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 exhibit_31-1.htm
EX-31.2 exhibit_31-2.htm
EX-31.3 exhibit_31-3.htm
EX-32.1 exhibit_32-1.htm
EX-32.2 exhibit_32-2.htm
EX-32.3 exhibit_32-3.htm

Thanksgiving Coffee Earnings 2012-03-31

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 thanksgivingcoffee_10q-15114.htm THANKSGIVING COFFEE 10Q 03-31-2012 thanksgivingcoffee_10q-15114.htm


 
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, 2012
 
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: 033-96070-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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 December 31, 2011 the registrant had 1,236,744 shares of Class A common stock, no par value per share, outstanding.
 
 
1

 

 
FORM 10-Q
TABLE OF CONTENTS
         
       
     
Item 1.
   
3
     
     
4
     
     
6
     
     
7
     
     
8
     
Item 2.
   
16
     
Item 3.
   
19
     
Item 4.
   
19
     
       
     
Item 1.
   
20
     
Item 1A.
   
20
     
Item 2.
   
20
     
Item 3.
   
20
     
Item 4.
   
20
     
Item 5.    Other Information   20 
         
Item 6.
   
21
     
     
22
 
 
2

 

 
and Notes to Financial Statements
 
Thanksgiving Coffee Company, Inc.
 
For the Three Months Ended March 31, 2012 and 2011
 
 
Item 1. Financial Statements
 
The 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, 2012 and December 31, 2011, and its results of operations for the three month periods ended March 31, 2012 and 2011 and its cash flows for the three month periods ended March 31, 2012 and 2011. 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

 

 
 
Balance Sheets
                 
   
March 31,
2012
   
December 31,
2011
 
   
(Unaudited)
   
(See Note 1)
 
Assets
               
Current assets
               
Cash
 
$
234,107
   
$
64,271
 
Cash – Restricted Funds
   
372,825
     
0
 
Accounts receivable, net of allowance
   
248,035
     
256,785
 
Inventories
   
329,851
     
473,217
 
Prepaid expenses
   
33,868
     
27,629
 
                 
Total current assets
   
1,218,686
     
821,902
 
     
Property and equipment
               
Property and equipment
   
1,107,989
     
1,089,126
 
Accumulated depreciation
   
(707,493
)
   
(686,855
)
                 
Total property and equipment
   
400,496
     
402,271
 
     
Other assets
               
Deposits and other assets
   
550
     
550
 
Other intangibles, net of amortization
   
1,539
     
1,960
 
                 
Total other assets
   
2,089
     
2,510
 
                 
Total assets
 
$
1,621,271
   
$
1,226,683
 
                 
 
See accompanying notes to financial statements
 
 
4

 

 
Thanksgiving Coffee Company, Inc.
 
Balance Sheets
                 
   
March 31, 2012
   
December 31, 2011
 
   
(Unaudited)
   
(See Note 1)
 
Liabilities and shareholders’ equity
               
Current liabilities
               
Accounts payable
 
$
320,098
   
$
375,656
 
Accounts payable – related party
   
14,376
     
147,271
 
Notes payable - bank
   
44,591
     
42,212
 
Capital lease obligations
   
14,755
     
19,528
 
Accrued liability – Restricted Funds New Bldg
   
372,825
     
0
 
Accrued liabilities
   
91,399
     
49,142
 
                 
Total current liabilities
   
858,044
     
633,809
 
     
Long term debt
               
Notes payable - bank
   
76,853
     
93,368
 
Capital lease obligations
   
20,069
     
22,568
 
                 
Total long term debt
   
96,922
     
115,936
 
                 
Total liabilities
   
954,966
     
749,745
 
     
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
   
(220,111
)
   
(409,478
)
                 
Total shareholders’ equity
   
666,305
     
476,938
 
                 
Total liabilities and shareholders’ equity
 
$
1,621,271
   
$
1,226,683
 
                 
 
See accompanying notes to financial statements
 
 
 
5

 
 
