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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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
EX-31.1 f10q0617ex31i_thanksgiving.htm
EX-31.2 f10q0617ex31ii_thanksgiving.htm
EX-32.1 f10q0617ex32i_thanksgiving.htm
EX-32.2 f10q0617ex32ii_thanksgiving.htm

Thanksgiving Coffee Earnings 2017-06-30

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 f10q0617_thanksgiving.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended June 30, 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: 33-960-70LA

 

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  ☒    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  ☐    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.

  

On June 30, 2017 the registrant had 1,236,744 shares of Class A common stock, no par value per share, outstanding.

 

 

 

 

 

FORM 10-Q

TABLE OF CONTENTS

 

  PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
     
  Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016 2
     
  Statements of Operations for the three months and six months ended June 30, 2017(unaudited) and June 30, 2016 (unaudited) 3
     
  Statements of Cash Flows for the six months ended June 30, 2017(unaudited) and June 30, 2016 (unaudited) 4
     
  Notes to Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
     
Item 4. Controls and Procedures 15
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 16
     
Item 1A. Risk Factors 16
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
     
Item 3. Defaults Upon Senior Securities 16
     
Item 4. Submission of Matters to a Vote of Security Holders 16
     
Item 5. Other Information 16
     
Item 6. Exhibits 16
     
Signatures   17

 

 

 

Financial Statements
and Notes to Financial Statements
 
Thanksgiving Coffee Company, Inc.
 
For the Six Months Ended June 30, 2017 and 2016

 

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 June 30, 2017 and December 31, 2016, and its results of operations for the three month and six month periods ended June 30, 2017 and 2016 and its cash flows for the six month periods ended June 30, 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
         
   June 30,   December 31, 
   2017   2016 
   (Unaudited)   (See Note 1) 
Assets        
Current assets        
Cash  $129,140   $149,936 
Accounts receivable, net of allowance   223,691    239,738 
Inventories   247,942    279,751 
Prepaid expenses   83,683    109,974 
Total current assets   684,456    779,399 
           
Property and equipment          
Property and equipment   1,424,201    1,418,820 
Accumulated depreciation   (1,048,330)   (992,441)
Total property and equipment   375,871    426,379 
           
Other assets          
Deposits and other assets   8,800    12,242 
Note receivables   32,697    29,728 
Total other assets   41,497    41,970 
           
Total assets  $1,101,824   $1,247,748 

 

See accompanying notes to financial statements

 

2

 

 

Thanksgiving Coffee Company, Inc.
         
Balance Sheets
         
   June 30,   December 31, 
   2017   2016 
   (Unaudited)   (See Note 1) 
Liabilities and shareholders' equity        
Current liabilities        
Accounts payable  $199,769   $286,852 
Accrued Liabilites   62,294    67,344 
Current portion of long term debt   38,004    38,004 
Total current liabilities   300,067    392,200 
           
Long term debt          
Long-term debt   111,123    130,297 
Less current portion of long term debt   (38,004)   (38,004)
Total long term debt   73,119    92,293 
Total liabilities   373,186    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   (157,778)   (123,161)
Total shareholders' equity   728,638    763,255 
Total liabilities and shareholders' equity  $1,101,824   $1,247,748 


 

See accompanying notes to financial statements 

 

3

 

 

Thanksgiving Coffee Company, Inc.

Statements of Operations
Unaudited
                 
   For theThree Months   For the Six Months 
   Ended June 30,   Ended June 30, 
   2017   2016   2017   2016 
Income                
Net sales  $948,802   $890,936   $1,768,098   $1,757,333 
Cost of sales   565,069    521,547    1,019,994    1,055,180 
Gross profit   383,733    369,389    748,104    702,153 
                     
Operating expenses                    
Selling, general and administrative expenses   344,055    359,533    706,719    719,363 
Depreciation and amortization   22,282    20,112    44,458    42,110 
Total operating expenses   366,337    379,645    751,177    761,473 
Operating profit/ (loss)   17,396    (10,256)   (3,073)   (59,320)
                     
