COFFEE HOLDING CO INC 10-Q

ITEM 1. FINANCIAL STATEMENTS COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS April 30, 2025 October 31, 2024 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,832,162 $ 1,381,023 Accounts receivable, net of allowances for credit losses of $ 144,000 for 2025 and 2024 10,146,393 9,367,338 Inventories 17,215,904 15,705,984 Due from broker 2,688,024 1,466,059 Prepaid expenses and other current assets 439,129 167,207 Prepaid and refundable income taxes — 285,439 TOTAL CURRENT ASSETS 32,321,612 28,373,050 Building, machinery, and equipment, net 3,111,793 3,221,865 Customer list and relationships, net of accumulated amortization of $ 301,000 and $ 285,750 for 2025 and 2024, respectively 139,000 154,250 Trademarks and tradenames 327,000 327,000 Equity method investments 39,651 39,651 Right-of-use asset 2,894,746 1,166,537 Deferred income tax assets, net 366,858 592,398 Deposits and other assets 528,324 135,937 TOTAL ASSETS $ 39,728,984 $ 34,010,688 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 5,212,257 $ 5,743,899 Due to broker 484,048 794,804 Lease liabilities - current portion 793,729 307,364 TOTAL CURRENT LIABILITIES 6,490,034 6,846,067 Line of credit 3,000,000 — Lease liabilities – long term 2,135,691 865,668 Deferred compensation payable 128,381 121,386 TOTAL LIABILITIES 11,754,106 7,833,121 Commitments and Contingencies (Note 9) - - 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 April 30, 2025 and October 31, 2024; 5,708,599 shares outstanding for April 30, 2025 and October 31, 2024 6,634 6,634 Additional paid in capital 19,094,618 19,094,618 Retained earnings 13,507,186 11,709,875 Less: common stock held in treasury, at cost; 925,331 shares for April 30, 2025 and October 31, 2024 ( 4,633,560 ) ( 4,633,560 ) TOTAL STOCKHOLDERS’ EQUITY 27,974,878 26,177,567 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 39,728,984 $ 34,010,688 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 1 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 2025 2024 2025 2024 Six months ended April 30, Three months ended April 30, 2025 2024 2025 2024 NET SALES $ 44,625,346 $ 38,536,315 $ 23,320,061 $ 18,995,913 COST OF SALES 34,474,548 31,352,036 18,901,189 15,291,933 GROSS PROFIT 10,150,798 7,184,279 4,418,872 3,703,980 OPERATING EXPENSES Selling and administrative 7,216,581 6,319,625 3,286,983 3,629,578 Officers’ salaries 454,571 314,393 243,274 141,052 TOTAL 7,671,152 6,634,018 3,530,257 3,770,630 INCOME FROM OPERATIONS 2,479,646 550,261 888,615 ( 66,650 ) OTHER INCOME (EXPENSE) Interest income 23 34,413 13 34,406 Interest expense ( 49,222 ) ( 190,786 ) ( 17,552 ) ( 73,253 ) Gain(loss) from equity method investments — — 23 6,024 Other income 29 — 29 — TOTAL ( 49,170 ) ( 156,373 ) ( 17,487 ) ( 32,823 INCOME (LOSS) BEFORE EXPENSE FOR INCOME TAXES 2,430,476 393,888 871,128 ( 99,473 ) Expense (benefit) for income taxes 633,165 64,705 227,073 ( 77,632 ) NET INCOME (LOSS) $ 1,797,311 $ 329,183 $ 644,055 $ ( 21,841 ) Basic and diluted earnings per share $ 0.31 $ 0.06 $ 0.11 $ — Weighted average common shares outstanding: Basic and diluted 5,708,599 5,708,599 5,708,599 5,708,599 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 2 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2024, AND 2025 (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, 2023 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 Balance January 31, 2024 5,708,599 6,634 925,331 ( 4,633,560 ) 19,094,618 9,842,885 ( 244,462 ) 24,066,115 Net loss — — — — — ( 21,841 ) — ( 21,841 ) Balance, April 30, 2024 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 9,821,044 $ ( 244,462 ) $ 24,044,274 Balance October 31, 2024 5,708,599 6,634 925,331 ( 4,633,560 ) 19,094,618 11,709,875 — 26,177,567 Net income — — — — — 1,153,256 — 1,153,256 Balance, January 31, 2025 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 12,863,131 $ — $ 27,330,823 Balance 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 12,863,131 $ — $ 27,330,823 Net income — — — — — $ 644,055 — $ 644,055 Net income (loss) — — — — — $ 644,055 — $ 644,055 Balance, April 30, 2025 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 13,507,186 $ — $ 27,974,878 Balance 5,708,599 $ 6,634 925,331 $ ( 4,633,560 ) $ 19,094,618 $ 13,507,186 $ — $ 27,974,878 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 3 COFFEE HOLDING CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 2025 2024 Six months ended April 30, 2025 2024 OPERATING ACTIVITIES: Net income $ 1,797,311 $ 329,183 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 