 
Statements of Operations
Unaudited
                 
   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Income
               
Net sales
 
$
996,573
   
$
959,213
 
Cost of sales
   
739,658
     
638,993
 
                 
Gross profit
   
256,915
     
320,220
 
     
Operating expenses
               
Selling, general and administrative expenses
   
422,992
     
396,352
 
Depreciation and amortization
   
13,200
     
19,808
 
                 
Total operating expenses
   
436,192
     
416,160
 
                 
Operating loss
   
(179,277
)
   
(95,940)
 
     
Other income (expense)
               
Miscellaneous income/ (expense), net
   
374,930
     
32,429
 
Loss on disposal of assets
   
0
     
(7,755
)
Interest expense
   
(5,487
)
   
(6,376
)
                 
Total other income (expense)
   
369,443
     
18,298
 
                 
Profit/ (loss) before income taxes
   
190,166
     
(77,642
)
Income tax expense
   
(800
)
   
(800
)
                 
Net income/ (loss)
 
$
189,366
   
$
(78,442
)
                 
Profit/ (loss) per share (basic and dilutive)
 
$
0.153
   
$
(0.063
)
Weighted average number of shares
   
1,236,744
     
1,236,744
 
 
See accompanying notes to financial statements
 
 
 
6

 
 
 
Statements of Cash Flows
Unaudited
                 
   
For the Three Months
March 31,
 
   
2012
   
2011
 
Operating activities
               
Net Income
 
$
189,366
   
$
(78,442
)
Adjustments to reconcile net loss to cash flows from operating activities:
               
Depreciation and amortization
   
16,417
     
28,452
 
Allowance for bad debts
   
768
 
   
(1,923
)
(Gain) on disposal of assets
   
0
     
7,755
 
Restricted funds to be used to rebuild fire damaged building
   
372,825
     
0
 
(Increase) decrease in:
               
Accounts receivable
   
8,844
     
60,951
 
Inventories
   
143,366
 
   
58,097
 
Prepaid expenses
   
(6,333
)
   
10,670
 
Deposits and other assets
   
0
     
0
 
Increase (decrease) in:
               
Accounts payable
   
(188,453
)
   
(83,841
)
Accrued liabilities
   
42,257
 
   
(35,925
)
                 
Net cash provided by operating activities
   
579,057
     
(34,206
)
     
Investing activities
               
Purchases of property and equipment
   
(18,863
)
   
(60,217
)
Disposal of assets
   
0
     
0
 
Net cash (used in) investing activities
   
(18,863
)
   
(60,217
)
     
Financing activities
               
Repayments of notes payable and capital leases
   
(17,534
)
   
(15,777
)
                 
Net cash (used in) financing activities
   
(17,534
)
   
(15,777
)
     
Net Increase (Decrease) in cash
   
542,660
 
   
(110,200
)
Cash at beginning of period
   
64,271
     
191,618
 
                 
Cash at end of period
 
$
606,931
   
$
81,418
 
                 
 
Supplemental Cash Flow Information:
               
                 
Cash Paid for Interest      5,487     $  6,376  
                 
Cash Paid for Taxes      800     $  800  
 
See accompanying notes to financial statements
 
 
7

 
 
 
Notes to Financial Statements
 
March 31, 2012 (unaudited) and December 31, 2011
 
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 2011 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, 2011 audited financial statements and the accompanying notes on Form 10-K, as filed with the Securities and Exchange Commission.
 
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, 2012 are not necessarily indicative of results to be expected for the full year.
 
Concentration of Risk
 
For the first quarter of fiscal 2012 one customer accounted for 15% 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 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.
 
2. Accounts Receivable
 
Accounts receivable consist of the following:
                 
   
3/31/2012
   
12/31/2011
 
Accounts receivable
 
$
253,378
   
$
260,745
 
Less: allowance for doubtful accounts
   
(5,343
)
   
(3,960
)
                 
Net accounts receivable
 
$
248,035
   
$
256,785
 
                 
 
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, 2012 and 2011 was $1,383 and $(1,923) respectively.
 
