COFFEE HOLDING CO INC 10-Q

ITEM 1 – FINANCIAL STATEMENTS. COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS APRIL 30, 2023 AND OCTOBER 31, 2022 April 30, 2023 October 31, 2022 (Unaudited) - ASSETS - CURRENT ASSETS: Cash and cash equivalents $ 1,468,012 $ 2,515,873 Accounts receivable, net of allowances of $ 144,000 for 2023 and 2022 6,604,418 7,816,473 Inventories 15,823,297 19,252,214 Due from broker 773,196 818,892 Prepaid expenses and other current assets 282,006 432,126 Prepaid and refundable income taxes 866,155 866,155 TOTAL CURRENT ASSETS 25,817,084 31,701,733 Building, machinery and equipment, net 3,540,586 3,199,790 Customer list and relationships, net of accumulated amortization of $ 295,133 and $ 279,883 for 2023 and 2022, respectively 200,000 215,250 Trademarks and tradenames 327,000 327,000 Equity method investments 345,141 354,444 Investment - other 2,500,000 2,500,000 Right of use asset 2,858,346 2,871,773 Deferred income tax assets - net 1,388,437 1,073,187 Deposits and other assets 350,500 449,348 TOTAL ASSETS $ 37,327,094 $ 42,692,525 - LIABILITIES AND STOCKHOLDERS’ EQUITY - CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,084,620 $ 3,814,864 Cash overdrafts - 876,148 Due to broker 541,391 1,523,563 Note payable – current portion 4,200 4,200 Lease liability – current portion 137,222 220,734 TOTAL CURRENT LIABILITIES 2,767,433 6,439,509 Line of credit 7,520,000 8,314,000 Lease liabilities 3,230,204 3,136,006 Note payable – long term 6,343 9,105 Deferred compensation payable 144,390 243,238 TOTAL LIABILITIES 13,668,370 18,141,858 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 for 2023 and 2022; 5,708,599 shares outstanding for 2023 and 2022 6,634 6,634 Additional paid-in capital 19,094,618 19,094,618 Retained earnings 9,435,494 10,327,437 Less: Treasury stock, 925,331 common shares, at cost for 2023 and 2022 ( 4,633,560 ) ( 4,633,560 ) Total Coffee Holding Co., Inc. Stockholders’ Equity 23,903,186 24,795,129 Noncontrolling interest ( 244,462 ) ( 244,462 ) TOTAL EQUITY 23,658,724 24,550,667 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 37,327,094 $ 42,692,525 See Notes to Condensed Consolidated Financial Statements 3 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX AND THREE MONTHS ENDED APRIL 30, 2023 AND 2022 (Unaudited) 2023 2022 2023 2022 Six Months Ended April 30, Three Months Ended April 30, 2023 2022 2023 2022 NET SALES $ 33,646,818 $ 33,203,029 $ 15,320,703 $ 16,498,169 COST OF SALES 28,494,333 26,938,669 12,488,522 14,505,415 GROSS PROFIT 5,152,485 6,264,360 2,832,181 1,992,754 OPERATING EXPENSES: Selling and administrative 6,013,188 6,784,824 3,071,747 3,215,085 Officers’ salaries 324,775 302,275 144,888 151,138 TOTAL 6,337,963 7,087,099 3,216,635 3,366,223 LOSS FROM OPERATIONS ( 1,185,478 ) ( 822,739 ) ( 384,454 ) ( 1,373,469 ) OTHER (EXPENSE) INCOME Interest income 3,113 4,094 6 2,556 Loss from equity method investment ( 9,303 ) ( 35,801 ) ( 4,286 ) ( 4,075 ) Other income 234,041 - - - Interest expense ( 249,566 ) ( 90,293 ) ( 119,106 ) ( 49,683 ) TOTAL ( 21,715 ) ( 122,000 ) ( 123,386 ) ( 51,202 ) LOSS BEFORE BENEFIT FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY ( 1,207,193 ) ( 944,739 ) ( 507,840 ) ( 1,424,671 ) Benefit for income taxes ( 315,250 ) ( 248,275 ) ( 148,000 ) ( 385,681 ) NET (LOSS) INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY ( 891,943 ) ( 696,464 ) ( 359,840 ) ( 1,038,990 ) Less: Net loss attributable to the non-controlling interest - 609,231 - 670,894 NET LOSS ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $ ( 891,943 ) $ ( 87,233 ) $ ( 359,840 ) $ ( 368,096 ) Basic and diluted (loss) earnings per share $ ( .16 ) $ ( .02 ) $ ( .06 ) $ ( .06 ) Weighted average common shares outstanding: Basic and diluted 5,708,599 5,708,599 5,708,599 5,708,599 See Notes to Condensed Consolidated Financial Statements 4 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY THREE AND SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (Unaudited) 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, October 31, 2021 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 18,688,797 $ 14,471,222 $ 837,226 $ 29,370,319 Net income - - - - - 280,863 - 280,863 Stock Compensation 189,768 189,768 Dividend to common shareholders ( 399,000 ) ( 399,000 ) Non-controlling Interest 61,663 61,663 Balance, January 31, 2022 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 18,878,565 $ 14,353,085 $ 898,889 $ 29,503,613 Stock Compensation 174,241 174,241 Distribution