x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Nevada
|
11-2238111
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
4401
First Avenue, Brooklyn, New York
(Address
of principal executive offices)
|
11232-0005
(Zip
Code)
|
Title
of each class:
|
Name
of each exchange on which registered:
|
Common
Stock, Par Value $0.001 Per Share
|
American
Stock Exchange
|
PAGE
|
||||
PART
I
|
||||
ITEM
1.
|
BUSINESS
|
1
|
||
ITEM
1A.
|
RISK
FACTORS
|
10
|
||
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
16
|
||
ITEM
2.
|
PROPERTIES
|
16
|
||
ITEM
3.
|
LEGAL
PROCEEDINGS
|
16
|
||
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
16
|
||
PART
II
|
||||
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
17
|
||
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
18
|
||
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
19
|
||
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
27
|
||
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
27
|
||
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
27
|
||
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
28
|
||
ITEM
9B.
|
OTHER
INFORMATION
|
28
|
||
PART
III
|
||||
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
29
|
||
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
29
|
||
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
29
|
||
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
29
|
||
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
30
|
||
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
31
|
||
SIGNATURES
|
32
|
|||
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
F-1
|
· |
Wholesale
Green Coffee:
unroasted raw beans imported from around the world and sold to large
and
small roasters and coffee shop
operators;
|
· |
Private
Label Coffee:
coffee roasted, blended, packaged and sold under the specifications
and
names of others, including supermarkets that want to have their own
brand
name on coffee to compete with national brands;
and
|
· |
Branded
Coffee:
coffee roasted and blended to our own specifications and packaged
and sold
under our seven brand names in different segments of the
market.
|
· |
Retail
branded coffee;
|
· |
Retail
private label coffee
|
· |
Wholesale
specialty green and gourmet whole bean
coffees;
|
· |
Food
service;
|
· |
Instant
coffees; and
|
· |
Niche
products.
|
· |
Specialty
blends;
|
· |
Private
label “value” blends and trial-sized mini-brick
packages;
|
· |
Specialty
instant coffees;
|
· |
Instant
cappuccinos and hot chocolates; and
|
· |
Tea
line products.
|
· |
Wholesale
Green Coffee: unroasted
raw beans imported from around the world and sold to large and small
roasters and coffee shop operators;
|
· |
Private
Label Coffee: coffee
roasted, blended, packaged and sold under the specifications and
names of
others, including supermarkets that want to have their own brand
name on
coffee to compete with national brands;
and
|
· |
Branded
Coffee:
coffee roasted and blended to our own specifications and sold under
our
seven brand names in different segments of the
market.
|
· |
Café
Caribe is
a specialty espresso coffee that targets espresso coffee drinkers
and, in
particular, the Hispanic consumer market;
|
· |
S&W
is
an upscale canned coffee established in 1921 and includes Premium,
Premium
Decaf, French Roast, Colombian, Colombian Decaf, Swiss Water Decaf,
Kona,
Mellow'd Roast and IL CLASSICO
lines;
|
· |
Café
Supremo is
a specialty espresso that targets espresso drinkers of all backgrounds
and
tastes. It is designed to introduce coffee drinkers to the tastes
of dark
roasted coffee;
|
· |
Don
Manuel
is
produced from the finest 100% Colombian coffee beans. Don Manuel
is an
upscale quality product which commands a substantial premium compared
to
the more traditional brown coffee blends. We also use this known
trademark
in our food service business because of the high brand
quality;
|
· |
Fifth
Avenue
is
a blended coffee that has become popular as an alternative for consumers
who purchase private label or national branded coffee. We also market
this
brand to wholesalers who do not wish to undertake the expense of
developing a private label coffee program under their own
name;
|
· |
Via
Roma
is
an Italian espresso targeted at the more traditional espresso drinker;
and
|
· |
Il
CLASSICO
is
an S&W brand espresso product.
|
· |
trial-sized
mini-brick coffee packages;
|
· |
specialty
instant coffees;
|
· |
instant
cappuccinos and hot chocolates; and
|
· |
tea
line products.
|
· |
For
over 12 years, we have been members of Coffee Kids, an international
non-profit organization that helps to improve the quality of life
of
children and their families in coffee-growing communities in Mexico,
Guatemala, Nicaragua and Costa
Rica.
|
· |
We
are members of Grounds for Health, an organization that educates,
screens,
and arranges treatment for women who have cancer and live in the
rural
coffee growing communities of
Mexico.
|
· |
We
are a licensed Fair Trade dealer of Fair Trade certified coffee.
