COFFEE HOLDING CO INC 10-Q

ITEM 1 – FINANCIAL STATEMENTS. COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS JANUARY 31, 2024 AND OCTOBER 31, 2023 January 31, 2024 October 31, 2023 (Unaudited) - ASSETS - CURRENT ASSETS: Cash and cash equivalents $ 2,407,863 $ 2,733,977 Accounts receivable, net of allowances of $ 144,000 for 2024 and 2023 8,070,427 7,983,032 Receivable from sale of investment 450,000 3,150,000 Inventories 17,012,265 18,986,539 Due from broker 902,120 345,760 Prepaid expenses and other current assets 493,519 413,752 Prepaid and refundable income taxes 310,906 365,876 TOTAL CURRENT ASSETS 29,647,100 33,978,936 Building, machinery and equipment, net 3,347,607 3,494,450 Customer list and relationships, net of accumulated amortization of $ 318,008 and $ 310,383 for 2024 and 2023, respectively 177,125 184,750 Trademarks and tradenames 327,000 327,000 Equity method investments 33,652 39,676 Right of use asset 2,655,799 2,696,159 Deferred income tax assets - net 1,254,056 1,341,407 Deposits and other assets 136,162 129,523 TOTAL ASSETS $ 37,578,501 $ 42,191,901 - LIABILITIES AND STOCKHOLDERS’ EQUITY - CURRENT LIABILITIES: Accounts payable and accrued expenses $ 4,446,339 $ 5,206,442 Line of credit 4,700,000 9,620,000 Due to broker 1,031,605 292,407 Note payable – current portion 4,200 4,200 Lease liability – current portion 563,474 255,625 TOTAL CURRENT LIABILITIES 10,745,618 15,378,674 Lease liabilities 2,637,535 2,974,579 Note payable – long term 2,071 3,034 Deferred compensation payable 127,162 120,523 TOTAL LIABILITIES 13,512,386 18,476,810 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 2024 and 2023; 5,708,599 shares outstanding for 2024 and 2023 6,634 6,634 Additional paid-in capital 19,094,618 19,094,618 Retained earnings 9,842,885 9,491,861 Less: Treasury stock, 925,331 common shares, at cost for 2024 and 2023 ( 4,633,560 ) ( 4,633,560 ) Total Coffee Holding Co., Inc. Stockholders’ Equity 24,310,577 23,959,553 Noncontrolling interest ( 244,462 ) ( 244,462 ) TOTAL EQUITY 24,066,115 23,715,091 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 37,578,501 $ 42,191,901 See Notes to Condensed Consolidated Financial Statements 3 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 2024 AND 2023 (Unaudited) 2024 2023 NET SALES $ 19,540,402 $ 18,326,114 COST OF SALES 16,060,103 16,005,814 GROSS PROFIT 3,480,299 2,320,300 OPERATING EXPENSES: Selling and administrative 2,690,047 2,941,437 Officers’ salaries 173,341 179,888 TOTAL 2,863,388 3,121,325 INCOME (LOSS) FROM OPERATIONS 616,911 ( 801,025 ) OTHER INCOME (EXPENSE): Interest income 7 3,107 Loss from equity method investments ( 6,024 ) ( 5,017 ) Other income - 234,041 Interest expense ( 117,533 ) ( 130,459 ) TOTAL ( 123,550 ) 101,672 INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) AND NON-CONTROLLING INTEREST IN SUBSIDIARY 493,361 ( 699,353 ) Income Tax provision (benefit) 142,337 ( 167,250 ) NET INCOME (LOSS) BEFORE ADJUSTMENT FOR NON-CONTROLLING INTEREST IN SUBSIDIARY 351,024 ( 532,103 ) Less: Net income attributable to the non-controlling interest in subsidiary - - NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $ 351,024 $ ( 532,103 ) Basic and diluted earnings (loss) per share $ 0.06 $ ( 0.09 ) Weighted average common shares outstanding: Basic and diluted 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 MONTHS ENDED JANUARY 31, 2024 AND 2023 (Unaudited) Common Stock Treasury Stock Additional Paid-in Retained Non- Controlling Shares Amount Shares Amount Capital Earnings Interest Total 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 Balance, October 31, 2023 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,491,861 $ ( 244,462 ) $ 23,715,091 Balance 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,491,861 $ ( 244,462 ) $ 23,715,091 Net income - - - - - 351,024 - 351,024 Net income (loss) - - - - - 351,024 - 351,024 Balance, January 3l, 2024 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,842,885 $ ( 244,462 ) $ 24,066,115 Balance 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,842,885 $ ( 244,462 ) $ 24,066,115 See Notes to Condensed Consolidated Financial Statements 5 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JANUARY 31, 2024 AND 2023 (Unaudited) 2024 2023 OPERATING ACTIVITIES: Net income (loss) $ 351,024 $ ( 532,103 ) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 154,468 140,188 Unrealized loss (gain) on commodities 182,838 ( 772,021 ) Loss on equity method investments 6,024 5,017 Amortization of right to use asset 82,322 79,663 Deferred income taxes 87,351 ( 167,250 ) Changes in operating assets and liabilities: Accounts receivable 2,612,605 915,609 Inventories 1,974,274 2,555,433 Prepaid expenses and other current assets ( 79,767 ) 111,636 Prepaid and refundable income taxes 54,970 - Lease liability ( 71,157 ) ( 67,699 ) Deposits and other assets - - Accounts payable and accrued expenses ( 760,103 ) 535,039 Net cash provided by operating activities 4,594,849 2,803,512 INVESTING ACTIVITIES: Purchases of machinery and equipment - ( 202,018 ) Net cash used in investing activities - ( 202,018 ) FINANCING ACTIVITIES: Advances under bank line of credit 14,404 914,782 Cash overdraft - ( 876,148 ) Principal payments on note