to non-controlling interest ( 220,043 ) ( 220,043 ) Non-controlling Interest ( 670,894 ) ( 670,894 ) Net loss - - - - - ( 368,096 ) - ( 368,096 ) Balance, April 30, 2022 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,052,806 $ 13,984,989 $ 7,952 $ 28,418,821 Ending balance,value 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,052,806 $ 13,984,989 $ 7,952 $ 28,418,821 Balance, October 31, 2022 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 10,327,437 $ ( 244,462 ) $ 24,550,667 Net loss - - - - - ( 532,103 ) - ( 532,103 ) Balance, January 31, 2023 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,795,334 $ ( 244,462 ) $ 24,018,564 Beginning balance, value 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,795,334 $ ( 244,462 ) $ 24,018,564 Net loss - - - - - ( 359,840 ) - ( 359,840 ) Net income (loss) - - - - - ( 359,840 ) - ( 359,840 ) Balance, April 30, 2023 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,435,494 $ ( 244,462 ) $ 23,658,724 Ending, balance value 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,435,494 $ ( 244,462 ) $ 23,658,724 See Notes to Condensed Consolidated Financial Statements 5 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (Unaudited) 2023 2022 OPERATING ACTIVITIES: Net (loss) $ ( 891,943 ) $ ( 696,464 ) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 283,585 280,594 Stock-based compensation - 364,009 Unrealized loss (gain) on commodities ( 936,476 ) ( 112,446 ) Loss on equity method investments 9,303 35,801 Write-off of accounts receivable 415,096 Write-down of obsolete inventory 718,353 Amortization of right to use asset 159,843 179,949 Deferred income taxes ( 315,250 ) ( 37,567 ) Changes in operating assets and liabilities: Accounts receivable 1,212,055 1,548,935 Inventories 3,428,917 ( 949,058 ) Prepaid expenses and other current assets 150,120 111,286 Prepaid and refundable income taxes - ( 299,465 ) Lease liability ( 135,730 ) ( 152,934 ) Deposits and other assets - ( 68,757 ) Accounts payable and accrued expenses ( 1,730,244 ) ( 2,423,835 ) Income taxes payable - ( 410,235 ) Net cash provided by (used in) operating activities 1,234,180 ( 1,496,738 ) INVESTING ACTIVITIES: Purchases of machinery and equipment ( 609,131 ) ( 871,919 ) Net cash used in investing activities ( 609,131 ) ( 871,919 ) FINANCING ACTIVITIES: Advances under bank line of credit 934,783 2,500,000 Cash overdraft ( 876,148 ) - Principal payments on note payable ( 2,762 ) ( 2,631 ) Payment of dividend ( 399,000 ) Principal payments under bank line of credit ( 1,728,783 ) ( 400,850 ) Net cash (used in) provided by financing activities ( 1,672,910 ) 1,697,519 NET (DECREASE) INCREASE IN CASH ( 1,047,861 ) ( 671,138 ) CASH, BEGINNING OF PERIOD 2,515,873 3,696,275 CASH, END OF PERIOD $ 1,468,012 $ 3,025,137 See Notes to Condensed Consolidated Financial Statements 6 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (Unaudited) 2023 2022 SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: Interest paid $ 243,100 $ 84,967 Income taxes paid $ - $ 498,992 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 $ 146,416 See Notes to Condensed Consolidated Financial Statements 7 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 1 - BUSINESS ACTIVITIES : Coffee Holding Co., Inc. (the “Company”) conducts wholesale coffee operations, including manufacturing, roasting, packaging, marketing and distributing roasted and blended coffees for private labeled accounts and its own brands, and it sells green coffee. The Company also manufactures and sells coffee roasters. The Company’s core product, coffee, can be summarized and divided into three product categories (“product lines”) as follows: Wholesale Green Coffee: 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. On September 29, 2022, the Company entered into a Merger and Share Exchange Agreement (the “Merger Agreement”), by and among the Company, Delta Corp Holdings Limited, a Cayman Islands exempted company (“Pubco”), Delta Corp Holdings Limited, a company incorporated in England and Wales (“Delta”), CHC Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Pubco (“Merger Sub”), and each of the holders of ordinary shares of Delta as named therein (the “Sellers”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving as a direct, wholly-owned subsidiary of Pubco (the “Merger”). As a result of the Merger, each issued and outstanding share of the Company common stock, $ 0.001 par value per share (the “Common Stock”), will be cancelled and converted for the right of the holder thereof to receive one ordinary share, par value $ 0.0001 of Pubco (the “Pubco Ordinary Shares”). 