Fair
Trade helps small coffee farmers to increase their incomes and improve
the
prospects of their communities and families. It guarantees farmers
a
minimum price of $1.26 per pound or five cents above the current
market
price.
|
· |
Most
recently, we are the administrative benefactors to a new non-profit
organization called Cup for Education. After discovering the lack
of
schools, teachers, and basic fundamental learning supplies in the
poor
coffee growing communities of Central and Latin America, “Cup” was
established by our employee, Karen Gordon, to help build schools,
sponsor
teachers, and purchase basic supplies such as books, chalk and other
necessities for a proper education.
|
· |
the
roasting, blending, packaging and distribution of private label coffee;
|
· |
the
roasting, blending, packaging and distribution of proprietary branded
coffee; and
|
· |
the
sale of wholesale specialty green coffee.
|
· |
consumer
tastes and preferences;
|
· |
national,
regional and local economic conditions;
|
· |
demographic
trends; and
|
· |
the
type, number and location of competing products.
|
· |
market
our products on a national scale;
|
· |
increase
our brand recognition on a national scale;
|
· |
enter
into distribution and other strategic arrangements with third party
retailers; and
|
· |
manage
growth in administrative overhead and distribution costs likely to
result
from the planned expansion of our distribution channels.
|
· |
such
acquisitions, licensing arrangements or other strategic alliances
may
divert our management’s attention from our existing
operations;
|
· |
we
may not be able to successfully integrate any acquired coffee companies
or
new coffee brands into our existing
business;
|
· |
we
may not be able to manage the contingent risks associated with the
past
operations of, and other unanticipated problems arising in, any acquired
coffee company; and
|
· |
we
may not be able to control unanticipated costs associated with such
acquisitions, licensing arrangements or strategic
alliances.
|
· |
potentially
dilutive issuances of our equity securities;
and
|
· |
the
incurrence of additional debt.
|
· |
fluctuations
in purchase prices and supply of green
coffee;
|
· |
fluctuations
in the selling prices of our
products;
|
· |
the
level of marketing and pricing competition from existing or new
competitors in the coffee industry;
|
· |
the
success of our hedging strategy;
|
· |
our
ability to retain existing customers and attract new customers;
and
|
· |
our
ability to manage inventory and fulfillment operations and maintain
gross
margins.
|
· |
weather
patterns in coffee-producing
countries;
|
· |
economic
and political conditions affecting coffee-producing countries, including
acts of terrorism in such
countries;
|
· |
foreign
currency fluctuations; and
|
· |
trade
regulations and restrictions between coffee-producing countries and
the
United States.
|
ITEM 5. |
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY
SECURITIES
|
2005
|
|||||||
High
|
Low
|
||||||
3rd
Quarter
|
$
|
10.60
|
$
|
4.40
|
|||
4th
Quarter
|
$
|
15.75
|
$
|
4.64
|
2006
|
|||||||
1st
Quarter
|
$
|
8.45
|
$
|
5.40
|
|||
2nd
Quarter
|
$
|
7.40
|
$
|
5.55
|
|||
3rd
Quarter
|
$
|
6.46
|
$
|
3.50
|
|||
4th
Quarter
|
$
|
4.50
|
$
|
3.30
|
For
the Years Ended October 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
(Dollars
in thousands, except per share data)
|
||||||||||||||||
Income
Statement Data:
|
||||||||||||||||
Net
sales
|
$
|
51,171
|
$
|
41,545
|
$
|
28,030
|
$
|
20,240
|
$
|
17,433
|
||||||
Cost
of sales
|
43,576
|
33,876
|
20,928
|
15,373
|
12,453
|
|||||||||||
Gross
profit
|
7,595
|
7,669
|
7,102
|
4,867
|
4,980
|
|||||||||||
Operating
expenses
|
6,231
|
5,698
|
5,400
|
3,993
|
3,505
|
|||||||||||
Income
from operations
|
1,364
|
1,971
|
1,702
|
874
|
1,475
|
|||||||||||
Other
income (expense)
|
(68
|
)
|
(60
|
)
|
(134
|
)
|
(136
|
)
|
(162
|
)
|
||||||
Income
before income taxes
|
1,296
|
1,911
|
1,568
|
738
|
1,313
|
|||||||||||
Provision
for income taxes
|
602
|
726
|
693
|
116
|
558
|
|||||||||||
Minority
interest
|
(6
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Net
income
|
$
|
700
|
$
|
1,185
|
$
|
875
|
$
|
622
|
$
|
755
|
||||||
Net
income per share -
Basic
and diluted
|
$
|
0.13
|
$
|
0.25
|
$
|
0.22
|
$
|
0.16
|
$
|
0.19
|
At
October 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
(Dollars
in thousands, except per share data)
|
||||||||||||||||
Income
Statement Data:
|
||||||||||||||||
Total
assets
|
$
|
18,982
|
$
|
16,545
|
$
|
10,914
|
$
|
7,035
|
$
|
6,042
|
||||||
Short-term
debt
|
2,543
|
1,064
|
3,048
|
215
|
205
|
|||||||||||
Long-term
debt
|
-
|
-
|
6
|
2,800
|
1,972
|
|||||||||||
Total
liabilities
|
7,640
|
5,904
|
7,918
|
4,915
|
4,544
|
|||||||||||
Shareholders’
equity
|
11,342
|
10,642
|
2,996
|
2,120
|
1,498
|
|||||||||||
Book
value per share
|
$
|
2.05
|
$
|
1.92
|
$
|
0.75
|
$
|
0.53
|
0.37
|
ITEM 7. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
· |
the
impact of rapid or persistent fluctuations in the price of coffee
beans;
|
· |
fluctuations
in the supply of coffee beans;
|
· |
general
economic conditions and conditions which affect the market for
coffee;
|
· |
our
success in implementing our business strategy or introducing new
products;
|
· |
our
ability to attract and retain
customers;
|
· |
our
success in expanding our market presence in new geographic
regions;
|
· |
the
effects of competition from other coffee manufacturers and other
beverage
alternatives;
|
· |
changes
in tastes and preferences for, or the consumption of, coffee;
|
· |
our
ability to obtain additional financing;
and
|
· |
other
risks which we identify in future filings with the Securities and
Exchange
Commission.