318,228 306,706 Unrealized gain on commodities ( 1,532,721 ) ( 470,702 ) Amortization of right-of-use asset 385,372 123,456 Deferred income taxes 225,540 64,705 Changes in operating assets and liabilities: Accounts receivable ( 247,470 ) 589,995 Inventories ( 1,241,503 ) 3,474,176 Prepaid expenses and other current assets ( 271,922 ) 76,151 Prepaid and refundable income taxes 285,438 ( 13,399 ) Lease liabilities ( 357,193 ) ( 101,246 ) Deposits and other assets ( 392,387 ) ( 12,006 ) Deferred compensation payable 6,995 — Accounts payable, accrued expenses ( 531,642 ) ( 976,325 ) Net cash (used in) provided by operating activities ( 1,555,954 ) 3,390,694 Cash flows from investing activities: Acquisition of Second Empire ( 800,000 ) — Cash paid for leasehold improvements ( 160,000 ) Purchases of machinery and equipment ( 32,907 ) ( 224,073 ) Proceeds from sale of investment — 3,150,000 Net cash (used in) provided by investing activities ( 992,907 ) 2,925,927 Cash flows from financing activities: Proceeds from bank line of credit 4,500,000 — Principal payments on note payable — ( 2,909 ) Payments on bank line of credit ( 1,500,000 ) ( 6,620,000 ) Net cash provided by (used in) financing activities 3,000,000 ( 6,622,909 ) Net change in cash and cash equivalents 451,139 ( 306,288 ) Cash and cash equivalents, beginning of period 1,381,023 2,733,977 Cash and cash equivalents, end of period $ 1,832,162 $ 2,427,689 SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: Interest paid $ 41,413 $ 231,844 Income taxes paid $ — $ — SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Initial recognition of operating lease right-of-use asset $ 2,113,581 $ — Initial recognition of operating lease liabilities $ 2,113,581 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 4 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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. Going Concern and Liquidity The Company’s line of credit will be due June 28, 2026 (see Note 6). The agreement requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis. As of April 30, 2025, the Company is in compliance with those financial covenants. The Company has net income for the six months ended April 30, 2025 of $ 1,797,311 and a net working capital surplus of $ 25,831,578 . As a result, the Company does not believe that substantial doubt is raised regarding the Company’s ability to continue as a going concern and the ability to meet its obligations as they become due within the twelve months from the date the condensed consolidated financial statements are issued. F- 5 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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 its annual consolidated financial statements for the fiscal year ended October 31, 2024. 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 its 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, 2024 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, 2024 and notes thereto included in the Company’s fiscal 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on January 31, 2025 (the “2024 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, and Second Empire, LLC (“Second Empire”). All significant inter-company balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and comply with SEC reporting requirements. Significant Accounting Policies The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the Company’s 2024 10-K, and there have been no changes to the Company’s significant accounting policies during the six months ended April 30, 2025. 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. The following table presents revenues by product line for the six and three months ended April 30, 2025 and 2024: Schedule of Revenue 2025 2024 2025 2024 Six Months Ended April 30, Three Months Ended April 30, 2025 2024 2025 2024 Green $ 18,256,948 $ 14,709,905 $ 9,362,994 $ 7,230,703 Packaged 26,368,398 23,826,410 13,957,067 11,765,210 Totals $ 44,625,346 $ 38,536,315 $ 23,320,061 $ 18,995,913 Revenues $ 44,625,346 $ 38,536,315 $ 23,320,061 $ 18,995,913 F- 6 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 the 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. 