{"url_path":"/sec/jva/10-k/2026/item-1","section_key":"item-1","section_title":"Item 1 BUSINESS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-01-28","source_url":"https://www.sec.gov/Archives/edgar/data/1007019/0001493152-26-004052-index.html","accession_number":"0001493152-26-004052","cik":"0001007019","ticker":"JVA","issuer_name":"COFFEE HOLDING CO INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1007019/0001493152-26-004052-index.html","primary_entity_key":"0001007019","primary_entity_name":"COFFEE HOLDING CO INC"},"word_count":4925,"has_tables":true,"body_markdown":"** **\n\n**ITEM\n1. BUSINESS**\n\n \n\nAll\nreferences in this Annual Report to “JVA,” the “Company,” “Coffee Holding,” “we,” “us,”\nor “our” mean Coffee Holding Co., Inc. and its subsidiaries unless stated otherwise or the context otherwise indicates.\n\n \n\n**General\nOverview**\n\n* *\n\n*Products\nand Operations.* We are an integrated wholesale coffee roaster and dealer located in the United States. Our core products can be divided\ninto three categories:\n\n \n\n●**Wholesale\nGreen Coffee:** unroasted raw beans imported from around the world and sold to large and\nsmall roasters and coffee shop operators;\n\n●**Private\nLabel Coffee:** coffee roasted, blended, packaged and sold under the specifications and\nnames of others, including supermarkets that want to have their own brand name on coffee\nto compete with national brands; and\n\n●**Branded\nCoffee:** coffee roasted and blended to our own specifications and packaged and sold under\nour eight proprietary and licensed brand names in different segments of the market.\n\n \n\nOur\nprivate label and branded coffee products are sold throughout the United States and certain countries in Asia to supermarkets, wholesalers,\nand individually owned and multi-unit retail customers. Our unprocessed green coffee, which includes over 90 specialty coffee offerings,\nis primarily sold to specialty gourmet roasters in the United States, Canada and multiple international countries.\n\n \n\nWe\nconduct our operations in accordance with strict freshness and quality standards. All of our private label and branded coffees are produced\nfrom high quality coffee beans that are deep roasted for full flavor using a slow roasting process that has been perfected utilizing\nalmost 50 years of experience in the coffee industry. In order to ensure freshness, our products are delivered to our customers within\n72 hours of roasting. We believe that our long history has enabled us to develop a loyal customer base.\n\n \n\n*Corporate\nHistory*\n\n \n\nWe\nwere incorporated on October 9, 1995 under the laws of the State of Nevada under the name Transpacific International Group Corp (“Transpacific”).\nOn April 16, 1998, Transpacific completed a merger with Coffee Holding Co., Inc., a New York corporation. Upon the consummation of the\nmerger, Coffee Holding Co., Inc. was merged into Transpacific and Transpacific changed its name to Coffee Holding Co., Inc.\n\n \n\nIn\nJune 2016, we acquired substantially all of the assets of Coffee Kinetics LLC (doing business as Sonofresco) through our wholly-owned\nsubsidiary Sonofresco, LLC (“Sonofresco” or “SONO”), including equipment, inventory, customer lists, relationships\nand accounts payable. In addition to our wholesale green coffee, private label coffee and branded coffee product offerings, we currently\nsell tabletop coffee roasting equipment to our customers through Sonofresco.\n\n \n\nOn\nFebruary 23, 2017, we purchased all the outstanding common stock of Comfort Foods, Inc. (“CFI”). CFI is a medium sized regional\nroaster, manufacturing both branded and private label coffee for retail and foodservice customers located predominantly in the northeast\nUnited States marketplace.\n\n \n\nOn\nOctober 7, 2025, the Company announced its plan to close its Comfort Foods manufacturing facility located in North Andover, Massachusetts\n(the “Comfort Foods facility”). The closure of the Comfort Foods facility was completed by the end of October 2025. The Company\noriginally acquired the Comfort Foods business in 2017, which included the related Harmony Bay brand and the operations conducted at\nthis facility.\n\n \n\n1\n\n \n\n \n\nThe\ndecision to cease operations was based on the continued decline in sales of certain regional brands and the shift by major retailers\ntoward national branded products, which reduced the profitability of the Comfort Foods facility. In connection with this closure, production\nactivities previously performed at the Comfort Foods facility will be transitioned to the Company’s Second Empire, LLC (“Second\nEmpire”) facility located in Port Chester, New York. The Company expects that consolidating manufacturing operations into a single\nEast Coast production hub will enhance operational efficiency and reduce duplicative overhead costs.