Company Quick10K Filing
Thanksgiving Coffee
Price-0.00 EPS0
Shares1 P/E-0
MCap-0 P/FCF-0
Net Debt-0 EBIT0
TEV-0 TEV/EBIT-1
TTM 2019-06-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-12-18
10-Q 2020-06-30 Filed 2020-11-23
10-Q 2020-03-31 Filed 2020-11-09
10-K 2019-12-31 Filed 2020-10-26
10-Q 2019-09-30 Filed 2020-08-19
10-Q 2019-06-30 Filed 2019-12-12
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-27
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-15
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-30
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-15
10-Q 2017-03-31 Filed 2017-05-23
10-K 2016-12-31 Filed 2017-03-29
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-31
8-K 2019-12-12
8-K 2019-07-31

TCCI 10Q Quarterly Report

Part 1. Financial Information
Item 1. Financial Statements
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Remove and Reserved
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EX-31.1 dex311.htm
EX-31.2 dex312.htm
EX-31.3 dex313.htm
EX-32.1 dex321.htm
EX-32.2 dex322.htm
EX-32.3 dex323.htm

Thanksgiving Coffee Earnings 2010-03-31

Balance SheetIncome StatementCash Flow
1.91.51.10.80.40.02017201820192020
Assets, Equity
1.20.90.70.40.2-0.12017201820192020
Rev, G Profit, Net Income
0.30.20.10.1-0.0-0.12017201820192020
Ops, Inv, Fin

10-Q 1 d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2010

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              To             

Commission File Number: 33-96070-LA

 

 

THANKSGIVING COFFEE COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

 

 

California   94-2823626

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

19100 South Harbor Drive, Fort Bragg, California   95437
(Address of principal executive offices)   (Zip Code)

(707) 964-0118

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b–2 of the Exchange Act. (Check one):

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).    Yes  ¨    No  x

On May 14, 2010 the registrant had 1,236,744 shares of Class A common stock, no par value per share, outstanding.

 

 

 


Table of Contents

FORM 10-Q

TABLE OF CONTENTS

 

     PART I – FINANCIAL INFORMATION     

Item 1.

   Consolidated Financial Statements    3
   Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009.    4
   Consolidated Statements of Operations for the three months ended March 31, 2010 and March 31, 2009 (unaudited)    6
   Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and March 31, 2009 (unaudited)    7
   Notes to Consolidated Financial Statements    8

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    18

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    21

Item 4.

   Controls and Procedures    21
   PART II – OTHER INFORMATION    22

Item 1.

   Legal Proceedings    22

Item 1A.

   Risk Factors    22

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds    22

Item 3.

   Defaults Upon Senior Securities    22

Item 4.

   Remove and Reserved    22

Item 6.

   Exhibits    22
Signatures    23

 

2


Table of Contents

Financial Statements

and Notes to Financial Statements

Thanksgiving Coffee Company, Inc.

For the Three Months Ended March 31, 2010 and 2009

PART 1. Financial Information

 

Item 1. Financial Statements

The consolidated financial statements included herein have been prepared by Thanksgiving Coffee Company, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such SEC rules and regulations. In the opinion of management of the Company, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2010 and December 31, 2009, and its results of operations for the three month periods ended March 31, 2010 and 2009 and its cash flows for the three month periods ended March 31, 2010 and 2009. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto filed as a part of the Company’s annual report on Form 10-K.

 

3


Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

     March 31,
2010
(Unaudited)
    December 31,
2009

See Note 1
 

Assets

    

Current assets

    

Cash

   $ 39,004      $ 54,743   

Accounts receivable, net of allowance

     213,542        245,315   

Inventories

     287,022        307,192   

Prepaid expenses

     16,687        28,267   
                

Total current assets

     556,255        635,517   

Property and equipment

    

Property and equipment

     2,666,517        2,653,539   

Accumulated depreciation

     (2,336,722     (2,310,811
                

Total property and equipment

     329,795        342,728   

Other assets

    

Deposits and other assets

     2,000        12,569   

Other intangibles, net of amortization

     4,299        5,505   
                

Total other assets

     6,299        18,074   
                

Total assets

   $ 892,349      $ 996,319   
                

See accompanying notes to financial statements

 