 
8

 
 
 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
3. Inventories
 
Inventories consist of the following:
                 
   
3/31/2012
   
12/31/2011
 
Coffee
               
Unroasted
 
$
163.954
   
$
283,196
 
Roasted
   
48,580
     
48,276
 
Tea
   
798
     
798
 
Packaging, supplies and other merchandise held for sale
   
116,519
     
140,947
 
                 
Total inventories
 
$
329,851
   
$
473,217
 
                 
 
4. Property and Equipment
 
Property and equipment consist of the following:
                 
   
3/31/2012
   
12/31/2011
 
Equipment
 
$
462,725
   
$
443,862
 
Furniture and fixtures
   
82,017
     
82,017
 
Leasehold improvements
   
391,792
     
391,792
 
Transportation equipment
   
64,569
     
64,569
 
Property held under capital leases
   
106,886
     
106,886
 
                 
Total property and equipment
   
1,107,989
     
1,089,126
 
Accumulated depreciation
   
(707,493
)
   
(686,855
)
                 
Property and equipment, net
 
$
400,496
   
$
402,271
 
                 
 
Depreciation expense for the three months ended March 31, 2012 and 2011 was $20,638 and $27,246 respectively.
 
5. Goodwill and Other Intangible Assets
 
Intangible assets subject to amortization consist of the following:
   
3/31/2012
   
12/31/2011
 
Leasehold value
 
$
67,000
   
$
67,000
 
Trademarks
   
5,127
     
5,127
 
Website
   
2,800
     
2800
 
                 
Total intangible assets
   
74,927
     
74,927
 
Accumulated amortization
   
(73,388
)
   
(72,967
)
                 
Other intangibles, net of amortization
   
1,539
   
$
1,960
 
                 
 
Amortization expense for the three months ended March 31, 2012 and 2011 was $421 and $1,206 respectively.
 
6. Deposits and Other Assets
 
Included in Deposits and Other Assets is $550, deposit on additional warehouse space required after fire.
 
 
9

 
 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
 
7. Long Term Debt
 
Notes Payable
             
   
3/31/2012
12/31/2011
 
Note payable to Savings Bank of Mendocino, payable in monthly installments of $4,309, 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.
 
$
121,444
 
$
135,580
 
     
Line of credit to Savings Bank of Mendocino, payable in monthly installments of interest only at 2% over prime rate extended through May 2012, with a minimum rate of 6.5% (6.5% at December 31, 2011). 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, of which the full amount of $25,000 was unused and available at March 31, 2012.
   
 
 
0
 
     
Capital Lease Obligations
   
               
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.
 
$
15,598
 
$
16,873
 
     
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
   
6,332
   
7,572
 
     
Note payable to Bank of the West payable in monthly installments of $427, including interest at 11.83%, collateralized by equipment, final payment due on April 1, 2015
   
12,893
   
13,776
 
     
Note payable to BSB Leasing payable in monthly installments of $285, including interest at 15.89%, collateralized by equipment, final payment due June 2, 2012; paid in full March 2012 to coincide with Bulk Sale of Bakery
   
0
   
1,634
 
     
Note payable to BSB Leasing payable in monthly installments of $390, including interest at 14.30% collateralized by equipment, final payment due on June 2, 2012; paid in full March 2012 to coincide with Bulk Sale of Bakery
   
0
   
2,241
 
               
   
$
156,268
 
$
269,153
 
Less current portion
   
(59,346
)
 
(91,452
)
               
Long term portion of notes payable
 
$
96,922
 
$
177,701
 


 
 
10

 
 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
 

 

 
7. Long Term Debt (continued)
 
Capital Lease Obligations (continued)
 
Interest paid for the three months ended March 31, 2012 and 2011 was $5,487 and $6,376, respectively.
 
As of March 31, 2012 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,
 
     
2013
  $ 59,346
2014
    57,363
2015
    39,559
2016
    0
      0
         
    $ 156,268
         
 
Based on current borrowing rates, the fair value of the notes payable and capital lease obligations approximate their carrying amounts.
 
