GlobeNewswire Inc | Feb 16, 2021 09:00AM EST

February 16, 2021

STATEN ISLAND, New York, Feb. 16, 2021 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq: JVA) (the Company) today announced its operating results for the fiscal year ended October 31, 2020:

Net (Loss) Income. The Company had a net loss of $94,301 or $0.02 per share basic and diluted, for the fiscal year ended October 31, 2020, compared to a net loss of $94,598, or $0.02 per share basic and diluted for the fiscal year ended October 31, 2019. The decrease in net income was due to numerous factors which had to be dealt with during the Companys fiscal fourth quarter. For example, for the fiscal year ended October 31, 2020, the Company had a loss before its non-controlling interest in its subsidiary of $336,044, versus net income of $264,006 for the fiscal year ended October 31, 2019. The Companys non-controlling interest for the fiscal year ended October 31, 2020 reduced the Companys loss by $366,044, bringing the net loss attributable to Coffee Holding Co. to $94,301, whereas the non-controlling interest for the fiscal year ended October 31, 2019 reduced profit by $358,604, bringing the net loss attributable to Coffee Holding Co. to a loss of $94,598. The Companys consolidated subsidiary, in which it has a 60% interest, had write downs on both inventories and accounts receivable due to COVID-19, including an approximately $85,000 write down of receivables and an approximately $217,000 write down of inventories.

Net Sales. Net sales totaled $74,335,815 for the fiscal year ended October 31, 2020, a decrease of $12,131,617, or 14%, from $86,467,432 for the fiscal year ended October 31, 2019. The decrease in net sales was due to the COVID-19 pandemic which caused many of the Companys green coffee customers, who service the restaurant and food service industries, as well as the Companys customers in the food service space, to either close or suspend their business operations during the period resulting in lost revenues.

Cost of Sales. Cost of sales for the fiscal year ended October 31, 2020 was $61,256,926, or 82.4% of net sales, as compared to $70,708,100, or 81.8% of net sales, for the fiscal year ended October 31, 2019. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. The decrease in cost of sales was due to the Companys decreased sales and the rising cost of coffee.

Gross Profit. Gross profit for the fiscal year ended October 31, 2020 was $13,078,889, a decrease of $2,680,443 from $15,759,332 for the fiscal year ended October 31, 2019. Gross profit as a percentage of net sales decreased to 17.6% for the fiscal year ended October 31, 2020 from 18.2% for the fiscal year ended October 31, 2019. The decrease in gross profits resulted from a decrease in sales due to the COVID-19 pandemic and inventory adjustments resulting from such decreased sales, lost customers and outdated inventory during the year.

Operating Expenses. Total operating expenses decreased by $1,314,596 to $13,904,207 for the fiscal year ended October 31, 2020 from $15,218,803 for the fiscal year ended October 31, 2019. Selling and administrative expenses decreased $1,281,500, or 8.8%, to $13,223,207 for the fiscal year ended October 31, 2020 from $14,504,707 for the fiscal year ended October 31, 2019. The Companys efforts to control costs through the elimination of redundancy in its operations and the elimination of certain unnecessary variable costs were the primary reasons for this decrease.

In a year which most people would choose to forget, we too were not immune to the effects of extended lockdowns and consumer belt tightening due to the pandemic caused by COVID-19. Our sales declined by approximately $12.0 million, or 14%, as shutdowns closed bars, restaurants and most non-essential retail establishments. However, the decline in sales were isolated in two areas, while the balance of our business remained relatively strong in what proved to be a very negative business environment for most companies. The first area of our business that was negatively impacted by the shutdowns was the sales of green unroasted coffee beans to our small and medium sized roaster clientele. Sales of green coffee to these roasters who service the retail and foodservice industries declined by approximately $5.9 million as businesses remained closed for multiple months throughout the fiscal year.

The second area of our business negatively impacted by the shutdowns was our Steep N Brew subsidiary, which experienced a decline of approximately $4.5 million. This decline was primarily due to Steep N Brews largest customer converting its existing relationship from a direct customer buying basis to a brokerage basis. Thus, we were unable to recognize 100% of the revenues, as we have done in the past, stated Andrew Gordon, Chief Executive Officer of Coffee Holding.

We had a similar net loss as in the prior year, as we lost approximately $95,000, or $0.02 per share. However, considering that our revenues were lower by approximately $12.0 million, and our gross profit and operating margins remained relatively steady, we believe that if the revenues of green coffee sales were not negatively impacted by the pandemic, we would have been profitable in the year as this area of the business has historically experienced margins between 15% to 22% and is highly scalable with minimal variable costs needed to increase sales. In addition, other one-time or non-cash items which negatively affected our bottom line included a non-cash cost of approximately $0.9 million for our stock option plan, approximately $0.7 million in depreciation and amortization, and approximately $0.2 million in interest expenses which offset our income from revenues. Other factors negatively impacting income were approximately $85,000 write down of receivables and approximately $217,000 write down of inventory. We believe these year-end write downs, which were greater than in past years, were due to the impact of the pandemic caused by COVID-19, which slowed sales to existing customers causing inventory to become outdated in addition to forcing many of our smaller customers to permanently close their doors. All of these factors negatively impacted our ability to turn inventories at historical and forecasted levels.