4


Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

     March 31,
2010
(Unaudited)
    December 31,
2009

See Note 1
 

Liabilities and shareholders’ equity

    

Current liabilities

    

Accounts payable

   $ 299,067      $ 330,381   

Notes payable - bank

     49,376        50,568   

Notes payable - other

     3,081        3,611   

Note payable - shareholders

     25,019        31,019   

Capital lease obligations

     17,244        19,988   

Accrued liabilities

     63,441        42,249   
                

Total current liabilities

     457,228        477,816   

Long term debt

    

Notes payable - Bank

     166,300        175,266   

Notes payable - Other

     —          325   

Capital lease obligations

     40,658        44,486   
                

Total long term debt

     206,958        220,077   
                

Total liabilities

     664,186        697,893   

Shareholders’ equity

    

Common stock, no par value, 1,960,000 shares authorized, 1,236,744 shares issued and outstanding

     861,816        861,816   

Additional paid in capital

     24,600        24,600   

Accumulated deficit

     (658,253     (587,990
                

Total shareholders’ equity

     228,163        298,426   
                

Total liabilities and shareholders’ equity

   $ 892,349      $ 996,319   
                

See accompanying notes to financial statements

 

5


Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Operations

Unaudited

 

     For the Three Months
Ended March 31,
 
     2010     2009  

Income

    

Net sales

   $ 1,003,088      $ 1,079,650   

Cost of sales

     648,305        650,025   
                

Gross profit

     354,783        429,625   

Operating expenses

    

Selling, general and administrative expenses

     390,593        427,356   

Depreciation and amortization

     23,671        25,582   
                

Total operating expenses

     414,264        452,938   
                

Operating loss

     (59,481     (23,313

Other income (expense)

    

Miscellaneous income (expense)

     (2,216     (2,334

Interest expense

     (7,766     (9,354
                

Total other income (expense)

     (9,982     (11,688
                

Loss before income taxes

     (69,463     (35,001

Income tax expense

     (800     (800
                

Net loss

   $ (70,263   $ (35,801
                

Loss per share (basic)

   $ (0.057   $ (0.029
                

Loss per share (dilutive)

   $ (0.057   $ (0.029
                

Weighted average number of shares

     1,236,744        1,236,744   
                

See accompanying notes to financial statements

 

6


Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited

 

     For the Three Months
Ended March 31,
 
     2010     2009  

Operating activities

    

Net loss

   $ (70,263   $ (35,801

Adjustments to reconcile net loss to cash flows from operating activities:

    

Depreciation and amortization

     27,117        28,104   

Allowance for bad debts

     (2,419     (192

(Increase) decrease in:

    

Accounts receivable

     34,193        24,858   

Inventories

     20,170        21,379   

Prepaid expenses

     11,580        8,109   

Deposits and other assets

     10,569        3,053   

Increase (decrease) in:

    

Accounts payable

     (31,315     (19,835

Accrued liabilities

     21,192        49,693   
                

Net cash provided by (used in) operating activities

     20,824        79,368   

Investing activities

    

Purchases of property and equipment

     (12,978     (5,085
                

Net cash (used in) investing activities

     (12,978     (5,085

Financing activities

    

Repayments of notes payable and capital leases

     (23,585     (33,264
                

Net cash (used in) financing activities

     (23,585     (33,264

Decrease in cash

     (15,739     41,019   

Cash at beginning of period

     54,743        52,144   
                

Cash at end of period

   $ 39,004      $ 93,163   
                

See accompanying notes to financial statements

 

7


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2009 and December 31, 2008

1. Basis of Presentation

The unaudited condensed financial statements in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. We have continued to follow the accounting policies disclosed in the financial statements included in our 2009 Form 10-K filed with the Securities and Exchange Commission (SEC). It is suggested that these statements be read in conjunction with the December 31, 2009 audited financial statements and the accompanying notes on Form 10-K, as filed with the SEC.

The interim financial information in this Form 10-Q reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our results of operations for the interim periods. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of results to be expected for the full year.

Concentration of Risk

In the first quarter of fiscal 2010, one customer accounted for 20.3% of the Company’s revenue. The account has purchased from the Company since 1992. The account has serving locations and is a distributor of the Company’s product. A loss of this account or any other large account, or a significant reduction in sales to any of the Company’s principal customers, could have an adverse impact on the Company.