|
· |
the
sale of wholesale specialty green
coffee;
|
· |
the
roasting, blending, packaging and sale of private label coffee;
and
|
· |
the
roasting, blending, packaging and sale of our seven brands of
coffee.
|
· |
the
level of marketing and pricing competition from existing or new
competitors in the coffee industry;
|
· |
our
ability to retain existing customers and attract new
customers;
|
· |
fluctuations
in purchase prices and supply of green coffee and in the selling
prices of
our products; and
|
· |
our
ability to manage inventory and fulfillment operations and maintain
gross
margins.
|
· |
We
recognize revenue in accordance with Securities and Exchange Commission
Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).
Under SAB 104, revenue is recognized at the point of passage to the
customer of title and risk of loss, when there is persuasive evidence
of
an arrangement, the sales price is determinable, and collection of
the
resulting receivable is reasonably assured. We recognize revenue
at the
time of shipment. Sales are reflected net of discounts and
returns.
|
· |
Our
allowance for doubtful accounts is maintained to provide for losses
arising from customers’ inability to make required payments. If there is
deterioration of our customers’ credit worthiness and/or there is an
increase in the length of time that the receivables are past due
greater
than the historical assumptions used, additional allowances may be
required. For example, every additional one percent of our accounts
receivable that becomes uncollectible, would reduce our operating
income
by approximately $65,000.
|
· |
Inventories
are stated at cost (determined on a first-in, first-out basis). Based
on
our assumptions about future demand and market conditions, inventories
are
subject to be written-down to market value. If our assumptions about
future demand change and/or actual market conditions are less favorable
than those projected, additional write-downs of inventories may be
required. Each additional one percent of potential inventory writedown
would have reduced operating income by approximately $30,000 for
the year
ended October 31, 2006.
|
· |
We
account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS No.
109”). Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the liabilities, using enacted tax rates in effect
for
the year in which the differences are expected to reverse. Deferred
tax
assets are reflected on the balance sheet when it is determined that
it is
more likely than not that the asset will be realized. Accordingly,
our net
deferred tax asset of $208,700 could need to be written off if we
do not
remain profitable.
|
Plan
category
|
Number
of securities
to
be issued
upon
exercise of outstanding options, warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||
(a)
|
(b)
|
(c)
|
||||
Equity
compensation plans approved by security holders
|
—
|
—
|
800,000
|
|||
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||
Total
|
—
|
—
|
800,000
|
COFFEE HOLDING CO., INC. | ||
|
|
|
By: | /s/ Andrew Gordon | |
Andrew Gordon |
||
President and Chief Executive Officer |
Signature
|
Title
|
|
/s/
Andrew Gordon
|
President,
Chief Executive Officer, Chief Financial Officer, Treasurer and
|
|
Andrew
Gordon
|
Director
(principal executive officer and principal financial and accounting
officer)
|
|
Date:
January 26, 2007
|
||
/s/
David Gordon
|
Executive
Vice President -- Operations, Secretary and Director
|
|
David
Gordon
|
||
Date:
January 26, 2007
|
||
/s/
Gerard DeCapua
|
Director
|
|
Gerard
DeCapua
|
||
Date:
January 26, 2007
|
||
/s/
Daniel Dwyer
|
Director
|
|
Daniel Dwyer |
||
Date:
January 26, 2007
|
||
Director
|
||
Barry
Knepper
|
|
|
Date:
|
||
/s/
John Rotelli
|
Director
|
|
John Rotelli
|
||
Date:
January 26, 2007
|
||
/s/ Robert M. Williams |
Director
|
|
Robert M. Williams |
||
Date:
January 26, 2007
|
|
Exhibit
No.
|
Description
|
|
2.1
|
Agreement
and Plan of Merger by and among Transpacific International Group
Corp. and
Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit
2 to
Post-Effective Amendment No. 1 to the Registration Statement on Form
SB-2
(file No. 333-00588-NY) as filed with the Securities and Exchange
Commission on November 10, 1997).
|
|
2.2
|
Asset
Purchase Agreement, dated February 4, 2004, by and between Coffee
Holding
Co., Inc. and Premier Roasters LLC (incorporated herein by reference
to
Exhibit 2.1 to the Current Report on Form 8-K dated February 4, 2004
as
filed with the SEC on February 20, 2004).
