COFFEE HOLDING CO INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Management, which includes our President, Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective. We believe the financial information presented herein is materially correct and fairly presents the financial position and operating results of the fiscal year ended October 31, 2021 in accordance with U.S. GAAP. Management Report on Internal Control Over Financial Reporting . Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities and Exchange Act of 1934 as a process designed by, or under the supervision of, our executive management and effected by our board of directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparations of financial statements for external purposes in accordance with U.S. GAAP. Based on this assessment, our management has determined that our internal control over financial reporting was not effective as of October 31, 2021 and the periods covered under this Annual Report on Form 10-K due to the material weaknesses described below. A material weakness is a control deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. During the year ended October 31, 2021, we identified inappropriate system access controls over the financial reporting system. These controls were not designed to prevent or detect unauthorized changes to source information, or implement an appropriate level of segregation of duties which ultimately led us to conclude that this was a material weakness. Further, during the year ended October 31, 2021, we determined that we lacked adequate controls with respect to identifying and accounting for material contracts. This was evidenced by our failure to properly identify and account for a material lease amendment. Accordingly, management has determined that this is a control deficiency that constitutes a material weakness. Notwithstanding these material weaknesses, management has concluded that our audited financial statements included in the fiscal year 2021 form 10-K are fairly stated in all material respects in accordance with GAAP for each of the periods. Remediation Plan for the Material Weakness To remediate the material weakness identified above, we are initiating controls and procedures in order to: ● educating control owners concerning the principles and requirements of each control, with a focus on those related to user access to our financial reporting systems impacting financial reporting; ● developing and maintaining documentation to promote knowledge transfer upon personnel and function changes; ● developing enhanced controls and reviews related to our financial reporting systems; and ● performing an in-depth analysis of who should have access to perform key functions within our financial reporting system that impact financial reporting and redesigning aspects of the system to better allow the access rights to be implemented. The material weaknesses identified above will not be considered remediated until our remediation efforts have been fully implemented and we have concluded that these controls are operating effectively. Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are 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 a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected. Changes in Control Over Financial Reporting. Except as described above, based on the evaluation of our management we believe that there were no changes in our internal control over financial reporting that occurred during the quarter ended October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Registered Public Accounting Firm . This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Protection Act that permits us to provide only management’s report in this annual report. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 28 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION Information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders. 29 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) List of Documents filed as part of this Report (1) Financial Statements The financial statements and related notes, together with the report of EisnerAmper LLP appear at pages F-1 through F-24 following the Exhibit List as required by Part II, Item 8 “Financial Statements and Supplementary Data” of this Form 10-K. (2) Financial Statement Schedules None. (3) List of Exhibits (a) Exhibits The Company has filed with this report or incorporated by reference herein certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act. 30 Exhibit No. Description 2.1 Agreement and Plan of Merger, dated October 31, 1997, 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 Company’s Registration Statement on Form SB-2 filed on November 10, 1997 (File No. 333-00588-NY)). 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 Company’s Current Report on Form 8-K filed on February 20, 2004 (File No. 333-00588-NY)). 3.1 Amended and Restated Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A the “2005 Registration Statement” filed on May 2, 2005 (File No. 001-32491)). 3.2 Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed February 25, 2019). 4.1 Form of Stock Certificate of the Company (incorporated herein by reference to the Company’s Registration Statement on Form SB-2 filed on June 24, 2004 (Registration No. 333-116838)). 4.2 Description of Capital Stock.* 10.1 Loan and Security Agreement, dated February 17, 2009, by and between Sterling National Bank and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K filed on February 23, 2009 (File No. 001-32491)). 10.2 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 Company’s Registration Statement on Form SB-2/A filed on August 12, 2004 (Registration No. 333-116838)). 10.3 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 Company’s Quarterly Report on Form 10-QSB/A for the quarter ended April 30, 2004 filed on August 26, 2004 (File No. 333-00588-NY)) as amended by that First Amendment to Trademark License Agreement, dated January 4, 2013. 10.4 First Amendment to Trademark License Agreement, dated January 4, 2013, by and between Del Monte Corporation and Coffee Holding Co., Inc. Certain portions of Exhibit 10.4 are omitted based upon approval of the Company’s request for confidential treatment through January 28, 2023. The omitted portions were filed separately with the SEC on a confidential basis (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended October 31, 2012 filed on January 28, 2013 (File No. 001-32491)). 10.5 Amended and Restated Employment Agreement, dated April 11, 2008, by and between Coffee Holding Co., Inc. and Andrew Gordon (incorporated herein by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K filed on April 16, 2008 (File No. 001-32491)). 10.6 Amended and Restated Employment Agreement, dated April 11, 2008, by and between Coffee Holding Co., Inc. and David Gordon (incorporated herein by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed on April 16, 2008 (File No. 001-32491)). 10.7 Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-QSB filed on June 14, 2005 (File No. 001-32491)). 10.8 Contract of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and 4401 1st Ave LLC (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed on January 28, 2010 (File No. 001-32491)). 31 10.9 First Amendment to Loan and Security Agreement between Coffee Holding Co., Inc. and Sterling National Bank, dated July 23, 2010 (incorporated herein by reference to Exhibit 103 to the Company’s Annual Report on Form 10-K filed on January 31, 2011 (File No. 001-32491)). 10.10 Placement Agency Agreement, dated as of September 27, 2011, by and among the Company, the selling stockholders named therein, Roth Capital Partners, LLC and Maxim Group, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)). 10.11 Subscription Agreement, dated as of September 27, 2011, by and between the Company, the selling stockholders named therein and each of the purchasers identified on the signature pages thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 27, 2011 (File No. 001-32491)). 