Segment Reporting

ASC 280, “Disclosures about Segments of an Enterprise and Related Information”, changed the way public companies report information about segments of their business in their financial statements. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers. See Note 12

Income Taxes

The Company accounts for income taxes under the asset and liability method as prescribed by ASC 740, Accounting for Income Taxes. As such, deferred income tax assets and liabilities are recognized for the future tax consequences of the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basses. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Accordingly, actual results could differ from those estimates.

 

8


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

2. Accounts Receivable

Accounts receivable consist of the following:

 

     3/31/2010     12/31/2009  

Accounts receivable

   $ 218,182      $ 252,374   

Less: allowance for doubtful accounts

     (4,640     (7,059
                

Net accounts receivable

   $ 213,542      $ 245,315   
                

The Company utilizes a percentage method to establish the allowance for doubtful accounts. The estimated allowance ranges from 1% to 10% of outstanding receivables based on factors pertaining to the credit risk of specific customers, historical trends and other information. Delinquent accounts are written off when it is determined that amounts are uncollectible. Bad debt expense (recovery) for the three months ended March 31, 2010 and 2009 was $(2,480) and $81 respectively.

3. Inventories

Inventories consist of the following:

 

     3/31/2010    12/31/2009

Coffee

     

Unroasted

   $ 110,225    $ 107,325

Roasted

     57,579      71,159

Tea

     1,663      1,393

Packaging, supplies and other merchandise held for sale

     117,555      127,315
             

Total inventories

   $ 287,022    $ 307,192
             

4. Property and Equipment

Property and equipment consist of the following:

 

     3/31/2010     12/31/2009  

Equipment

   $ 1,410,986      $ 1,334,579   

Furniture and fixtures

     190,991        210,016   

Leasehold improvements

     465,972        460,729   

Transportation equipment

     194,147        184,368   

Marketing equipment

     159,913        166,162   

Capitalized website development costs

     14,074        14,076   

Property held under capital leases

     230,434        283,609   
                

Total property and equipment

     2,666,517        2,653,539   

Accumulated depreciation

     (2,336,722     (2,310,811
                

Property and equipment, net

   $ 329,795      $ 342,728   
                

Depreciation expense for the three months ended March 31, 2010 and 2009 was $25,911 and $26,898 respectively.

 

9


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

5. Intangible Assets

Intangible assets subject to amortization consist of the following:

 

     3/31/2010     12/31/2009  

Leasehold value

   $ 67,000      $ 67,000   

Trademarks

     5,127        5,127   
                

Total intangible assets

     72,127        72,127   

Accumulated amortization

     (67,828     (66,622
                

Other intangibles, net of amortization

   $ 4,299      $ 5,505   
                

Amortization expense for the three months ended March 31, 2010 and 2009 was $1,206 for both years.

6. Deposits and Other Assets

Included in Deposits and Other Assets are artwork that was developed for the labels for the tea program and long-term deposits.

 

10


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

7. Long Term Debt

Notes Payable

 

     3/31/2009    12/31/2009
Note payable to Savings Bank of Mendocino, payable in monthly installments of $4,309 plus interest at 7.25% renewed December 1, 2009, final payment is due on December 1, 2014. The note payable is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights along with a personal guarantee from the Company’s majority shareholders.    $ 204,176    $ 213,334
Line of credit to Savings Bank of Mendocino, payable in monthly installments of interest only at 2% over prime rate renewed March 16, 2010 with a minimum rate of 6.50% (6.500% at March 31, 2010). The note payable for the line of credit is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights along with a personal guarantee from the Company’s majority shareholders. The line is for a maximum of $25,000 and $11,500 has been used as of March 31, 2010.      11,500      12,500
Note payable to majority shareholders, Paul and Joan Katzeff, uncollateralized, payable in monthly installments of $2,000 plus interest at 12%paid monthly, due on July 15, 2010 .      5,100      11,100
Note payable to majority shareholders, Paul and Joan Katzeff, uncollateralized payable in monthly installments of interest only at 12%, with balance due on demand after June 30, 1996.      19,919      19,919
Note payable to Chrysler Financing, payable in monthly installments of $329, including interest at 15.492%, collateralized by a vehicle, final payment due on January 24, 2011      3,081      3,936