Other income (expense)                    
Miscellaneous income/ (expense)   (30,750)   0    (30,750)   0 
Total other income (expense)   (30,750)   0    (30,750)   0 
                     
Profit/ (loss) before income taxes   (13,354)   (10,256)   (33,823)   (59,320)
Income tax expense   0    0    (800)   (837)
Net profit/ (loss)  $(13,354)  $(10,256)  $(34,623)  $(60,157)
                     
Profit/ (loss) per share (basic and dilutive)  $(0.011)  $(0.008)  $(0.028)  $(0.049)
                     
Weighted average number of shares   1,236,744    1,236,744    1,236,744    1,236,744 

 

See accompanying notes to financial statements 

 

4

 

 

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited
         
   For the Six Months 
   June 30, 
   2017   2016 
Operating activities        
Net loss  $(34,623)  $(60,157)
Adjustments to reconcile net loss to cash flows from operating activities:          
Depreciation and amortization   63,449    60,740 
    0    - 
(Increase) decrease in:          
Accounts receivable   16,047    (11,297)
Inventories   31,809    18,650 
Prepaid expenses   26,291    10,442 
Deposits and other assets   3,442    - 
Increase (decrease) in:          
Accounts payable   (87,077)   (22,857)
Accrued liabilities   (5,050)   (9,133)
Net cash provided by (used in) operating activities   14,288    (13,612)
           
Investing activities          
Purchases of property and equipment   (12,941)   (90,561)
Net cash (used in) investing activities   (12,941)   (90,561)
           
Financing activities          
(Increase) in notes receivables   (2,969)   (1,011)
Net increase in long term debt   0    59,739 
Repayments of notes payable and capital leases   (19,174)   - 
Net cash (used in)Provided by financing activities   (22,143)   58,728 
           
Decrease in cash   (20,796)   (45,445)
Cash at beginning of period   149,936    213,193 
Cash at end of period  $129,140   $167,748 

 

Cash paid for income taxes was $800, separately for each of the six months ending June 30, 2017 and June 30, 2016.
June 30, 2017 and June 30, 2016.        

 

See accompanying notes to financial statements 

 

5

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

June 30, 2017 (unaudited) and December 31, 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 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 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 six months ended June 30, 2017 are not necessarily indicative of results to be expected for the full year.

 

Concentration of Risk

 

For the sixth month period ending June 2017, one customer accounted for 12.47% of the Company’s revenue. This customer has purchased from the Company since 1992, and has several locations. A loss of this customer 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 bases. 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)

June 30, 2017 (unaudited) and December 31, 2016

 

2.Accounts Receivable

 

Accounts receivable consist of the following:

 

   6/30/2017   12/31/2016 
Accounts receivable  $229,663   $246,616 
Less: allowance for doubtful accounts   (5,972)   (6,878)
Net accounts receivable  $223,691   $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 six months ended June 30, 2017 and 2016 was $(907) and $(1,522), respectively.

 

3.Inventories

 

Inventories consist of the following:

 

   6/30/2017   12/31/2016 
Coffee        
Unroasted  $137,649   $168,003 
Roasted   51,436    55,066 
Tea   1,128    1,690 
Packaging, supplies and other merchandise held for sale   57,729    54,992 
Total inventories  $247,942   $279,751 

 

4.       Property and Equipment

 

Property and equipment consist of the following:

 

   6/30/2017   12/31/2016 
Equipment  $512,320   $506,939 
Furniture and fixtures   138,715    138,715 
Leasehold improvements   352,237    352,237 
Transportation equipment   146,133    146,133 
Package 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  $1,424,201   $1,418,820 
Accumulated depreciation   (1,048,330)   (992,441)
Property and equipment, net  $375,871   $426,379 

 

Depreciation and amortization expense for the six months ended June 30, 2017 and 2016 was $63,449 and $60,740, respectively.

