 | 1,463,949 |
Totals | 15,077,317 | 16,310,572 |
Packed Coffee [Member] | ||
Inventory - Coffee | 2,856,855 | 2,242,714 |
Green Coffee [Member] | ||
Inventory - Coffee | $ 10,195,549 | $ 12,317,394 |
Commodities Held by Broker (Det
Commodities Held by Broker (Details Narrative) | 3 Months Ended | 12 Months Ended | ||
Jan. 31, 2018USD ($)Integer$ / shares | Jan. 31, 2018GBP (£) | Oct. 31, 2017GBP (£) | Oct. 31, 2017Integer$ / shares | |
Number of futures contracts | Integer | 40 | 145 | ||
Options [Member] | ||||
Number of futures contracts | Integer | 140 | |||
Purchase of futures contracts | £ | £ 5,250,000 | |||
Fair market value of futures contract | $ 1.22 | |||
Options fair market value | $ | $ 105,000 | |||
Pounds [Member] | ||||
Purchase of futures contracts | £ | £ 1,500,000 | £ 5,437,500 | ||
Futures contracts weighted average price | $ 1.22 | $ 1.31 | ||
Fair market value of futures contract | $ 1.21 | $ 1.25 | ||
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 ($) | Jan. 31, 2018 | Oct. 31, 2017 |
Commodities Held By Broker | ||
Option Contracts | $ (21,232) | $ 166,945 |
Future Contracts | (73,762) | (377,807) |
Total Commodities | $ (94,994) | $ (210,862) |
Commodities Held by Broker - 30
Commodities Held by Broker - Schedule of Realized and Unrealized Gains and Losses (Details) - USD ($) | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Commodities Held By Broker | ||
Gross realized gains | $ 130,946 | $ 405,258 |
Gross realized losses | (413,335) | (460,018) |
Unrealized gain | 115,868 | 38,949 |
Total | $ (166,521) | $ (15,811) |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) | Apr. 25, 2017 | Jan. 31, 2018 | Oct. 31, 2017 |
Bank Line of Credit [Member] | |||
Line of credit, maximum principal amount | $ 9,407,627 | $ 8,407,627 | |
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, maximum principal amount | $ 3,000,000 | ||
Line of credit interest rate | 85.00% | ||
Amended and Restated Loan and Security Agreement [Member] | Borrowers [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Line of credit interest rate | 2.40% | ||
Prepayment premium 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 | ||
Organic Products Trading Company [Member] | |||
Prepayment premium percentage | 0.50% | ||
Amended and Restated Loan Agreement and Amended and Restated Loan Facility [Member] | |||
Line of credit expire date | Mar. 31, 2020 | ||
Line of credit, maximum principal amount | $ 14,000,000 | ||
Amended and Restated Loan Agreement and Amended and Restated Loan Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Line of credit interest rate | 2.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Dec. 22, 2017 | Jan. 31, 2018 | Oct. 31, 2017 |
Unrecognized tax benefits | |||
Accrued interest or penalties | |||
Unites States [Member] | October 31, 2018 [Member] | |||
Reduction in corporate tax rate | 21.00% | ||
Blended corporate tax rate | 23.00% |
Earnings Per Share (Details Nar
Earnings Per Share (Details Narrative) - shares | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Earnings Per Share [Abstract] | ||
Weighted average common shares outstanding: Basic and diluted | 5,765,335 | 5,862,302 |
Economic Dependency (Details Na
Economic Dependency (Details Narrative) - USD ($) | 3 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Four Customers [Member] | ||
Accounts receivable | $ 7,710,000 | $ 3,744,000 |
Four Customers [Member] | Sales Revenue [Member] | ||
Concentration risk percentage | 25.00% | 28.00% |
Four Vendors [Member] | ||
Concentration risk percentage | 20.00% | 22.00% |
Accounts payable | $ 475,000 | $ 518,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Oct. 31, 2017 | |
Contract labor expense | $ 111,668 | $ 111,062 | |
Purchases from related party vendor | 1,397,000 | 835,000 | |
Accounts payable from related party vendor | 291,000 | $ 0 | |
Deferred compensation liability | $ 528,261 | $ 488,529 | |
Generations Coffee Company, LLC [Member] | |||
Related party transaction percentage | 40.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Jan. 31, 2018 | Oct. 31, 2017 | Oct. 31, 2016 | Sep. 10, 2017 | Sep. 29, 2015 | Jan. 24, 2014 | |
Number of treasury stock shares | 63,041 | 57,367 | ||||
Number of treasury stock shares, value | $ 264,928 | $ 247,382 | ||||
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 treasury stock shares | 3,384 | 337,269 | ||||
Number of treasury stock shares, value | $ 15,829 | $ 1,754,878 | ||||
Number of common stock repurchase | 2,000,000 | |||||
2017 Share Repurchase Program [Member] | ||||||
Number of treasury stock shares | 63,041 | 53,983 | ||||
Number of treasury stock shares, value | $ 264,928 | $ 239,091 | ||||
Number of common stock repurchase | 2,000,000 |