 
 
 
 
 
 
 
 
 
11

 

 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012(unaudited) and December 31, 2011
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 2032.  The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating 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, 2012 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, 2012
                                   
Federal
  $ 8,624       2017     $ 1,294     $ (1,294 )   $ (1,294 )   $ -  
      128,576       2023       19,286       (19,286 )     (19,286 )     -  
      96,867       2023       14,530       (14,530 )     (14,530 )     -  
      49,714       2024       7,457       (7,457 )     (7,457 )     -  
      118,013       2026       17,702       (17,702 )     (17,702 )     -  
      63,303       2028       9,495       (9,495 )     (9,495 )     -  
      48,425       2030       7,264       (7,264 )     (7,264 )     -  
      100,392       2032       15,059       (15,059 )     (15,059 )     -  
                                                 
    $ 613,914             $ 92,087     $ (92,087 )   $ (92,087 )   $ -  
                                                 
State
  $ 4,743       2026     $ 419     $ (419 )   $ (419 )   $ -  
      67,858       2028       5,999       (5,999 )     (5,999 )     -  
      59,114       2030       5,226       (5,226 )     (5,226 )     -  
      99,592       2032       8,804       (8,804 )     (8,804 )     -  
                                                 
    $ 231,307             $ 20,448     $ (20,448 )   $ (20,448 )   $ -  

Income taxes at the expected statutory rate are reconciled to the Company’s actual income taxes as follows:
 
   
2012
 
Tax (benefit) at federal statutory rate
    (15.00 ) %
State tax (benefit) net of federal benefit
    (8.84 )
Non-taxable differences
    (0.15 )
Temporary differences
    0.50  
Valuation allowance
    23.07  
Tax provision - effective rate
    (0.42 )
 
Income taxes paid for the three months ended March 31, 2012 and the year ended December 31, 2011 were $800 and $800 respectively.
 
 
12

 
 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
9. Operating Leases
 
The Company leases some office equipment under non-cancelable operating leases with terms ranging from three to five years.
 
As of March 31, 2012, minimum annual lease payments due under these agreements for each of the next three years and in the aggregate were:
         
 
Years Ending March 31,
 
     
2013
 
$
6,652
 
2014
   
5,961
 
2015
   
1,045
 
         
   
$
13,658
 
 
Total operating lease payments for the three months ended March 31, 2012 and 2011 was $2,720, for both years.
 
10. Long Term Leases
 
The Company leases its corporate headquarters, warehouse and waterfront facilities from Paul and Joan Katzeff (the Company’s majority shareholders). 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. Effective July 1, 2011 rent was reduced to $4,500 a month to reflect reduction in usable square footage as a result of fire damage. After the building has been rebuilt, the original monthly rental payments of $8,600 will resume.
 
The Company also leases a bakery establishment in Mendocino, California under operating leases expiring September 30, 2011, and became month-to-month thereafter. The lease provides for monthly rental payments of approximately $4,600, effective March 1, 2012 a new lease was negotiated and monthly lease payments were taken over by Teddy Winslow and Ari Lundgren, under a  Bulk Sale of the Bakery which is in escrow at the time of this filing, pending approval and signature of the Bulk Sale Note.
 
As of March 31, 2012, minimum future rental payments under non-cancelable facilities operating leases for each of the next five years and in the aggregate are as follows:
         
 
Years Ending March 31,
 
     
2013
   
54,000
 
2014
   
54,000
 
2015
   
27,000
 
2016
   
17,200
 
         
   
$
152,200
 
 
 
 
13

 

 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
11. Related Third Party Transactions
 
The Company is in the process of negotiating and approving the 2012/2013 Green Bean Purchase Contract from three cooperatives in Nicaragua for approximately $414,000 (127,000 pounds), and increase of one full container [37,500 pounds and approximately $82,000]. Ethical Trading and Investment Company of Nicaragua (Etico) is the importer for the transaction. Nicolas Hoskyns, a Director of the Company, is the managing director of Etico.
 