10.12 2013 Equity Compensation Plan (incorporated by reference to Annex A of the Company’s Definitive Proxy Statement filed on February 28, 2013 (File No. 13653320)). 10.13 Loan Modification Agreement, dated as of May 10, 2013, by and between Sterling National Bank and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on January 24, 2014 (File No. 001-32491)). 10.14 Loan Modification Agreement, dated March 10, 2015, by and between Sterling National Bank and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 31, 2015). 10.15 Loan Agreement, dated March 10, 2015, by and between Sterling National Bank and Organic Products Trading Company LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 31, 2015). 10.16 Security Agreement, dated March 10, 2015, by and between Sterling National Bank and Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 31, 2015). 10.17 Guarantee, dated March 10, 2015, by Coffee Holding Co., Inc. (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 31, 2015). 10.18 Amended and Restated Loan and Security Agreement, dated April 25, 2017, by and among Coffee Holding Co., Inc., Organic Products Trading Company LLC and Sterling National Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 28, 2017). 10.19 Guaranty Agreement, dated April 25, 2017, made by each of Sonofresco and Comfort Foods in favor of Sterling National Bank (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 28, 2017). 10.20 Lease, dated December 6, 2000, by and between Comfort Foods, Inc. and One Clark Street North Andover LLC. (incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed January 29, 2018). 10.21 Second Amendment to Lease, dated March 23, 2017, by and between Coffee Holding Co., Inc. and 25 COMM NAM, LLC (incorporated herein by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed January 29, 2018). 10.22 Loan Modification Agreement and Waiver, dated March 23, 2018, by and by and among Coffee Holding Co., Inc., Organic Products Trading Company LLC and Sterling National Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 27, 2018). 10.23 Form of Incentive Stock Option Agreement to the Company’s 2013 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed June 29, 2019). 32 10.24 Form of Non-Qualified Stock Option Award Agreement to the Company’s 2013 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed June 29, 2019). 10.25 Loan Modification Agreement and Waiver, dated March 13, 2020, by and among Coffee Holding Co., Inc., Organic Products Trading Company LLC and Sterling National Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on March 16, 2020). 10.6 Lease, dated September 22, 2021, by and between Coffee Holding Co., Inc. and Our Two Buddies, LLC, TANJ Properties, LLC and VGM Realty Services, LLC.* 21.1 List of Significant Subsidiaries.* 23.1 Consent of EisnerAmper LLP* 23.2 Consent of Marcum LLP* 31.1 Principal Executive Officer and Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Principal Executive Officer and Principal Financial Officer’s Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. * Filed herewith **Furnished herewith ITEM 16. FORM 10-K SUMMARY None. 33 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on January 31, 2022. COFFEE HOLDING CO., INC. By: /s/ Andrew Gordon Andrew Gordon President, Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/Andrew Gordon President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director January 31, 2022 Andrew Gordon (principal executive officer and principal financial and accounting officer) /s/ David Gordon Executive Vice President – Operations, Secretary and Director January 31, 2022 David Gordon /s/ Gerard DeCapua Director January 31, 2022 Gerard DeCapua /s/ Daniel Dwyer Director January 31, 2022 Daniel Dwyer /s/ Barry Knepper Director January 31, 2022 Barry Knepper /s/ John Rotelli Director January 31, 2022 John Rotelli /s/ George Thomas Director January 31, 2022 George Thomas 34 COFFEE HOLDING CO., INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE FINANCIAL STATEMENTS: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS F-2 CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 2021 AND 2020 F-5 CONSOLIDATED STATEMENTS OF OPERATIONS - YEARS ENDED OCTOBER 31, 2021 AND 2020 F-6 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - YEARS ENDED OCTOBER 31, 2021 AND 2020 F-7 CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED OCTOBER 31, 2021 AND 2020 F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-10 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Coffee Holdings Co., Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Coffee Holding Co., Inc. (the “Company”) as of October 31, 2021, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of October 31, 2021, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F- 2 Impairment of goodwill and indefinite lived intangible assets The Company had goodwill and indefinite lived intangible assets with a book value of $2,488,785 and $408,000, respectively, at October 31, 2021. As discussed in Note 2 to the consolidated financial statements the Company performs its annual impairment test on October 31 of each year by first performing a qualitative assessment to determine if it is more than likely than not that the carrying amounts exceed the fair values. Depending on the outcome of the qualitative assessment, the Company may perform a quantitative assessment to determine if the carrying amounts exceed the fair values on the assessment date. The quantitative annual assessment of indefinite lived intangible assets was performed at the asset level by the Company as of October 31, 2021, and the quantitative annual assessment of goodwill was performed at the reporting unit level, for which the Company has determined it operates as one single reporting unit, as of October 31, 2021. The significant estimates and assumptions in these assessments include the royalty rate, projected future cashflows, and the discount rate. As a result of the indefinite lived intangible asset assessment, Management determined the fair values of the indefinite lived intangible assets did not exceed the respective carrying values and recorded an impairment charge of $1,080,000. As a result of the goodwill assessment, Management determined the fair value of the reporting unit exceeded the carrying value and no impairment charge was recorded. We identified the Company’s impairment evaluation over goodwill and indefinite lived intangible assets as a critical audit matter due to the significant measurement uncertainty in evaluating the significant estimates and assumptions utilized in the impairment assessments. As such, there is a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures to evaluate management’s significant estimates and assumptions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, (i) obtaining an understanding of management’s process and evaluating the design of controls related to the goodwill and indefinite lived intangible asset impairment assessments; (ii) testing management’s process for developing the fair value estimates; (iii) evaluating the appropriateness of the valuation models used in management’s estimate; (iv) testing the completeness, accuracy, and relevance of underlying data used in the models; and (v) evaluating the reasonableness of the assumptions used by management. Evaluating management’s assumptions related to the revenue growth rates, estimated costs, the discount rate, and the royalty rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Company, (ii) the consistency with external market and industry data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit, and (iv) performing a sensitivity analyses over significant estimates and assumptions. We involved valuation professionals with specialized skills and knowledge when performing audit procedures to evaluate the reasonableness of Management’s estimates and assumptions related to the selection of revenue growth rates, discount rates and royalty rates. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2021. EISNERAMPER LLP Iselin, New Jersey January 31, 2022 F- 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Coffee Holding Co., Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Coffee Holding Co., Inc. and Subsidiaries (the “Company”) as of October 31, 2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of the guidance in ASC Topic 842, Leases using the modified retrospective approach. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Marcum llp Marcum llp We have served as the Company’s auditor from 2013 to 2021 . New York, NY February 16, 2021 F- 4 COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 31, 2021 AND 2020 2021 2020 - ASSETS - CURRENT ASSETS: Cash and cash equivalents $ 3,696,275 $ 2,875,120 Accounts receivable, net of allowances of $ 144,000 for 2021 and 2020 9,299,978 7,408,905 Inventories 15,961,866 17,102,993 Due from broker 725,000 657,325 Prepaid expenses and other current assets 542,224 490,246 Prepaid and refundable income taxes 75,952 145,305 TOTAL CURRENT ASSETS 30,301,295 28,679,894 Building machinery and equipment, net 2,662,628 2,197,319 Customer list and relationships, net of accumulated amortization of $ 237,131 and $ 194,379 for 2021 and 2020, respectively 447,869 490,621 Trademarks and tradenames 408,000 1,488,000 Non-compete, net of accumulated amortization of $ 69,300 and $ 49,500 for 2021 and 2020, respectively 29,700 49,500 Goodwill 2,488,785 2,488,785 Equity method investments 402,245 561,405 Investment - other 2,500,000 - Right of use asset 3,545,786 2,114,228 Deferred income tax assets - net 77,394 - Deposits and other assets 449,225 285,548 TOTAL ASSETS $ 43,312,927 $ 38,355,300 - LIABILITIES AND STOCKHOLDERS’ EQUITY - CURRENT LIABILITIES: Accounts payable and accrued expenses $ 5,047,640 $ 3,036,097 Line of credit – current portion 3,800,850 - Due to broker 708,321 1,109,650 Note payable – current portion 4,200 5,075 Lease liability – current portion 340,400 484,163 Income taxes payable 416,449 5,371 TOTAL CURRENT LIABILITIES 10,317,860 4,640,356 Deferred income tax liabilities - net - 100,407 Line of credit net of current portion - 3,796,822 Lease liabilities 3,299,784 1,780,306 Note payable – long term 13,092 17,292 Deferred compensation payable 311,872 276,548 TOTAL LIABILITIES 13,942,608 10,611,731 Commitments and Contingencies (Note 8) - - 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 for 2021 and 2020; 5,708,599 shares outstanding for 2021 and 2020 6,634 6,634 Additional paid-in capital 18,688,797 17,929,724 Retained earnings 14,471,222 13,215,868 Less: Treasury stock, 925,331 common shares, at cost for 2021 and 2020 ( 4,633,560 ) ( 4,633,560 ) Total Coffee Holding Co., Inc. stockholders’ equity 28,533,093 26,518,666 Non-controlling interest 837,226 1,224,903 TOTAL EQUITY 29,370,319 27,743,569 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 43,312,927 $ 38,355,300 See Notes to Consolidated Financial Statements F- 5 COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED OCTOBER 31, 2021 AND 2020 2021 2020 NET SALES $ 63,922,402 $ 74,335,815 COST OF SALES (which includes purchases of approximately $ 3.5 million and $ 5.3 million in fiscal years 2021 and 2020, respectively, from a related party) 47,901,126 61,256,926 GROSS PROFIT 16,021,276 13,078,889 OPERATING EXPENSES: Selling and administrative 13,963,328 13,223,207 Officers’ salaries 612,793 681,000 TOTAL 14,576,121 13,904,207 INCOME (LOSS) FROM OPERATIONS 1,445,155 ( 825,318 ) OTHER INCOME (EXPENSE): Interest income 7,658 3,354 Loss from equity method investment ( 159,160 ) ( 5,016 ) Gain on forgiveness of PPP loan - 634,400 Interest expense ( 85,796 ) ( 185,177 ) TOTAL ( 237,298 ) 447,561 INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY 1,207,857 ( 377,757 ) Provision for (benefit from) for income taxes 340,180 ( 41,713 ) NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY 867,677 ( 336,044 ) Plus: Net loss attributable to the non-controlling interest in subsidiary 387,677 241,743 NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $ 1,255,354 $ ( 94,301 ) Basic and diluted earnings (loss) per share $ 0.22 $ ( .02 ) Weighted average common shares outstanding: Basic and diluted 5,708,599 5,575,453 See Notes to Consolidated Financial Statements F- 6 COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY YEARS ENDED OCTOBER 31, 2021 AND 2020 Shares Amount Shares Amount Capital Earnings Interest Total Common Stock Treasury Stock Additional Paid-in Retained Non- Controlling Shares Amount Shares Amount Capital Earnings Interest Total Balance, November 1, 2019 5,569,349 $ 6,494 925,331 $ ( 4,633,560 ) $ 16,580,974 $ 13,310,169 $ 1,466,646 $ 26,730,723 Stock Compensation 868,477 868,477 - Stock issuance equity investment 139,250 140 480,273 480,413 Non-Controlling interest - ( 241,743 ) ( 241,743 ) Net loss ( 94,301 ) ( 94,301 ) Balance, October 31, 2020 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 17,929,724 $ 13,215,868 $ 1,224,903 $ 27,743,569 Stock Compensation 759,073 759,073 Non-Controlling Interest - ( 387,677 ) ( 387,677 ) Net income - - 1,255,354 1,255,354 Balance, October 31, 2021 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 18,688,797 $ 14,471,222 $ 837,226 $ 29,370,319 See Notes to Consolidated Financial Statements F- 7 COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 2021 AND 2020 2021 2020 OPERATING ACTIVITIES: Net income (loss) $ 867,677 $ ( 336,044 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 662,909 741,503 Impairment of trademarks and tradenames 1,080,000 - Stock-based compensation 759,073 868,477 Unrealized (gain) loss on commodities - net ( 469,004 ) 553,356 Loss on equity method investments 159,160 5,016 Loss on disposal of machinery and equipment 321,651 - Amortization of right of use asset 350,871 397,794 Deferred income taxes ( 177,801 ) ( 291,352 ) Changes in operating assets and liabilities: Accounts receivable ( 1,891,073 ) 2,012,522 Inventories 1,141,127 1,738,232 Prepaid expenses and other current assets ( 51,978 ) 97,380 Prepaid and refundable income taxes 69,353 240,629 Deposits and other assets ( 128,353 ) 101,905 Accounts payable and accrued expenses 2,011,543 ( 1,307,917 ) Change in lease liability ( 406,714 ) ( 441,015 ) Income taxes payable 411,078 5,271 Net cash provided by operating activities 4,709,519 4,385,757 INVESTING ACTIVITIES: Purchases of other investment ( 2,500,000 ) - Distribution of funds from deferred compensation plan - ( 101,905 ) Proceeds from sale of machinery and equipment 113,166 - Purchases of building, machinery and equipment ( 1,500,483 ) ( 435,930 ) Net cash used in investing activities ( 3,887,317 ) ( 537,835 ) FINANCING ACTIVITIES: Advances under bank line of credit 6,016,413 1,141,132 Principal payment on note payable ( 5,075 ) ( 4,440 ) Principal payments under bank line of credit ( 6,012,385 ) ( 4,512,050 ) Net cash used in financing activities ( 1,047 ) ( 3,375,358 ) NET INCREASE IN CASH 821,155 472,564 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,875,120 2,402,556 CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,696,275 $ 2,875,120 See Notes to Consolidated Financial Statements F- 8 COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 2021 AND 2020 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: Interest paid $ 85,357 $ 196,823 Income taxes paid $ 35,120 $ 3,739 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: On October 15, 2020 Coffee Holding Company acquired an equity method investment through a contribution of shares in Jordre Well, LLC - 480,413 Initial recognition of operating lease right of use asset $ 2,091,316 $ 2,512,022 Initial recognition of operating lease liabilities $ 2,091,316 $ 2,705,484 Termination of operating lease right of use asset $ 242,888 - Termination of