\n\n \n\nOn\nSeptember 29, 2022, the Company entered into a Merger and Share Exchange Agreement (the “Merger Agreement”), by and among\nthe Company, Delta Corp Holdings Limited, a Cayman Islands exempted company (“Pubco”), Delta Corp Holdings Limited, a company\nincorporated in England and Wales (“Delta”), CHC Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Pubco\n(“Merger Sub”), and each of the holders of ordinary shares of Delta as named therein. Upon the terms and subject to the conditions\nset forth in the Merger Agreement, Merger Sub would merge with and into the Company, with the Company surviving as a direct, wholly-owned\nsubsidiary of Pubco (the “Merger”). As a result of the Merger, each issued and outstanding share of the Company’s common\nstock, $0.001 par value per share, would be cancelled and converted for the right of the holder thereof to receive one ordinary share,\npar value $0.0001 of Pubco. There was a shareholder vote in April 2024 on the Merger Agreement that did not pass. On June 21, 2024, the\nCompany terminated the Merger Agreement. No early termination penalties were payable by the Company upon termination of the Merger Agreement.\n\n \n\nOn\nNovember 11, 2024, the Company purchased all of the assets of Empire Coffee Company (“Empire Coffee”) for $800,000 in a Uniform\nCommercial Code (“UCC”) Chapter 9 sale (the “Second Empire Acquisition”). The assets purchased consisted of accounts\nreceivable, inventory, equipment, the customer list and all intellectual property. To facilitate the purchase, Coffee Holding created\na new wholly owned subsidiary named Second Empire, LLC. Operations will be conducted by Second Empire. The operations of Second Empire\nwill include roasting and packing for current Coffee Holding customers as well as customers of Empire Coffee.\n\n \n\nIn\nconnection with this transaction, the Company entered into a four-year lease with 21 Grace Church Street Realty LLC for the existing\nproperty at 21 Grace Church Street, Port Chester, NY 10573 where Empire Coffee had its offices and production facility.\n\n \n\nOur\ncorporate offices are located at 3475 Victory Boulevard, Staten Island, New York 10314. Our telephone number is (718) 832-0800 and our\nwebsite address is www.coffeeholding.com. On our website, investors can obtain, free of charge, a copy of our Annual Reports on Form\n10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Code of Conduct and Business Ethics, including disclosure related\nto any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d)\nof the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with,\nor furnish it to, the Securities and Exchange Commission, or the SEC. None of the information posted on our website is incorporated by\nreference into this Annual Report. The SEC also maintains a website at https://www.sec.gov that contains reports, proxy and information\nstatements and other information regarding us and other companies that file materials with the SEC electronically.\n\n \n\n**Recent\nDevelopments**\n\n \n\nIn\nDecember 2025, the Company invested $850,000 in The Ryl Company LLC pursuant to a subscription agreement in exchange for a non-controlling\nminority interest. The investment is passive in nature, and the Company does not participate in management or operations of The Ryl Company\nLLC.\n\n \n\n2\n\n \n\n \n\n**Our\nCompetitive Strengths**\n\n \n\nTo\nachieve our growth objectives described below, we intend to leverage the following competitive strengths:\n\n \n\n*Positioned\nto Profitably Grow Through Varying Cycles of the Coffee Market.* We believe that we are one of the few coffee companies to offer a\nbroad array of branded and private label roasted ground coffees and wholesale green coffee across the spectrum of consumer tastes, preferences\nand price points. While many of our competitors engage in distinct segments of the coffee business, we sell products in each of the following\nareas:\n\n \n\n●Retail\nbranded coffee;\n\n●Mainstream\nretail private label coffee;\n\n●Specialty\nretail coffees both private label and branded;\n\n●Wholesale\nspecialty green and gourmet whole bean coffees;\n\n●Single\ncup coffee pods;\n\n●Food\nservice;\n\n●Instant\ncoffees;\n\n●Tea;\nand\n\n●Tabletop\ncoffee roasting equipment.