The Company leases its production and warehouse facilities from its majority shareholders. The total payments made to its majority shareholders in connection with these related third party transactions for the three months ended March 31, 2012 are as follows:
         
Rent payments
 
$
13,500
 
 
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
                 
   
3/31/2012
   
3/31/2011
 
Net Sales
               
Specialty Coffee
 
$
962,461
   
$
874,840
 
Bakery
   
63,368
     
92,712
 
                 
Total
 
$
1,025,829
   
$
967,552
 
                 
Intersegment Sales
               
Specialty Coffee
 
$
29,257
   
$
8,339
 
                 
Total Sales
 
$
996,572
   
$
959,213
 
                 
Operating Income/(Loss)
               
Specialty Coffee
 
$
(164,996
)
 
$
(69,007
)
Bakery
   
(14,281
)
   
(26,933
)
                 
Total
 
$
(179,277
)
 
$
(95,940
)
                 
Depreciation and Amortization
               
Specialty Coffee
 
$
12,088
   
$
14,318
 
Bakery
   
1,112
     
5,490
 
                 
Total
 
$
13,200
   
$
19,808
 
                 
Interest Expense
               
Specialty Coffee
 
$
5,087
   
$
5,978
 
Bakery
   
400
     
398
 
                 
Total
 
$
5,487
   
$
6,376
 
                 
 
 

 
14

 

 
Thanksgiving Coffee Company, Inc.
 
Notes to Financial Statements (continued)
 
March 31, 2012 (unaudited) and December 31, 2011
 
12. Information on Business Segments (continued)
                 
   
3/31/2012
   
12/31/2011
 
Assets
               
     
Specialty Coffee
 
$
1,569,860
   
$
1,164,042
 
Bakery
   
51,411
     
62,641
 
                 
Total
 
$
1,621,271
   
$
1,226,683
 
                 
Fixed Assets – Property and Equipment
               
     
Specialty Coffee
 
$
363,701
   
$
364,365
 
Bakery
   
36,795
     
37,906
 
                 
Total
 
$
400,496
   
$
402,271
 
                 
 
 

 
15

 

 
 
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.
 
The Company has a revolving line of credit for $25,000 of which $ 0 is currently outstanding and a term debt facility of $121,444 with the Savings Bank of Mendocino. The term debt is a five-year note due December 1, 2014 and the line of credit 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.”
 
 

 
16

 

 
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Results of Operations
 
Three months ended March 31, 2012  versus March 31, 2011
                 
 
Income and Expense
 
 
Increase (Decrease)
   
Percent Change
 
Net Sales
 
$
37,359
     
3.89
%
Cost of Sales
   
100,665
     
15.75
%
Gross Margin %
   
(19.77)
%
   
(7.60
)%
Selling, G&A Expense
   
26,640
     
6.72
%
Depreciation And Amortization
   
(6,608
)
   
(33.36
)%
Interest Expense
   
(889
)
   
(13.95
)%
Net Income (Loss)
   
267,808
     
341.41
%
 
Net sales for the three months ended March 31, 2012 were $996,572, up 3.89%, or approximately $37,000 when compared with net sales of $959,213 for the same period in fiscal 2011.
 
Distribution revenues (e.g., revenues generated on the Company’s own truck distribution) were up over $31,000 or 7.1% for the three months ended March 31, 2012, when compared with distribution sales for the same period in 20110. Sales on the coast of Mendocino and Humboldt counties were up for the quarter.
 
National revenues (e.g., revenues not derived by mail order and direct truck distribution) were up nearly $63,000, 13.43% for the three months ended March 31, 2012 when compared to national sales for the same period in 2011. The increase in sales is primarily in North Central Valley area.
 
Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) were flat for the three months ended March 31, 2012 when compared to mail order sales for the same period in 2011.
 