operating lease liability $ 242,888 - Machinery and equipment acquired through financing $ - $ 26,807 See Notes to Consolidated Financial Statements F- 9 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 1 - BUSINESS ACTIVITIES : Coffee Holding Co., Inc. (the “Company”) conducts wholesale coffee operations, including manufacturing, roasting, packaging, marketing and distributing roasted and blended coffees for private labeled accounts and its own brands, and it sells green coffee. The Company’s core product, coffee, can be summarized and divided into three product categories (“product lines”) as follows: 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 the Company’s own specifications and packaged and sold under the Company’s eight proprietary and licensed brand names in different segments of the market. The Company’s private label and branded coffee sales are primarily to customers that are located throughout the United States with limited sales in Canada and certain countries in Asia. Such customers include supermarkets, wholesalers, and individually-owned and multi-unit retailers. The Company’s unprocessed green coffee, which includes over 90 specialty coffee offerings, is sold primarily to specialty gourmet roasters and to coffee shop operators in the United States with limited sales in Australia, Canada, England and China. The Company’s wholesale green, private label, and branded coffee product categories generate revenues and cost of sales individually but incur selling, general and administrative expenses in the aggregate. There are no individual product managers and discrete financial information is not available for any of the product lines. The Company’s product portfolio is used in one business and it operates and competes in one business activity and economic environment. In addition, the three product lines share customers, manufacturing resources, sales channels, and marketing support. Thus, the Company considers the three product lines to be one single reporting segment. COVID-19 The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020 and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, mandated closures and stay-at-home orders, and created significant disruption of the financial markets. The continuing impact on the Company’s business including the decrease in our sales, the length and impact of stay-at-home orders and/or regional quarantines, labor shortages and employment trends, disruptions to supply chains, including its ability to obtain products from global suppliers, higher operating costs, the form and impact of economic stimulus and general overall economic instability, has contributed to and may continue to have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. At this time the full impact could not be fully determined. LIQUIDITY The Company has historically financed its operations with the use of a line of credit facility further discussed in Note 6. This credit facility currently expires in March 2022. The Company expects to renew the line of credit facility or, if necessary, seek alternative financing on similar terms. There can be no assurance that the Company will be able to renew the line of credit facility in a timely manner and/or that any such renewal will contain commercially acceptable terms. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : BASIS OF PRESENTATION : The consolidated financial statements include the accounts of the Company, Organic Products Trading Company, LLC (“OPTCO”), Sonofresco LLC (“SONO”), Comfort Foods, Inc. (“CFI”) and Generations Coffee Company, LLC (“GCC”). All inter-company balances and transactions have been eliminated in consolidation. USE OF ESTIMATES : The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates include, depreciable lives for long-lived assets, and valuation of goodwill and indefinitely lived intangible assets. These estimates may be adjusted as more current information becomes available, and any adjustment could have a significant impact on recorded amounts. CASH AND CASH EQUIVALENTS : Cash and cash equivalents consists primarily of unrestricted cash on deposit and securities with an original maturity of 3 months or less at financial institutions and brokerage firms. F- 10 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): ACCOUNTS RECEIVABLE : Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Past due balances over 60 days and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The reserve for sales discounts represents the estimated discount that customers will take upon payment. The reserve for other allowances represents the estimated amount of returns, slotting fees and volume based discounts estimated to be incurred by the Company from its customers. The allowances are summarized as follows: SCHEDULE OF ACCOUNTS RECEIVABLE 2021 2020 Allowance for doubtful accounts $ 65,000 $ 65,000 Reserve for other allowances 35,000 35,000 Reserve for sales discounts 44,000 44,000 Totals $ 144,000 $ 144,000 INVENTORIES : Inventories are stated at the lower of cost (first in, first out basis) or net realizable value, including provisions for obsolescence commensurate with known or estimated exposures. There are no reserves for obsolescence as of October 31, 2021 and 2020. BUILDING, MACHINERY AND EQUIPMENT : Building, machinery and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Purchases of buildings, machinery and equipment and additions and betterments which substantially extend the useful life of an asset are capitalized at cost. Expenditures which do not materially prolong the normal useful life of an asset are charged to operations as incurred. The Company also provides for amortization of leasehold improvements which are depreciated over the shorter of the useful life of the improvement or the lease term. F- 11 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): COMMODITIES HELD BY BROKER : The commodities held at broker represent the market value of the Company’s trading account, which consists of option and future contracts for coffee held with a brokerage firm. The Company uses options and futures contracts, which are not designated or qualifying as hedging instruments, to partially hedge the effects of fluctuations in the price of green coffee beans. Options and futures contracts are level 1 investments recognized at fair value in the consolidated financial statements with current recognition of gains and losses on such positions. The Company’s accounting for options and futures contracts may impact earnings volatility in any particular period. We record all open contract positions on our consolidated balance sheets at fair value in the due from and due to broker line items and typically do not offset these assets and liabilities. The Company classifies its options and future contracts as trading securities and accordingly, unrealized holding gains and losses are included in the statement of operations as a component of cost of sales and not reflected as a net amount as a separate component of stockholders’ equity. The Company recorded realized and unrealized gains and losses on these contracts as follows: SCHEDULE OF REALIZED AND UNREALIZED GAINS AND LOSSES ON CONTRACTS 2021 2020 Year Ended October 31, 2021 2020 Gross realized gains $ 1,392,949 $ 1,678,995 Gross realized (losses) ( 63,516 ) ( 1,451,761 ) Unrealized gains (losses) 469,004 ( 553,356 ) Total $ 1,798,437 $ ( 326,122 ) The notional amount of open future and option contracts was approximately $ 1,712,000 as of October 31, 2021. CUSTOMER LIST AND RELATIONSHIPS : Customer list and relationships consist of a specific customer lists and customer contracts obtained by the Company in the acquisition of OPTCO, Comfort Foods, Sonofresco and Steep & Brew which are being amortized on the straight-line method over their estimated useful life of twenty years. Amortization expense for the years ended October 31, 2021 and 2020 was $ 62,552 , respectively. F- 12 