\n\n \n\nOur\nbranded and private label roasted ground coffees are sold at competitive and value price levels, while some of our other branded and\nspecialty coffees are sold predominantly at premium price levels. Premium price level coffee is high-quality gourmet coffee, such as\nAA Arabica coffee, which sell at a substantial premium over traditional retail canned coffee, while competitive and value price level\ncoffee is mainstream or traditional canned coffee. Because of this diversification, we believe that our profitability is not dependent\non any one area of the coffee industry and, therefore, is less sensitive than our competition to potential coffee commodity price and\noverall economic volatility.\n\n \n\n*Wholesale\nGreen Coffee Market Presence.* As a large roaster-dealer of green coffee, we believe that we are favorably positioned to increase\nour specialty coffee sales. Since 1998, we have increased the number of our wholesale green coffee customers, including coffee houses,\nsingle store operators, mall coffee stores and mail order sellers. We are a charter member of the Specialty Coffee Association of America\nand one of the largest distributors of Swiss Water Processed Decaffeinated Coffees and Dattera specialty Brazil coffees in the United\nStates. Our almost 50 years of experience as a roaster and a dealer of green coffee allows us to provide our roasting experience as a\nvalue-added service to our gourmet roaster customers. The assistance we provide to our customers includes training, coffee blending and\nmarket identification. We believe that our relationships with wholesale green coffee customers and our focus on selling green coffee\nas a wholesaler has enabled us to participate in the growth of the specialty coffee market while mitigating the risks associated with\nthe competitive retail specialty coffee environment.\n\n \n\n*Diverse\nPortfolio of Differentiated Branded Coffees.* We have amassed a portfolio of eight proprietary name brands that are sold to supermarkets,\nwholesalers and individually owned stores in the United States, including brands for specialty espresso, Latin espresso, Italian espresso,\n100% Colombian coffee and blended and flavored coffees. In addition, we have entered into a licensing agreement with Del Monte Corporation\nfor the exclusive right to use the S&W trademark in the United States and other countries approved by Del Monte Corporation in connection\nwith the production, manufacture and sale of roasted whole bean and ground coffee for distribution to retail customers. Our existing\nportfolio of differentiated brands combined with our management expertise serve as a platform for us to add additional name brands through\nacquisition or licensing agreements, which target product niches and segments that do not compete with our existing brands.\n\n \n\n*Management\nHas Extensive Experience in the Coffee Industry.*Andrew Gordon, our President, Chief Executive Officer, Chief Financial Officer and\nTreasurer, and David Gordon, our Executive Vice President – Operations, have worked with Coffee Holding for 44 and 46 years, respectively.\nDuring this period, the Company has successfully navigated varying cycles in both the coffee industry and macro economy. David Gordon\nis an original member of the Specialty Coffee Association of America. We believe that our employees and management are dedicated to our\nvision and mission, which is to produce high quality products, as well as to provide quality and responsive service to our customers.\n\n \n\n**Our\nGrowth Strategy**\n\n \n\nWe\nbelieve that significant growth opportunities exist by selectively pursuing strategic acquisitions and alliances, increasing penetration\nwith existing customers by adding new products, developing our Harmony Bay brand and increasing the number of our wholesale green coffee\ncustomers. By capitalizing on this strategy, we hope to continue to grow our business with our commitment to quality and personalized\nservice to our customers. We do not intend to compete on price alone, nor do we intend to expand sales at the expense of profitability.\n\n \n\n3\n\n \n\n \n\n*Selectively\nPursue Strategic Acquisitions and Alliances.* We have expanded our operations by acquiring coffee companies, entering into strategic\nalliances and acquiring or licensing brands, which complement our business objectives. We intend to continue to seek such opportunities.\n\n \n\n*Grow\nOur Cafe Caribe and Cafe Supremo Products.*We believe the Latin population in the United States is the fastest growing and now represents\nthe largest minority demographic in the United States. We believe there is significant opportunity for our Café Caribe and Café\nSupremo brands to gain market share among Latin consumers in the United States. Café Caribe, which has historically been our leading\nbrand by poundage, is a specialty espresso coffee that targets espresso coffee drinkers and, in particular, Latin consumers. Café\nSupremo is a specialty espresso coffee which is priced for the more price sensitive Latin espresso coffee drinker.