ITEM 1A. RISK FACTORS 8
ITEM 1B. UNRESOLVED STAFF COMMENTS 18
ITEM 1C. CYBERSECURITY 18
ITEM 2. PROPERTIES 19
ITEM 3. LEGAL PROCEEDINGS 19
ITEM 4. MINE SAFETY DISCLOSURES 19
ITEM 6. RESERVED 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
ITEM 9A. CONTROLS AND PROCEDURES 24
ITEM 9B. OTHER INFORMATION 25
ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 25
PART III 25
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 25
ITEM 11. EXECUTIVE COMPENSATION 30
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 37
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 38
SIGNATURES 41
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1
I
PART
I
ITEM
1. BUSINESS
All
references in this Annual Report to “JVA,” the “Company,” “Coffee Holding,” “we,” “us,”
or “our” mean Coffee Holding Co., Inc. and its subsidiaries unless stated otherwise or the context otherwise indicates.
General
Overview
Products
and Operations. We are an integrated wholesale coffee roaster and dealer located in the United States. Our core products can be divided
into three categories:
Our
private label and branded coffee products are sold throughout the United States and certain countries in Asia to supermarkets, wholesalers,
and individually owned and multi-unit retail customers. Our unprocessed green coffee, which includes over 90 specialty coffee offerings,
is primarily sold to specialty gourmet roasters in the United States, Canada and multiple international countries.
We
conduct our operations in accordance with strict freshness and quality standards. All of our private label and branded coffees are produced
from high quality coffee beans that are deep roasted for full flavor using a slow roasting process that has been perfected utilizing
almost 50 years of experience in the coffee industry. In order to ensure freshness, our products are delivered to our customers within
72 hours of roasting. We believe that our long history has enabled us to develop a loyal customer base.
Corporate
History
We
were incorporated on October 9, 1995 under the laws of the State of Nevada under the name Transpacific International Group Corp (“Transpacific”).
On April 16, 1998, Transpacific completed a merger with Coffee Holding Co., Inc., a New York corporation. Upon the consummation of the
merger, Coffee Holding Co., Inc. was merged into Transpacific and Transpacific changed its name to Coffee Holding Co., Inc.
In
June 2016, we acquired substantially all of the assets of Coffee Kinetics LLC (doing business as Sonofresco) through our wholly-owned
subsidiary Sonofresco, LLC (“Sonofresco” or “SONO”), including equipment, inventory, customer lists, relationships
and accounts payable. In addition to our wholesale green coffee, private label coffee and branded coffee product offerings, we currently
sell tabletop coffee roasting equipment to our customers through Sonofresco.
On
February 23, 2017, we purchased all the outstanding common stock of Comfort Foods, Inc. (“CFI”). CFI is a medium sized regional
roaster, manufacturing both branded and private label coffee for retail and foodservice customers located predominantly in the northeast
United States marketplace.
On
October 7, 2025, the Company announced its plan to close its Comfort Foods manufacturing facility located in North Andover, Massachusetts
(the “Comfort Foods facility”). The closure of the Comfort Foods facility was completed by the end of October 2025. The Company
originally acquired the Comfort Foods business in 2017, which included the related Harmony Bay brand and the operations conducted at
this facility.
The
decision to cease operations was based on the continued decline in sales of certain regional brands and the shift by major retailers
toward national branded products, which reduced the profitability of the Comfort Foods facility. In connection with this closure, production
activities previously performed at the Comfort Foods facility will be transitioned to the Company’s Second Empire, LLC (“Second
Empire”) facility located in Port Chester, New York. The Company expects that consolidating manufacturing operations into a single
East Coast production hub will enhance operational efficiency and reduce duplicative overhead costs.
On
September 29, 2022, the Company entered into a Merger and Share Exchange Agreement (the “Merger Agreement”), by and among
the Company, Delta Corp Holdings Limited, a Cayman Islands exempted company (“Pubco”), Delta Corp Holdings Limited, a company
incorporated in England and Wales (“Delta”), CHC Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Pubco
(“Merger Sub”), and each of the holders of ordinary shares of Delta as named therein. Upon the terms and subject to the conditions
set forth in the Merger Agreement, Merger Sub would merge with and into the Company, with the Company surviving as a direct, wholly-owned
subsidiary of Pubco (the “Merger”). As a result of the Merger, each issued and outstanding share of the Company’s common
stock, $0.001 par value per share, would be cancelled and converted for the right of the holder thereof to receive one ordinary share,
par value $0.0001 of Pubco. There was a shareholder vote in April 2024 on the Merger Agreement that did not pass. On June 21, 2024, the
Company terminated the Merger Agreement. No early termination penalties were payable by the Company upon termination of the Merger Agreement.