 

11


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

Capital Lease Obligations

 

     3/31/2010    12/31/2009
Note payable to US Bancorp Manifest Funding Services payable in monthly installments of $621, including interest at 14.32%, collateralized by equipment, final payment due on September 8, 2014    24,639    25,599
Note payable to Marlin Leasing payable in monthly installments of $544, including interest at 17.172%, collateralized by equipment, final payment due on May 1, 2010.    1,069    2,619
Note payable to Marlin Leasing payable in monthly installments of $428, including interest at 18.00%, collateralized by equipment, final payment due on October 1, 2010.    1,651    2,830
Note payable to US Bancorp Manifest Funding Services payable in monthly installments of $533, including interest at 22.24%, collateralized by equipment, final payment due on January 10, 2010.    —      524

 

12


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

7. Long Term Debt (continued)

Capital Lease Obligations (continued)

 

     3/31/2010     12/31/2009  
Note payable to Bank of the West payable in monthly installments of $489, including interest at 12.69% collateralized by equipment, final payment due on May 1, 2013    $ 15,237      $ 16,201   
Note payable to BSB Leasing payable in monthly installments of $285, including interest at 15.89%, colateralized by equipment, final payment due on June 2, 2012      8,869        9,680   
Note payable to BSB Leasing payable in monthly installments of $390, including interest at 14.30%, collateralized by equipment, final payment due June 2, 2012      6,437        7,021   
                
   $ 301,678      $ 325,263   

Less current portion

     (94,720     (105,186
                

Long term portion of notes payable

   $ 206,958      $ 220,077   
                

Interest paid for the three months ended March 31, 2010 and 2009 was $7,766 and $9,354, respectively.

As of March 31, 2010, maturities of notes payable and capital lease obligations for each of the next five years and in the aggregate were as follows:

 

Years Ending March 31,

    

2011

   $ 94,720

2012

     77,564

2013

     79,541

2014

     49,853
      
   $ 301,678
      

Based on current borrowing rates, the fair value of the notes payable and capital lease obligations approximate their carrying amounts.

 

13


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

8. Income Taxes

Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist of the benefit from net operating loss (NOL) carryforwards and temporary differences. The net operating loss carryforwards expire in various years through 2030. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operation loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.

The Company’s deferred tax assets, valuation allowance, and change in valuation allowance as of March 31, 2010 are as follows:

 

Period Ending

   Estimated NOL
Carryforward Less
Temporary
Differences
   NOL
Expires
   Benefit
From
NOL
   Valuation
Allowance
    Change in
Valuation
Allowance
    Net Tax
Benefit

March 31, 2010

               

Federal

   $ 11,416    2017    $ 1,712    $ (1,712   $ (1,712   $ —  
     128,576    2018      19,286      (19,286     (19,286     —  
     96,867    2023      14,530      (14,530     (14,530     —  
     49,714    2024      7,457      (7,457     (7,457     —  
     125,700    2026      18,855      (18,855     (18,855     —  
     63,303    2028      9,495      (9,495     (9,495     —  
     69,160    2030      10,374      (10,374     (10,374     —  
                                       
   $ 544,736       $ 81,709    $ (81,709   $ (81,709   $ —  
                                       
                  —  

State

   $ 5,881    2018    $ 520    $ (520   $ (520   $ —  
     67,858    2029      5,999      (5,999     (5,999     —  
     69,491    2030      6,143      (6,143     (6,143     —  
                                       
   $ 143,230       $ 12,662    $ (12,662   $ (12,662   $ —  
                                       

Income taxes at the expected statutory rate are reconciled to the Company’s actual income taxes as follows:

 

     2010  

Tax (benefit) at federal statutory rate

   (15.00 )% 

State tax (benefit) net of federal benefit

   (7.50

Non-taxable differences

   0.50   

Temporary differences

   (0.44

Valuation allowance

   23.59   
      

Tax provision - effective rate

   1.15   
      

 

14


Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

9. Operating Leases

The Company leases some office equipment under noncancelable operating leases with terms ranging from three to five years.