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): GOODWILL AND TRADEMARKS : The Company has determined that its goodwill and trademarks, which consist of product lines, trade names and packaging designs have an indefinite useful life. Goodwill and trademarks are not amortized but are tested for impairment at least annually or upon the occurrence of an event or when circumstances indicate that the carrying amount of goodwill and trademarks is greater than its fair value. For purposes of evaluating goodwill for impairment, the Company has determined it operates as one single reporting unit based on the Company’s internal reporting structure, the level at which discrete financial information is available and for which operating results are reviewed. The Company performs its annual impairment test on October 31 of each year by first performing a qualitative assessment to determine if it is more likely than not that the carrying amounts exceed the fair values. Depending on the outcome of our qualitative assessment, we may perform a quantitative assessment to determine if the carrying amounts exceed the fair values on the assessment date. The most significant assumptions used in these impairment tests were the royalty rates, the projections used to determine the future cashflows, and the discount rate applied to those future cashflows. For the years ending October 31, 2021 and 2020, no impairment charges were recorded to the carrying value of goodwill and the reporting unit has a fair value in excess of its carrying value by approximately 4 % as of October 31, 2021. For the year ended October 31, 2021, we recorded impairment on two of our trademarks as the carrying amount of these trademarks exceeded the respective fair values on the test date which were determined using a relief from royalty method. These impairments were due to a change in the estimated future revenues relating to these trademarks. The impairment expense totaled $ 1,080,000 for the year ended October 31, 2021 and is reflected as a component of selling and administrative expenses in the accompanying consolidated statement of income. SCHEDULE OF CONSOLIDATED STATEMENT OF INCOME Trademarks and tradenames Total Balance at November 1, 2019 $ 1,488,000 Impairment - Balance at October 31, 2020 $ 1,488,000 Impairment ( 1,080,000 ) Balance at October 31, 2021 $ 408,000 IMPAIRMENT OF LONG-LIVED ASSETS : The Company assesses the impairment of long-lived assets used in operations, primarily buildings, machinery and equipment as well as purchased intangible assets subject to amortization, when events and circumstances indicate that the carrying value of these assets might not be recoverable. For purposes of evaluating the recoverability of buildings, machinery and equipment and amortizing intangible assets, the undiscounted cash flows estimated to be generated by those assets are compared to the carrying amount of those assets. If and when the carrying values of the assets exceed the undiscounted cashflows, then the related assets will be written down to fair value. During the year ended October 31, 2021 and 2020, no impairment charges were recorded against buildings, machinery, and equipment or amortizing intangible assets. ADVERTISING : The Company expenses the cost of advertising and promotion as incurred. Advertising costs charged to operations totaled $ 67,643 and $ 149,505 for the years ended October 31, 2021 and 2020, respectively. INCOME TAXES : The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or benefit is the tax incurred for the period plus or minus the change during the period in deferred tax assets and liabilities. EARNINGS PER SHARE : Basic earnings per common share were computed by dividing net income by the sum of the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing the net income by the weighted-average number of common shares outstanding plus the dilutive effect of common shares issuable upon exercise of potential sources of dilution. The Company has issued 1,000,000 options that are outstanding which have not been included in the calculation of diluted earnings per share because they are anti-dilutive. The weighted average common shares outstanding used in the computation of basic and diluted earnings per share were 5,708,599 and 5,575,453 for the years ended October 31, 2021 and 2020, respectively. F- 13 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): FAIR VALUE OF FINANCIAL INSTRUMENTS : The carrying amounts of cash, accounts receivable, notes due to/(from) broker , accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The carrying amount of the bank line of credit approximates fair value because the debt is based on current rates at which the Company could borrow funds with similar remaining maturities. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments when available. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The Company measures fair value as required by Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: A) Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. B) Level 2 – inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. C) Level 3 – unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. The hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. REVENUE RECOGNITION : The Company recognizes revenue in accordance with the five-step model as prescribed by the Financial Accounting Standards Board (“FASB”) Accounting Codification (“ASC”) Topic 606 (“ASC 606”) in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. F- 14 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): The following table presents revenues by product line for the years ended October 31, 2021 and 2020. SCHEDULE OF REVENUE 2021 2020 Green $ 26,118,492 $ 23,912,022 Packaged 37,803,910 50,423,793 Totals $ 63,922,402 $ 74,335,815 Revenue for these product lines is recognized upon shipment to the customer. SHIPPING AND HANDLING FEES AND COSTS : Revenue earned from shipping and handling fees is reflected in net sales. Costs associated with shipping product to customers aggregating approximately $ 3,165,000 and $ 2,780,000 for the years ended October 31, 2021 and 2020, respectively, is included in selling and administrative expenses. PAYCHECK PROTECTION PROGRAM : On July 22, 2020, the Company received loan proceeds of $ 634,400 under the Paycheck Protection Program (“PPP”). The PPP, which was established under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times certain average monthly payroll expenses of the qualifying business. The loan and accrued interest, or a portion thereof, may be forgiven after 24 weeks so long as the borrower uses the loan proceeds for eligible purposes including payroll, benefits, rent, mortgage interest and utilities, and maintains its payroll levels, as defined by the PPP. At least 60% of the amount forgiven must be attributable to payroll costs, as defined by the PPP . The PPP loan was set to mature in five years from the date of the first disbursement of proceeds to the Company and accrued interest at a fixed rate of 1 %. Payments were deferred for at least the first six months and payable in 54 equal consecutive monthly installments of principal and interest commencing upon expiration of the deferral period of the PPP loan date. U.S. GAAP does not contain authoritative accounting standards for forgivable loans provided by governmental entities to a for-profit entity. Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allows for the selection of accounting policies amongst acceptable alternatives. Based on facts and circumstances outlined below, the Company determined it most appropriate to account for the PPP loan proceeds as an in-substance government grant by analogy to International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions of IAS 20, “a forgivable loan from the government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”, however, based on certain interpretations, it is analogous to “probable” as defined in Financial Accounting Standards Board (“FASB”) ASC 450-20-20 under U.S. GAAP, which is the definition the Company has applied to its expectations of PPP loan forgiveness. Under IAS 20, government grants are recognized in earnings on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified expenses). Further, IAS 20 permits for the recognition in earnings either separately under a general heading such as other income, or as a reduction of F- 15 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): the related expenses. The Company has elected to recognize government grant income separately within other income to present a more clear distinction in its financial statements between its operating income and the amount of net income resulting from the PPP loan and subsequent expected forgiveness. The Company believes this presentation method promotes greater comparability amongst all period presented. The following table provided the balance and activity related to the PPP Loan as of October 31, 2020: SCHEDULE OF PAYCHECK PROTECTION PROGRAM PPP Loan $ 634,400 Qualified expenses incurred to date 634,400 Unrecognized government grant income $ - The PPP loan was formally forgiven during fiscal year ended October 31, 2021. STOCK- BASED COMPENSATION : Stock-based awards are accounted for as required by ASC Topic 718 “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718 stock-based awards are valued at fair value on the date of grant, and that fair value is recognized over requisite service period. The Company accounts for forfeitures when they occur. CONCENTRATION OF RISK : Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions and brokerage firms. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At October 31, 2021 and 2020, the Company had approximately $ 2,224,000 and $ 816,000 in excess of FDIC insured limits, respectively. The accounts at the brokerage firm contain cash and securities. Balances are insured up to $ 500,000 , with a limit of $ 100,000 for cash, by the Securities Investor Protection Corporation (SIPC). At October 31, 2021 and 2020, the Company had approximately $ 523,000 and $ 1,421,000 in excess of SIPC insured limits, respectively. RECLASSIFICATION : Certain amounts in the prior year financial statements have been reclassified to conform to the current year’s presentation. These reclassification adjustments had no effect on the Company’s previously reported net income. EQUITY METHOD OF ACCOUNTING : Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an Investee depends on an evaluation of several factors including, among others, representation on the Investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the Investee company . Under the equity method of accounting, an Investee company’s accounts are not reflected within the Company’s consolidated Balance Sheets and consolidated Statements of Operations; however, the Company’s share of the earnings or losses of the Investee company is reflected in the caption “Loss from equity method investments” in the consolidated F- 16 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): EQUITY METHOD OF ACCOUNTING (cont’d): Statements of Operations. The Company’s carrying value in an equity method Investee company is reflected in the caption “Equity method investments” in the Company’s consolidated Balance Sheets. The Company’s equity method investments consist of the following: (1) 20 % interest in Healthwise Gourmet Coffees, LLC, a distributor of low acidity coffees. The initial investment in this company amounted to $ 100,000 . The loss recognized amounted to $ 9,213 and $ 5,016 for the years ended October 31, 2021 and 2020, respectively. The net value of this investment as presented on our consolidated balance sheet at October 31, 2021 and 2020 was $ 71,779 and $ 80,992 , respectively. (2) On October 15, 2020 the Company acquired a 49 % interest in Jordre Well LLC, a company that will produce CBD infused products. The investment was made in 139,250 shares of the Company’s common stock. The price of the stock on October 15, 2020 was $ 3.45 for an initial investment of $ 480,413 . An additional 139,250 shares of the Company’s common stock will be transferred if Jordre Well LLC generates $ 500,000 in revenue from the sale of its newly created brands. Through October 31, 2020 there was no operational activity. The loss recognized amounted to $ 149,947 for the year ended October 31, 2021. The net value of this investment as presented on our consolidated balance sheet at October 31, 2021 and 2020 was $ 330,466 and $ 480,413 . INVESTMENTS - OTHER : Investment – other represent investments made by the Company that do not qualify as equity method investments as the Company cannot exercise significant influence over the target. The Company accounts for these investments in accordance with ASC Topic 321 “Investments – Equity Securities” (“ASC 321”). In August 2021, the Company made an investment of $ 2,500,000 in an entity that hold investments in the plant-based protein drink manufacturing industry. The Company has determined they do not have significant influence over the investee. Pursuant to ASC 321, the Company has elected an alternate measurement to account for this investment at cost less any impairment with adjustments to fair value if there are observable price changes. As of October 31, 2021, no such price changes and investments-other was $ 2,500,000 on the accompanying consolidated balance sheet. LEASES : Effective November 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”). The new guidance increases transparency by requiring the recognition of right to use assets and lease liabilities on the statement of financial condition. The recognition of these lease assets and lease liabilities represents a change from previous US GAAP requirement, which did not require lease assets and lease liabilities to be recognized for most operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease, have not significantly changed from previous US GAAP requirements. On November 1, 2019, the effective date of ASC 842, existing leases of the Company were required to be recognized and measured. Additionally any leases entered into during the year were also required to recognized and measured. In applying ASC 842, the Company made an accounting policy election not to recognize the right of use assets and lease liabilities relating to short-term leases. Implementation of ASC 842 included an analysis of contracts, including real estate leases and service contracts to identify embedded leases, to determine the initial recognition of the right to use assets and lease liabilities, which required subjective assessment over the determination of the associated discount rates to apply in determining the lease liabilities. The standard provides a number of transition practical expedients, which the Company has elected, including: F- 17 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d): LEASES (cont’d): ● A “package of three” expedients that must be taken together and allow entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases, and ● An implementation expedient which allows the requirements of the standard in the period of adoption with no restatement of prior periods. The adoption of ASC 842 resulted in the recording of operating lease right of use assets of $ 2,512,022 and operating lease liabilities of $ 2,705,484 at November 1, 2019. The Company implemented ASC 842 using the modified retrospective approach. In addition, at November 1, 2019, there was no impact to stockholder’s equity upon adoption. The Company determines if an arrangement is or contains a lease at inception. The Company’s operating lease arrangement are comprised of real estate and facility leases. Right of use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As the Company’s leases do not provide an implicit rate and the implicit rate is not readily determinable, the Company estimates