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 f10q0917ex31-1_thanks.htm
EX-31.2 f10q0917ex31-2_thanks.htm
EX-32.1 f10q0917ex32-1_thanks.htm
EX-32.2 f10q0917ex32-2_thanks.htm

Thanksgiving Coffee Earnings 2017-09-30

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 f10q0917_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 September 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. xYes    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). xYes   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 x
    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 September 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 September 30, 2017 (unaudited) and December 31, 2016 2
     
  Statements of Operations for the three months and nine months ended September 30, 2017(unaudited) and Sept 30, 2016 (unaudited) 4
     
  Statements of Cash Flows for the nine months ended September 30, 2017(unaudited) and September 30, 2016 (unaudited) 5
     
  Notes to Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
     
Item 4. Controls and Procedures 13
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 14
     
Item 1A. Risk Factors 14
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14
     
Item 3. Defaults Upon Senior Securities 14
     
Item 4. Submission of Matters to a Vote of Security Holders 14
     
Item 5. Exhibits 14
     
Item 6. Exhibits 14
     
Signatures 15

 

 

 

 

Financial Statements

and Notes to Financial Statements

 

Thanksgiving Coffee Company, Inc.

 

For the Nine Months Ended September 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 September 30, 2017 and December 31, 2016, and its results of operations for the three month and nine month periods ended September 30, 2017 and 2016 and its cash flows for the nine month periods ended September 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

 

   September 30,   December 31, 
   2017   2016 
   (Unaudited)   (See Note 1) 
Assets        
Current assets        
Cash  $168,261   $149,936 
Accounts receivable, net of allowance   205,966    239,738 
Inventories   203,014    279,751 
Prepaid expenses   75,965    109,974 
Total current assets   653,206    779,399 
           
Property and equipment          
Property and equipment   1,437,358    1,418,820 
Accumulated depreciation   (1,080,096)   (992,441)
Total property and equipment   357,262    426,379 
           
Other assets          
Deposits and other assets   3,112    12,242 
Note receivables   0    29,728 
Total other assets   3,112    41,970 
           
Total assets  $1,013,580   $1,247,748 

 

See accompanying notes to financial statements

 

 2 

 

 

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

   September 30,   December 31, 
   2017   2016 
   (Unaudited)   (See Note 1) 
Liabilities and shareholders' equity        
Current liabilities        
Accounts payable  $156,080   $286,852 
Accrued Liabilities   45,822    67,344 
Current portion of long term debt   38,004    38,004 
Total current liabilities   239,906    392,200 
           
Long term debt          
Long-term debt   101,337    130,297 
Less current portion of long term debt   (38,004)   (38,004)
Total long term debt   63,333    92,293 
Total liabilities   303,239    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   (176,075)   (123,161)
Total shareholders' equity   710,341    763,255 
Total liabilities and shareholders' equity  $1,013,580   $1,247,748 

 

See accompanying notes to financial statements

 

 3 

 

 

Thanksgiving Coffee Company, Inc.

Statements of Operations

Unaudited

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
Income                
Net sales  $856,952   $903,403   $2,625,044   $2,660,735 
Cost of sales   481,066    543,324    1,501,060    1,570,470 
Gross profit   375,886    360,079    1,123,984    1,062,265 
                     
Operating expenses                    
Selling, general and administrative expenses   370,867    398,542    1,077,586    1,113,331 
Depreciation and amortization   22,203    22,495    66,661    64,605 
Total operating expenses   393,070    421,037    1,144,247    1,177,936 
Operating loss   (17,184)   (60,958)   (20,263)   (115,671)
                     
Other income (expense)                    
Miscellaneous income/ (expense)   (1,107)   143    (31,710)   (1,246)
Total other income (expense)   (1,107)   143    (31,710)   (1,246)
                     
Loss before income taxes   (18,291)   (60,815)   (51,973)   (116,917)
Income tax expense   0    0    (800)   (800)
Net Loss  $(18,291)  $(60,815)  $(52,773)  $(117,717)
                     
Loss per share (basic and dilutive)  $(0.015)  $(0.049)  $(0.043)  $(0.095)
                     