\n\n \n\n*Further\nMarket Penetration of Our Niche Products.* We intend to capture additional market share through our existing distribution channels\nby selectively adding or introducing new brand names and products across multiple price points, including:\n\n \n\n●New\nlicensing agreements;\n\n●Specialty\nblends and foodservice opportunities; and\n\n●Sales\nof our tabletop coffee roasting equipment.\n\n** **\n\n**Our\nCore Products**\n\n \n\nOur\ncore products can be divided into three categories:\n\n \n\n●*Wholesale\nGreen Coffee:* unroasted raw beans imported from around the world and sold to large, medium\nand small roasters and coffee shop operators;\n\n●*Private\nLabel Coffee:* coffee roasted, blended, packaged and sold under the specifications and\nnames of others, including supermarkets that want to have their own brand name on coffee\nto compete with national brands; and\n\n●*Branded\nCoffee:* coffee roasted and blended to our own specifications and packaged and sold under\nour eight proprietary and licensed brand names in different segments of the market.\n\n \n\n**Wholesale\nGreen Coffee.**The specialty coffee market remains the fastest growing area of our industry. The number of gourmet coffee houses\nhave been increasing in all areas of the United States. The growth in specialty coffee sales has created a marketplace for higher quality\nand differentiated products, which can be priced at a premium in the marketplace. As a large roaster-dealer of green coffee, we are favorably\npositioned to increase our specialty coffee sales. We sell green coffee beans to small roasters and coffee shop operators located throughout\nthe United States and carry over approximately 90 different varieties. Specialty green coffee beans are sold unroasted, direct from warehouses\nto small roasters and gourmet coffee shop operators, which then roast the beans themselves. We sell from as little as one bag (132 pounds)\nto a full truckload (44,000 pounds) of specialty green coffee beans, depending on the size and need of the customer. We believe that\nwe can increase sales of wholesale green coffee without an increase in infrastructure and without venturing into the highly competitive\nretail specialty coffee environment. We believe that by utilizing our current strategy we can be as profitable as, or more profitable\nthan, our competitors in this segment by selling “one bag at a time” rather than “one cup at a time.”\n\n \n\n**Private\nLabel Coffee.**We roast, blend, package and sell coffee under private labels for companies throughout the United States and Canada.\nOur private label coffee is sold in cans, brick packages and instants in a variety of sizes. We produce private label coffee for customers\nwho desire to sell coffee under their own name but do not want to engage in the manufacturing process. Our private label customers seek\na quality similar to the national brands at a lower cost, which represents a better value for the consumer.\n\n \n\n**Branded\nCoffee.**We roast and blend our branded coffee according to our own recipes and package the coffee at our facilities in La Junta,\nColorado. We then sell the packaged coffee under our brand labels to supermarkets, wholesalers and individually-owned stores throughout\nthe United States.\n\n \n\n4\n\n \n\n \n\nWe\nhold trademarks for each of our proprietary name brands and have the exclusive right to use the S&W, IL CLASSICO brand names in the\nUnited States in connection with the production, manufacture and sale of roasted whole bean and ground coffee for distribution at the\nretail level. For further information regarding our trademark rights, see “Business—Trademarks.”\n\n \n\nEach\nof our name brands is directed at a particular segment of the coffee market. Our branded coffees are:\n\n \n\n*Cafe\nCaribe*, a specialty espresso coffee that targets espresso coffee drinkers and, in particular, the Latin consumer market;\n\n \n\n*Don\nManuel*, is produced from the finest 100% Colombian coffee beans. Don Manuel is an upscale quality product which commands a substantial\npremium compared to the more traditional brown coffee blends. We also use this known trademark in our food service business because of\nthe high brand quality;\n\n \n\n*S&W*,\nan upscale canned coffee established in 1921 and includes Premium, Premium Decaf, French Roast, Colombian, Colombian Decaf, Swiss Water\nDecaf, Kona, Mellow’d Roast and IL CLASSICO lines;\n\n \n\n*Cafe\nSupremo*, a specialty espresso that targets espresso drinkers of all backgrounds and tastes. It is designed to introduce coffee drinkers\nto the tastes of dark roasted coffee;\n\n \n\n*Via\nRoma*, an Italian espresso targeted at the more traditional espresso drinker;\n\n \n\n*Premier\nRoasters*, a line of high-quality Arabica coffees packed in composite cans and poly bags and single serve;\n\n \n\n*Harmony\nBay*, an upscale line of flavored beans in 11oz and 40oz bags, along with single serve offerings in a multitude of unique flavor profiles;\nand\n\n \n\n*Café\nFemenino Coffee*, coffee beans produced from around the world from 100% women-owned coffee cooperative.