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Coffee Holding Co., Inc.,
(incorporated herein by reference to Exhibit 3.1 to the Coffee Holding
Co., Inc. Form 8-A, filed with the Securities and Exchange Commission
on
May 2, 2005).
|
|
3.2
|
By-Laws
of Coffee Holding Co., Inc. (incorporated herein by reference to
Exhibit
3.2 to the Coffee Holding Co., Inc. Form 8-A, filed with the Securities
and Exchange Commission on May 2, 2005).
|
|
4.1
|
Form
of Stock Certificate of Coffee Holding Co., Inc. (incorporated herein
by
reference to the Coffee Holding Co., Inc. Registration Statement
on Form
SB-2, filed with the Securities and Exchange Commission on June 24,
2004).
|
|
10.1
|
Lease
with T&O Management Corp. dated August 15, 1997 (incorporated herein
by reference to Exhibit 10.1 to the Coffee Holding Co., Inc. Quarterly
Report on Form 10-Q for the quarter ended April 30, 1998, filed with
the
Securities and Exchange Commission on October 27,
2000).
|
|
10.2
|
1998
Stock Option Plan (incorporated herein by reference to Exhibit 10.2
to the
Coffee Holding Co., Inc. Quarterly Report on Form 10-Q for the quarter
ended April 30, 1998, filed with the Securities and Exchange Commission
on
October 27, 2000).
|
|
10.3
|
Working
Capital Management Account Loan and Security Agreement with Merrill
Lynch
Business Financial Services Inc. (incorporated herein by reference
to
Exhibit 10.3 to the Coffee Holding Co., Inc. Annual Report on Form
10-KSB,
filed with the Securities and Exchange Commission on February 10,
2005).
|
|
10.4
|
Amendment
to Working Capital Account Loan and Security Agreement with Merrill
Lynch
Business Financial Services, Inc. (incorporated herein by reference
to
Exhibit 10.4 to the Coffee Holding Co., Inc. Quarterly Report on
Form
10-QSB for the quarter ended January 31, 2005, filed with the Securities
and Exchange Commission on March 17, 2005).
|
|
10.9
|
Capital
Lease Agreement with HSBC Business Credit (USA), Inc. (incorporated
herein
by reference to Exhibit 10.9 to Amendment No. 1 to the Coffee Holding
Co.,
Inc. Registration Statement on Form SB-2/A, filed with the Securities
and
Exchange Commission on August 12, 2004).
|
|
10.10
|
Sales
contract with Supervalu and Cub Foods (incorporated herein by reference
to
Exhibit 10.10 to Amendment No. 1 to the Coffee Holding Co., Inc.
Annual
Report on Form 10-KSB/A for the year ended October 31, 2002, filed
with
the Securities and Exchange Commission on August 26, 2004) (confidential
portions have been redacted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange
Commission).
|
10.11
|
Sales
contract with Shurfine Central (incorporated herein by reference
to
Exhibit 10.11 to Amendment No. 1 to the Coffee Holding Co., Inc.
Annual
Report on Form 10-KSB/A for the year ended October 31, 2002, filed
with
the Securities and Exchange Commission on August 26, 2004) (confidential
portions have been redacted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange
Commission).
|
|
10.12
|
Lease
dated February 4, 2004 by and between Coffee Holding Co., Inc. and
the
City of La Junta, Colorado (incorporated herein by reference to Exhibit
10.12 to Amendment No. 1 to the Coffee Holding Co., Inc. Registration
Statement on Form SB-2/A, filed with the Securities and Exchange
Commission on August 12, 2004).
|
|
10.13
|
Trademark
License Agreement dated February 4, 2004 between Del Monte Corporation
and
Coffee Holding Co, Inc. (incorporated herein by reference to Exhibit
10.13
to the Coffee Holding Co., Inc. Quarterly Report on Form 10-QSB/A
for the
quarter ended April 30, 2004, filed with the Securities and Exchange
Commission on August 26, 2004).
|
|
10.14
|
Employment
agreement by and among Coffee Holding Co., Inc. and Andrew Gordon
(incorporated herein by reference to the Coffee Holding Co., Inc.
Registration Statement on Form SB-2, filed with the Securities and
Exchange Commission on June 24, 2004).
|
|
10.15
|
Employment
agreement by and among Coffee Holding Co., Inc. and David Gordon
(incorporated herein by reference to the Coffee Holding Co., Inc.