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 chief operating decision maker (“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 adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements, however; it did result in enhanced disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of these standards will have on it financial statements. Recent Accounting Pronouncements – Not Yet Adopted In October 2023, the FASB issued 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 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. Note 3 – Business Combination On November 6, 2024, the Company (through its wholly-owned subsidiary, Second Empire) purchased the remaining assets of Empire Coffee Company for $ 800,000 in a Uniform Commercial Code (“UCC”) Chapter 9 sale (the “Second Empire Acquisition”). Operations of Second Empire will include roasting and packing for current Company’s customers as well as customers of Empire Coffee. The results of Second Empire are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company has accounted for the Second Empire Acquisition as a business combination using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets purchased in the Second Empire Acquisition based on assessments of their respective fair values. The provisional fair value estimates of the assets acquired are subject to subsequent adjustments as additional information is obtained during the applicable measurement period. The assets purchased consisted of equipment, accounts receivable and inventories. The Company has determined that no portion of the purchase price is allocated to intangible assets as there were no acquired intangibles that are considered identifiable under ASC 805. In addition, the Company determined that the acquired equipment had no value as it was originally purchased in the mid-1990s and has been fully depreciated for a few years. Based on a fair value assessment, all value has been attributed to tangible assets. Second Empire will operate as a 100 % wholly owned subsidiary of the Company. The following tables summarize the fair values of consideration transferred and the fair values of identified assets acquired at the date of acquisition: Schedule of Business Combination Accounts Receivable $ 531,585 Inventory 268,415 Equipment - Total purchase price $ 800,000 The acquired business contributed revenues of $ 1,740,173 and a loss of $ 414,938 to the Company for the period from November 6, 2024, to April 30, 2025. There were no acquisition costs incurred. In connection with this transaction, the Company entered into a 4 four-year lease with 21 Grace Church Street Realty LLC for the existing property at 21 Grace Church Street, Port Chester, NY 10573 where Empire Coffee Company had its offices and production facility. Note 4 - Inventories Inventories at April 30, 2025 and October 31, 2024 consisted of the following: Schedule of Inventories April 30, 2025 October 31, 2024 Packed coffee $ 3,507,725 $ 2,025,335 Green coffee 11,533,418 11,525,118 Roasters parts 437,732 469,849 Packaging supplies 1,737,029 1,685,682 Totals $ 17,215,904 $ 15,705,984 Inventories $ 17,215,904 $ 15,705,984 F- 7 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 5 - 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 level 1 investments 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 impact earnings volatility in any particular period. The Company records all open contract positions on the condensed 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, realized and unrealized holding gains and losses are included in the condensed consolidated statements of operations as a component of cost of sales. 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 2025 2024 Three Months Ended April 30, 2025 2024 Gross realized gains 947,821 $ 214,080 Gross realized losses ( 63,371 ) ( 734,947 ) Unrealized (losses) gains ( 1,164,647 ) 653,538 Total ( 280,197 ) $ 132,671 2025 2024 Six Months Ended April 30, 2025 2024 Gross realized gains 2,113,443 $ 781,774 Gross realized (losses) gains 2,113,443 $ 781,774 Gross realized losses ( 234,992 ) ( 769,770 ) Unrealized gains ( 421,729 ) 470,702 Total 1,456,722 $ 482,706 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”) (later acquired by Webster, which consolidated (i) the financing agreement between the Company and Sterling, dated February 17, 2009, as modified, and (ii) the financing agreement between the Company, as guarantor, OPTCO and Sterling, dated March 10, 2015, 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. F- 8 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company is required to maintain certain financial covenants with respect to the A&R Loan Agreement. The Company was not in compliance with such requirements as of October 31, 2023. The Company received a waiver from the lender on May 24, 2024 for all past defaults. The A&R Loan Agreement was also modified on March 15, 2023 to, among other things: (i) provide for a