On
November 11, 2024, the Company purchased all of the assets of Empire Coffee Company (“Empire Coffee”) for $800,000 in a Uniform
Commercial Code (“UCC”) Chapter 9 sale (the “Second Empire Acquisition”). The assets purchased consisted of accounts
receivable, inventory, equipment, the customer list and all intellectual property. To facilitate the purchase, Coffee Holding created
a new wholly owned subsidiary named Second Empire, LLC. Operations will be conducted by Second Empire. The operations of Second Empire
will include roasting and packing for current Coffee Holding customers as well as customers of Empire Coffee.
In
connection with this transaction, the Company entered into a four-year lease with 21 Grace Church Street Realty LLC for the existing
property at 21 Grace Church Street, Port Chester, NY 10573 where Empire Coffee had its offices and production facility.
Our
corporate offices are located at 3475 Victory Boulevard, Staten Island, New York 10314. Our telephone number is (718) 832-0800 and our
website address is www.coffeeholding.com. On our website, investors can obtain, free of charge, a copy of our Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Code of Conduct and Business Ethics, including disclosure related
to any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with,
or furnish it to, the Securities and Exchange Commission, or the SEC. None of the information posted on our website is incorporated by
reference into this Annual Report. The SEC also maintains a website at https://www.sec.gov that contains reports, proxy and information
statements and other information regarding us and other companies that file materials with the SEC electronically.
Recent
Developments
In
December 2025, the Company invested $850,000 in The Ryl Company LLC pursuant to a subscription agreement in exchange for a non-controlling
minority interest. The investment is passive in nature, and the Company does not participate in management or operations of The Ryl Company
LLC.
Our
Competitive Strengths
To
achieve our growth objectives described below, we intend to leverage the following competitive strengths:
Positioned
to Profitably Grow Through Varying Cycles of the Coffee Market. We believe that we are one of the few coffee companies to offer a
broad array of branded and private label roasted ground coffees and wholesale green coffee across the spectrum of consumer tastes, preferences
and price points. While many of our competitors engage in distinct segments of the coffee business, we sell products in each of the following
areas:
● Retail branded coffee;
● Mainstream retail private label coffee;
● Specialty retail coffees both private label and branded;
● Wholesale specialty green and gourmet whole bean coffees;
● Single cup coffee pods;
● Food service;
● Instant coffees;
● Tea; and
● Tabletop coffee roasting equipment.
Our
branded and private label roasted ground coffees are sold at competitive and value price levels, while some of our other branded and
specialty coffees are sold predominantly at premium price levels. Premium price level coffee is high-quality gourmet coffee, such as
AA Arabica coffee, which sell at a substantial premium over traditional retail canned coffee, while competitive and value price level
coffee is mainstream or traditional canned coffee. Because of this diversification, we believe that our profitability is not dependent
on any one area of the coffee industry and, therefore, is less sensitive than our competition to potential coffee commodity price and
overall economic volatility.
Wholesale
Green Coffee Market Presence. As a large roaster-dealer of green coffee, we believe that we are favorably positioned to increase
our specialty coffee sales. Since 1998, we have increased the number of our wholesale green coffee customers, including coffee houses,
single store operators, mall coffee stores and mail order sellers. We are a charter member of the Specialty Coffee Association of America
and one of the largest distributors of Swiss Water Processed Decaffeinated Coffees and Dattera specialty Brazil coffees in the United
States. Our almost 50 years of experience as a roaster and a dealer of green coffee allows us to provide our roasting experience as a
value-added service to our gourmet roaster customers. The assistance we provide to our customers includes training, coffee blending and
market identification. We believe that our relationships with wholesale green coffee customers and our focus on selling green coffee
as a wholesaler has enabled us to participate in the growth of the specialty coffee market while mitigating the risks associated with
the competitive retail specialty coffee environment.
Diverse
Portfolio of Differentiated Branded Coffees. We have amassed a portfolio of eight proprietary name brands that are sold to supermarkets,
wholesalers and individually owned stores in the United States, including brands for specialty espresso, Latin espresso, Italian espresso,
100% Colombian coffee and blended and flavored coffees. In addition, we have entered into a licensing agreement with Del Monte Corporation
for the exclusive right to use the S&W trademark in the United States and other countries approved by Del Monte Corporation in connection
with the production, manufacture and sale of roasted whole bean and ground coffee for distribution to retail customers. Our existing
portfolio of differentiated brands combined with our management expertise serve as a platform for us to add additional name brands through
acquisition or licensing agreements, which target product niches and segments that do not compete with our existing brands.
Management
Has Extensive Experience in the Coffee Industry. Andrew Gordon, our President, Chief Executive Officer, Chief Financial Officer and
Treasurer, and David Gordon, our Executive Vice President – Operations, have worked with Coffee Holding for 44 and 46 years, respectively.