8 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICY : The Company’s fiscal year ends on October 31, of each calendar year. The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as our annual consolidated financial statements for the fiscal year ended October 31, 2022. In the opinion of the Company’s management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The October 31, 2022 year-end condensed consolidated balance sheet data in this document was derived from audited consolidated financial statements. These condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended October 31, 2022 and notes thereto included in the Company’s fiscal 2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 29, 2023 (the “2022 10-K”). The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. The condensed consolidated financial statements include the accounts of the Company, the Company’s subsidiaries, Organic Products Trading Company, LLC (“OPTCO”), Sonofresco, LLC (“SONO”), Comfort Foods, Inc. (“CFI”) and Generations Coffee Company, LLC (“GCC”), the entity formed as a result of the Company’s joint venture with Caruso’s Coffee, Inc. The Company owns a 60 % equity interest in GCC. All significant inter-company transactions and balances have been eliminated in consolidation. Significant Accounting Policies The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in our 2022 10-K, and there have been no changes to the Company’s significant accounting policies during the three and six months ended April 30, 2023. 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. 9 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICY (cont’d): The following table presents revenues by stream for the six and three months ended April 30, 2023 and 2022. SCHEDULE OF REVENUE Six Months Ended April 30, 2023 Three Months Ended April 30, 2023 Six Months Ended April 30, 2022 Three Months Ended April 30, 2022 Green $ 14,432,796 $ 6,773,848 $ 14,148,853 $ 7,197,280 Packaged $ 19,214,022 $ 8,546,855 $ 19,054,176 $ 9,300,889 Totals $ 33,646,818 $ 15,320,703 $ 33,203,029 $ 16,498,169 Revenues $ 33,646,818 $ 15,320,703 $ 33,203,029 $ 16,498,169 NOTE 3 - INVENTORIES : Inventories at April 30, 2023 and October 31, 2022 consisted of the following: SCHEDULE OF INVENTORIES April 30, 2023 October 31, 2022 Packed coffee $ 3,164,089 $ 2,677,617 Green coffee 10,582,615 14,847,708 Roasters and parts 539,175 576,778 Packaging supplies 1,537,418 1,150,111 Totals $ 15,823,297 $ 19,252,214 Inventories $ 15,823,297 $ 19,252,214 10 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 4 - COMMODITIES HELD BY BROKER : The Company has used, and intends to continue to use in a limited capacity, short term coffee futures and options contracts primarily for the purpose of partially hedging and minimizing the effects of changing green coffee prices and to reduce cost of sales. The commodities held by broker represent the market value of the Company’s trading account, which consists of options and futures contracts for coffee held with a brokerage firm. The Company uses options and futures contracts, which are not designated or qualifying as hedging instruments, to partially hedge the effects of fluctuations in the price of green coffee beans. Options and futures contracts are recognized at fair value in the condensed consolidated financial statements with current recognition of gains and losses on such positions. The Company’s accounting for options and futures contracts may increase earnings volatility in any particular period. 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 earnings and not reflected as a net amount as a separate component of stockholders’ equity. The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows: SCHEDULE OF REALIZED AND UNREALIZED GAINS AND LOSSES ON CONTRACTS 2023 2022 Three Months Ended April 30, 2023 2022 Gross realized gains $ 247,983 $ 1,000,908 Gross realized losses ( 626,311 ) ( 878,440 ) Unrealized gain 164,455 179,213 Total $ ( 213,873 ) $ 301,681 Gain (Loss) on Investments $ ( 213,873 ) $ 301,681 2023 2022 Six Months Ended April 30, 2023 2022 Gross realized gains $ 376,908 $ 1,323,048 Gross realized losses ( 1,292,361 ) ( 1,257,359 ) Unrealized gain 936,476 112,446 Total $ 21,023 $ 178,135 Gain (Loss) on Investments $ 21,023 $ 178,135 11 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 5 - 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”) (later