requirement for subordination agreements, if necessary, (ii) change the terms of transactions with affiliates from a dollar limitation to allowable in the ordinary course of business, and (iii) establish a new covenant for a fixed charge coverage ratio. On June 27, 2024, the Borrowers entered into the Tenth Loan Modification Agreement with Webster which amended the A&R Loan Agreement to, among other things: (i) provide for a new loan maturity date of June 29, 2025 , (ii) provide that the applicable margin requirement for any revolving loan outstanding under the A&R Loan Agreement to 2.25 %, (iii) provide that the maximum facility amount shall be $ 10,000,000 and (iv) to adjust certain definitions and terms related to the borrowing base and leverage ratios applicable to the A&R Loan Agreement. The average interest for the six months ended April 30, 2025 was 6.74 %. On April 17, 2025, the Borrowers entered into the Eleventh Loan Modification Agreement with Webster which, among other things, amended the A&R Loan Agreement to provide for a new loan maturity date of June 28, 2026 . 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 line of credit was $ 3,000,000 and $ 0 as of April 30, 2025, and October 31, 2024, respectively. Note 7 – 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 net operating loss carryforwards and 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, 2025 and October 31, 2024, 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, 2025 and October 31, 2024, 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, Massachusetts, Michigan, Montana, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, and Virginia state tax returns. For the three months ended April 30, 2025 and 2024, the Company recorded income tax benefit (expense) of ($ 227,073 ) and $ 77,632 , respectively. For the six months ended April 30, 2025 and 2024, the Company recorded income tax expense of $ 633,165 and $ 64,705 , respectively. Note 8 – Earnings (loss) Per Share The Company presents “basic” and “diluted” earnings per common share pursuant to the provisions included in ASC Topic 260, “Earnings (loss) per Share,” and certain other financial accounting pronouncements. Basic earnings per common share is 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- and six-months ending April 30, 2025, and 2024. The Company has 921,000 options outstanding which have not been included in the calculation of diluted earnings per share. F- 9 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 9 - 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 10 – Leases The following summarizes the Company’s operating leases as of April 30, 2025 and October 31, 2024: Schedule of Operating Leases Assets April 30, 2025 October 31, 2024 Right-of-use operating lease assets $ 2,894,746 $ 1,166,537 Total lease assets $ 2,894,746 $ 1,166,537 Liabilities April 30, 2025 October 31, 2024 Current lease liability $ 793,729 $ 307,364 Non-current lease liability 2,135,691 $ 865,668 Total lease liability $ 2,929,420 $ 1,173,032 The amortization of the right-of-use assets for the three months ended April 30, 2025 and 2024 was $ 195,410 and $ 83,096 , respectively. The amortization of the right-of-use assets for the six months ended April 30, 2025, and 2024 was $ 385,372 and $ 123,456 , respectively. Variable lease payments were $ 106,000 and $ 31,700 during the three months ended April 30, 2025, and 2024, respectively. Variable lease payments were $ 271,000 and $ 62,300 during the six months ended April 30, 2025, and 2024, respectively. Operating lease costs were $ 491,200 and $ 237,672 for the six months ended April 30, 2025, and 2024, respectively. Operating lease costs were $ 245,600 and $ 195,600 for the three months ended April 30, 2025, and 2024, respectively. The weighted-average remaining lease term and the weighted-average discount rate of the Company’s leases were as follows: Weighted average remaining lease term (in years) 3.43 Weighted average discount rate 6.77 % Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows: Schedule of Maturity Lease Liability For the Years Ending October 31,: Remainder of fiscal 2025 $ 478,476 2026 955,052 2027 920,091 2028 864,490 2029 66,741 Total lease payments 3,284,850 Less: imputed interest ( 355,430 ) Present value of operating lease liabilities $ 2,929,420 F- 10 COFFEE HOLDING CO., INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In May 2024, the Company modified its existing lease agreement pertaining to a portion of its office facility. The Company wrote off $ 1,848,032 in right-of-use