 

7

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

June 30, 2017 (unaudited) and December 31, 2016

 

5. Long Term Debt

 

Capital Lease Obligations        
         
   6/30/2017   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.  $28,154   $31,486 
           
Bank of the West payable in monthly installments of $1,465, including interest at 9.227%, collateralized by equipment, final payment due on January 1, 2020.   40,270    47,020 
           
Hansel Ford, payable in monthly installments of $385.18, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   8,021    10,290 
           
Hansel Ford, payable in monthly installments of $385.18, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   8,021    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.   26,657    31,211 
   $111,123   $130,297 
Less current portion   (38,004)   (38,004)
Long term portion of notes payable  $73,119   $92,293 

8

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

June 30, 2017 (unaudited) and December 31, 2016

 

 

5. Long Term Debt (continued)

 

 

Interest paid for the six months ended June 30, 2017 and 2016 was $3,800 and $4,562, respectively.

 

As of June 30, 2017, maturities of notes payable and capital lease obligations for each of the next four years and in the aggregate were as follows:

 

 

Years Ending June 30,    
2017  $38,004 
2018   39,248 
2019   32,767 
2020   1,104 
2021     
   $111,123 

 

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

 

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 carryforward expires in various years through 2036. 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 the company ownership and other provisions of the tax laws.

 

9

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

June 30, 2017 (unaudited) and December 31, 2016

 

7.       Operating Leases

 

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

 

As of June 30, 2017, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate were:

 

Years Ending June 30,    
2017  $8,126 
2018   7,147 
2019   1,754 
2020   0 
2021   0 
   $17,027 


 

Total operating lease payments for the six months ended June 30, 2017 and 2016 was $4,463 and $3,160 respectively.

 

10

 

 

Thanksgiving Coffee Company Inc.

Notes to Financial Statements (continued)

June 30, 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). 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 June 30, 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:

 

2018   103,200 
2019   103,200 
2020   103,200 
2021   103,200 
2022   412,800 
   $928,800 

 

9. Related Party Transactions

 

As of June 30, 2017, the Company has green coffee contracts with three cooperatives in Nicaragua, Ethical Trading and Investment Company of Nicaragua (ETICO) is the importer for the transaction. Nicholas Hoskyns, a director of the company, is the managing director of ETICO. As of June 30, 2017, amounts owed to ETICO totaled $37,168. All the amounts owed are current and were paid in 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

 

The total rent payments made to the majority shareholders in connection with these related transactions for the years ended June 30, 2017 and June 30, 2016 were $103,200 and $103,200, respectively.

 

11

 

 

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 the availability and costs of green beans, 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,and 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 on increasing our on-line sales with the main focus of promoting our award as “Roaster of the Year for 2017”, from Roast magazine. 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 changes 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 the higher quality, the 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 if the Company cannot offset costs by raising prices, it would have a negative impact on the Company and its margins.

 

12

 

 

Results of Operations

 

Six months ended June 30, 2017 versus June 30, 2016

 

Income and Expense  Increase (Decrease)   Percent Change 
         
Net Sales  $10,765    0.6%
Cost of Sales   (35,186)   -3.3%
Gross Margin %   -    6.5%
Selling, G&A Expense   (12,644)   1.8%
Depreciation And Amortization   2,347    5.6%
Net Profit (Loss)   25,543    42%

  

Net sales for the six months ended June 30, 2017 were $1,768,098- up .62%,( or up $10,765),when compared with net sales of $1,757,333 for the same period in fiscal 2016.

 

Distribution revenues (e.g., revenues generated by the Company’s own truck distribution) were down by ($35,714), or (-3.6%) for the six months ended June 30, 2017, when compared with distribution sales for the same period in 2016. Sales on the coast of Mendocino continue to rise.

 

National revenues (e.g., revenues not derived by mail order and direct truck distribution) were up $46,908; 5.67% for the six months ended June 30, 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) were up $7,222; 3.6% for the six months ended June 30, 2017 when compared to mail order sales for the same period in 2016.