acquired by Webster Financial Corp. (“Webster”), 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 17, 2022, the Company reached an agreement for a new loan modification agreement and credit facility which extended the maturity date to June 29, 2022 . The facility was then approved for a two-year extension. All other terms of the A&R Loan Agreement and A&R Loan Facility remained the same. On June 28, 2022, the Company reached an agreement for a new loan modification agreement and credit facility with Webster. The terms of the new agreement, among other things: (i) provided for a new maturity date of June 30, 2024 , and (ii) changed the interest rate per annum to SOFR 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 remained the same. The Company is subject to certain covenants with respect to its line of credit agreement. The Company was not in compliance with the net profit and non-borrower affiliate covenants as of October 31, 2022. The Company requested a waiver from the lender and the waiver was granted and received on March 15, 2023. The lender also extended the due date of the October 31, 2022 financial statements until April 15, 2023. The loan agreement was also modified on March 15, 2023 to, among other things: (i) provide for a requirement for subordination agreements if necessary, and (ii) change the terms of transactions with affiliates from a dollar limitation to allowable in the ordinary course of business, (iii) establishe a new covenant for a fixed charge coverage ratio. 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 outstanding balance on the Company’s lines of credit were $ 7,520,000 and $ 8,314,000 as of April 30, 2023 and October 31, 2022, respectively. NOTE 6 - INCOME TAXES : The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or benefit is the tax incurred for the period plus or minus the change during the period in deferred tax assets and liabilities. As of April 30, 2023 and October 31, 2022, 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 April 30, 2023 and October 31, 2022, the Company had no accrued interest or penalties related to income taxes. The Company currently has no federal or state tax examinations in progress. 12 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 6 - INCOME TAXES (cont’d): 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 2019. 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 2019. 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 2019. NOTE 7 - EARNINGS (LOSS) PER SHARE : The Company presents “basic” and “diluted” earnings per common share pursuant to the provisions included in the authoritative guidance issued by FASB, “Earnings per Share,” and certain other financial accounting pronouncements. Basic earnings per common share were computed by dividing net (loss) income by the sum of the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing the net (loss) income by the weighted-average number of common shares outstanding plus the dilutive effect of common shares issuable upon exercise of potential sources of dilution. The weighted average common shares outstanding used in the computation of basic and diluted earnings per share were 5,708,599 for the six and three months ended April 30, 2023 and 2022. The Company had granted 1,000,000 options in the second quarter of 2019, which have not been included in the calculation of diluted earnings per share due to their anti-dilutive nature. 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 (the “Court”) on or about December 21, 2020. The plaintiffs, Eileen Brodsky and Rhonda Diamond, purported to represent a class of individuals who purchased coffee products at one of our supermarket customers, generally allege that such client sold private label coffee products manufactured by the Company and one of its partners, which falsely described the number of cups of coffee that could be made from the amount of product purchased. These parties were also named as defendants in the action. The complaint asserted a variety of claims under New York and California consumer protection laws, and sought 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. On September 28, 2021, the Court entered an order granting the Company’s motion to dismiss with prejudice (the “Dismissal Order”). In the Dismissal Order, the Court stated that no reasonable coffee drinker would be deceived by the Company’s packaging. The plaintiffs filed an appeal with the 7 th Circuit Court of Appeals (the “Appeal”). After the Appeal was filed, the Company settled the matter during mediation in late January 2022 and the Appeal was dismissed. 