Registration Statement on Form SB-2, filed with the Securities and
Exchange Commission on June 24, 2004).
|
|
10.17
|
Corporate
Brands Agreement dated as of March 30, 2004 by and between Albertson’s,
Inc. and Coffee Holding Co., Inc. (incorporated herein by reference
to
Amendment No. 2 to the Coffee Holding Co., Inc. Registration Statement
on
Form SB-2/A, filed with the Securities and Exchange Commission on
October
25, 2004) (confidential portions have been redacted pursuant to a
request
for confidential treatment and filed separately with the Securities
and
Exchange Commission).
|
|
10.19
|
Coffee
Holding Co., Inc. Non-Qualified Deferred Compensation Plan (incorporated
herein by reference to the Coffee Holding Co., Inc. Quarterly Report
on
Form 10-QSB, filed with the Securities and Exchange Commission on
June 14,
2005).
|
|
11.1
|
Earnings
Per Share.
|
|
|
||
31.1
|
Rule
13a-14(a)/15d-14(a) Certification.
|
|
32.1
|
Section
1350 Certification.
|
PAGE
|
|
FINANCIAL
STATEMENTS:
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
|
F-2
|
CONSOLIDATED
BALANCE SHEETS AS OF OCTOBER 31, 2006 AND 2005
|
F-3
|
CONSOLIDATED
STATEMENTS OF INCOME - YEARS ENDED OCTOBER 31, 2006, 2005 AND 2004
|
F-4
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - YEARS ENDED OCTOBER
31,
2006, 2005 AND 2004
|
F-5
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS - YEARS ENDED OCTOBER 31, 2006, 2005 AND
2004
|
F-6
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-7/21
|
/s/
LAZAR LEVINE & FELIX, LLP
|
|||
LAZAR
LEVINE & FELIX,
LLP
|
2006
|
2005
|
||||||
-
ASSETS -
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
|
$
|
1,112,165
|
$
|
735,468
|
|||
Commodities
held at broker
|
4,330,489
|
2,994,394
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $420,349 for
2006
and 2005, respectively
|
6,534,848
|
5,159,576
|
|||||
Inventories
|
2,899,543
|
4,496,578
|
|||||
Prepaid
expenses and other current assets
|
328,544
|
272,541
|
|||||
Prepaid
and refundable income taxes
|
302,003
|
11,629
|
|||||
Deferred
income tax assets
|
221,000
|
318,600
|
|||||
TOTAL
CURRENT ASSETS
|
15,728,592
|
13,988,786
|
|||||
Property
and equipment, at cost, net of accumulated depreciation of $4,159,274
and
$3,727,524 for 2006 and 2005, respectively
|
2,138,951
|
2,379,952
|
|||||
Investment
in joint venture
|
408,798
|
-
|
|||||
Due
from joint venture
|
73,658
|
-
|
|||||
Deposits
and other assets
|
631,859
|
176,575
|
|||||
TOTAL
ASSETS
|
$
|
18,981,858
|
$
|
16,545,313
|
|||
-
LIABILITIES AND STOCKHOLDERS' EQUITY -
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
4,828,689
|
$
|
4,431,577
|
|||
Current
portion of obligations under capital lease
|
-
|
1,329
|
|||||
Line
of credit borrowings
|
2,542,881
|
1,063,167
|
|||||
Income
taxes payable - current
|
-
|
218,864
|
|||||
TOTAL
CURRENT LIABILITIES
|
7,371,570
|
5,714,937
|
|||||
Deferred
income tax liabilities
|
12,300
|
53,700
|
|||||
Deferred
compensation payable
|
256,284
|
135,054
|
|||||
TOTAL
LIABILITIES
|
7,640,154
|
5,903,691
|
|||||
MINORITY
INTEREST
|
-
|
-
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS'
EQUITY:
|
|||||||
Preferred
stock, par value $.001 per share; 10,000,000 shares authorized; none
issued
|
-
|
-
|
|||||
Common
stock, par value $.001 per share; 30,000,000 shares authorized, 5,529,830
shares issued and outstanding for 2006 and 2005,
respectively
|
5,530
|
5,530
|
|||||
Additional
