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
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10-K 2018-12-31 Filed 2019-03-27
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10-Q 2018-06-30 Filed 2018-08-15
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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
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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. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EX-31.1 f10q0317ex31i_thanksgiving.htm
EX-31.2 f10q0317ex31ii_thanksgiving.htm
EX-32.1 f10q0317ex32i_thanksgiving.htm
EX-32.2 f10q0317ex32ii_thanksgiving.htm

Thanksgiving Coffee Earnings 2017-03-31

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 f10q0317_thanksgiving.htm QUARTERLY REPORT

 

 

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, 2017

 

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

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 March 31, 2017 the registrant had 1,236,744 shares of Class A common stock, no par value per share, and _______ shares of Class B common stock, par value _______ per share, outstanding.

 

 

 

 

 

 

FORM 10-Q

TABLE OF CONTENTS

 

    Page
     
  PART I – FINANCIAL INFORMATION     
     
Item 1. Financial Statements    1
     
  Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016.    2
     
  Statements of Operations for the three months ended March 31, 2017 and March 31, 2016 (unaudited) 4
     
  Statements of Cash Flows for the three months ended March 31, 2017 and March 31, 2016 (unaudited) 5
     
  Notes to Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations    11
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk    14
     
Item 4. Controls and Procedures    14
     
  PART II – OTHER INFORMATION     
     
Item 1. Legal Proceedings    15
     
Item 1A. Risk Factors    15
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
     
Item 3.

Defaults Upon Senior Securities

15
     
Item 4. Submission of Matters to a Vote of Security Holders 15
     
Item 6. Exhibits 15
   
Signatures 16

 

 

 

 

PART 1. Financial Information

 

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, 2017 and December 31, 2016, and its results of operations for the three month periods ended March 31, 2017 and 2016 and its cash flows for the three month periods ended March 31, 2017 and 2016. 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.

 

 1 
 

 

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

   March 31,   December 31, 
   2017   2016 
   (Unaudited)   See Note 1 
Assets        
Current assets        
Cash  $94,802   $149,936 
Accounts receivable, net of allowance   225,002    239,738 
Inventories   341,044    279,751 
Prepaid expenses   75,117    109,974 
Total current assets   735,965    779,399 
           
Property and equipment          
Property and equipment   1,431,006    1,418,820 
Accumulated depreciation   (1,024,095)   (992,441)
Total property and equipment   406,911    426,379 
           
Other assets          
Deposits and other assets   8,800    12,242 
Other intangibles, net of amortization   30,402    29,728 
Total other assets   39,202    41,970 
           
Total assets  $1,182,078   $1,247,748 

 

See accompanying notes to financial statements

 

 2 
 

 

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

   March 31,   December 31, 
   2017   2016 
   (Unaudited)   See Note 1 
Liabilities and shareholders’ equity        
Current liabilities        
Accounts payable  $272,234   $286,852 
Accued Liabilities   47,087    67,344 
Current portion of long term debt   38,004    38,004 
Total current liabilities   357,325    392,200 
           
Long term debt          
Long-term debt   120,777    130,297 
Less current portion of long term debt   (38,004)   (38,004)
Total long term debt   82,773    92,293 
Total liabilities   440,098    484,493 
           
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   (144,430)   (123,161)
Total shareholders’ equity   741,986    763,255 
           
Total liabilities and shareholders’ equity  $1,182,084   $1,247,748 

 

See accompanying notes to financial statements

 

 3 
 

 

Thanksgiving Coffee Company, Inc. 

Statements of Operations

Unaudited

 

   For the Three Months Ended  
   March 31, 
   2017   2016 
Income        
Net sales  $819,286   $866,396 
Cost of sales   454,925    533,594 
Gross profit   364,361    332,802 
           
Operating expenses          
Selling, general and administrative expenses   362,658    358,418 
Depreciation and amortization   22,176    20,111 
Total operating expenses   384,834    378,529 
Operating loss   (20,473)   (45,727)
           
Loss before income taxes   (20,473)   (45,727)
Income tax expense   (800)   (800)
Net loss  $(21,273)  $(46,527)
           
Loss per share (basic)  $(0.017)  $(0.038)
           
Loss per share (dilutive)  $(0.017)  $(0.038)
           
Weighted average number of shares  $1,236,744   $1,236,744 

 

See accompanying notes to financial statements

 

 4 
 

 

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited

 

   For the Three Months Ended 
   March 31, 
   2017   2016 
Operating activities        
Net loss  $(21,273)  $(46,527)
Adjustments to reconcile net loss to cash flows from operating activities:          
Depreciation and amortization   31,654    29,281 
           
