December 5, 2022

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Coffee Holding Co., Inc. Reports 14% Increase in Net Sales, But Records Small Net Loss Due to Losses at Steep N Brew Subsidiary

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Coffee Holding Co., Inc.

Coffee Holding Co., Inc.

STATEN ISLAND, New York, June 14, 2022 (GLOBE NEWSWIRE) — Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company”) today announced its operating results for the fiscal quarter ended April 30, 2022:

Net Sales. Net sales totaled $16,498,169 for the three months ended April 30, 2022, an increase of $2,029,611, or 14.0%, from $14,468,558 for the three months ended April 30, 2021. The increase in net sales was due to an increase of sales to the Company’s legacy customers partially offset by a decrease in sales from the Company’s Generations/Steep N Brew subsidiary.

Cost of Sales. Cost of sales for the three months ended April 30, 2022 was $14,505,415, or 87.9% of net sales, as compared to $10,699,090, or 74% of net sales, for the three months April 30, 2021. The increase in cost of sales was due to the Company’s increased sales to the Company’s legacy customers, increased prices of green coffee and packaging materials and the Company’s continued losses from the Company’s Generations/Steep N Brew subsidiary, which included obsolete inventory write-off of approximately $718,000.

Gross Profit. Gross profit for the three months ended April 30, 2022 amounted to $1,992,754 or 12.1% of net sales, as compared to $3,769,468 or 26.1% of net sales, for the three months ended April 30, 2021. The decrease in gross profits on a percentage basis was attributable to the factors listed above.

Operating Expenses. Total operating expenses increased by $50,899 to $3,366,223 for the three months ended April 30, 2022 from $3,315,324 for the three months ended April 30, 2021. Selling and administrative expenses increased by $53,399 and officers’ salaries decreased by $2,500.

Net (Loss) Income. The Company had a net loss of $368,096 or $(0.06) per share basic and diluted, for the three months ended April 30, 2022 compared to net income of $357,044, or $0.06 per share basic and diluted for the three months ended April 30, 2021. The decrease in net income was due primarily to the continued losses from the Company’s Generations/Steep N Brew subsidiary.

“Although we increased sales by approximately $2.0 million or 14.0% compared to last year and business remained strong in both the Coffee Holding legacy and Optco divisions, we recorded a loss of $0.06 per share for this fiscal period, primarily as a result of an operating loss at our Generations/Steep N Brew division. After several periods of losses at Generations/Steep N Brew, stemming from increasing costs, impacts of the COVID pandemic and poor performance, we are now looking to restructure the operational activities at Generations/Steep N Brew. Unfortunately, we incurred write offs relating to accounts receivables, inventory and packaging materials at this division, resulting in an operating loss of approximately $508,000 (net of tax) or $0.09 per share,” said Andrew Gordon, President and CEO of Coffee Holding Company.

“Moving forward, I believe we have a clear direction on how to grow both our sales and profits as we had in the past by focusing on sales of unroasted green coffee beans to small and medium size roasters, sales of private label products to large wholesalers and retailers and a continued push on our own legacy brands. I believe this has been and will continue to be a winning formula in our efforts to grow both our sales and profits. We have increased our sales now for seven consecutive months compared to the prior year despite low meaningful sales from our Generations/Steep N Brew subsidiary, including a 14% increase this quarter and I anticipate that trend will continue in spite of the inflationary headwinds that many of our green coffee customers now face. We appreciate our shareholders’ loyalty and patience and we look forward to a clearer path forward in the immediate future,” concluded Mr. Gordon.

About Coffee Holding

Coffee Holding Co., Inc. is a leading integrated wholesale coffee roaster and dealer in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. Coffee Holding has been a family-operated business for three generations and has remained profitable through varying cycles in the coffee industry and the economy. The Company’s private label and branded coffee products are sold throughout the United States, Canada and abroad to supermarkets, wholesalers, and individually owned and multi-unit retail customers.

Forward looking statements

Any statements that are not historical facts contained in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the Company’s outlook on its revenue growth and operations. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. The Company has based these forward-looking statements upon information available to management as of the date of this release and management’s expectations and projections about certain future events. It is possible that the assumptions made by management for purposes of such statements may not materialize. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, hedging activities, the effect of economic conditions, the effect of any pandemics including the one caused by Covid-19, intellectual property rights, the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions and other factors discussed from time to time in the Company’s Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

Company Contact

Coffee Holding Co., Inc.