paid-in capital
|
7,327,023
|
7,327,023
|
|||||
Retained
earnings
|
4,009,151
|
3,309,069
|
|||||
TOTAL
STOCKHOLDERS' EQUITY
|
11,341,704
|
10,641,622
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
18,981,858
|
$
|
16,545,313
|
2006
|
2005
|
2004
|
||||||||
NET
SALES
|
$
|
51,171,202
|
$
|
41,545,345
|
$
|
28,030,389
|
||||
COST
OF SALES
|
43,575,963
|
33,875,973
|
20,927,506
|
|||||||
GROSS
PROFIT
|
7,595,239
|
7,669,372
|
7,102,883
|
|||||||
OPERATING
EXPENSES:
|
||||||||||
Selling
and administrative
|
5,585,787
|
4,854,018
|
4,746,895
|
|||||||
Bad
debt expense
|
29,093
|
270,000
|
30,914
|
|||||||
Officers'
salaries
|
616,052
|
574,245
|
622,573
|
|||||||
TOTALS
|
6,230,932
|
5,698,263
|
5,400,382
|
|||||||
INCOME
FROM OPERATIONS
|
1,364,307
|
1,971,109
|
1,702,501
|
|||||||
OTHER
INCOME (EXPENSE)
|
||||||||||
Interest
income
|
128,967
|
50,363
|
11,966
|
|||||||
Other
income
|
65,310
|
-
|
-
|
|||||||
Equity
in loss of joint venture
|
(176,911
|
)
|
-
|
-
|
||||||
Management
fee income
|
44,403
|
-
|
-
|
|||||||
Interest
expense
|
(130,101
|
)
|
(110,684
|
)
|
(145,930
|
)
|
||||
TOTALS
|
(68,332
|
)
|
(60,321
|
)
|
(133,964
|
)
|
||||
INCOME
BEFORE INCOME TAXES AND MINORITY INTEREST IN
SUBSIDIARY
|
1,295,975
|
1,910,788
|
1,568,537
|
|||||||
Provision
for income taxes
|
602,059
|
725,653
|
693,195
|
|||||||
INCOME
BEFORE MINORITY INTEREST
|
|
693,916
|
|
-
|
|
-
|
||||
Minority
interest in subsidiary
|
6,166
|
-
|
-
|
|||||||
NET
INCOME
|
$
|
700,082
|
$
|
1,185,135
|
$
|
875,342
|
||||
Basic
and diluted earnings per share
|
$
|
.13
|
$
|
.25
|
$
|
.22
|
||||
Weighted
average common shares outstanding:
|
||||||||||
Basic
|
5,529,830
|
4,721,327
|
3,999,650
|
|||||||
Diluted
|
5,599,830
|
4,776,757
|
3,999,650
|
Common
Stock
|
Additional
Paid - in Capital
|
Retained
Earnings
|
Total
|
|||||||||||||
$.001
Par Value
|
||||||||||||||||
Number
of
|
||||||||||||||||
Shares
|
Amount
|
|
|
|||||||||||||
Balance,
October 31, 2003
|
3,999,650
|
$
|
4,000
|
$
|
867,887
|
$
|
1,248,592
|
$
|
2,120,479
|
|||||||
Net
income
|
-
|
-
|
-
|
875,342
|
875,342
|
|||||||||||
Balance,
October 31, 2004
|
3,999,650
|
4,000
|
867,887
|
2,123,934
|
2,995,821
|
|||||||||||
Sale
of common stock
|
1,610,000
|
1,610
|
6,434,496
|
-
|
6,436,016
|
|||||||||||
Return
of stock to Treasury-Cancelled
|
(89,820
|
)
|
(90
|
)
|
-
|
-
|
-
|
|||||||||
Issuance
of common stock for services
|
10,000
|
10
|
24,640
|
-
|
24,650
|
|||||||||||
Net
income
|
-
|
-
|
-
|
1,185,135
|
1,185,135
|
|||||||||||
Balance,
October 31, 2005
|
5,529,830
|
5,530
|
7,327,023
|
3,309,069
|
10,641,622
|
|||||||||||
Net
income
|
-
|
-
|
-
|
700,082
|
700,082
|
|||||||||||
Balance,
October 31, 2006
|
5,529,830
|
$
|
5,530
|
$
|
7,327,023
|
$
|
4,009,151
|
$
|
11,341,704
|
2006
|
2005
|
2004
|
||||||||
OPERATING
ACTIVITIES:
|
||||||||||
Net
income
|
$
|
700,082
|
$
|
1,185,135
|
$
|
875,342
|
||||
Adjustments
to reconcile net income to net cash (used in) provided by operating
activities:
|
||||||||||
Depreciation
|
431,750
|
373,106
|
363,612
|
|||||||
Bad
debt expense
|
5,421
|
270,000
|
30,914
|
|||||||
Deferred
income taxes
|
56,200
|
(173,200
|
)
|
(27,200
|
)
|
|||||
Loss
from joint venture
|
176,911
|
-
|
-
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Commodities
held at broker
|
(1,336,095
|
)
|
(2,120,493
|
)
|
20,222
|
|||||
Accounts
receivable
|
(1,380,693
|
)
|
(1,423,821