Cost of sales for the three months ended for March 31, 2012 were $739,658 up over 15%, or nearly $101,000 when compared with the cost of sales of $638,993 for the same period in 2011. This increase was a result of continuing higher cost of green beans, increased fuel costs (propane/electricity), rent that had not been charged in the year subsequent to the fire, and material/usage manual adjustments based on physical counts are continuing until a perpetual inventory system is set up in MAS90. Average cost per pound in the third quarter was $3.49 versus $3.38 for the same period in 2011, or over $15,000 in additional green bean cost.  Additional rent for production and warehouse that was not charged March 2011, of $14,412. Additional adjustments were made to packaging inventory of $11,000 for packaging that was erroneously included in the 2011 year end inventory. Another potential area of significance is our Standard Costing Methodology that is used to relieve Green Bean Inventory, which has not been evaluated and/or adjusted in three quarters; additional cost analysis is needed to determine an accurate variance analysis. Gross margin percentage (gross profit as a percentage of net sales) for the three months ended March 31, 2012 was 25.78 %, down 7.60% when compared with gross margin of 33.38% for the same period in 2011; it has been determined that Urth Café one of our largest customer was under-billed due to roasting log miscalculations from June 2011 through March 2012 which would contribute to a higher cost of sales due to the more expensive coffees purchased specifically for their blends.
 
Selling, general and administrative expenses were $422,992 for the three months ended March 31, 2012, an increase of 6.72% or over $26,000 when compared with the selling, general and administrative expenses of $96,352 for the same period in 2011. The increases are in Audit and Tax Accounting Fees.
 
Depreciation and amortization expenses for the three months ended March 31, 2012 were $13,200 compared to $19,808 for the same period in 2011.
 
Interest expense for the three months ended March 31, 2012 was $5,487 compared with interest expense of $6,376 for the same period in 2011. Total debt is $156,267 at March 31, 2012 versus $177,676 at December 31, 2011, pay down of term note with Savings Bank of Mendocino I primarily principal at this time.
 
Miscellaneous income for the three months ended March 31, 2012 was $374,930 versus $32,429 for the same period in 2011. The increase in other income is the result of ongoing advances from the insurance company for business interruption, extra expense and business personal property claims coverage. As a result of the foregoing factors, the Company had a net profit of $190,166 for the three months ended March 31, 2012, compared to a loss of ($77,642) for the same period in 2011, however, operating profit before insurance advances for the three month period ended March 31, 2012 was a loss of ($179,277) compared to a loss of ($95,940) for the same period 2011. Management is addressing and analyzing this significant loss in the first quarter by reviewing all sales contracts, pricing, inventory management, equipment agreements and repairs, and green bean purchasing and contracts.
 
 
 
17

 

 
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
LIQUIDITY AND CAPITAL RESOURCES
 
As of March 31, 2012, the Company had working capital of $360,642 versus working capital of $188,093 as of December 31, 2011. The increase in working capital is due primarily to the Cash provided by insurance proceeds.
 
Net cash provided by operating activities was $579,057 for the three months ended March 31, 2012 compared to net cash provided by operating activities for the three months ended March 31, 2011 of ($34,206). The increase in net cash provided by operating activities in the three months of 2012 was principally the result of the advances from the insurance company relating to the Company’s fire coverage.
 
Net cash used in investing activities was $18,863 for the three months ended March 31, 2012 compared to $60,217 used in the same period in 2011. Capital additions for the first three months of 2012 were $18,863 for a new compressor installation costs, brewing equipment and in-store fixtures.
 
Net cash used in financing activities for the three months ended March 31, 2012 was $17,534 compared to net cash used in financing activities of $15,777 during the same period in 2011. The increase in cash used in financing activities was a result of repayment of debt including paying off bakery equipment leases.
 
Because of additional cash settlements, including Restricted Funds [$372,825] for the specific use to rebuild the building from the insurance company cash at March 31, 2012 increased by $542,660 versus the cash balance at January 1, 2012. There was a $525,513 increase in cash versus the same three month period ending March 31, 2011.
 
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, 2012, the balance on the note is $121,444. (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 7.25% and was renewed in May of 2011 The rate was 7.25% at March 31, 2012 with no outstanding balance on the line. 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)
 
At March 31, 2012 the Company had total borrowings of $156,268 including $121,444 owing to the Savings Bank of Mendocino. This compares to total borrowings of 269,153 as of December 31, 2011, including $135,580 outstanding to the Savings Bank of Mendocino.
 