Despite the significant headwinds we endured during this turbulent year, I believe our company successfully navigated the COVID-19 economy, and did the work necessary to position our company and business for future success. Although most supermarket chains and customers were curtailing operations, delaying category reviews and postponing purchases of new items, we were able to expand sales of Caf Caribe in new and existing markets, including sales to the United States military commissaries. We also added a new 150-store supermarket chain in Florida to which we plan on commencing shipping product in the second fiscal quarter of 2021. We also increased sales of our S&W coffee brand to a major wholesaler in the Midwest and were awarded the private label coffee business for two new major supermarket chains, also to begin shipping in 2021.

Lastly, in October 2020, we acquired a 49% stake in The Jordre Well LLC, a hemp and Cannabidiol (CBD) beverage company based in Columbus, Ohio. The Jordre Well is a functional brand incubator focused on creating innovative, sustainably sourced, CBD infused beverages for health and wellness conscious consumers. Our plan is to begin infusing our brands, Caf Caribe Latin Espresso and Harmony Bay Gourmet coffee, with CBD as soon as we are comfortable with our formulations. We believe CBD coffee will be a fast growing and profitable market for us and if the legislative environment surrounding CBD products continue to improve, our plan is to offer all our customers the opportunity to infuses their products with CBD. I remain confident that our business is extraordinarily resilient, and despite a year that proved to be unpredictable and challenging, we still had many successes which we believe will lead to positive results for our company and our shareholders as early as the first quarter of 2021 and beyond, concluded Mr. Gordon.

About Coffee Holding

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

Forward looking statements

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

Company Contact

Coffee Holding Co., Inc.Andrew GordonPresident & CEO718-832-0800

COFFEE HOLDING CO., INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSOCTOBER 31, 2020 AND 2019

2020 2019 - ASSETS - CURRENT ASSETS: Cash $ 2,875,120 $ 2,402,556 Accounts receivable, net of allowances of 7,408,905 9,421,427 $144,000 for 2020 and 2019Inventories 17,102,993 18,841,225 Due from broker 101,031 Prepaid expenses and other current assets 490,246 587,626 Prepaid and refundable income taxes 145,305 385,934 TOTAL CURRENT ASSETS 28,022,569 31,739,799 Machinery and equipment, at cost, net ofaccumulated depreciation of $7,610,864 and 2,197,319 2,413,533 $6,931,913 for 2020 and 2019, respectivelyCustomer list and relationships, net ofaccumulated amortization of $194,379 and 490,621 533,373 $151,627 for 2020 and 2019, respectivelyTrademarks and tradenames 1,488,000 1,488,000 Non-compete, net of accumulated amortizationof $49,500 and $29,700 for 2020 and 2019, 49,500 69,300 respectivelyGoodwill 2,488,785 2,488,785 Equity method investments 561,405 86,008 Deferred income tax asset 782,175 480,473 Right of use asset 2,114,228 Deposits and other assets 285,548 387,453 TOTAL ASSETS $ 38,480,150 $ 39,686,724 - LIABILITIES AND STOCKHOLDERS? EQUITY - CURRENT LIABILITIES: Accounts payable and accrued expenses $ 3,036,097 $ 4,344,015 Line of credit 7,167,740 Due to broker 452,325 Note payable ? current portion 5,075 Lease liability ? current portion 484,163 Income taxes payable 5,371 100 TOTAL CURRENT LIABILITIES 3,983,031 11,511,855 Deferred income tax liabilities 882,582 872,232 Line of credit 3,796,822 Deferred rent payable 193,461 Lease liability 1,780,306 Note payable ? long term 17,292 Deferred compensation payable 276,548 378,453 TOTAL LIABILITIES 10,736,581 12,956,001 Commitments and Contingencies STOCKHOLDERS? EQUITY: Coffee Holding Co., Inc. stockholders? equity:Preferred stock, par value $.001 per share; - - 10,000,000 shares authorized; none issuedCommon stock, par value $.001 per share;30,000,000 shares authorized, 6,633,930 and6,494,680 shares issued for 2020 and 2019; 6,634 6,494 5,708,599 and 5,569,349 shares outstandingfor 2020 and 2019Additional paid-in capital 17,929,724 16,580,974 Retained earnings 13,215,868 13,310,169 Less: Treasury stock, 925,331 common shares, (4,633,560 ) (4,633,560 )at cost for 2020 and 2019Total Coffee Holding Co., Inc. Stockholders? 26,518,666 25,264,077 EquityNoncontrolling interest 1,224,903 1,466,646 TOTAL EQUITY 27,743,569 26,730,723 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 38,480,150 $ 39,686,724