 

Cost of sales for the six months ended June 30, 2017 was $1,019,994, down by 3.3%; ($35,186), when compared with the cost of sales of $1,055,180 for the same period in 2016. This decrease was a result of lower cost of green beans. Cost per pound of green beans in the second quarter was $2.56 in 2017 versus $2.78 for the same period in 2016, creating a $42,765 cost savings.

 

Gross margin percentage (gross profit as a percentage of net sales) for the six months ended June 30, 2017, was 42%, up almost 2% when compared with gross margin of 40.1% for the same period in 2016. The increase in gross margin was a result of lower green bean costs and better efficiencies in our overall inventory.

 

Selling, general and administrative expenses were $706,719 for the six months ended June 30, 2017, a decrease of 1.8% ($12,644) when compared with the selling, general and administrative expenses of $719,363 for the same period in 2016. The decrease was a result of insurance rates.

 

Depreciation and amortization expenses for the six months ended June 30, 2017, were $44,458, an increase of 6% up $2,338 when compared to depreciation and amortization expense of $42,110 for the same period in 2016. The increase reflects the new fixtures that were added to accommodate three new Safeway stores.

 

As a result of the foregoing factors, the Company had a net loss of ($33,623) for the six months ended June 30, 2017, compared to a loss of $60,157 for the same period in 2016. It should be noted that in then Statement of Operations, for the three month ending June 30, 2017, that a one-time bonus of $30K was awarded to the company employees. This bonus was awarded from the final payment from sale of the bakery in 2012, and the sale at the time was recorded as revenue. The bonus payment was a non-recurring event and the Company would have otherwise experienced a net gain.

 

Due to the increase costs of insurance and other goods, there can be no assurances that the Company will be profitable in future periods.

 

13

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of June 30, 2017 the Company had working capital of $384,389 versus working capital of $387,199 as of December 31, 2016. The decrease in working capital is due primarily to the decrease in cash of $20,796.

 

Net cash provided by operating activities was $14,288 for the six months ended June 30, 2017, compared to ($13,612) net cash used by operating activities for the six months ended June 30, 2016. The increase in net cash provided from operating activities in the six months of 2017 was principally the result of a decrease in inventory.

 

Net cash used in investing activities was ($12,941) for the six months ended June 30, 2017, compared to ($90,561) used in the same period in 2016. The increase in capital additions of $12,986 this year was a result of adding two new Safeway stores and, another commercial grinder to our packaging facility.

 

Net cash used in financing activities for the six months ended June 30, 2017 was ($22,143) compared to net cash used in financing activities of $58,728 during the same period in 2016. The decrease in cash used in financing activities was a result of paying existing debts.

 

As of June 30, 2017, the Company had total borrowings of $111,123. This compares to total borrowings of $130,297 as of December 31, 2016.

 

For long-term debt, see Note 8 of the Notes to Financial Statements. For operating leases, see Note7 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

 
Long Term Debt  $111,125   $38,004   $71,1197   $0   $0 
                          
Operating Leases   17,027    8,126    8,901    0    0 
                          
Real Estate Leases   928,800    103,200    309,600    206,400    309,600 
                          
Total Cash Obligations  $1,056,950   $149,330   $391,620   $206,400   $309,600 

 

The Company is dependent on successfully executing its business plan to achieve profitable operations, obtain 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 “9 —“ 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.

 

14

 

 

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 preceeding 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 the President of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2017. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the President 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 second quarter of 2017 that have materially affected or are reasonably likely to affect the Company’s internal controls over financial reporting.

 

15

 

 

Part II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

- None -

 

ITEM 1A. RISK FACTORS

 

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

 

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)
       
  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).
       
  101.INS   XBRL Instance Document
       
  101.SCH    XBRL Taxonomy Extension Schema Document
       
  101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document.
       
  101.DEF   XBRL Taxonomy Extension Definition Linkbase Document.
       
  101.LAB   XBRL Taxonomy Extension Label Linkbase Document.
       
  101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document.

 

16

 

 

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   August 14, 2017
Paul Katzeff        
         
/s/ Joan Katzeff     President         August 14, 2017
Joan Katzeff        

 

 

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