As of March 31, 2010, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate were:

 

Years Ending March 31,

    

2011

     10,909

2012

     9,840

2013

     6,652

2014

     6,652

2015

     836
      
   $ 34,889
      

Total operating lease payments for the three months ended March 31, 2010 and 2009 was $2,727 and $1,657 respectively.

10. Long Term Leases

The Company leases its corporate headquarters, warehouse and waterfront facilities from Paul and Joan Katzeff (the Company’s majority shareholders, directors and officers). The lease is classified as an operating lease and provides for monthly rental payments of $8,600. The Company is responsible for all real estate taxes, insurance and maintenance costs related to the facilities. The ten-year lease term ends May 31, 2015.

The Company also leases a bakery establishment in Mendocino, California under an operating lease expiring September 30, 2011. The lease provides for monthly rental payments of approximately $4,600

As of March 31, 2010, minimum future rental payments under noncancelable facilities operating leases for each of the next five years and in the aggregate are as follows:

 

Years ending March 31,

    

2011

   $ 160,380

2012

     132,480

2013

     103,200

2014

     103,200

2015

     43,000

Thereafter

     —  
      
   $ 542,260
      

 

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

11. Related Party Transactions

As of March 31, 2010, the Company has an interest only note payable for $19,919, due on demand, to Paul and Joan Katzeff, (the Company’s majority shareholders, directors and officers). In addition, the Company has a note payable to Paul and Joan Katzeff with a principal balance of $5,100, as of March 31, 2010. The loan is uncollateralized, is due July 15, 2010, requires monthly payments of $2,000 and bears interest at 12% per annum. The Company also leases properties from its majority shareholders.

The summary of payments made to Paul and Joan Katzeff in connection with these related party transactions for the three months ended March 31, 2010, is as follows:

 

Interest payments

   $ 852

Rent payments

   $ 17,600

Principal payments

   $ 6,000

The Company’s majority shareholders’ also guarantee certain notes payable of the Company (See Note 7).

12. Information on Business Segments

As noted in Note 1 in the Notes to the Financial Statements, the Company operates in two different business segments: the specialty coffee business and the retail bakery business. The specialty coffee business, although primarily based in California, sells to grocery stores, serving locations and other retail outlets throughout the United States and some international business. The bakery sells exclusively on the north coast of California in Mendocino and Fort Bragg.

Selected financial data by business segment

 

     3/31/2010     3/31/2009  

Net Sales

    

Specialty Coffee

   $ 905,114      $ 964,655   

Bakery

     109,904        125,808   
                

Total

   $ 1,015,018      $ 1,090,463   
                

Intersegment Sales

    

Specialty Coffee

     11,930        10,813   
                

Total Sales

   $ 1,003,088      $ 1,079,650   
                

Operating Income/(Loss)

    

Specialty Coffee

   $ (21,708   $ 11,656   

Bakery

     (37,773     (34,969
                

Total

   $ (59,481   $ (23,313
                

Depreciation and Amortization

    

Specialty Coffee

   $ 17,552      $ 19,346   

Bakery

     6,119        6,236   
                

Total

   $ 23,671      $ 25,582   
                

 

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

 

12. Information on Business Segments (continued)

 

      3/31/2010    03/31/2009

Interest Expense

     

Specialty Coffee

   $ 7,071    $ 8,513

Bakery

     695      841
             

Total

   $ 7,766    $ 9,354
             
     3/31/2010    12/31/2009

Assets

     

Specialty Coffee

   $ 798,518    $ 890,709

Bakery

     93,831      105,610
             

Total

   $ 892,349    $ 996,319
             

Fixed Assets

     

Specialty Coffee

   $ 262,049    $ 274,988

Bakery

     67,746      67,740
             

Total

   $ 329,795    $ 342,728
             

 