During this period, the Company has successfully navigated varying cycles in both the coffee industry and macro economy. David Gordon
is an original member of the Specialty Coffee Association of America. We believe that our employees and management are dedicated to our
vision and mission, which is to produce high quality products, as well as to provide quality and responsive service to our customers.
Our
Growth Strategy
We
believe that significant growth opportunities exist by selectively pursuing strategic acquisitions and alliances, increasing penetration
with existing customers by adding new products, developing our Harmony Bay brand and increasing the number of our wholesale green coffee
customers. By capitalizing on this strategy, we hope to continue to grow our business with our commitment to quality and personalized
service to our customers. We do not intend to compete on price alone, nor do we intend to expand sales at the expense of profitability.
Selectively
Pursue Strategic Acquisitions and Alliances. We have expanded our operations by acquiring coffee companies, entering into strategic
alliances and acquiring or licensing brands, which complement our business objectives. We intend to continue to seek such opportunities.
Grow
Our Cafe Caribe and Cafe Supremo Products. We believe the Latin population in the United States is the fastest growing and now represents
the largest minority demographic in the United States. We believe there is significant opportunity for our Café Caribe and Café
Supremo brands to gain market share among Latin consumers in the United States. Café Caribe, which has historically been our leading
brand by poundage, is a specialty espresso coffee that targets espresso coffee drinkers and, in particular, Latin consumers. Café
Supremo is a specialty espresso coffee which is priced for the more price sensitive Latin espresso coffee drinker.
Further
Market Penetration of Our Niche Products. We intend to capture additional market share through our existing distribution channels
by selectively adding or introducing new brand names and products across multiple price points, including:
● New licensing agreements;
● Specialty blends and foodservice opportunities; and
● Sales of our tabletop coffee roasting equipment.
Our
Core Products
Our
core products can be divided into three categories:
Wholesale
Green Coffee. The specialty coffee market remains the fastest growing area of our industry. The number of gourmet coffee houses
have been increasing in all areas of the United States. The growth in specialty coffee sales has created a marketplace for higher quality
and differentiated products, which can be priced at a premium in the marketplace. As a large roaster-dealer of green coffee, we are favorably
positioned to increase our specialty coffee sales. We sell green coffee beans to small roasters and coffee shop operators located throughout
the United States and carry over approximately 90 different varieties. Specialty green coffee beans are sold unroasted, direct from warehouses
to small roasters and gourmet coffee shop operators, which then roast the beans themselves. We sell from as little as one bag (132 pounds)
to a full truckload (44,000 pounds) of specialty green coffee beans, depending on the size and need of the customer. We believe that
we can increase sales of wholesale green coffee without an increase in infrastructure and without venturing into the highly competitive
retail specialty coffee environment. We believe that by utilizing our current strategy we can be as profitable as, or more profitable
than, our competitors in this segment by selling “one bag at a time” rather than “one cup at a time.”
Private
Label Coffee. We roast, blend, package and sell coffee under private labels for companies throughout the United States and Canada.
Our private label coffee is sold in cans, brick packages and instants in a variety of sizes. We produce private label coffee for customers
who desire to sell coffee under their own name but do not want to engage in the manufacturing process. Our private label customers seek
a quality similar to the national brands at a lower cost, which represents a better value for the consumer.
Branded
Coffee. We roast and blend our branded coffee according to our own recipes and package the coffee at our facilities in La Junta,
Colorado. We then sell the packaged coffee under our brand labels to supermarkets, wholesalers and individually-owned stores throughout
the United States.
We
hold trademarks for each of our proprietary name brands and have the exclusive right to use the S&W, IL CLASSICO brand names in the
United States in connection with the production, manufacture and sale of roasted whole bean and ground coffee for distribution at the
retail level. For further information regarding our trademark rights, see “Business—Trademarks.”
Each
of our name brands is directed at a particular segment of the coffee market. Our branded coffees are:
Cafe
Caribe, a specialty espresso coffee that targets espresso coffee drinkers and, in particular, the Latin consumer market;
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;
S&W,
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;
Cafe
Supremo, 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;
Via
Roma, an Italian espresso targeted at the more traditional espresso drinker;
Premier
Roasters, a line of high-quality Arabica coffees packed in composite cans and poly bags and single serve;
Harmony
Bay, an upscale line of flavored beans in 11oz and 40oz bags, along with single serve offerings in a multitude of unique flavor profiles;
and
Café
Femenino Coffee, coffee beans produced from around the world from 100% women-owned coffee cooperative.
Other
Products
We
also offer several niche products, including:
● tea; and
● table-top coffee roasters and grinders.