13 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 8 - COMMITMENTS AND CONTINGENCIES (cont’d): 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 the Company sold to the customer. The plaintiff, David Cohen, purported to represent a class of individuals who purchased coffee products from the Company’s customer, generally alleged 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 was not named as a defendant in the action, but the Company agreed to indemnify the customer for the costs and expenses incurred in defending the lawsuit and for any liability the customer suffered as a result. The complaint asserted a variety of claims under Massachusetts consumer protection laws, and sought unspecified monetary damages as well as other forms of relief including class certification, declaratory and injunctive relief, attorneys’ fees, and interest. The parties finalized the details of a settlement agreement and the final settlement amount was immaterial to the Company’s operations and results of operations. 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 . 14 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 9 - LEASES : The following summarizes the Company’s operating leases: SCHEDULE OF OPERATING LEASES 2023 2022 Right-of-use operating lease assets $ 2,858,346 $ 2,871,773   Current lease liability 137,222 220,734 Non-current lease liability 3,230,204 3,136,006 Total lease liability $ 3,367,426 $ 3,356,740 The amortization of the right-of-use asset for the three months ended April 30, 2023 and 2022 was $ 80,180 and $ 77,268 , respectively. The amortization of the right-of-use asset for the six months ended April 30, 2023 and 2022 was $ 159,843 and $ 179,949 , respectively. Weighted average remaining lease term 10.8 Weighted average discount rate 4.9 % Maturities of lease liabilities by year for our operating leases are as follows: SCHEDULE OF MINIMUM FUTURE LEASE PAYMENTS 2023 $ 473,033 2024 519,304 2025 393,668 2026 376,683 2027 367,788 Thereafter 2,333,300 Total lease payments $ 4,463,776 Less: imputed interest ( 1,096,350 ) Present value of operating lease liabilities $ 3,367,426 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 December 2022, the Company extended its lease at its subsidiary Sonofresco in Washington through December 2023. As a result, on the date of the modification the Company increased its right-of-use asset and lease liability by $ 40,797 as of January 31, 2023. In March 2023, the Company extended its lease at its subsidiary Organics Products Trading Company in Washington through March 2026. As a result, on the date of the modification the Company increased its right-of-use asset and lease liability by $ 105,619 as of April 30, 2023. 15 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2023 (UNAUDITED) NOTE 10 - RELATED PARTY TRANSACTIONS : The Company has engaged its 40 % former partner in Generation Coffee Company LLC (“GCC”) as an outside contractor (the “Partner”). Included in contract labor expense are expenses incurred by the Partner during the three and six months ended April 30, 2023 and 2022 of $ 0 and $ 94,037 and $ 56,851 and $ 152,471 , respectively, for the processing of finished goods. In January 2005, the Company established the “Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan.” Currently, there is only one participant in the plan: the Company’s Chief Executive Officer. Within the plan guidelines, this employee is deferring a portion of his current salary and bonus. The assets are held in a separate trust. The deferred compensation payable represents the liability due to the Chief Executive Officer of the Company. The assets were $ 144,390 and $ 243,238 at April 30, 2023 and October 31, 2022, respectively, and are included in the Deposits and other assets in the accompanying balance sheets. The deferred compensation liability at April 30, 2023 and October 31, 2022 were $ 144,390 and $ 243,238 , respectively. 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 three and six months ended April 30, 2023 and the year ended October 31, 2022. 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 three and six months ended April 30, 2023 or for the year ended October 31, 2022. The Company recorded $ 0 stock-based compensation for the three and six months ended April 30, 2023 and $ 174,241 and $ 364,009 for the three and six months ended April 30, 2022. 16