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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. In some cases, forward-looking statements may be identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These statements relate to, among other things, possible expansions into new and existing markets and trends in the operations of Thanksgiving Coffee Company, Inc. (“the Company”). Any forward-looking statements should be considered in light of various risks and uncertainties that could cause results to differ materially from expectations, estimates or forecasts expressed. These various risks and uncertainties include, but are not limited to: changes in general economic conditions, changes in business conditions in the coffee industry, fluctuations in consumer demand for coffee products and in the availability and costs of green beans, continuing competition within the Company’s businesses, variances from budgeted sales mix and growth rate, consumer acceptance of the Company’s products, inability to secure adequate capital to fund its operating expenses and working capital requirements, inability to hire, train and retain qualified personnel, concentration of production and sales in Northern California, the loss of one or more major customers, inability to successfully implement the Company’s sales goals, natural disasters, civil unrest in countries which produce coffee and tea, weather and other risks identified herein. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this Quarterly Report on Form 10-Q. The Company’s forward-looking statements should also be considered in light of its reviewed financial statements, related notes and the other financial information appearing elsewhere in this report and in its other filings with the Securities and Exchange Commission. As a result of these risks and uncertainties, the Company’s actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company assumes no obligation to update any forward-looking statements.

SUMMARY

Sales of the Company have eroded over the last five years primarily due to declines in the direct distribution sales method of the Company’s business (i.e., delivery by company truck). Increased competition, customer attrition and customers roasting green beans for their own use have all had a negative impact on the Company’s sales. The Company has tried a number of strategies that have not proven effective in abating these declines. The Company has changed its method of distribution to rely less on direct distribution (with only two routes) and instead uses independent distributors or shipping direct (via UPS or other common carrier). The effect of these changes on the Company’s sales has been limited but has reduced distribution expenses. Because of the limited impact of these changes, as well as the increase in cost of sales and other factors noted herein, there can be no assurances that the Company will be profitable in any future period, and, as a consequence, the Company is considering various strategic alternatives.

The Company pays substantially more for its green beans than the market price, because of quality, organic nature of many of its lines and the fact that it uses fair-traded coffees. Green bean costs have continued to rise and have placed pressure on margins. If green bean costs do not decline or continue to rise, whether as a consequence of inclement weather in a major producing area or any other event that affects green bean pricing, and the Company cannot offset costs by raising prices, it would have a negative impact on the Company and its margins.

 

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The Company has a revolving line of credit for $25,000 of which $11,500 is currently outstanding and a term debt facility of $204,176 with the Savings Bank of Mendocino. The term debt is a five-year note renewed December 1, 2009 and is due December 1, 2014. The line of credit was renewed on March 13, 2010 and is renewed annually. If the credit line should not be renewed, the stability of the Company’s business would be in question. “See Liquidity and Capital Resources.”

Results of Operations

Three months ended March 31, 2010 versus March 31, 2009

 

Consolidated

   Increase (Decrease)     Percent Change  

Net Sales

   $ (76,562   (7.1 )% 

Cost of Sales

     (1,720   (0.3 )% 

Gross Margin %

     (4.4 )%    (11.1 )% 

Selling, G&A Expense

     (36,763   (8.6 )% 

Depreciation And Amortization

     (1,911   (7.5 )% 

Interest Expense

     (1,588   (17.0 )% 

Net Income (Loss)

     (34,462   —  

Consolidated net sales for the three months ended March 31, 2010 were $1,003,088, down 7.1%, or over $76,000 when compared with net sales of $1,079,650 for the same period in fiscal 2009.

Distribution revenues (e.g., revenues generated on the Company’s own truck distribution) were down $35,000 or 9% for the three months ended March 31, 2010, when compared with distribution sales for the same period in 2009. The decline appears to be a result of slower volume at existing customers as no customers have been lost. It is also a result of lower sales to a grocery chain in California that eliminates the Company’s products when they remodel existing stores.

National revenues (e.g., revenues not derived by mail order and direct truck distribution) were up $5,000, or 1% for the three months ended March 31, 2010 when compared to national sales for the same period in 2009.

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) decreased $30,000, or 25% for the three months ended March 31, 2010 when compared to mail order sales for the same period in 2009. The decrease was attributable to a decline in the Cornucopia program through the elimination of some partners and a slowdown in the Company’s online store volume.

Sales of the Company’s bakery were down $16,000 for the three months ended March 31, 2010 when compared to bakery sales for the same period in 2009. Lower customer counts and a lower cash register ring per customer resulted in the lower sales volume.

Consolidated cost of sales for the three months ended March 31, 2010 were $648,305, down .3%, or over $1,700 when compared with the cost of sales of $650,025 for the same period in 2009.