Raw
Materials
Coffee
is a commodity traded on the Commodities and Futures Exchange subject to price fluctuations. Over the past five years, the average price
per pound of coffee beans ranged from approximately $0.9270 to $3.4835. The price for coffee beans on the commodities market as of October
31, 2025, and 2024 was $3.92 and $2.46 per pound, respectively. Specialty green coffee, unlike most coffee, is not tied directly to the
commodities cash markets. Instead, it tends to trade on a negotiated basis at a substantial premium over commodity coffee pricing, depending
on the origin, supply and demand at the time of purchase. We are a licensed Fair Trade dealer for Fair Trade certified coffee. Fair Trade
certified coffee helps small coffee farmers to increase their incomes and improve the prospects of their communities and families by
guaranteeing farmers a minimum price of ten cents above the current market price. Our North Andover plant that is operated by our Comfort
Foods division is certified organic by the Organic Crop Improvement Association (OCIA). All of our specialty green coffees, as well as
all of the other coffees we import for roasting, are subject to multiple levels of quality control.
We
purchase our green coffee from dealers located primarily within the United States. The dealers supply us with coffee beans from many
countries, including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. We do not have any formalized, material agreements or long-term
contracts with any of these suppliers. Rather, our purchases are typically made pursuant to individual purchase orders. We do not believe
that the loss of any one supplier would have a material adverse effect on our operations due to the availability of alternate suppliers.
The
supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Supply
and price can be affected by factors such as weather, politics, tariffs, currency fluctuations and economics within the countries that
export coffee. Increases in the cost of coffee beans can, to a certain extent, be passed on to our customers in the form of higher prices
for coffee beans and processed coffee. Drastic or prolonged increases in coffee prices may also adversely impact our business as it could
lead to a decline in overall consumption of coffee. Similarly, rapid decreases in the cost of coffee beans may force us to lower our
sale prices before realizing cost reductions in our purchases.
We
subject all of our private unroasted green coffee to both a pre-shipment sample approval and an additional sample approval upon arrival
into the United States. Once the arrival sample is approved, we then bring the coffee to one of our facilities to roast and blend according
to our own strict specifications. During the roasting and blending process, samples are pulled off the production line and tested on
an hourly basis to ensure that each batch roasted is consistent with the others and meets the strict quality standards demanded by our
customers and us.
Our
Use of Derivatives
The
supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Historically,
we have used, and intend to continue to use in a limited capacity, short-term coffee futures and options contracts primarily for the
purpose of partially hedging the effects of changing green coffee prices and to reduce our costs of sales. In addition, we acquired,
and expect to continue to acquire, futures contracts with longer terms, generally three to four months, primarily for the purpose of
guaranteeing an adequate supply of green coffee. Realized and unrealized gains or losses on options and futures contracts are reflected
in our cost of sales. Gains on options and futures contracts reduce our cost of sales and losses on options and futures contracts increase
our cost of sales. The use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices.
We believe that, in normal economic times, our hedging policies remain a vital element of our business model not only in controlling
our cost of sales, but also giving us the flexibility to obtain the inventory necessary to continue to grow our sales while trying to
minimize margin compression during a time of high coffee prices. However, no strategy can entirely eliminate pricing risks and we generally
remain exposed to losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain
exposed to supply risk in the event of non-performance by the counterparties in any one of our physical contracts. Although we have had
net gains on options and futures contracts in the past, we have incurred significant losses on options and futures contracts during some
reporting periods. In these cases, our cost of sales has increased, resulting in a decrease in our profitability or increase our losses.
Such losses have and could in the future materially increase our cost of sales and materially decrease our profitability and adversely
affect our stock price. See “Item 1A – Risk Factors - If our hedging policy is not effective, we may not be able to control
our coffee costs, we may be forced to pay greater than market value for green coffee and our profitability may be reduced.” Failure
to properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If
the hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedges result in losses, our cost
of sales may increase, resulting in a decrease in profitability or increased losses. As previously announced, as a result of the volatile
nature of the commodities markets, we have and are continuing to scale back our use of hedging and short-term trading of coffee futures
and options contracts, and intend to continue to use these practices in a limited capacity going forward. See “Quantitative and
Qualitative Disclosures About Market Risk—Commodity Price Risks.”
Trademarks
and Tradename
We
hold trademarks, registered with the United States Patent and Trademark Office, for all eight of our proprietary coffee brands and an
exclusive license for S&W brands for sale in the United States. Trademark registrations are subject to periodic renewal and we anticipate
maintaining our registrations. We believe that our brands are recognizable in the marketplace and that brand recognition is important
to the success of our branded coffee business.
Customers
We
sell our private label and our branded coffee to some of the largest retail and wholesale customers in the United States.