For long-term debt, see Note 7 and Note 11 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.
 
     
After 5 years
     
After 5 years
     
After 5 years
     
After 5 years
     
After 5 years
 
   
Payments Due By Period
 
Contractual Obligations
 
Total
   
Less than
One year
   
1-3 years
   
4-5 years
   
After 5 years
 
Long Term Debt
 
$
156,268
   
$
59,346
   
$
96,922
   
$
   
$
 
Operating Leases
   
13,658
     
8,160
     
5,498
     
     
 
 
 
18

 

 
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
     
After 5 years
     
After 5 years
     
After 5 years
     
After 5 years
     
After 5 years
 
   
Payments Due By Period
 
Real Estate Leases
   
152,200
     
17,200
     
135,000
             
 
Total Cash Obligations
 
$
322,126
   
$
84,706
   
$
237,420
   
$
     
$
 
 
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 along with the Director of the Company, Nicolas Hoskyns . 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.
 
 
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.
 
 
 
(a)
We maintain a system of controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange act of 1934, as amended, is accumulated and communicated to our management including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of March 31, 2012, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation our disclosure controls and procedures. Based on that evaluation, the Chief Financial Officer concluded that our disclosure controls and procedures were materially ineffective and is in the process of re-evaluating all internal controls and procedures as they relate but not limited to accounting, inventory management, pricing and standard costing.
     
  (b)  Changes in Internal Controls. There were limited changes in our internal control over financial reporting during the quarter ended March 31, 2012 until all areas have been completely re-evaluated and the materiality quantified for each of the areas as listed in 4 (a).
 
 
 
19

 

 
 
 
-None-
 
 
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 likely to continue to have far-reaching effects on the economic activity in the country for an 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.
 
The Company experienced a major fire on July 5, 2010. The Company has building, business personal property, extra expense, loss of rent and business interruption insurance coverage which was renewed on April 1, 2011. Although the Company has continued the packaging and shipping operations and has located the administrative and warehousing operation in leased facilities, the Company has not begun to rebuild its facility but has been working with architects to develop a design concept to prepare building construction estimates. Up to the first $1,000 of the loss will be borne by the Company as a deductible per the terms of the policy. There can be no assurances that the Company will have sufficient resources to rebuild and maintain it current business.
 
 
- None –
 
 
- None –
 
 
- None -
 
 
The Letter of Intent for the Bulk Sale Agreement [dated February 29, 2012] of the Mendocino Bakery Café, entered into between Thanksgiving Coffee Company [Seller] and Teddy Winslow & Ari Lundgren [Buyer] was not finalized, Note had not been signed by the Buyer, by the filing date of this 10Q and hence not recorded as a transaction for the period ending March 31, 2012. All elements of the Bulk Sale Agreement remain the same as stated in the 10K filed on March 30, 2012. It is management’s opinion and position that the Bulk Sale will be recorded in the June 30, 2012 10Q.
 

 
20

 


 
 
 
 
 
a.
Exhibits

     
 
   
 
   
 
   
 
   
 
   
 
   
101*+
 
The following materials from Thanksgiving Coffee Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, to be filed in November 2011 formatted in Extensible Business Reporting Language (XBRL):
   
   
(i) Balance Sheets,
(ii) Balance Sheets (Parenthetical),
(iii) Statement of Operations,
(iv) Statement of Cash Flows,
(v) Related Notes.

*
Filed or furnished herewith.

+
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
 
21

 


 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, The Registrant has duly caused this Quarterly Report to be signed on it behalf by the undersigned, thereunto duly authorized.
             
THANKSGIVING COFFEE COMPANY, INC.
       
       
 
Name
 
 
Title
 
 
Date
   
       
             
             
       
/s/ Ben Corey-Moran
 
President
 
May 14, 2012
   
Ben Corey-Moran
           
       
/s/ Janet Aguilar
 
Chief Financial Officer
 
May 14, 2012
   
Janet Aguilar
           
 
 
22