(Increase) decrease in:          
Accounts receivable   14,736    2,632 
Inventories   (61,293)   (13,652)
Prepaid expenses   34,857    31,264 
Deposits and other assets   3,442    - 
Increase (decrease) in:          
Accounts payable   (14,618)   50,703 
Accrued liabilities   (20,257)   (23,252)
Net cash provided by (used in) operating activities   (32,752)   30,449 
           
Investing activities          
Purchases of property and equipment   (12,186)   (44,277)
Net cash (used in) investing activities   (12,186)   (44,277)
           
Financing activities          
(Repayments) issuances of notes payable and capital leases   (10,194)   30,413 
Net cash (used in) financing activities   (10,194)   30,413 
           
Increase (decrease) in cash   (55,132)   16,585 
Cash at beginning of period   149,936    213,193 
Cash at end of period  $94,804   $229,778 

 

Cash paid for income taxes was $800, separately for each of the three months ending  March 31, 2017 and March 31, 2016.

 

See accompanying notes to financial statements

 

 5 
 

 

Thanksgiving Coffee Company, Inc. 

Notes to Financial Statements 

March 31, 2017 and December 31, 2016

 

Cash paid for income taxes was $800 for each of the three months ending March 31 2017 and 2016.

 

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 2016 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, 2016 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, 2017 are not necessarily indicative of results to be expected for the full year.

 

Concentration of Risk

 

In the first quarter of fiscal 2017, one customer accounted for 10.9% of the Company’s revenue. The account has purchased from the Company since 2009. 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.

 

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.

 

 6 
 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2017 and December 31, 2016

 

2.Accounts Receivable

 

Accounts receivable consist of the following:

 

   3/31/2017   12/31/2016 
Accounts receivable  $230,617   $246,616 
Less: allowance for doubtful accounts   (5,615)   (6,878)
Net accounts receivable  $225,002   $239,738 

 

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, 2017 and 2016 was $(1263) and (233) respectively.

 

3.Inventories

 

Inventories consist of the following:

 

   3/31/2017   12/31/2016 
Coffee        
Unroasted   $226,222   $168,003 
Roasted   51,661    55,066 
Tea   1,996    1,690 
Packaging, supplies and other merchandise held for sale   61,165    54,992 
Total inventories  $341,044   $279,751 

 

4.Property and Equipment

 

Property and equipment consist of the following:

 

   3/31/2017   12/31/2016 
Equipment  $519,125   $506,939 
Furniture and fixtures   138,715    138,715 
Leasehold improvements   352,237    352,237 
Transportation equipment   146,133    146,133 
Pacakge design   41,000    41,000 
Capitalized website development costs   19,000    19,000 
Property held under capital leases   214,796    214,796 
Total property and equipment   1,431,006    1,418,820 
Accumulated depreciation   (1,024,095)   (992,441)
Property and equipment, net  $406,911   $426,379 

 

Depreciation expense for the three months ended March 31, 2017 and 2016 was $22,176 and $20,112 respectively.

 

 7 
 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2017 and December 31, 2016

 

5.Long Term Debt (continued)

 

Capital Lease Obligations  3/31/2017   12/31/2016 
Bank of the West payable in monthly installments of $787.03, including interest at 9.234% collateralized by equipment, final payment due on January 1, 2021  $29,839   $31,486 
           
Bank of the West payable in monthly installments of $1,465, including interest at 9.227%, colateralized by equipment, final payment due on January 1, 2020   43,685    47,020 
           
Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   9,157    10,290 
           
Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   9,157    10,290 
           
Hansel Ford, payable in monthly installments of $806.38, including interest at 1.939%, collateralized by equipment, final payment due on April 10, 2020.   28,939    31,211 
   $120,777   $130,297 
Less current portion   (38,004)   (38,004)
Long term portion of notes payable  $82,773   $92,293 

 

Interest paid for the three months ended March 31, 2017 and 2016 was $1,966 and $2,277, respectively.

 

 8 
 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2017 and December 31, 2016

 

As of March 31, 2017, 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,    
2017  $32,194 
2018   40,534 
2019   35,855 
2020   12,194 
      
   $120,777 

  

6.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.

 

7.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, 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,    
     
2017   8,135 
2018   7,154 
2019   1,754 
2020   - 
2021   - 
      
   $17,043 

 

Total operating lease payments for the three months ended March 31, 2017 and 2016 was $2,278 and $1,580 respectively.

 

 9 
 

 

Thanksgiving Coffee Company, Inc. 

Notes to Financial Statements (continued) 

March 31, 2017 and December 31, 2016

 

8.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, 2025.

 

As of March 31, 2017, 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,    
2017  $103,200 
2018   103,200 
2019   103,200 
2020   103,200 
2021   103,200 
Thereafter   309,600 
   $825,600 

 

9.Related Party Transactions

 

As of March 31, 2017, the Company has green contract with three cooperatives in Nicaragua, 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. At March 31, 2017, amounts owed to ETICO totaled $37,168. All the amounts owed are current and were paid accordance with our standard vendor payment policies. The loss of the ETICO relationship could have an adverse effect on the Company’s business in the short term. Management believes other options are available that could be utilized in the event the ETICO relationship was terminated..