its incremental borrowing rate based on the information available at the measurement date in determining the present value of the lease payments. The present value of the lease payments was determined using a 4.75 % incremental borrowing rate for in place leases as of October 31, 2020 and 5.00 % for new leases and lease amendments that occurred during fiscal year 2021. Right of use assets also exclude lease incentives. The Company presents the amortization of its right to use assets and payments of related lease liabilities originating in connection with operating leases as an adjustment to reconcile net income or loss to net cash generated or used in operating activities and an operating cash outflow, respectively within the operating section of the statement of cash flows. NOTE 3 - INVENTORIES : Inventories at October 31, 2021 and 2020 consisted of the following: SCHEDULE OF INVENTORIES 2021 2020 Packed coffee $ 2,705,356 $ 3,590,709 Green coffee 10,890,091 11,390,668 Roaster parts 422,858 381,617 Packaging supplies 1,943,561 1,739,999 Totals $ 15,961,866 $ 17,102,993 NOTE 4 – BUILDING, MACHINERY AND EQUIPMENT : Building machinery and equipment at October 31, 2021 and 2020 consisted of the following: SCHEDULE OF MACHINERY AND EQUIPMENT Estimated Useful Life 2021 2020 Improvements 15 - 30 years $ 233,766 $ 233,766 Building 31 years 900,321 - Machinery and equipment 7 years 8,441,382 8,492,395 Furniture and fixtures 7 years 1,082,022 1,082,022 10,657,491 9,808,183 Less, accumulated depreciation 7,994,863 7,610,864 $ 2,662,628 $ 2,197,319 F- 18 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 4 – BUILDING, MACHINERY AND EQUIPMENT (cont’d): Depreciation expense totaled $ 600,357 and $ 678,951 for the years ended October 31, 2021 and 2020, respectively. In October 2021 the Company sold $ 651,175 of machinery and equipment with a carrying value of $ 434,817 at disposal for $ 113,166 of proceeds and recognized a loss on disposal of $ 321,651 recorded as a component of operating expenses for the year ended October 31, 2021. NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES : Accounts payable and accrued expenses at October 31, 2021 and 2020 consisted of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES 2021 2020 Accounts payable $ 4,144,700 $ 2,672,777 Purchase accruals 875,201 336,480 Other accruals 27,739 26,840 Totals $ 5,047,640 $ 3,036,097 NOTE 6 - LINE OF CREDIT : On April 25, 2017 the Company and OPTCO (together with the Company, collectively referred to herein as the “Borrowers”) entered into an Amended and Restated Loan and Security Agreement (the “A&R Loan Agreement”) and Amended and Restated Loan Facility (the “A&R Loan Facility”) with Sterling National Bank (“Sterling”), which consolidated (i) the financing agreement between the Company and Sterling, dated February 17, 2009, as modified, (the “Company Financing Agreement”) and (ii) the financing agreement between Company, as guarantor, OPTCO and Sterling, dated March 10, 2015 (the “OPTCO Financing Agreement”), amongst other things. On March 13, 2020, the Company reached an agreement for a new loan modification agreement and credit facility with Sterling. The terms of the new agreement, among other things: (i) provides for a new maturity date of March 31, 2022 and (ii) decreases the interest rate per annum to LIBOR plus 1.75 % (with such interest rate not to be lower than 3.50 %). All other terms of the A&R Loan Agreement and A&R Loan Facility remain substantially the same. Each of the A&R Loan Facility and A&R Loan Agreement contains covenants, subject to certain exceptions, that place annual restrictions on the Borrowers’ operations, including covenants relating to debt restrictions, capital expenditures, indebtedness, minimum deposit restrictions, tangible net worth, net profit, leverage, employee loan restrictions, dividend and repurchase restrictions (common stock and preferred stock), and restrictions on intercompany transactions. The Company was in compliance with all covenants as of October 31, 2021 and October 31, 2020. The outstanding balance on the Company’s lines of credit were $ 3,800,850 and $ 3,796,822 as of October 31, 2021 and October 31, 2020, respectively. Interest expense recorded for the years ended October 31, 2021 and 2020 were $ 85,359 and $ 184,045 , respectively. F- 19 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 7 - INCOME TAXES : The Company’s provision/(benefit) for income taxes in 2021 and 2020 consisted of the following: SCHEDULE OF PROVISION FOR INCOME TAX 2021 2020 Current Federal $ 427,210 $ 187,140 State and local 90,771 62,499 Total 517,981 249,639 Deferred Federal ( 50,451 ) ( 229,355 ) State and local ( 127,350 ) ( 61,997 ) Total ( 177,801 ) ( 291,352 ) Income tax expense/(benefit) $ 340,180 $ ( 41,713 ) A reconciliation of the difference between the expected income tax rate using the statutory U.S. federal tax rate and the Company’s effective tax rate is as follows: SCHEDULE OF EFFECTIVE INCOME TAX RATE 2021 2020 Provision for (Benefit) from tax at the federal statutory rate $ 253,650 $ ( 79,329 ) Other permanent differences 19,736 52,537 State and local tax, net of federal 66,794 ( 14,921 ) Provision for (benefit from) income taxes $ 340,180 $ ( 41,713 ) Effective income tax rate 28 % 11 % F- 20 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 7 - INCOME TAXES (cont’d): The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2021 and 2020 are as follows: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 Deferred tax assets: Accounts receivable $ 34,203 $ 36,468 Unrealized loss - 140,136 Deferred rent 20,652 36,810 Deferred compensation 74,075 70,035 Net operating loss 57,576 70,275 Stock-based compensation 499,841 340,715 Inventory 77,579 87,736 Total deferred tax asset $ 763,926 $ 782,175 Deferred tax liabilities: Intangible assets acquired 346,892 484,932 Unrealized gain 111,068 Buildings, machinery and equipment 228,572 $ 397,650 Total deferred tax liabilities $ 686,532 $ 882,582 Net deferred tax assets (liabilities) $ 77,394 $ ( 100,407 ) A valuation allowance was not provided at October 31, 2021 or 2020. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are expected to be deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. As of October 31, 2021 and 2020, the Company did no t have any unrecognized tax benefits or open tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of October 31, 2021 and 2020, the Company had no accrued interest or penalties related to income taxes. The Company currently has no federal or state tax examinations in progress. The Company files a U.S. federal income tax return and California, Colorado, Connecticut, Idaho, Kansas, Michigan, New Jersey, New York, New York City, Virginia, Texas, Rhode Island, South Carolina, and Oregon state tax returns. The Company’s federal income tax return is no longer subject to examination by the federal taxing authority for years before fiscal 2018. The Company’s California, Colorado and New Jersey and Texas income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2018. The Company’s Oregon, New York, Kansas, South Carolina, Rhode Island, Connecticut and Michigan income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2018. As of October 31, 2021, and 2020, the Company had cumulative net operating loss carryforwards of approximately $ 274,173 and $ 334,642 respectively, which begin to expire in 2038. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards is subject to an annual limitation of $ 60,469 . These net operating loss carryforwards may be further limited in the event of a change in ownership. F- 21 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 8 - COMMITMENTS AND CONTINGENCIES : CLASS ACTION COMPLAINT The Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Illinois on or about December 21, 2020. The plaintiffs, Eileen Brodsky and Rhonda Diamond, purporting to represent a class of individuals who purchased coffee products at Aldi, Inc. (“Aldi”), a supermarket chain, generally allege that Aldi sold private label coffee products manufactured by us and by Pan American Coffee Co., LLC (“Pan American”), which falsely described the number of cups of coffee that could be made from the amount of product purchased. Aldi and Pan American are also named as defendants in the action. The complaint asserts a variety of claims under New York and California consumer protection laws, and seeks unspecified monetary damages, including disgorgement and restitution, as well as other forms of relief including class certification, declaratory and injunctive relief, attorneys’ fees, and interest. The Company believes the allegations in the complaint are wholly without merit and that the claims asserted are legally deficient, and the Company intends to vigorously defend the action. As of the filing of this Form 10-K, the Company has not been served with the complaint. Therefore, the Company is unable to predict the ultimate outcome of this lawsuit as the suit was dismissed and we are awaiting a ruling on the plantiff’s appeal. A significant customer of the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the District of Massachusetts on or about February 2, 2021, concerning the labeling on private label coffee productions we sold to the customer. The plaintiff, David Cohen, purporting to represent a class of individuals who purchased coffee products from our customer, generally allege that the customer sold private label coffee products manufactured by the Company which falsely described the number of cups of coffee that could be made from the amount of product purchased. The Company is not named as a defendant in the action, but has agreed to indemnify the customer for the costs and expenses incurred in defending the lawsuit and for any liability the customer may suffer as a result. The complaint asserts a variety of claims under Massachusetts consumer protection laws, and seeks unspecified monetary damages as well as other forms of relief including class certification, declaratory and injunctive relief, attorneys’ fees, and interest. The Company believes the allegations in the complaint are wholly without merit and that the claims asserted are legally deficient, and intends to vigorously support the customer in defending the action. As of the filing of this Form 10-K, the Company is unable to predict the ultimate outcome of this lawsuit. The Company has a 401(k) Retirement Plan, which covers all the full time employees who have completed one year of service and have reached their 21 st birthday. The Company matches 100% of the aggregate salary reduction contribution up to the first 3% of compensation and 50% of aggregate contribution of the next 2% of compensation . Contributions to the plan aggregated $ 72,558 and $ 81,384 for the years ended October 31, 2021 and 2020, respectively. F- 22 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 9 - LEASES : The following summarizes the Company’s operating leases: SCHEDULE OF OPERATING LEASE LIABILITY 2021 2020 Right-of-use operating lease assets $ 3,545,786 $ 2,114,228   Current lease liability 340,400 484,163 Non-current lease liability 3,299,784 1,780,306 Total lease liability $ 3,640,184 $ 2,264,469 The amortization of the right-of-use asset for the years ended October 31, 2021 and 2020 was $ 350,871 and $ 397,794 , respectively. Weighted average remaining lease term 11.4 Weighted average discount rate 4.9 % Maturities of lease liabilities by year for our operating leases are as follows: SCHEDULE OF MATURITY LEASE LIABILITY 2022 $ 514,053 2023 494,899 2024 356,304 2025 354,528 2026 360,104 Thereafter 2,701,089 Total lease payments $ 4,780,977 Less: imputed interest ( 1,140,793 ) Present value of operating lease liabilities $ 3,640,184 The aggregate cash payments under these leasing agreements was $ 442,118 for the year ended October 31, 2021. In June 2021, the Company purchased a facility in Colorado for $ 900,321 that it was previously leasing. On the date of purchase, the Company wrote off the carrying value of the right-of-use asset and lease liability associated with this facility of $ 242,888 . In September 2021, the Company extended its headquarters lease in Staten Island, New York through September 2036. As a result, on the date of the modification the Company increased its right-of-use asset and lease liability by $ 2,025,316 . F- 23 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 10 - RELATED PARTY TRANSACTIONS : The Company has engaged its 40 % partner in Generation Coffee Company, LLC as an outside contractor (the “Partner”). Included in contract labor expense, which is a component of cost of sales, are expenses incurred from the Partner during the years ended October 31, 2021 and 2020 of $ 349,760 and $ 380,838 , respectively. An employee of one of the top two vendors is a director of the Company. Purchases from that vendor totaled approximately $ 3,500,000 and $ 5,300,000 for the years ended October 31, 2021 and 2020, respectively. The corresponding accounts payable balance to this vendor was approximately $ 1,014,000 and $ 0 at October 31, 2021 and 2020, respectively. In January 2005, the Company established the “Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan.” Currently, there is only one participant in the plan: Andrew Gordon, the CEO. The deferred compensation payable represents the liability due to this employee of the Company upon his retirement. The deferred compensation liability at October 31, 2021 and 2020 was $ 311,872 and $ 276,548 , respectively. Deferred compensation expenses included in officers’ salaries were $ 0 during the years ended October 31, 2021 and 2020, respectively as no amounts were contributed to this plan during the years ended October 31, 2021 and 2020. F- 24 COFFEE HOLDING CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 AND 2020 NOTE 11 - STOCKHOLDERS’ EQUITY : a. Treasury Stock . The Company utilizes the cost method of accounting for treasury stock. The cost of reissued shares is determined under the last-in, first-out method. The Company did not purchase any shares during the years ended October 31, 2021 and 2020. b. Stock Options . The Company has an incentive stock plan, the 2013 Equity Compensation Plan (the “2013 Plan”), and on April 19, 2019, has granted 1,000,000 stock options to employees, officers and non-employee directors from the 2013 Plan each with an exercise price of $ 5.43 . Options granted under the 2013 Plan may be Incentive Stock Options or Nonqualified Stock Options, as determined by the Administrator at the time of grant. No options were granted, forfeited or expired during the years ended October 31, 2021 and 2020. As of October 31, 2021, 666,383 options are exercisable. The Company recorded $ 759,073 and $ 868,477 of stock-based compensation during the years ended October 31, 2021 and 2020, respectively. The weighted average remaining contractual life of the outstanding options as of October 31, 2021 is 0.5 years. The unrecognized stock compensation expense as of October 31, 2021 was approximately $ 405,821 . c. Common Stock . Our common stock is traded on the Nasdaq Capital Market. As of October 31, 2021 we had 30,000,000 shares of our $ 0.001 par value common stock authorized, with 6,633,930 and 5,708,599 shares issued and outstanding, respectively. d. Preferred Stock. We are authorized to issue up to 10,000,000 shares of preferred stock, par value $ 0.001 per share, with such designations, rights, and preferences as may be determined from time to time by our board of directors. As of October 31, 2021, no shares of our preferred stock were outstanding. NOTE 12 – SUBSEQUENT EVENTS : In January 2022, the Board of Directors approved a special dividend $ 0.073 per share of our outstanding common stock. The dividend is payable on February 21, 2022 to stockholders of record at the close of business on February 10, 2022. F- 25