|
)
|
(1,881,986
|
)
|
||||
Inventories
|
1,597,035
|
(2,238,289
|
)
|
(476,865
|
)
|
|||||
Prepaid
expenses and other current assets
|
(56,003
|
)
|
563,558
|
(244,963
|
)
|
|||||
Prepaid
and refundable income taxes
|
(290,374
|
)
|
(11,629
|
)
|
-
|
|||||
Due
from joint venture
|
(73,658
|
)
|
-
|
-
|
||||||
Accounts
payable and accrued expenses
|
397,112
|
(227,259
|
)
|
2,797,389
|
||||||
Income
tax payable
|
(218,864
|
)
|
58,864
|
160,000
|
||||||
Deposits
and other assets
|
(328,388
|
)
|
(135,054
|
)
|
-
|
|||||
Net
cash (used in) provided by operating activities
|
(319,564
|
)
|
(3,879,082
|
)
|
1,616,465
|
|||||
INVESTING
ACTIVITIES:
|
||||||||||
Purchases
of property and equipment
|
(190,749
|
)
|
(466,122
|
)
|
(1,039,479
|
)
|
||||
Investment
in joint venture
|
(585,709
|
)
|
-
|
-
|
||||||
Security
deposits
|
-
|
(8,025
|
)
|
(16,700
|
)
|
|||||
Net
cash used in investing activities
|
(776,458
|
)
|
(474,147
|
)
|
(1,056,179
|
)
|
||||
FINANCING
ACTIVITIES:
|
||||||||||
Principal
payments on term loan
|
-
|
(252,000
|
)
|
(84,000
|
)
|
|||||
Net
proceeds from initial public offering
|
-
|
6,436,016
|
-
|
|||||||
Advances
under bank line of credit
|
41,847,244
|
27,754,052
|
28,108,814
|
|||||||
Principal
payments under bank line of credit
|
(40,367,530
|
)
|
(29,375,930
|
)
|
(27,715,835
|
)
|
||||
Payments
to related parties
|
-
|
-
|
(79,646
|
)
|
||||||
Principal
payments of obligations under capital leases
|
(1,329
|
)
|
(115,586
|
)
|
(221,306
|
)
|
||||
Net
cash provided by financing activities
|
1,478,385
|
4,446,552
|
8,027
|
|||||||
MINORITY
INTEREST
|
(5,666
|
)
|
-
|
-
|
||||||
NET
INCREASE IN CASH
|
376,697
|
93,323
|
568,313
|
|||||||
Cash,
beginning of year
|
735,468
|
642,145
|
73,832
|
|||||||
CASH,
END OF YEAR
|
$
|
1,112,165
|
$
|
735,468
|
$
|
642,145
|
||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW DATA:
|
||||||||||
Interest
paid
|
$
|
121,844
|
$
|
103,286
|
$
|
145,930
|
||||
Income
taxes paid
|
$
|
831,503
|
$
|
460,744
|
$
|
370,850
|
YEARS
ENDED
OCTOBER
31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Gross
realized gains
|
$
|
2,769,507
|
$
|
4,081,339
|
$
|
3,129,479
|
||||
Gross
realized losses
|
$
|
(1,462,183
|
)
|
$
|
(3,264,522
|
)
|
$
|
(1,415,505
|
)
|
|
Unrealized
gains (losses)
|
$
|
347,494
|
$
|
11,111
|
$
|
(92,236
|
)
|
Current
assets
|
$
|
406,041
|
||
Machinery
and other assets
|
481,023
|
|||
Total
assets
|
$
|
887,064
|
||
Current
liabilities
|
$
|
569,057
|
||
Other
liabilities
|
3,926
|
|||
Capital
|
314,081
|
|||
Total
liabilities and capital
|
$
|
887,064
|
||
Sales
|
$
|
903,242
|
||
Expenses
|
1,257,064
|
|||
Net
loss
|
$
|
(353,822
|
)
|
|
Company’s
share of net loss
|
$
|
(176,911
|
)
|
2006
|
2005
|
||||||
Packed
coffee
|
$
|
700,284
|
$
|
1,276,050
|
|||
Green
coffee
|
1,466,161
|
2,483,061
|
|||||
Packaging
supplies
|
733,098
|
737,467
|
|||||
Totals
|
$
|
2,899,543
|
$
|
4,496,578
|
Estimated
Useful
Life
|
2006
|
2005
|
||||||||
Building
and improvements
|
30
years
|
$
|
1,401,016
|
$
|
1,393,516
|
|||||
Machinery
and equipment
|
7
years
|
3,853,272
|
3,784,129
|
|||||||
Machinery
and equipment under capital lease
|
7
years
|
458,179
|
458,179
|
|||||||
Automobile
|
3
years
|
84,925
|
43,617
|
|||||||
Furniture
and fixtures
|
7
years
|
359,833
|
287,035
|
|||||||
6,157,225
|
5,966,476
|
|||||||||
Less
accumulated depreciation
|
4,159,274
|
3,727,524
|