 

 10 
 

 

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). In addition the company is trying to focus increasing our on-line sales with the main focus of promoting our award as “Roaster of the Year for 2017”, from Roast magazine. We expect a upward trend with the award announcement. 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.

 

 11 
 

 

Results of Operations

 

Three months ended March 31, 2017 versus March 31, 2016

 

   Increase
(Decrease)
   Percent
Change
 
         
Net Sales  $(47,110)   (5.4)%
Cost of Sales   (78,669)   (14.7)%
Gross Margin %   31,559    9.5%
           
Selling, G&A Expense   4,240    1.2%
Depreciation And Amortization   2,065    10.3%
Interest Expense   1,134    (100)%
Net Income (Loss)    25,254    (54)%

 

Net sales for the three months ended March 31, 2017 were $819,283, down 5.41%, or under $47,110 when compared with net sales of $866,397 for the same period in fiscal 2016

 

Distribution revenues (e.g., revenues generated on the Company’s own truck distribution) were down $16,814 or 5% for the three months ended March 31, 2017, when compared with distribution sales for the same period in 2016. 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 down $22,238, or 5% for the three months ended March 31, 2017 when compared to national sales for the same period in 2016.

 

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) decreased $1,000, or 1% for the three months ended March 31, 2017 when compared to mail order sales for the same period in 2016. The decrease was attributable to a decline in the slowdown in the Company’s online store volume.

 

Cost of sales for the three months ended March 31, 2017 were $454,929, down 15%, or under $78,669 when compared with the cost of sales of $553,594 for the same period in 2016.

 

Gross margin percentage (gross profit as a percentage of net sales) for the three months ended March 31, 2017 was, up 9.49% percentage points when compared with gross margin of 9.32% for the same period in 2016. Lower costs in green bean costs in the three months ended 2017 resulted in increase in gross margins.

 

Selling, general and administrative expenses were $362,658 for the three months ended March 31, 2017, a increase of 1.2%or over $4,2409 when compared with the selling, general and administrative expenses of $358,418 for the same period in 2016. The increase was a result of a $5,000 in health insurance expense, a $4,000 increase in data in computer repairs..

 

Depreciation and amortization expenses for the three months ended March 31, 2017 were $22,176, a 10.3% increase, or nearly $2,065 when compared to depreciation expense of $20,112 for the same period in 2016.

 

Interest expense for the three months ended March 31, 2017 was (0), a 100% decrease or over compared with interest expense of (1733) for the same period in 2016.

 

As a result of the foregoing factors, the Company had a net loss of $21,273 for the three months ended March 31, 2017, compared to a loss of $46,527 for the same period in 2016.

 

 12 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2017, the Company had working capital of $378,640 versus working capital of $387,199 as of December 31, 2016. The decrease in working capital is due primarily to the decrease in cash, accounts receivable, inventory and prepaid expenses.

 

Net cash used in operating activities was ($32,752) for the three months ended March 31, 2017 compared to net cash provided by operating activities of $30,449 during the same period in 2016. The decrease in net cash provided by operating activities in the three months of 2017 was the result of increases in inventory in the amount of $47,641 and decreases in accounts payable in the amount of $65,321.

 

Cash used in investing activities was( $12,186) for the three months ended March 31, 2017 compared to ($44,277) used in the same period in 2016. Capital additions for the first three months of 2017 were $12,186 for new fixtures for addition of two new Safeway stores.

 

Net cash used in financing activities for the three months ended March 31, 2017 was ($10,194) compared to net cash used in financing activities of $30,413 during the same period in 2016. The cash used by financing activities was a result of paying existing debt.

 

At March 31, 2017, the Company had total borrowings of $120,777.

 

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  $120,777   $38,004   $70,579   $12,194   $- 
                          
Operating Leases   17,043    8,135    7,154    1,754    - 
                          
Real Estate Leases   825,600    103,200    206,400    206,400    309,600 
                          
Total Cash Obligations  $963,420   $149,339   $276,979   $220,348   $309,600 

 

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.

 

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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 preceding 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 and President, of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2017. Based on that evaluation, the Company’s management, including the Chief Executive Officer, the President r concluded that the Company’s disclosure controls and procedures were effective. There have been no changes in the Company’s Disclosure controls over financial reporting during the first quarter of 2017 that have materially affected or are reasonably likely to affect the Company’s internal controls 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

- 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 Quarterly 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 19, 2017
Paul Katzeff        
         
/s/ Joan Katzeff   President   May 19, 2017
Joan Katzeff        

 

 

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