Although
our agreements with wholesale customers generally contain only pricing terms, our contracts with certain customers also contain minimum
and maximum purchase obligations at fixed prices. Because our profits on a fixed-price contract could decline if coffee prices increased,
we acquire futures contracts with longer terms (generally three to four months) primarily for the purpose of guaranteeing an adequate
supply of green coffee at favorable prices. Although the use of these derivative financial instruments has generally enabled us to mitigate
the effect of changing prices, no strategy can entirely eliminate pricing risks or increased losses and we generally remain exposed to
losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain exposed to supply
risk in the event of non-performance by the counterparties to any futures contracts. See “Our Use of Derivatives.”
Marketing
We
market our private label and wholesale coffee through trade shows, industry publications, face-to-face contact and through the use of
our internal sales force and non-exclusive independent food and beverage sales brokers. We also use our web site (www.coffeeholding.com)
as a method of marketing our coffee products and ourselves.
For
our private label and branded coffees, we will, from time to time in conjunction with retailers and with wholesalers, conduct in-store
promotions, such as product demonstrations, coupons, price reductions, two-for-one sales and new product launches to capture changing
consumer taste preferences for upscale canned, bagged and single cup coffees.
We
evaluate opportunities for growth consistent with our business objectives. In addition, we have established relationships with independent
sales brokers to market our products across the United States, in areas of the country where we have not had a high penetration of sales,
and in Canada. We utilize our in-house sales personnel to market our private label brands. We intend to capture additional market share
in our existing distribution channels by selectively adding or introducing new brand names and products across multiple price points,
including niche specialty blends, private label “value” blends and tea and our own brands, filter packages and peripheral
products.
Competition
The
coffee market is highly competitive. We compete in the following areas:
Wholesale
Green Coffee. There are many green coffee dealers throughout the United States. Many of these dealers have greater financial resources
than we do. However, we believe that we have both the knowledge and the capability to assist small specialty gourmet coffee roasters
with developing and growing their businesses. Our over 40 years of experience as a roaster and a dealer of green coffee allows us to
provide our roasting experience as a value added service to our gourmet roaster customers. While other coffee merchants may be able to
offer lower prices for coffee beans, we market ourselves as a value-added supplier to small roasters, with the ability to help them market
their specialty coffee products and develop a customer base. The assistance we provide our customers includes training, coffee blending
and market identification. Because specialty green coffee beans are sold unroasted to small coffee shops and roasters that market their
products to local gourmet customers, we do not believe that our specialty green coffee customers compete with our private label or branded
coffee lines of business. We believe that the addition of Organic Products Trading Company, LLC (“OPTCO”), Sonofresco, CFI
as well as our external green coffee salespeople allows us to compete more effectively throughout the country and Canada.
Private
Label Competition. There are several major producers of coffee for private label sales in the United States. Many other companies
produce coffee for sale on a regional basis. Our main competitor is the Massimo Zanetti Beverage Company. The Massimo Zanetti Beverage
Company is larger and has more financial and other resources than we do and, therefore, is able to devote more resources to product development
and marketing. We believe that we remain competitive by providing a higher level of quality and customer service. This service includes
ensuring that the coffee produced for each label maintains a consistent taste and is delivered on time and in the proper quantities.
Branded
Competition. Our proprietary brand coffees compete with many other brands that are sold in supermarkets and specialty stores, primarily
in the Northeastern United States. The branded coffee market in both the Northeast and elsewhere is dominated by two large companies:
Kraft Foods, Inc. (owner of the Maxwell House brand), and J.M. Smucker Co. (owner of the Folgers and Café Bustelo brands). Our
large competitors have greater access to capital and a greater ability to conduct marketing and promotions. We believe that, while our
competitors’ brands may be more nationally recognizable, our Café Caribe and Café Supremo brands are competitive
in the fast-growing Latin demographic, our Harmony Bay has a strong regional presence in the northeast and our S&W brand has been
a recognizable brand on the west coast for over 80 years.
Government
Regulation
Our
coffee roasting operations are subject to various governmental laws and regulations, which require us to obtain licenses relating to
customs, health and safety, building and land use and environmental protection. Our roasting facility is subject to state and local air-quality
and emissions regulation. If we encounter difficulties in obtaining any necessary licenses or if we have difficulty complying with these
laws and regulations, then we could be subject to fines and penalties, which could have a material adverse effect on our profitability.
In addition, our product offerings could be limited, thereby reducing our revenues.
We
believe that we are in compliance in all material respects with all such laws and regulations and that we have obtained all material
licenses and permits that are required for the operation of our business. We are not aware of any environmental regulations that have
or that we believe will have a material adverse effect on our operations.