\n\n \n\n**Other\nProducts**\n\n \n\nWe\nalso offer several niche products, including:\n\n \n\n●tea;\nand\n\n●table-top\ncoffee roasters and grinders.\n\n** **\n\n**Raw\nMaterials**\n\n \n\nCoffee\nis a commodity traded on the Commodities and Futures Exchange subject to price fluctuations. Over the past five years, the average price\nper pound of coffee beans ranged from approximately $0.9270 to $3.4835. The price for coffee beans on the commodities market as of October\n31, 2025, and 2024 was $3.92 and $2.46 per pound, respectively. Specialty green coffee, unlike most coffee, is not tied directly to the\ncommodities cash markets. Instead, it tends to trade on a negotiated basis at a substantial premium over commodity coffee pricing, depending\non the origin, supply and demand at the time of purchase. We are a licensed Fair Trade dealer for Fair Trade certified coffee. Fair Trade\ncertified coffee helps small coffee farmers to increase their incomes and improve the prospects of their communities and families by\nguaranteeing farmers a minimum price of ten cents above the current market price. Our North Andover plant that is operated by our Comfort\nFoods division is certified organic by the Organic Crop Improvement Association (OCIA). All of our specialty green coffees, as well as\nall of the other coffees we import for roasting, are subject to multiple levels of quality control.\n\n \n\n5\n\n \n\n \n\nWe\npurchase our green coffee from dealers located primarily within the United States. The dealers supply us with coffee beans from many\ncountries, including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. We do not have any formalized, material agreements or long-term\ncontracts with any of these suppliers. Rather, our purchases are typically made pursuant to individual purchase orders. We do not believe\nthat the loss of any one supplier would have a material adverse effect on our operations due to the availability of alternate suppliers.\n\n \n\nThe\nsupply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Supply\nand price can be affected by factors such as weather, politics, tariffs, currency fluctuations and economics within the countries that\nexport coffee. Increases in the cost of coffee beans can, to a certain extent, be passed on to our customers in the form of higher prices\nfor coffee beans and processed coffee. Drastic or prolonged increases in coffee prices may also adversely impact our business as it could\nlead to a decline in overall consumption of coffee. Similarly, rapid decreases in the cost of coffee beans may force us to lower our\nsale prices before realizing cost reductions in our purchases.\n\n \n\nWe\nsubject all of our private unroasted green coffee to both a pre-shipment sample approval and an additional sample approval upon arrival\ninto the United States. Once the arrival sample is approved, we then bring the coffee to one of our facilities to roast and blend according\nto our own strict specifications. During the roasting and blending process, samples are pulled off the production line and tested on\nan hourly basis to ensure that each batch roasted is consistent with the others and meets the strict quality standards demanded by our\ncustomers and us.\n\n \n\n**Our\nUse of Derivatives**\n\n \n\nThe\nsupply and price of coffee beans are subject to volatility and are influenced by numerous factors which are beyond our control. Historically,\nwe have used, and intend to continue to use in a limited capacity, short-term coffee futures and options contracts primarily for the\npurpose of partially hedging the effects of changing green coffee prices and to reduce our costs of sales. In addition, we acquired,\nand expect to continue to acquire, futures contracts with longer terms, generally three to four months, primarily for the purpose of\nguaranteeing an adequate supply of green coffee. Realized and unrealized gains or losses on options and futures contracts are reflected\nin our cost of sales. Gains on options and futures contracts reduce our cost of sales and losses on options and futures contracts increase\nour cost of sales. The use of these derivative financial instruments has generally enabled us to mitigate the effect of changing prices.