||||||||
1,997,951
|
2,238,952
|
|||||||||
Land
|
141,000
|
141,000
|
||||||||
$
|
2,138,951
|
$
|
2,379,952
|
2006
|
2005
|
||||||
Deferred
tax assets:
|
|||||||
Accounts
receivable
|
$
|
167,000
|
$
|
168,855
|
|||
Inventory
|
54,000
|
149,745
|
|||||
$
|
221,000
|
$
|
318,600
|
||||
Deferred
tax liabilities:
|
|||||||
Fixed
assets
|
$
|
12,300
|
$
|
53,700
|
2006
|
2005
|
2004
|
||||||||
Federal
- current
|
$
|
430,211
|
$
|
726,364
|
$
|
497,421
|
||||
Federal
- deferred
|
37,800
|
(134,700
|
)
|
(29,072
|
)
|
|||||
State
and local - current
|
112,648
|
172,489
|
232,174
|
|||||||
State
and local - deferred
|
21,400
|
(38,500
|
)
|
(7,328
|
)
|
|||||
Total
|
$
|
602,059
|
$
|
725,653
|
$
|
693,195
|
2006
|
2005
|
2004
|
||||||||
Federal
income tax statutory rate
|
34
|
%
|
34
|
%
|
34
|
%
|
||||
State
income taxes, net of federal tax benefit
|
6
|
%
|
8
|
%
|
8
|
%
|
||||
Other
- benefit of tax refunds
|
-
|
%
|
-
|
%
|
2
|
%
|
||||
Effective
tax rate
|
40
|
%
|
42
|
%
|
44
|
%
|
a)
|
The
Company occupies warehouse facilities under an operating lease, which
was
set to expire on August 31, 2006. The lease was renegotiated effective
February 2006 for a term of five years, expiring on January 31, 2011,
at a
monthly rental of $15,000. The lease requires the Company to pay
utilities
and other maintenance expenses. Rent charged to operations amounted
to
$161,000, $90,000 and $59,030 in 2006, 2005 and 2004, respectively.
|
b)
|
In
February 2004, the Company entered into a lease for office and warehouse
space in La Junta City, Colorado. This lease, which is at a monthly
rental
of $8,341 beginning January 2005, expires on January 31,
2024.
|
October
31,
|
||||
2007
|
$
|
280,093
|
||
2008
|
280,093
|
|||
2009
|
280,093
|
|||
2010
|
280,093
|
|||
2011
|
145,093
|
|||
Thereafter
|
1,326,232
|
|||
|
||||
$
|
2,591,697
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||
2006
|
|||||||||||||
Net
Sales
|
$
|
13,844,845
|
$
|
12,010,928
|
$
|
11,858,581
|
$
|
13,456,848
|
|||||
Gross
profit
|
2,325,443
|
862,694
|
1,941,651
|
2,465,451
|
|||||||||
Income
(loss) from operations
|
906,631
|
(492,969
|
)
|
385,843
|
564,802
|
||||||||
Net
income (loss)
|
519,638
|
(284,234
|
)
|
179,450
|
285,228
|
||||||||
Diluted
earnings (loss) per share
|
$
|
.09
|
$
|
(.05
|
)
|
$
|
.03
|
$
|
.05
|
||||
|
|||||||||||||
2005
|
|||||||||||||
Net
Sales
|
$
|
8,060,280
|
$
|
10,173,230
|
$
|
10,782,680
|
$
|
12,529,155
|
|||||
Gross
profit
|
2,072,267
|
2,252,858
|
1,033,458
|
2,310,789
|
|||||||||
Income
(loss) from operations
|
676,881
|
1,003,371
|
(792,607
|
)
|
1,083,464
|
||||||||
Net
income (loss)
|
402,281
|
598,356
|
(447,875
|
)
|
632,373
|
||||||||
Diluted
earnings (loss) per share
|
$
|
.10
|
$
|
.15
|
$
|
(.08
|
)
|
$
|
.13
|
(a)
Description
|
(b)
Balance at
Beginning
of Year
|
(c)
Additions Charged to (reversed from) Costs and
Expenses
|
(d)
Deductions - Net Write-Offs
|
(e)
Balance at End of Year
|
|||||||||
Year
Ended October 31, 2006:
|
|||||||||||||
Allowance
for doubtful accounts on
trade
receivables
|
$
|
420,349
|
$
|
-
|
$
|
-
|
$
|
420,349
|
|||||
Year
Ended October 31, 2005:
|
|||||||||||||
Allowance
for doubt accounts on
trade
receivables
|
$
|
150,349
|
$
|
270,000
|
$
|
-
|
$
|
420,349
|
|||||
Year
Ended October 31, 2004:
|
|||||||||||||
Allowance
for doubtful accounts on
trade
receivables
|
$
|
119,435
|
$
|
30,914
|
$
|
-
|
$
|
150,349
|