Andrew Gordon

President & CEO

718-832-0800

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

April 30, 2022

 

 

October 31, 2021

 

 

 

(Unaudited)

 

 

 

 

– ASSETS –

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash

 

$

3,025,137

 

 

$

3,696,275

 

Accounts receivable, net of allowances of $144,000 for 2022 and 2021

 

 

7,335,947

 

 

 

9,299,978

 

Inventories

 

 

15,972,528

 

 

 

15,961,866

 

Prepaid expenses and other current assets

 

 

430,938

 

 

 

542,224

 

Due from broker

 

 

261,250

 

 

 

725,000

 

Prepaid and refundable income taxes

 

 

375,417

 

 

 

75,952

 

TOTAL CURRENT ASSETS

 

 

27,401,217

 

 

 

30,301,295

 

 

 

 

 

 

 

 

 

 

Building machinery and equipment, net

 

 

3,277,216

 

 

 

2,662,628

 

Customer list and relationships, net of accumulated amortization of $255,444 and $237,131 for 2022 and 2021, respectively

 

 

429,556

 

 

 

447,869

 

Trademarks and tradenames

 

 

408,000

 

 

 

408,000

 

Non-compete, net of accumulated amortization of $74,250 and $69,300 for 2022 and 2021, respectively

 

 

24,750

 

 

 

29,700

 

Goodwill

 

 

2,488,785

 

 

 

2,488,785

 

Equity method investments

 

 

366,444

 

 

 

402,245

 

Investment – other

 

 

2,500,000

 

 

 

2,500,000

 

Deferred income tax asset – net

 

 

114,961

 

 

 

77,394

 

Right of Use Asset

 

 

3,365,837

 

 

 

3,545,786

 

Deposits and other assets

 

 

508,522

 

 

 

449,225

 

TOTAL ASSETS

 

$

40,885,288

 

 

$

43,312,927

 

 

 

 

 

 

 

 

 

 

– LIABILITIES AND STOCKHOLDERS’ EQUITY –

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

2,623,805

 

 

$

5,047,640

 

Line of credit – current portion

 

 

5,900,000

 

 

 

3,800,850

 

Lease liability – current portion

 

 

191,374

 

 

 

340,400

 

Note payable – current portion

 

 

4,200

 

 

 

4,200

 

Due to broker

 

 

132,125

 

 

 

708,321

 

Income taxes payable

 

 

6,214

 

 

 

416,449

 

TOTAL CURRENT LIABILITIES

 

 

8,857,718

 

 

 

10,317,860

 

 

 

 

 

 

 

 

 

 

Lease liabilities

 

 

3,295,876

 

 

 

3,299,784

 

Note payable – long term

 

 

10,461

 

 

 

13,092

 

Deferred compensation payable

 

 

302,412

 

 

 

311,872

 

TOTAL LIABILITIES

 

 

12,466,467

 

 

 

13,942,608

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Coffee Holding Co., Inc. 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, 6,633,930 shares issued as of April 30, 2022 and October 31, 2021; 5,708,599 shares outstanding as of April 30, 2022 and October 31, 2021

 

 

6,634

 

 

 

6,634

 

Additional paid-in capital

 

 

19,052,806

 

 

 

18,688,797

 

Retained earnings

 

 

13,984,989

 

 

 

14,471,222

 

Less: Treasury stock, 925,331 common shares, at cost as of April 30, 2022 and October 31, 2021

 

 

(4,633,560

)

 

 

(4,633,560

)

Total Coffee Holding Co., Inc. Stockholders’ Equity

 

 

28,410,869

 

 

 

28,533,093

 

Non-controlling interest

 

 

7,952

 

 

 

837,226

 

TOTAL EQUITY

 

 

28,418,821

 

 

 

29,370,319

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

40,885,288

 

 

$

43,312,927

 

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED APRIL 30, 2022 AND 2021
(Unaudited)

 

 

Six Months Ended
April 30,

 

 

Three Months Ended
April 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

NET SALES

 

$

33,203,029

 

 

$

32,602,395

 

 

$

16,498,169

 

 

$

14,468,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

 

26,938,669

 

 

 

24,353,356

 

 

 

14,505,415

 

 

 

10,699,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

6,264,360

 

 

 

8,249,039

 

 

 

1,992,754

 

 

 

3,769,468

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative

 

 

6,784,824

 

 

 

6,321,651

 

 

 

3,215,085

 

 

 

3,161,686

 

Officers’ salaries

 

 

302,275

 

 

 

306,863

 

 

 

151,138

 

 

 

153,638

 

TOTAL

 

 

7,087,099

 

 

 

6,628,514

 

 

 

3,366,223

 

 

 

3,315,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) INCOME FROM OPERATIONS

 

 

(822,739

)

 

 

1,620,525

 

 

 

(1,373,469

)

 

 

454,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE) INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

4,094

 

 

 

929

 

 

 

2,556

 

 

 

519

 