Employees
We
have 92 full-time employees. None of our employees are represented by unions or collective bargaining agreements. Our management believes
that we maintain good working relationships with our employees. To supplement our internal sales staff, we sometimes engage independent
national and regional sales brokers as independent contractors who work on a commission basis.
ITEM
1A. RISK FACTORS
An
investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully
consider the risks and uncertainties described below together with all of the other information included in this Annual Report. In addition
to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market
price of our common stock could decline due to any of these identified or other risks, and you could lose all of your investment.
Risks
Related to our Company
Because
our business is highly dependent upon a single commodity, coffee, any decrease in demand for coffee could materially adversely affect
our revenues and profitability.
Our
business is centered on essentially one commodity: coffee. Our operations have primarily focused on the following areas of the coffee
industry:
● the roasting, blending, packaging and distribution of private label coffee;
● the sale of wholesale specialty green coffee.
Demand
for our products is affected by:
● consumer tastes and preferences;
● global economic conditions;
● demographic trends; and
● the type, number and location of competing products.
Because
we rely on a single commodity, any decrease in demand for coffee would harm our business more than if we had more diversified product
offerings and could materially adversely affect our revenues and operating results.
Adverse
global conditions, including tariffs and economic uncertainty, may negatively impact our financial results.
Global
conditions, dislocations in the financial markets, any negative financial impacts affecting United States corporations operating on a
global basis as a result of tax reform. tariffs, or changes to existing trade agreements or tax conventions, or inflation, could adversely
impact our business in a number of ways, including longer sales cycles, lower prices for our products, reduced licensing renewals, customer
disruption or foreign currency fluctuations.
In
addition, the global macroeconomic environment could be negatively affected by, among other things, the COVID-19 pandemic or other epidemics,
instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global
credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the Russian invasion of Ukraine and
the resulting prolonged conflict and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and
may continue to cause, uncertainty and instability in local economies and in global financial markets.
If
we are unable to geographically expand our branded and private label products, our growth will be impeded which could result in reduced
sales and profitability.
Our
business strategy emphasizes, among other things, the geographic expansion of our branded and private label products as opportunities
arise. We may not be able to implement successfully this portion of our business strategy. Our ability to implement this portion of our
business strategy is dependent on our ability to:
● market our products on a national scale;
● increase our brand recognition on a national scale;
Our
sales and profitability may be adversely affected if we fail to successfully expand the geographic distribution of our branded and private
label products. In addition, our expenses could increase and our profits could decrease as we implement our growth strategy.
If
our hedging policy is not effective, we may not be able to control our coffee costs, we may be forced to pay greater than market value
for green coffee and our profitability may be reduced.
The
supply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. We have
used and expect to continue to use to a lesser extent short-term coffee futures and options contracts for the purpose of hedging the
effects of changing green coffee prices. In addition, we have acquired and expect to continue to acquire to a lesser extent futures contracts
with longer terms, generally three to four months, for the purpose of guaranteeing an adequate supply of green coffee. Realized and unrealized
gains or losses on options and futures contracts are reflected in our cost of sales. Gains on options and futures contracts reduce our
cost of sales and losses on options and futures contracts increase our cost of sales.
The
use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices. However, no strategy
can entirely eliminate pricing risks and we generally remain exposed to losses on futures contracts when prices decline significantly
in a short period of time, and we would generally remain exposed to supply risk in the event of non-performance by the counterparties
in any one of our physical contracts. Historically, we generally have been able to pass green coffee price increases through to customers,
thereby maintaining our gross profits, however, we may not be able to pass price increases through to our customers in the future. Failure
to properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If
the hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedging results in losses, our cost
of sales may increase, resulting in a decrease in profitability or an increase in losses. Although we have had net gains on options and
futures contracts in the past, we have incurred losses on options and futures contracts during some reporting periods. In these cases,
our cost of sales has increased, resulting in a decrease in our profitability or an increase in losses. Such losses have and could in
the future materially increase our cost of sales and materially decrease our profitability or increase losses and adversely affect our
stock price.
Any
inability to successfully implement our strategy of growth through selective acquisitions, licensing arrangements and other strategic
alliances, including joint ventures, could materially affect our revenues and profitability.
Part
of our growth strategy utilizes the selective acquisition of coffee companies, the selective acquisition or licensing of additional coffee
brands and other strategic alliances including joint ventures, presents risks that could result in increased expenditures and could materially
adversely affect our revenues and profitability, including:
In
addition, any such acquisitions, licensing arrangements or strategic alliances may result in:
● potentially dilutive issuances of our equity securities;
● the incurrence of additional debt;
● restructuring charges; and
As
has been our practice in the past, we will continuously evaluate any such acquisitions, licensing opportunities or strategic alliances
as they arise. However, we have not reached any new agreements or arrangements with respect to any such acquisition, licensing opportunity
or strategic alliance (other than those described herein) at this time and we may not be able to consummate any acquisitions, licensing
arrangements or strategic alliances on terms favorable to us or at all. The failure to consummate any such acquisitions, licensing arrangements
or strategic alliances may reduce our growth and expansion. In addition, if these acquisitions, licensing opportunities or strategic
alliances are not successful, our earnings could be materially adversely affected by increased expenses and decreased revenues.