\nWe believe that, in normal economic times, our hedging policies remain a vital element of our business model not only in controlling\nour cost of sales, but also giving us the flexibility to obtain the inventory necessary to continue to grow our sales while trying to\nminimize margin compression during a time of high coffee prices. However, no strategy can entirely eliminate pricing risks and we generally\nremain exposed to losses on futures contracts when prices decline significantly in a short period of time, and we would generally remain\nexposed to supply risk in the event of non-performance by the counterparties in any one of our physical contracts. Although we have had\nnet gains on options and futures contracts in the past, we have incurred significant losses on options and futures contracts during some\nreporting periods. In these cases, our cost of sales has increased, resulting in a decrease in our profitability or increase our losses.\nSuch losses have and could in the future materially increase our cost of sales and materially decrease our profitability and adversely\naffect our stock price. See “Item 1A – Risk Factors - If our hedging policy is not effective, we may not be able to control\nour coffee costs, we may be forced to pay greater than market value for green coffee and our profitability may be reduced.” Failure\nto properly design and implement an effective hedging strategy may materially adversely affect our business and operating results. If\nthe hedges that we enter do not adequately offset the risks of coffee bean price volatility or our hedges result in losses, our cost\nof sales may increase, resulting in a decrease in profitability or increased losses. As previously announced, as a result of the volatile\nnature of the commodities markets, we have and are continuing to scale back our use of hedging and short-term trading of coffee futures\nand options contracts, and intend to continue to use these practices in a limited capacity going forward. See “Quantitative and\nQualitative Disclosures About Market Risk—Commodity Price Risks.”\n\n \n\n6\n\n \n\n \n\n**Trademarks\nand Tradename**\n\n \n\nWe\nhold trademarks, registered with the United States Patent and Trademark Office, for all eight of our proprietary coffee brands and an\nexclusive license for S&W brands for sale in the United States. Trademark registrations are subject to periodic renewal and we anticipate\nmaintaining our registrations. We believe that our brands are recognizable in the marketplace and that brand recognition is important\nto the success of our branded coffee business.\n\n \n\n**Customers**\n\n \n\nWe\nsell our private label and our branded coffee to some of the largest retail and wholesale customers in the United States.\n\n \n\nAlthough\nour agreements with wholesale customers generally contain only pricing terms, our contracts with certain customers also contain minimum\nand maximum purchase obligations at fixed prices. Because our profits on a fixed-price contract could decline if coffee prices increased,\nwe acquire futures contracts with longer terms (generally three to four months) primarily for the purpose of guaranteeing an adequate\nsupply of green coffee at favorable prices. Although the use of these derivative financial instruments has generally enabled us to mitigate\nthe effect of changing prices, no strategy can entirely eliminate pricing risks or increased losses and we generally remain exposed to\nlosses on futures contracts when prices decline significantly in a short period of time, and we would generally remain exposed to supply\nrisk in the event of non-performance by the counterparties to any futures contracts. See “Our Use of Derivatives.”\n\n \n\n**Marketing**\n\n \n\nWe\nmarket our private label and wholesale coffee through trade shows, industry publications, face-to-face contact and through the use of\nour internal sales force and non-exclusive independent food and beverage sales brokers. We also use our web site (www.coffeeholding.com)\nas a method of marketing our coffee products and ourselves.\n\n \n\nFor\nour private label and branded coffees, we will, from time to time in conjunction with retailers and with wholesalers, conduct in-store\npromotions, such as product demonstrations, coupons, price reductions, two-for-one sales and new product launches to capture changing\nconsumer taste preferences for upscale canned, bagged and single cup coffees.\n\n \n\nWe\nevaluate opportunities for growth consistent with our business objectives. In addition, we have established relationships with independent\nsales brokers to market our products across the United States, in areas of the country where we have not had a high penetration of sales,\nand in Canada. We utilize our in-house sales personnel to market our private label brands. We intend to capture additional market share\nin our existing distribution channels by selectively adding or introducing new brand names and products across multiple price points,\nincluding niche specialty blends, private label “value” blends and tea and our own brands, filter packages and peripheral\nproducts.