Consolidated gross margin percentage (gross profit as a percentage of net sales) for the three months ended March 31, 2010 was 35.4%, down 4.4 percentage points when compared with gross margin of 39.8% for the same period in 2009. Higher costs of payroll, utilities and an $.08 per pound increase in green bean costs in the three months ended 2010 resulted in reduced gross margins.

Consolidated selling, general and administrative expenses were $390,593 for the three months ended March 31, 2010, a decrease of 8.6% or over $36,000 when compared with the selling, general and administrative expenses of $427,356 for the same period in 2009. The decrease was a result of a $10,000 reduction in payroll expense, a $10,000 reduction in insurance costs and a $16,000 reduction in other operating expenses.

Consolidated depreciation and amortization expenses for the three months ended March 31, 2010 were $23,671, a 7.5% decrease, or nearly $2,000, when compared to depreciation expense of $25,582 for the same period in 2009.

Consolidated interest expense for the three months ended March 31, 2010 was $7,766, a 17% decrease or over $1,500 compared with interest expense of $9,354 for the same period in 2009. Total debt is $301,678 at March 31, 2010 versus $325,653 at December 31, 2009.

As a result of the foregoing factors, the Company had a consolidated net loss of $70,263 for the three months ended March 31, 2010, compared to a loss of $35,801 for the same period in 2009. Because of the declines in sales and increases in the cost of green beans, there can be no assurances that the Company will be profitable in future periods

 

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LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2010, the Company had working capital of $99,027 versus working capital of $157,701 as of December 31, 2009. The decrease in working capital is due primarily to the decrease in cash, accounts receivable, inventory and prepaid expenses of $80,000 offset by a $30,000 reduction in debt.

Net cash provided by operating activities was $20,824 for the three months ended March 31, 2010 compared to net cash provided by operating activities of $79,368 during the same period in 2009. The decrease in net cash provided by operating activities in the three months of 2010 was the result of a loss of over $70,000 versus a loss of $35,000 for the first three months of 2009, a $10,000 additional reduction in accounts payable in 2010 versus 2009 and smaller increase in accrued liabilities of $28,000 in 2010 versus 2009.

Cash used in investing activities was $12,978 for the three months ended March 31, 2010 compared to $5,085 used in the same period in 2009. Capital additions for the first three months of 2010 were $5,000 to upgrade phone and internet access with a T-1 line and $7,000 for a new online store.

Net cash used in financing activities for the three months ended March 31, 2010 was $23,585 compared to net cash used in financing activities of $33,264 during the same period in 2009. The cash used by financing activities was a result of paying existing debt.

Because of the decline in cash provided by operating activities, cash at March 31, 2010 dropped by over $15,000 from the cash balance at January 1, 2010 and was over $54,000 lower than cash at March 31, 2009.

In December 2009, the Company extended a term note with the Savings Bank of Mendocino. This note is for five years and is due on December 1, 2014 with an interest rate of 7.25%. The note is collateralized by the Company’s accounts receivable, inventory, equipment, instruments, general intangibles and contract rights. This note is personally guaranteed by the Company’s majority shareholders. As of March 31, 2010, the balance on the note is $204,176 (See Note 7 of Notes to the Financial Statements).

The Company also has a $25,000 line of credit with the Savings Bank of Mendocino. The credit line is interest only payments renewable annually at 2% over the prime rate with a minimum rate of 6.5 % and was renewed in March of 2010. The rate was 6.50% at March 31, 2010 with an outstanding balance on the line of $11,500. The credit line is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights. The line of credit is personally guaranteed by the Company’s majority shareholders. (See Note 7 of Notes to Financial Statements)

The Company has an interest-only note for $19,919 and a principal and interest note for $5,100 at March 31, 2010, payable to the majority shareholders, directors and officers, Joan and Paul Katzeff. The interest-only note is at 12%, with balance due on demand after June 30, 1996 and is uncollateralized. The principal and interest note is at 12% payable in monthly installments of $2,000 plus interest with the balance due on July 15, 2010 and is uncollateralized. (See Note 7 and Note 11 of Notes to Financial Statements)

At March 31, 2010, the Company had total borrowings of $301,678 including $215,676 owing to the Savings Bank of Mendocino. This compares to total borrowings of $325,263 as of December 31, 2009, including $225,834 outstanding to the Savings Bank of Mendocino.