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 nine Months 
   September 30, 
   2017   2016 
Operating activities          
Net loss  $(52,773)  $(117,717)
Adjustments to reconcile net loss to cash flows from operating activities:          
Depreciation and amortization   

92,215

    92,696 
(Increase) decrease in:          
Accounts receivable   33,772    (30,424)
Inventories   76,737    39,663 
Prepaid expenses   34,009    47,170 
Deposits and other assets   9,130    - 
Increase (decrease) in:          
Accounts payable   (130,772)   1,687 
Accrued liabilities   (21,522)   (21,052)
Net cash provided by operating activities   

43,796

    12,023 
           
Investing activities          
Purchases of property and equipment   (18,538)   (93,058)
Net cash (used in) investing activities   (18,538)   (93,058)
           
Financing activities          
Decreases in notes receivable   29,728    - 
(Repayments) increases of notes payable and capital leases   (36,661)   79,528 
Net cash (used in) provided by financing activities   

(6,933

)   79,528 
           
Decrease in cash   18,325    (1,507)
Cash at beginning of period   149,936    213,193 
Cash at end of period  $168,261   $211,686 

 

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

 

See accompanying notes to financial statements

 

 5 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

September 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 nine months ended September 30, 2017 are not necessarily indicative of results to be expected for the full year.

 

Concentration of Risk

 

For the nine months period ending September 2017, one customer accounted for 11.24% 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

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

 

2.Accounts Receivable

 

Accounts receivable consist of the following:

 

   9/30/2017   12/31/2016 
Accounts receivable  $211,518   $246,616 
Less: allowance for doubtful accounts   (5,552)   (6,878)
Net accounts receivable  $205,966   $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 nine months ended September 30, 2017 and 2016 was $(1,326) and $(661), respectively.

 

3.Inventories

 

Inventories consist of the following:

 

   9/30/2017   12/31/2016 
Coffee        
Unroasted  $81,782   $168,003 
Roasted   61,501    55,066 
Tea   2,444    1,690 
Packaging, supplies and other merchandise held for sale   57,286    54,992 
Total inventories  $203,014   $279,751 

 

4. Property and Equipment

 

Property and equipment consist of the following:

 

   9/30/2017   12/31/2016 
Equipment  $516,229   $506,939 
Furniture and fixtures   143,410    138,715 
Leasehold improvements   352,237    352,237 
Transportation equipment   150,686    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  $1,437,358   $1,418,820 
Accumulated depreciation   (1,080,096)   (992,441)
Property and equipment, net  $357,262   $426,379 

 

Depreciation and amortization expense for the nine months ended September 30, 2017 and 2016 was $92,215 and $92,696, respectively.

 

Included in cost of goods sold is $25,554 and $28,064 of depreciation expense, respectively, for the nine months ending September 30, 2017 and September 30, 2016. 

 

 7 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

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

 

5. Long Term Debt 

 

Capital Lease Obligations  9/30/2017   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.  $26,430   $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.   36,778    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.   6,883    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.   6,883    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.   24,363    31,211 
   $101,337   $130,297 
Less current portion   (38,004)   (38,004)
Long term portion of notes payable  $63,333   $92,293 

  

Interest paid for the nine months ended September 30, 2017 and 2016 was $5,500 and $6,784, respectively.

 

As of September 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 September 30,    
2018  $38,004 
2019   40,554 
2020   22,779 
   $101,337 

  

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.

 

 8 

 

 

Thanksgiving Coffee Company, Inc. 

Notes to Financial Statements

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

 

7. Operating Leases

 

The Company leases some office equipment under non cancelable operating leases.

 

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

 

Years Ending September 30,    
2018  $9,626 
2021   326 
   $9,953 

 

Total operating lease payments for the nine months ended September 30, 2017 and 2016 were $6,094 and $5,526 respectively.

 

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 September 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:

 

Years ending September 30,    
2018  $103,200 
2019   103,200 
2020   103,200 
2021   103,200 
2022   103,200 
Thereafter   275,200 
   $791,200 

 

9. Related Party Transactions

 

As of September 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 transactions. Nicholas Hoskyns, a director of the company, is the managing director of ETICO. As of September 30, 2017, amounts owed to ETICO totaled $40,083. 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 nine months ended September 30, 2017 and September 30, 2016 were $77,400 and $77,400, respectively.