Our
revenues and profitability could be adversely affected if our joint ventures or acquisitions are not successful.
We
have historically utilized joint ventures and acquisitions to grow our business and we intend to continue to seek opportunities for new
joint ventures and acquisitions that will be complimentary to our business. While we believe that our joint ventures will be successful,
losses in our joint ventures or any future joint ventures would hurt our profitability. In addition, we generally will not be in a position
to exercise sole decision-making authority regarding our joint ventures. Investments in joint ventures may, under certain circumstances,
involve risks not present when a third party is not involved, including the possibility that joint venture partners might become bankrupt
or fail to fund their share of the required capital contributions. Joint venture partners may also have business interests, strategies
or goals that are inconsistent with our business interests, strategies or goals and may be, in cases where we have a minority interest,
in a position to take actions contrary to our policies, strategies or objectives. Any disputes that may arise between us and our joint
venture partners may result in litigation or arbitration that could increase our expenses and could prevent our officers and/or directors
from focusing their time and effort exclusively on our business strategies. In addition, we may, in certain circumstances, be liable
for the actions of our third-party joint venture partners.
Acquisitions
including strategic investments or alliances entail numerous risks, which may include:
● diversion of management’s attention from our existing businesses;
Our
failure to successfully complete the integration of any acquired business, and any adverse consequences associated with our acquisition
activities, could have a material adverse effect on our business, financial condition and operating results.
The
loss of any of our key customers, could negatively affect our revenues and decrease our earnings.
We
had one customer that accounted for greater than 10% of our net sales during each of the 2025 and 2024 fiscal years, and such customer
was the same in both periods. We generally do not enter long-term contracts with most of our customers. Accordingly, some of our customers
can stop purchasing our products at any time without penalty and are free to purchase products from our competitors. The loss of, or
reduction in sales to any of our customers to which we sell a significant amount of our products or any material adverse change in the
financial condition of such customers would negatively affect our revenues and decrease our earnings.
If
we lose our key personnel, including Andrew Gordon and David Gordon, our revenues and profitability could suffer.
Our
success depends to a large degree upon the services of Andrew Gordon, our President, Chief Executive Officer, Chief Financial Officer
and Treasurer, and David Gordon, our Executive Vice President – Operations and Secretary. We also depend to a large degree on the
expertise of our coffee roasters. We do not have employment contracts with our coffee roasters. Our ability to source and purchase a
sufficient supply of high quality coffee beans and to roast coffee beans consistent with our quality standards could suffer if we lose
the services of any of these individuals. As a result, our business and operating results would be adversely affected. We may not be
successful in obtaining and retaining a replacement for either Andrew Gordon or David Gordon if they elect to stop working for us. In
addition, we do not have key-person insurance on the lives of Andrew Gordon or David Gordon.
Our
indebtedness may adversely affect our ability to obtain additional funds and may increase our vulnerability to economic or business downturns.
From
time to time, we utilize borrowings under our credit facility in connection with operations. All amounts under this line of credit will
become due on June 28, 2026. There is no assurance that it will be renewed. Outstanding debt could have significant negative consequences
to the holders of our securities, including the following:
● we may be subject to covenants that could restrict our operations.
Our
ability to make payments on our indebtedness and to fund our operations depends on our ability to generate cash in the future. Our future
operating performance is subject to market conditions and business factors that are beyond our control. If we are unable to make payments
on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our
debt.
There
can be no assurance that we will be able to extend our line of credit or complete any financing transaction in a timely manner or on
acceptable terms or otherwise. If we are not successful to extend our line of credit or to raise additional cash, we may be forced to
suspend or curtail planned programs or cease operations altogether.
If
we fail to promote, enhance and maintain our brands, the value of our brands could decrease and our revenues and profitability could
be adversely affected.
We
believe that promoting and enhancing our brands is critical to our success. If our brand-building strategy is unsuccessful, these expenses
may never be recovered, and we may be unable to increase awareness of our brands or protect the value of our brands. If we are unable
to achieve these goals, our revenues and ability to implement our business strategy could be adversely affected.
Our
success in promoting and enhancing our brands will also depend on our ability to provide customers with high quality products and service.