assets and $ 2,058,599 lease liability associated with this agreement, resulting in a gain on extinguishment of lease of $ 210,567 . On May 1, 2024, the Company entered into an amended lease agreement for the remaining portion of its office facility in Staten Island, NY, which changed the lease modification date to April 30, 2029. The amended lease commenced on May 1, 2024. The Company recognized a right-of-use asset and lease liability associated with this modified agreement of $ 547,975 . As a result of the modification, the Company decreased its right-of-use asset by $ 1,300,057 and lease liability by $ 1,510,624 as of July 31, 2024. In November 2024, the Company entered into a new lease in connection with the Second Empire Acquisition. As a result, the Company recognized a right-of-use asset and lease liability of $ 2,113,581 in connection with such new lease. Note 11 – Related Party Transactions 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 $ 128,381 and $ 121,386 as of April 30, 2025, and October 31, 2024, respectively, and are included in Deposits and other assets in the accompanying balance sheets. The deferred compensation liability at April 30, 2025 and October 31, 2024 was $ 128,381 and $ 121,386 , respectively. Note 12 - Stockholders’ Equity 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, 2025 and the year ended October 31, 2024. Stock Options The Company has an incentive stock plan, the 2013 Equity Compensation Plan (the “2013 Plan”), and has granted stock options for an aggregate of 1,000,000 shares to employees, officers and non-employee directors from the 2013 Plan 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, 2025. No options were granted or expired during the year ended October 31, 2024. As of April 30, 2025, and October 31, 2024, 921,000 options were exercisable. The Company recorded no stock-based compensation expense for the three and six months ended April 30, 2025 and 2024, as all stock option awards were fully vested as of the beginning of the reporting period. Note 13 – Segment Information ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker (“CODM”) is Andrew Gordon, President, Chief Executive Officer, Chief Financial Officer, and Director. The Company has one reportable segment: coffee. The Company derives revenue primarily in North America and manages the business activities on a consolidated basis. The coffee segment derives revenue from the sale of wholesale green coffee, private label coffee and branded coffee. Revenue for these product lines is recognized upon shipment to the customer. The CODM assesses performance for the coffee segment and decides how to allocate resources based on operating income (loss) that also is reported on statement of operations as consolidated income (loss) from operations. The measure of segment assets is reported on the condensed consolidated balance sheet as total consolidated assets. When evaluating the Company’s performance and making key decisions regarding resource allocation the CODM reviews the following key metrics: Schedule of Segment Information April 30, 2025 April 30, 2024 Statement of operations For the three months ended April 30, 2025 April 30, 2024 Net sales $ 23,320,061 $ 18,995,913 Cost of Goods Sold (1) ( 18,620,992 ) ( 15,424,604 ) Gross Profit 4,699,069 3,571,309 Trading Profit (Loss) (1) ( 280,197 ) 132,671 Overhead (2) ( 3,530,257 ) ( 3,770,630 ) Operating income (loss) $ 888,615 $ ( 66,650 ) April 30, 2025 April 30, 2024 Statement of operations For the six months ended April 30, 2025 April 30, 2024 Net sales $ 44,625,346 $ 38,536,315 Cost of Goods Sold (1) ( 35,931,270 ) ( 31,834,742 ) Gross Profit 8,694,076 6,701,573 Trading Profit (1) 1,456,722 482,706 Overhead (2) ( 7,671,152 ) ( 6,634,018 ) Operating income $ 2,479,646 $ 550,261 (1) Costs of goods sold and Trading profit is included in cost of sales in the consolidated statement of operations. (2) Overhead includes officers’ salaries and selling and administrative expenses included in the consolidated statement of operations. The CODM uses operating income (loss) to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the coffee segment or into other parts of the entity such as for acquisitions or to pay dividends. Intra-entity sales and cash transfers are eliminated in operating income (loss) used by the CODM. Note 14 - Subsequent Events The Company has evaluated all subsequent events through the date on which the condensed consolidated financial statements were available for use and has determined that no events need to be reported. F- 11