Loss from equity method investment

 

 

(35,801

)

 

 

(3,915

)

 

 

(4,075

)

 

 

(1,317

)

Interest expense

 

 

(90,293

)

 

 

(43,507

)

 

 

(49,683

)

 

 

(16,839

)

TOTAL

 

 

(122,000

)

 

 

(46,493

)

 

 

(51,202

)

 

 

(17,637

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY

 

 

(944,739

)

 

 

1,574,032

 

 

 

(1,424,671

)

 

 

436,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Benefit) provision for income taxes

 

 

(248,275

)

 

 

510,329

 

 

 

(385,681

)

 

 

129,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY

 

 

(696,464

)

 

 

1,063,703

 

 

 

(1,038,990

)

 

 

307,421

 

Less: Net loss (income) attributable to the non-controlling interest

 

 

609,231

 

 

 

(29,348

)

 

 

670,894

 

 

 

49,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC.

 

$

(87,233

)

 

$

1,034,355

 

 

$

(368,096

)

 

$

357,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per share

 

$

(.02

)

 

$

.18

 

 

$

(.06

)

 

$

.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

5,708,599

 

 

 

5,708,599

 

 

 

5,708,599

 

 

 

5,708,599

 

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2022 AND 2021
(Unaudited)

 

 

2022

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(696,464

)

 

$

1,063,703

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

280,594

 

 

 

337,353

 

Stock-based compensation

 

 

364,009

 

 

 

379,537

 

Unrealized gain on commodities

 

 

(112,446

)

 

 

(559,408

)

Loss on equity method investments

 

 

35,801

 

 

 

3,915

 

Write-off of accounts receivable

 

 

415,096

 

 

 

 

Write-down of obsolete inventory

 

 

718,353

 

 

 

 

Amortization of right of use asset

 

 

179,949

 

 

 

226,155

 

Deferred income taxes

 

 

(37,567

)

 

 

154,550

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,548,935

 

 

 

709,476

 

Inventories

 

 

(949,058

)

 

 

1,935,996

 

Prepaid expenses and other current assets

 

 

111,286

 

 

 

(173,177

)

Prepaid and refundable income taxes

 

 

(299,465

)

 

 

91,684

 

Accounts payable and accrued expenses

 

 

(2,423,835

)

 

 

970,875

 

Deposits and other assets

 

 

(68,757

)

 

 

(100,000

)

Change in lease liability

 

 

(152,934

)

 

 

(248,980

)

Income taxes payable

 

 

(410,235

)

 

 

255,611

 

Net cash (used in) provided by operating activities

 

 

(1,496,738

)

 

 

5,047,290

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of machinery and equipment

 

 

(871,919

)

 

 

(597,444

)

Net cash used in investing activities

 

 

(871,919

)

 

 

(597,444

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Advances under bank line of credit

 

 

2,500,000

 

 

 

15,563

 

Principal payments on note payable

 

 

(2,631

)

 

 

(2,507

)

Payment of dividend

 

 

(399,000

)

 

 

 

Principal payments under bank line of credit

 

 

(400,850

)

 

 

(3,809,885

)

Net cash provided by (used in) financing activities

 

 

1,697,519

 

 

 

(3,796,829

)

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH

 

 

(671,138

)

 

 

653,017

 

 

 

 

 

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

 

3,696,275

 

 

 

2,875,120

 

 

 

 

 

 

 

 

 

 

CASH, END OF PERIOD

 

$

3,025,137

 

 

$

3,528,137

 

 

 

2022

 

 

2021

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:

 

 

 

 

 

 

 

 

Interest paid

 

$

84,967

 

 

$

54,943

 

Income taxes paid

 

$

498,992

 

 

$

8,485

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of inventory by non-controlling interest

 

$

220,043

 

 

 

 

 

Initial recognition of operating lease right of use asset

 

 

 

 

$

65,999

 

Initial recognition of operating lease liabilities

 

 

 

 

$

65,999

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

To supplement Coffee Holding’s consolidated financial statements presented in accordance with U.S. GAAP, Coffee Holding uses a non-GAAP measure, Adjusted Earnings Before Interest, Income Taxes (benefits), Depreciation and Amortization (Adjusted EBITDA). This non-GAAP measure is provided to enhance overall understanding of Coffee Holding’s current financial performance. Reconciliation of the nearest GAAP measure to Adjusted EBITDA follows:

Net income (GAAP measure)

 

$

(368,096

)

Addback:
Interest expense

 

 

49,683

 

Income tax provision

 

 

(385,681

)

Depreciation and amortization

 

 

124,835

 

Stock compensation

 

 

174,241

 

Total adjusted EBITDA

 

$

(405,018

)

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