Although we take measures to ensure that we sell only fresh roasted coffee, we have no control over our roasted coffee products once
they are purchased by our customers. Accordingly, wholesale customers may store our coffee for longer periods of time or resell our coffee
without our consent, in each case, potentially affecting the quality of the coffee prepared from our products. Although we believe we
are less susceptible to quality control problems than many of our competitors because our products are processed in-house under strict
quality control guidelines which have been in place for more than 40 years, if consumers do not perceive our products and service to
be of high quality, then the value of our brands may be diminished and, consequently, our operating results and ability to implement
our business strategy may be adversely affected.
Our
roasting methods are not proprietary, so competitors may be able to duplicate them, which could harm our competitive position. If our
competitive position is weakened, our revenues and profitability could be materially adversely affected.
We
consider our roasting methods essential to the flavor and richness of our roasted coffee and, therefore, essential to our brands of coffee.
Because we do not hold any patents for our roasting methods, it may be difficult for us to prevent competitors from copying our roasting
methods if such methods become known. If our competitors copy our roasting methods, the value of our coffee brands may be diminished,
and we may lose customers to our competitors. In addition, competitors may be able to develop roasting methods that are more advanced
than our roasting methods, which may also harm our competitive position.
The
success of our brand also depends in part on our intellectual property. We rely on a combination of trademarks, copyrights, service marks,
trade secrets and similar rights to protect our intellectual property. The success of our growth strategy depends on our continued ability
to use our existing trademarks and service marks in order to increase brand awareness and further develop our brand in both domestic
and international markets. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates
or infringes on our intellectual property, the value of our brand may be harmed, which could have a material adverse effect on our business.
We may become engaged in litigation to protect our intellectual property, which could result in substantial costs to us as well as diversion
of management attention.
Since
we rely heavily on common carriers to ship our coffee on a daily basis, any disruption in their services or increase in shipping costs
could adversely affect our relationship with our customers, which could result in reduced revenues, increased operating expenses, a loss
of customers or reduced profitability.
We
rely on a number of common carriers to deliver coffee to our customers and to deliver coffee beans to us. We have no control over these
common carriers and the services provided by them may be interrupted as a result of labor shortages, contract disputes and other factors.
If we experience an interruption in these services, we may be unable to ship our coffee in a timely manner, which could reduce our revenues
and adversely affect our relationship with our customers. In addition, a delay in shipping could require us to contract with alternative,
and possibly more expensive, common carriers and could cause orders to be cancelled or receipt of goods to be refused. Any significant
increase in shipping costs could lower our profit margins or force us to raise prices, which could cause our revenue and profits to suffer.
If
there was a significant interruption in the operation of our Colorado or New York facilities, we may not have the capacity to service
all of our customers and we may not be able to service our customers in a timely manner, thereby reducing our revenues and earnings.
We
are dependent on the continued operations of our Colorado and New York coffee roasting and distribution facilities. Our operations depend
on our ability to maintain our computer and telecommunications equipment in effective working order and to protect against damage from
fire, natural disaster, power loss, telecommunications failure or similar events. In addition, growth of our customer base may strain
or exceed the capacity of our systems and lead to degradations in performance or systems failure. Although we continually review and
consider upgrades to our order fulfillment infrastructure and provide for system redundancies to limit the likelihood of systems overload
or failure, substantial damage to our systems or a systems failure that causes interruptions for a number of days could adversely affect
our business. Additionally, if we are unsuccessful in updating and expanding our order fulfillment infrastructure, our ability to grow
may be constrained. As a result, our revenues and earnings could be materially adversely affected.
There
may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may
materially harm our company.
We
are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by our management on, among other things, the effectiveness
of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements
will not be prevented or detected on a timely basis.
Effective
internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate
disclosure controls and procedures, are designed to reasonably detect and prevent fraud. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. Undetected material
weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the
expense of remediation.
Moreover,
we do not expect that disclosure controls or internal control over financial reporting will prevent all error and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control
systems to detect or prevent error or fraud could materially adversely impact us.
The
failure of our suppliers or customers to adhere to the quality standards that we set for our products could lead to investigations, litigation,
write-offs, recalls or boycotts of our products, which could damage our reputation and our brand, increase our costs, and otherwise adversely
affect our business. Unfavorable allegations, government investigations and legal actions surrounding our products and/or our business
could harm our reputation, impair our ability to grow or sustain our business, and adversely affect our business, financial condition
and operating results.
We
do not control the operations of our suppliers or customers, and we cannot guarantee that our suppliers or customers will comply with
applicable laws and regulations or operate in a legal, ethical and responsible manner. Additionally, it is possible that we may not be
able to identify noncompliance by our suppliers or customers notwithstanding any precautionary measures we implement. Violation of applicable