For long-term debt, see Note 7 of the Notes to Financial Statements. For operating leases, see Note 9 of the Notes to Financial Statements. For real estate leases, see Note 10 and Note 11 of the Notes to Financial Statements.

 

     Payments Due By Period

Contractual Obligations

   Total    Less than
One year
   1-3 years    4-5 years    After 5 years

Debt

   $ 301,678    $ 94,720    $ 157,105    $ 49,853    $ —  

Operating Leases

     34,889      10,909      16,492      7,488      —  

Real Estate Leases

     542,260      160,380      235,680      103,200      43,000

Total Cash Obligations

   $ 878,827    $ 266,009    $ 409,277    $ 160,541    $ 43,000

 

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The Company is dependent on successfully executing its business plan to achieve profitable operations, obtaining additional sources of borrowings (including normal trade credit) and securing favorable financing arrangements (including lease financing) to finance its working capital needs. There can be no assurance that the Company will be successful in this regard. If the Company is not able to meet its credit obligations the stability of the Company’s business would be in question.

RELATED PARTY TRANSACTIONS

From time to time, the Company enters into various transactions with its majority shareholders, Paul and Joan Katzeff. See note “11 — Related Party Transactions” in the Notes to the Financial Statements.

SEASONALITY AND OTHER FACTORS AFFECTING PERFORMANCE

The Company’s business is seasonal in nature. The seasonal availability of green bean coffee in the first two quarters of the year and increased sales in the last quarter historically creates a high use of cash and a build up in inventories in the first two quarters, with a corresponding decrease in inventory and increase in cash in the last quarter. Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Furthermore, past seasonal patterns are not necessarily indicative of future results.

INDEMNIFICATION MATTERS

The Company’s Bylaws provide that the Company may indemnify its directors, officers, employees and other agents to the fullest extent permitted by California law. The Company believes that indemnification under its Bylaws also permits the Company to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether California law would permit indemnification. The Company maintains such liability insurance for its directors and certain officers and employees.

At present, there is no pending litigation or proceeding involving any director, officer, employee or agent of the Company where indemnification would be required or permitted. The Company is not aware of any pending or threatened litigation or proceeding that might result in a claim for such indemnification.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s stock is generally illiquid and there have been few trades in recent years. There have been three trades in the Company’s Common Stock since 1999. In June 2004, 750 shares were traded at $4.50 per share. In December 2005, 400 shares were traded at $2.00 per share.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer, the President and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2010. Based on that evaluation, the Company’s management, including the Chief Executive Officer, the President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There have been no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation discussed above that occurred during the first quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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Part II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

-None-

ITEM 1A. RISK Factors

We have concerns regarding the current economic situation. The United States and the global economy is experiencing severe instability in the commercial and investment banking systems which is likely to continue to have far-reaching effects on the economic activity in the country for and indeterminable period. The long-term impact on the United States economy and the Company’s operating activities and ability to raise capital cannot be predicted at this time, but may be substantial.

Our coffee roasting facility is subject to state and local air-quality and emissions regulations. If we encounter difficulties in obtaining any necessary licenses or complying with these laws and regulations our ability to produce any of our roasted products would be severely limited. We believe that we are in compliance in all material respects with all such laws and regulations and we have obtained all material licenses that are required for the operation of our business. We are not aware of any environmental regulations that have or that we believe will have a material adverse effect on our operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

- None –

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

- None –

ITEM 4. Remove and Reserved

- None -

ITEM 5. OTHER INFORMATION

- None –

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

 

  a. Exhibits

31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

31.2 Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (President)

31.3 Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (President).

32.3 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

 

  b. No reports filed on Form 8-K

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on it behalf by the undersigned, thereunto duly authorized.

THANKSGIVING COFFEE COMPANY, INC.

 

Name

  

Title

 

Date

/s/ Paul Katzeff

   Chief Executive Officer   May 14, 2010
Paul Katzeff     

/s/ Joan Katzeff

   President   May 14, 2010
Joan Katzeff     

/s/ Sam Kraynek

   Chief Financial Officer   May 14, 2010
Sam Kraynek     

 

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