payable ( 963 ) ( 1,373 ) Principal payments under bank line of credit ( 4,934,404 ) ( 900,000 ) Net cash used in financing activities ( 4,920,963 ) ( 862,739 ) NET (DECREASE) INCREASE IN CASH ( 326,114 ) 1,738,755 CASH, BEGINNING OF PERIOD 2,733,977 2,515,873 CASH, END OF PERIOD $ 2,407,863 $ 4,254,628 See Notes to Condensed Consolidated Financial Statements 6 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JANUARY 31, 2024 AND 2023 (Unaudited) 2024 2023 SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: Interest paid $ 141,945 $ 121,019 Income taxes paid $ - $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Initial recognition of operating lease right of use asset $ 41,962 40,797 See Notes to Condensed Consolidated Financial Statements 7 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (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”). Going Concern As of October 31, 2023, the Company’s line of credit of $ 9.6 million becomes due in June 2024, for which the Company will seek to obtain a renewal of the financing arrangement. There were certain financial covenants that the Company is in violation. The Company has not received a waiver from the lender. The lender has reserved its rights and remedies at any time in its sole discretion. As of January 31, 2024, the Company is back in compliance with those financial covenants, however there are uncertainties surrounding the ability to receive a waiver and extending its line of credit when becomes due. These uncertainties raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they become due within twelve months from the date the consolidated financial statements were issued, The current balance outstanding as of March 6, 2024 is $ 4.7 million. The Company continues to expand its customer base, which is expected to increase margins and profitability in future periods. However, there can be no assurance of such continued success. 8 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (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, 2023. 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, 2023 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, 2023 and notes thereto included in the Company’s fiscal 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 9, 2024 (the “2023 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 2023 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended January 31, 2024. 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 JANUARY 31, 2024 (UNAUDITED) NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICY (cont’d): Recent Accounting Pronouncements – Adopted The Company follows the FASB Accounting Standard Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326). This guidance requires entities to use a current expected credit loss impairment model rather than incurred losses. The Company considers factors such as credit quality, age of balances, historical experience and current and future economic conditions that may affect the Company’s expectation of collectability in determining allowance for credit losses. The standard became effective for the Company on November 1, 2023. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. Recent Accounting Pronouncements – Not Yet Adopted In October 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-06, “Disclosure Improvements – Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This standard affects a wide variety of Topics in the Codification. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting – Improving Reportable Segment Disclosures (Topic 280).” The standard is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The standard requires disclosure to include significant segment expenses that are regularly provided to the CODM, a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The standard also requires all annual disclosures currently required by ASC Topic 280 to be included in interim periods. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” a final standard on improvements to income tax disclosures, The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted and should be applied prospectively. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. 10 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (UNAUDITED) NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICY (cont’d): The following table presents revenues by product line in the three months ended January 31, 2024 and 2023 SCHEDULE OF REVENUE January 31, 2024 January 31, 2023 Green $ 7,479,202 $ 7,658,947 Packaged 12,061,200 10,667,167 Totals $ 19,540,402 $ 18,326,114 Revenues $ 19,540,402 $ 18,326,114 NOTE 3 - INVENTORIES : Inventories at January 31, 2024 and October 31, 2023 consisted of the following: SCHEDULE OF INVENTORIES January 31,2024 October 31,2023 Packed coffee $ 3,261,524 $ 3,582,935 Green coffee 11,459,519 13,151,993 Roasters and parts 528,945 537,108 Packaging supplies 1,762,277 1,714,503 Totals $ 17,012,265 $ 18,986,539 Inventories $ 17,012,265 $ 18,986,539 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 at broker represent the market value of the Company’s trading account, which consists of options 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 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. 