COFFEE HOLDING CO., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSYEARS ENDED OCTOBER 31, 2020 AND 2019

2020 2019 NET SALES $ 74,335,815 $ 86,467,432 COST OF SALES (which includes purchases ofapproximately $5.3 million and $8.3 million 61,256,926 70,708,100 in fiscal years 2020 and 2019, respectively,from a related party) GROSS PROFIT 13,078,889 15,759,332 OPERATING EXPENSES: Selling and administrative 13,223,207 14,504,707 Officers? salaries 681,000 714,096 TOTAL 13,904,207 15,218,803 (LOSS) INCOME FROM OPERATIONS (825,318 ) 540,529 OTHER INCOME (EXPENSE): Interest income 3,354 11,046 Loss from equity method investment (5,016 ) (3,769 )Other income - PPP 634,400 Interest expense (185,177 ) (254,592 )TOTAL 447,561 (247,315 ) (LOSS) INCOME BEFORE PROVISION FOR INCOMETAXES AND NON-CONTROLLING INTEREST IN (377,757 ) 293,214 SUBSIDIARY (Benefit) provision for income taxes (41,713 ) 29,208 NET (LOSS) INCOME BEFORE NON-CONTROLLING (336,044 ) 264,006 INTEREST IN SUBSIDIARYLess: Net loss (income) attributable to the 241,743 (358,604 )non-controlling interest in subsidiary NET (LOSS) ATTRIBUTABLE TO COFFEE HOLDING $ (94,301 ) $ (94,598 )CO., INC. Basic and diluted (loss) per share $ (.02 ) $ (.02 ) Weighted average common shares outstanding: Basic and diluted 5,575,453 5,569,349

COFFEE HOLDING CO., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED OCTOBER 31, 2020 AND 2019

2020 2019 OPERATING ACTIVITIES: Net (loss) income $ (336,044 ) $ 264,006 Adjustments to reconcile net (loss)income to net cash provided by (used in) operating activities:Depreciation and amortization 741,503 742,637 Stock-based compensation 868,477 476,899 Unrealized loss (gain) on commodities 553,356 (123,077 )Loss on equity method investments 5,016 3,768 Deferred rent (48,682 )Amortization of right to use asset 397,794 Deferred income taxes (291,352 ) (49,938 )Changes in operating assets and liabilities:Accounts receivable 2,012,522 492,870 Inventories 1,738,232 (3,570,119 )Prepaid expenses and other current 97,380 (8,765 )assetsPrepaid and refundable income taxes 240,629 (2,728 )Accounts payable and accrued expenses (1,307,917 ) (489,533 )Change in lease liability (441,015 ) Deposits and other assets 101,905 165,451 Income taxes payable 5,271 (1,405 )Net cash provided by (used in) 4,385,757 (2,148,616 )operating activities INVESTING ACTIVITIES: Distribution of funds from deferred (101,905 ) (154,273 )compensation planPurchases of machinery and equipment (435,930 ) (743,410 )Net cash used in investing activities (537,835 ) (897,683 ) FINANCING ACTIVITIES: Advances under bank line of credit 1,141,132 1,407,726 Principal payment on note payable (4,440 ) (70,255 )Principal payments under bank line of (4,512,050 ) (500,000 )creditNet cash (used in) provided by (3,375,358 ) 837,471 financing activities NET INCREASE (DECREASE) IN CASH 472,564 (2,208,828 ) CASH, BEGINNING OF YEAR 2,402,556 4,611,384 CASH, END OF YEAR $ 2,875,120 $ 2,402,556

COFFEE HOLDING CO., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED OCTOBER 31, 2020 AND 2019

2020 2019 SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: Interest paid $ 196,823 $ 254,603 Income taxes paid $ 3,739 $ 83,279 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:On October 15, 2020 Coffee Holding Companyacquired an equity interest in Jordre Well, 480,413 LLC in exchange for 139,250 shares:Initial recognition of operating lease $ 2,512,022 right of use assetInitial recognition of operating lease $ 2,705,484 liabilities Machinery and equipment acquired through $ 26,807 financing

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

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

Net (loss) (GAAP measure) $ (94,301)Add back: 185,177Interest expenseIncome tax (benefit) (41,713)Depreciation and amortization 741,503Stock compensation 868,477Total adjusted EBITDA $ 1,659,143