\n\n \n\n**Competition**\n\n \n\nThe\ncoffee market is highly competitive. We compete in the following areas:\n\n \n\n*Wholesale\nGreen Coffee.* There are many green coffee dealers throughout the United States. Many of these dealers have greater financial resources\nthan we do. However, we believe that we have both the knowledge and the capability to assist small specialty gourmet coffee roasters\nwith developing and growing their businesses. Our over 40 years of experience as a roaster and a dealer of green coffee allows us to\nprovide our roasting experience as a value added service to our gourmet roaster customers. While other coffee merchants may be able to\noffer lower prices for coffee beans, we market ourselves as a value-added supplier to small roasters, with the ability to help them market\ntheir specialty coffee products and develop a customer base. The assistance we provide our customers includes training, coffee blending\nand market identification. Because specialty green coffee beans are sold unroasted to small coffee shops and roasters that market their\nproducts to local gourmet customers, we do not believe that our specialty green coffee customers compete with our private label or branded\ncoffee lines of business. We believe that the addition of Organic Products Trading Company, LLC (“OPTCO”), Sonofresco, CFI\nas well as our external green coffee salespeople allows us to compete more effectively throughout the country and Canada.\n\n \n\n7\n\n \n\n \n\n*Private\nLabel Competition.* There are several major producers of coffee for private label sales in the United States. Many other companies\nproduce coffee for sale on a regional basis. Our main competitor is the Massimo Zanetti Beverage Company. The Massimo Zanetti Beverage\nCompany is larger and has more financial and other resources than we do and, therefore, is able to devote more resources to product development\nand marketing. We believe that we remain competitive by providing a higher level of quality and customer service. This service includes\nensuring that the coffee produced for each label maintains a consistent taste and is delivered on time and in the proper quantities.\n\n \n\n*Branded\nCompetition.* Our proprietary brand coffees compete with many other brands that are sold in supermarkets and specialty stores, primarily\nin the Northeastern United States. The branded coffee market in both the Northeast and elsewhere is dominated by two large companies:\nKraft Foods, Inc. (owner of the Maxwell House brand), and J.M. Smucker Co. (owner of the Folgers and Café Bustelo brands). Our\nlarge competitors have greater access to capital and a greater ability to conduct marketing and promotions. We believe that, while our\ncompetitors’ brands may be more nationally recognizable, our Café Caribe and Café Supremo brands are competitive\nin the fast-growing Latin demographic, our Harmony Bay has a strong regional presence in the northeast and our S&W brand has been\na recognizable brand on the west coast for over 80 years.\n\n \n\n**Government\nRegulation**\n\n \n\nOur\ncoffee roasting operations are subject to various governmental laws and regulations, which require us to obtain licenses relating to\ncustoms, health and safety, building and land use and environmental protection. Our roasting facility is subject to state and local air-quality\nand emissions regulation. If we encounter difficulties in obtaining any necessary licenses or if we have difficulty complying with these\nlaws and regulations, then we could be subject to fines and penalties, which could have a material adverse effect on our profitability.\nIn addition, our product offerings could be limited, thereby reducing our revenues.\n\n \n\nWe\nbelieve that we are in compliance in all material respects with all such laws and regulations and that we have obtained all material\nlicenses and permits that are required for the operation of our business. We are not aware of any environmental regulations that have\nor that we believe will have a material adverse effect on our operations.\n\n \n\n**Employees**\n\n \n\nWe\nhave 92 full-time employees. None of our employees are represented by unions or collective bargaining agreements. Our management believes\nthat we maintain good working relationships with our employees. To supplement our internal sales staff, we sometimes engage independent\nnational and regional sales brokers as independent contractors who work on a commission basis."}