11 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (UNAUDITED) NOTE 4 - COMMODITIES HELD BY BROKER (cont’d): 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 2024 2023 Three Months Ended January 31, 2024 2023 Gross realized gains $ 567,694 $ 128,925 Gross realized losses ( 34,823 ) ( 666,050 ) Unrealized gain (loss) ( 182,836 ) 772,021 Total $ 350,035 $ 234,896 Gain (Loss) on Investments $ 350,035 $ 234,896 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 (later acquired by Webster Bank N.A.) (“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 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 Bank. 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. 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 fixed charge coverage ratio, debt to tangible net worth and tangible net worth. The Company, as of January 31, 2024, the Company was in compliance will all covenants. The Company as of October 31, 2023 has failed to comply with one of these covenants and resulted in an event of default under the loan agreement. The lender has various defenses that it can apply against the Company, which includes up to and calling the line of credit. There is no guarantee that the lender will not issue a waiver or not call the line of credit. The outstanding balance on the Company’s lines of credit were $ 4,700,000 and $ 9,620,000 as of January 31, 2024 and October 31, 2023, respectively. 12 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (UNAUDITED) 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 January 31, 2024 and October 31, 2023 the Company did not 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 January 31, 2024 and October 31, 2023, 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, Florida, Idaho, Illinois, Kansas, Louisiana, Michigan, Massachusetts, Montana, New Jersey, New York, New York City, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas and Virginia 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 2020. The Company’s California, Colorado, New Jersey and Texas income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2020. 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 2020. NOTE 7 - EARNINGS 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 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 weighted average common shares outstanding used in the computation of basic and diluted earnings per share were 5,708,599 for the three months ended January 31, 2024 and 2023. 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. 13 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (UNAUDITED) NOTE 8 – COMMITMENTS AND CONTINGENCIES : Legal Proceedings The Company and its subsidiaries are not involved in any pending proceedings other than ordinary routine litigation incidental to their business. Management believes none of these proceedings, if determined adversely, would have a material effect on the business or financial condition of the Company or its subsidiaries. NOTE 9 - LEASES : The following summarizes the Company’s operating leases: SCHEDULE OF OPERATING LEASES 2024 2023 Right-of-use operating lease assets $ 2,655,799 $ 2,832,907   Current lease liability 563,474 186,879 Non-current lease liability 2,637,535 3,142,959 Total lease liability $ 3,201,009 $ 3,329,838 The amortization of the right-of-use asset for the three months ended January 31, 2024 and 2023 was $ 82,322 and $ 79,663 , respectively. Weighted average remaining lease term 10.0 Weighted average discount rate 4.9 % Maturities of lease liabilities by year for our operating leases are as follows: SCHEDULE OF MATURITY LEASE LIABILITY 2024 $ 697,345 2025 400,868 2026 376,683 2027 367,788 2028 305,648 Thereafter 2,027,652 Total lease payments $ 4,175,984 Less: imputed interest ( 974,975 ) Present value of operating lease liabilities $ 3,201,009 In December 2023, 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 $ 41,962 as of January 31, 2024. 14 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2024 (UNAUDITED) NOTE 10 – RELATED PARTY TRANSACTIONS : The Company has engaged its 40 % former partner in GCC as an outside contractor (the “Partner”). Included in contract labor expense are expenses incurred from the Partner during the three months ended January 31, 2024 and 2023 of $ 0 and $ 56,851 , 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: 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 January 31, 2024 and October 31, 2023 was $ 127,162 and $ 120,523 , respectively. Deferred compensation expenses included in officers’ salaries were $ 0 during the quarters ended January 31, 2024 and 2023, respectively as no amounts were contributed to this plan. 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 months ended January 31, 2024 and the year ended October 31, 2023. 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 , which expire on April 17, 2029. As of January 31, 2024, there are 942,000 options remaining. 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 months ended January 31, 2024 or for the year ended October 31, 2023. NOTE 12 – SUBSEQUENT EVENTS : The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required further adjustment or disclosure in the condensed consolidated financial statements. 15