 

 9 

 

 

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, 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 more for its green beans, 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.

 

 10 

 

 

Results of Operations

 

Nine months ended September 30, 2017 versus September 30, 2016

 

Income and Expense  Increase (Decrease)   Percent Change 
         
Net Sales  $(35,691)   -1.3%
Cost of Sales   (97,410)   -6.09%
Gross Margin %   -      2.9%
Selling, G&A Expense   (35,745)   -3.21%
Depreciation And  Amortization   2,056    3.18%
Net Profit (Loss)   (64,944)   -55.17%

  

Net sales for the nine months ending September 30, 2017 were $2,625,044 down 1.3%, (or down by $35,691), when compared to net sales of $2,660,735 for the same period in fiscal 2016. 

 

Distribution revenues (e.g., revenues generated by the Company’s own truck distribution) were down by ($56,253), or (5.25%) for the nine months ending September 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 $26,312 or 2.09% for the nine months ending September 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 down $9,051; 2.67% for the nine months ending September 30, 2017 when compared to mail order sales for the same period in 2016.

 

Cost of sales for the nine months ending June 30, 2017 was $1,501,060 down by 6.09%; ($97,410), when compared to the cost of sales of $1,598,470 for the same period in 2016. This decrease was a result of lower costs of green beans. Cost per pound of green beans in the second quarter was $2.70 in 2017 versus $2.83 for the same period in 2016, creating a $77,424 cost savings.

 

Gross margin percentage (gross profit as a percentage of net sales) for the nine months ending September 30, 2017, was 42.82%, up almost 3% when compared with gross margin of 39.9% 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.

 

 11 

 

 

Selling, general and administrative expenses were $1,077,586 for the nine months ending September 30, 2017, a decrease of 3.21% ($35,745) when compared to the selling, general and administrative expenses of $1,113,331 for the same period in 2016. The decrease was a result of workers’ compensation rates and audit fees.

 

Depreciation and amortization expenses for the nine months ending September 30, 2017, were $92,215, a decrease of 0.5% (or $454) when compared to depreciation and amortization expense of $92,669 for the same period in 2016. 

 

As a result of the foregoing factors, the Company had a net loss of ($52,772) for the nine months ending September 30, 2017, compared to a loss of $117,717 for the same period in 2016. It should be noted that in the 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 less of a loss.

 

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

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2017 the Company had working capital of $413,300 versus working capital of $387,199 as of December 31, 2016. The increase in working capital is due primarily to the decrease in accounts payable.

 

Net cash provided by operating activities was $43,796 for the nine months ending September 30, 2017, compared to $12,033 for the nine months ending September 30, 2016. The increase of $31,773 or 265% was principally the result of a decrease in inventory.

 

Net cash used in investing activities was ($18,538) for the nine months ending September 30, 2017, compared to ($93,058) used in the same period in 2016. Capital additions of $12,986 this year were a result of adding two new Safeway stores and, another commercial grinder to our packaging facility.

 

Net cash used in financing activities for the nine months ending September 30, 2017 was ($6,933) compared to net cash provided by financing activities of $79,528 during the same period in 2016. The decrease in cash used in financing activities of $86,461 was a result of paying existing debts.

 

As of September 30, 2017, the Company had total borrowings of $101,338. This compares to total borrowings of $130,297 as of December 31, 2016.

 

For long-term debt, see Note 5 of the Notes to Financial Statements. For operating leases, see Note 7 of the Notes to Financial Statements. For real estate leases, see Note 8 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  $101,337   $38,004   $63,333   $0   $0 
                          
Operating Leases   9,952    9,626    326    0    0 
                          
Real Estate Leases   791,200    103,200    309,600    206,400    172,000 
                          
Total Cash Obligations  $902,489   $150,830   $373,259   $206,400   $172,000 

 

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.

 

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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 create 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 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 two 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 of 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 September 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.

 

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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

 

 

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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   November 9, 2017
Paul Katzeff        
         
/s/ Joan Katzeff   President   November 9, 2017
Joan Katzeff        

 

 

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